PAGE F1


Selected Consolidated Financial Data (Thousands of dollars, except per 
share amounts)

<TABLE>
<CAPTION>

Fiscal Year                                               1997            1996             1995            1994             1993
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>               <C>              <C>                 <C>   
Statements of Operations
Operating Revenue                                 $  1,565,249    $  1,330,972     $  1,144,458    $  1,016,464     $    898,920
Income from operations                                 105,010          67,128 (1)       67,543          69,666           61,222

Interest expense, net                                   (7,423)        (11,495)          (8,177)         (8,417)          (7,391)
Other non-operating expense                                (92)           (704)            (878)         (2,011)          (1,683)
------------------------------------------------------------------------------------------------------------------------------------
Net income from continuing operations
   before income  taxes                                 97,495          54,929           58,488          59,238           52,148

Income tax expense                                     (40,914)        (23,451)         (25,150)        (25,882)         (23,603)
------------------------------------------------------------------------------------------------------------------------------------
Net income from continuing operations                   56,581          31,478           33,338          33,356           28,545

Discontinued operations                                      -               -                -               -           (1,197)
Extraordinary item - operating rights                        -               -                -          (1,291)               -
------------------------------------------------------------------------------------------------------------------------------------

Net income                                        $     56,581    $     31,478(1)  $     33,338    $     32,065     $     27,348
------------------------------------------------------------------------------------------------------------------------------------

Basic Earnings Per Share
Net income per share from continuing operations   $       2.21    $       1.41(1)     $    1.52    $       1.53     $       1.26
Net income per share                                      2.21            1.41(1)          1.52            1.47             1.21

Diluted Earnings Per Share
Net income per share from continuing operations   $       2.19    $       1.40(1)     $    1.51    $       1.51     $       1.25
Net income per share                                      2.19            1.40(1)          1.51            1.45             1.20

Cash dividends declared per share                 $       0.37    $       0.37        $    0.37    $       0.37     $       0.37

Operating Statistics
LTL trucking companies (in thousands)
Total tons                                               8,579           7,732            6,835           6,210            5,977
Total shipments                                         12,857          11,590           10,187           9,045            8,762

Balance Sheets
Assets:
Current assets                                    $    237,116    $    203,577     $    158,611    $    144,615     $    122,770
Property and equipment, net                            448,315         395,500          338,846         272,264          247,123
Intangible assets, net                                 104,407          79,559           69,918          72,194           77,132
Other assets                                             9,697           9,872           10,819          11,929           13,755
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                      $    799,535    $    688,508     $    578,194    $    501,002     $    460,780

Liabilities and Stockholders' Equity:
Current liabilities                               $    181,714    $    144,348     $    128,484    $    118,447     $     97,744
Long-term debt                                         115,000         178,000          137,333         105,667          124,085
Other non-current liabilities                          110,621          96,900           79,225          68,794           58,442
Total stockholders' equity                             392,200         269,260          233,152         208,094          180,509
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
   stockholders' equity                           $    799,535    $    688,508     $    578,194    $    501,002     $    460,780
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) Income from operations, net income and earnings per share are after the USF
    Red Star restructuring charge of $4,050 before income tax, equivalent to
    $0.10 per share, net of tax.
<PAGE>                                                                         
                              PAGE F2



Management's Discussion and Analysis of Financial Condition and 
Results of Operations


Fiscal Year Ended  January 3, 1998,  Compared  to Fiscal  Year Ended 
December  28,  1996  Operating  revenue for the 53 weeks ended January 3, 1998 
("Fiscal 1997")  increased by $234,277,000  (17.6%) to  $1,565,249,000  from 
$1,330,972,000  for the 52 weeks ended December  28, 1996  ("Fiscal  1996"). 
The extra week in Fiscal 1997 (which  occurs only once every five or six years) 
contributed approximately  $20,600,000 in revenue but had a negative impact on
earnings of approximately  $0.04 per share because the New Year's holiday  fell
during that week.  The  Company's  regional  less-than-truckload  ("LTL") 
trucking  companies'  revenue  increased by $177,726,000 (a 14.4% increase over
the prior year) to  $1,409,086,000  in Fiscal 1997 from  $1,231,360,000 in 
Fiscal 1996 primarily as a result of new customers,  closure of certain 
competitors and expanded  business from existing  customers.  In Fiscal 1997, 
LTL shipments  increased by 10.9% while average  revenue per LTL shipment 
increased by 3.4% compared to Fiscal 1996.  Additionally,  in Fiscal 1997 LTL
tonnage  increased by 12.1% while  revenue per LTL  hundredweight  increased by
2.4% compared to Fiscal 1996. At the Company's  logistics  subsidiaries,  USF 
Logistics  and USF  Distribution  Services,  operating  revenue grew by 
$20,698,000  from $85,601,000 in Fiscal 1996 to  $106,299,000  in Fiscal 1997
(a 24.2% increase over the prior year)  primarily due to the addition of
new  customers  at USF  Logistics  and a full  year  of  revenue  at 
Interamerican,  a  provider  of  warehousing,  transportation, distribution 
and other logistics  services,  which was acquired on July 1, 1996. USF Seko
Worldwide,  a domestic and  international freight  forwarder  which was acquired
on September 30, 1997,  contributed  $31,813,000  revenue in Fiscal 1997,  and 
operated at an annualized revenue of approximately $120,000,000 at the time 
of acquisition.

In Fiscal 1997, the LTL regional trucking companies  accounted for 90.0% of 
consolidated  operating revenue,  whereas the logistics, freight forwarding and 
other subsidiaries accounted for 10.0%. In Fiscal 1996, the LTL regional
trucking  companies  accounted for 92.5% of all consolidated operating revenue,
the logistics and other subsidiaries for 7.5%.

Operating income in Fiscal 1997 was enhanced by a relatively mild winter,  a 
stable pricing  environment and a strong economy unlike Fiscal 1996 which was 
adversely  impacted by severe weather during the winter months,  intense 
industry  competitive  pricing and a somewhat  sluggish  economy in the first 
half of the year. A fuel surcharge,  which was implemented to partially offset
the increase in fuel prices in the summer of Fiscal 1996,  remained in effect 
throughout most of Fiscal 1997. The turnaround  achieved at USF Red Star during 
the fourth  quarter of Fiscal 1996 continued  through Fiscal 1997 as it reported
modest profits during each of the four quarters in Fiscal 1997.

Income from  operations  increased by 56.4% to  $105,010,000  in Fiscal 1997
from  $67,128,000,  in Fiscal 1996,  which is after the $4,050,000  
restructuring  charge at USF Red Star.  This  increase  results  from higher 
income at each of the  regional  carriers, additional  profits from a full year
of operations at Interamerican  and the last quarter Fiscal 1997 profits at
USF Seko Worldwide. Following the  acquisition of USF Seko  Worldwide, 
the Company's  statement of operations  has  fundamentally  changed  because the
relative  importance  of certain  expenses in the  freight  forwarding  business
is  different than in the LTL  trucking  business. Typically,  salaries,  wages
and benefits will  approximate 5% to 10% of a freight  forwarder's  operating  
revenue while  purchased transportation  (consisting of airlift,  pickup and 
delivery costs and agents' commissions) will approximate 80% to 90% of operating
revenue.  On the other hand,  salaries,  wages and benefits for regional 
trucking  companies  will  approximate  60% and  purchased transportation  will
approximate 3% to 4% of operating revenue.  In Fiscal 1997, the Company's total
operating  expenses (including amortization of intangible  assets) to operating 
revenue  improved to 93.3% from 95.0% in Fiscal 1996. The improvement in 
salaries, wages  and  benefits  to 62.1% in  Fiscal  1997  from  63.7% in 
Fiscal  1996 was  virtually  offset  by an  increase  in  purchased 
transportation  to 5.4% in Fiscal 1997 from 3.7%,  in Fiscal 1996,  both of
which were a direct  result of the inclusion of USF Seko Worldwide's  results in
Fiscal 1997. The principal  reduction in total operating  expenses occurred in 
the Other operating  expenses category  which  improved to 19.5% of Fiscal  1997
operating  revenue  compared to 20.9% of Fiscal  1996  operating  revenue.  This
reduction  results from the favorable  impact of a fuel surcharge  that was in
effect for all of Fiscal 1997,  except at USF Holland where the fuel  surcharge 
ended in late June  1997,  compared  to its being in effect  only  during  the 
last half of Fiscal  1996. Depreciation and amortization  expense improved to
4.5% of Fiscal 1997 operating  revenue from 4.7% of Fiscal 1996 operating 
revenue due to improvements in equipment  utilization and selective purchasing
of used transportation  equipment.  The non-recurring USF Red Star restructure
charge amounted to 0.3% of Fiscal 1996 operating revenue.
<PAGE>
                              PAGE F3

Management's Discussion and Analysis of Financial Condition and 
Results of Operations

Interest  expense,  as a  percentage  of  operating  revenue,  decreased  to 
0.5% in Fiscal 1997 from 0.9% in Fiscal 1996 as the net proceeds of $69,431,000 
from the Company's sale of 3,105,000  shares in February 1997 allowed the 
Company to remain  basically free of bank debt during the year.

Fiscal Year Ended  December  28,  1996  Compared to Fiscal Year Ended 
December  30, 1995  Operating  revenue for the 52 weeks ended December 28, 1996
("Fiscal 1996") increased by $186,514,000  (16.3%) to $1,330,972,000  from 
$1,144,458,000  for the 52 weeks ended December 30, 1995 ("Fiscal  1995").  Of
the total operating  revenue  increase,  the regional  less-than-truckload 
("LTL") trucking companies  accounted for  $155,704,000  (a 14.5%  increase 
over the prior year)  primarily as a result of new  customers,  expanded
business from existing  customers and the  acquisition  of Transus in the
Southeast.  Effective  January 1, 1996, USF Dugan acquired the business of 
Transus,  a  Southeastern  LTL motor carrier,  which  included 29 terminals, 
some of which were operating in cities where USF Dugan previously had an 
existing presence.



Those terminal  locations,  which were duplicated in both systems,  were 
consolidated.  Also, during January 1996, USF Reddaway andUSF United 
successfully  completed a merger of their separate operating systems resulting 
in elimination of four redundant terminal locations.  Finally,  as a result of 
restructuring  its operations during 1996, USF Red Star reduced its terminals
by six to 26 with no loss in geographic coverage.

In Fiscal 1996, LTL shipments  increased by 15.4% while average  revenue per LTL
shipment  declined by 0.5% compared to Fiscal 1995. Additionally,  in Fiscal
1996 LTL tonnage  increased  by 16.4% while  revenue  per LTL  hundredweight 
declined by 1.4%  compared to Fiscal 1995. At the  Company's  logistics 
subsidiaries,  USF Logistics and USF  Distribution  Services,  operating  
revenue grew by $21,508,000  from  $64,093,000 in Fiscal 1995 to $85,601,000 in 
Fiscal 1996 (a 33.6% increase over the prior year)  primarily due to
the addition of new customers at USF Logistics and its  acquisition of 
Interamerican,  a provider of  warehousing,  transportation, distribution and 
other logistics services, effective July 1, 1996.

In Fiscal 1996, the LTL regional trucking companies accounted for 92.5% of 
consolidated  operating revenue;  the logistics and other subsidiaries
accounted for 7.5%.  In Fiscal 1995,  the LTL regional  trucking  companies 
accounted  for 94.0% of all  consolidated operating revenue, the logistics and
other subsidiaries for 6.0%.

Operating  income in the first half of 1996 was adversely  impacted by severe 
weather during the winter  months,  intense  industry competitive  pricing and
a somewhat sluggish economy.  In the last half of the year,  industry pricing 
firmed, the economy improved, and revenue  growth  returned to double  digits.
A fuel  surcharge was also  implemented  to partially  offset the increase in 
fuel prices.  A turnaround was achieved at USF Red Star during the fourth 
quarter where,  despite a 5.2% reduction in total revenue,  the operating ratio 
improved from 104.3% in the 1995 fourth quarter to 99.5% in the 1996 fourth 
quarter,  before a restructuring  charge discussed  below.  The  improvement 
at USF Red Star  resulted  from an  increase  in yield per  shipment  of 5.6%
together  with a significant reduction in operating costs resulting from strict 
cost control.
<PAGE>
                              PAGE F4

Management's Discussion and Analysis of Financial Condition and 
Results of Operations

Income from operations,  after a $4,050,000  restructuring  charge at USF Red
Star,  decreased by 0.6% to $67,128,000 in Fiscal 1996 from  $67,543,000  in
Fiscal 1995.  The  restructuring  charge at USF Red Star related  primarily to
ongoing lease  commitments  for terminals no longer  occupied and to severance
pay incurred in connection with the reduction in personnel.  The Company  
anticipates that no further  charges  against its operations  will occur as a 
result of the USF Red Star  restructuring  which  occurred  during Fiscal 1996.
The decline in revenue per shipment,  costs incurred  associated with the 
acquisition of Transus,  and the USF Red Star restructuring  charge were major
factors in the  reduction in operating  income.  Other  operating  expenses 
increased to 20.9% of operating  revenue in Fiscal 1996 from 20.4% in Fiscal
1995,  mainly due to higher fuel costs  incurred  which were not recovered by
surcharges in the first half of the year.  Depreciation and amortization 
increased to 4.7% of operating  revenue during Fiscal 1996 from 4.2% in Fiscal 
1995 due mainly to revenue  equipment  acquired  with the  purchase  of 
Transus.  These  cost  increases  were partially  offset by a reduction  in
salaries,  wages and  benefits  from 64.1% in Fiscal 1995 to 63.7% in Fiscal
1996 due mainly to personnel reductions at USF Red Star and improved operating 
efficiencies at USF Holland.

Interest expense,  as a percentage of operating revenue,  increased slightly to
0.9% in Fiscal 1996 from 0.8% in Fiscal 1995 despite a decrease in average 
interest  rates of  approximately  0.4%, as average debt  outstanding  increased
due to the  acquisitions  of Transus and Interamerican and capital expenditures.

Liquidity and Capital  Resources The Company  generated  $137,058,000  in cash 
flows from operating  activities  during Fiscal 1997. Capital  expenditures 
during the year amounted to $155,588,000,  of which  $91,093,000 was for revenue
equipment,  $18,836,000 for terminals,  $18,880,000 for other assets and 
$26,779,000 for the cash acquisitions of USF Seko Worldwide,  an airfreight 
forwarding company,  and Mercury  Distribution,  an LTL general commodities
carrier located in the Northeast.  Capital  expenditures for Fiscal 1996 
amounted  to  $134,822,000  including  $40,765,000  for the  acquisitions  of 
Transus and  Interamerican.  In light of current business  levels,  management
expects that capital  expenditures  during the fiscal year ending on 
January 2, 1999 ("Fiscal  1998") will approximate $140,000,000 to $160,000,000.

In February  1997,  the Company sold  3,105,000 of its shares in a public  
offering.  The net proceeds  from the sale,  amounting to approximately
$69,431,000 were initially used to repay outstanding debt under the Company's
revolving credit facility.

In November 1997,  the Company  replaced its existing  $160,000,000  revolving 
credit  facility with a new  $200,000,000  revolving credit  facility  through a
syndicate of  commercial  banks.  The new  facility  expires in 2002 and allows
up to  $100,000,000  for standby  letters of credit to cover the Company's 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 Fiscal 1997, all borrowings were drawn at
LIBOR base rates,  with a weighted average  interest rate for the year of 5.9%,
excluding  fees charged on the  facility.  At January 3, 1998 the Company had
borrowed $15,000,000 and had $47,439,000 outstanding letters of credit under
this facility.

<PAGE>
                              PAGE F5

Management's Discussion and Analysis of Financial Condition and 
Results of Operations

In addition to the revolving credit facility,  the Company  maintains four
uncommitted  lines of credit,  which provide  $39,000,000 short-term funds at
rates  approximating  LIBOR.  These facilities are used in concert with a
centralized cash management system to finance short-term working capital needs, 
thereby enabling the Company to maintain minimal cash balances.

In  management's  opinion,  cash flows from operating  activities and funding 
from its revolving  credit  facilities are adequate to finance the Company's
anticipated business activity in Fiscal 1998.

At January 3, 1998 the Company had  commitments to purchase  approximately
$12,778,000 in land and  improvements,  $30,671,000  for transportation 
equipment and $679,000 for other equipment.

During Fiscal 1997, the Company declared cash dividends of $9,682,000.

Other The Company uses  underground  storage tanks at certain terminal 
facilities and maintains 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,
the Company takes prompt remedial action to remove the  contaminants.  It is 
management's opinion that the total costs related to all known  incidents  have 
been provided for in the financial  statements  and management is not aware of
any potential contamination incidents that would have a material effect on the 
results of the Company.

In 1997, the Company began, for all of its computer systems,  a year 2000 date
compliance  project to address all necessary changes, testing and  
implementation.  At January 3, 1998,  substantially all of the Company's 
internally  developed systems were compliant. The Company has targeted 
December 31, 1998 as its  compliance  project  completion  date.  By achieving 
completion at December 31, 1998, the Company will have a full year to complete
any additional  testing of internal  systems and  externally  provided  systems.
The Company  does not expect the amounts  that will be required to be expensed 
for  completion  of the  project,  over the next two years, to have a material
effect on its financial  position or its results of operations.  However,  there
can be no assurance that the systems of other  companies  on which the 
Company's  systems  rely also will be timely  converted  or that any such 
failure to convert by another  company would not have an adverse effect on the
Company's  systems.  To date,  confirmations  have been received
from the Company's primary  processing  vendors that plans are being  developed 
to address  processing of  transactions in the year 2000.
<PAGE>
                         PAGE F6

Independent Auditors' Report


The Board of Directors and Stockholders, 
USFreightways  Corporation:

We have audited the accompanying  consolidated  balance sheet of  USFreightways 
Corporation  and  Subsidiaries  as of January 3, 1998 and the  related  
consolidated  statements  of  operations, stockholders'  equity,  and cash 
flows for the year  ended  January  3,  1998.  These  consolidated  financial 
statements  are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these consolidated  financial
statements based on our audit.

We conducted our audit in accordance with generally  accepted auditing 
standards. Those standards require that we plan and perform the audit to obtain 
reasonable  assurance  about  whether the  financial  statements  are free of
material  misstatement.  An audit includes  examining,  on a test basis, 
evidence supporting the amounts and disclosures in the financial  statements. 
An audit also includes assessing the accounting  principles used and significant
estimates made by management,  as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 January 3, 1998 and the
results of their  operations and their cash flows for the year ended
January 3, 1998, in conformity with generally accepted accounting principles.



Arthur Andersen LLP
Chicago, Illinois
January 21, 1998
 



The Board of Directors and Stockholders,  
USFreightways  Corporation:  

We have audited the accompanying  consolidated  balance sheet of  USFreightways 
Corporation  and  Subsidiaries  as of December 28, 1996 and the related 
consolidated  statements of  operations, stockholders'  equity,  and cash flows 
for the two years ended December 28, 1996. These  consolidated  financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated  financial
statements based on our audits.

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

In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects,  the financial position of 
USFreightways  Corporation and  Subsidiaries as of December 28, 1996 and the
results of their operations and their cash flows for the two years ended
December 28, 1996, in conformity with generally accepted accounting principles.



KPMG Peat Marwick LLP
Chicago, Illinois
January 22, 1997.
<PAGE>
                                        PAGE F7

Consolidated Balance Sheets
Years ended January 3, 1998 and December 28, 1996
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>

                                                                                January 3,     December 28,
                                                                                      1998             1996
------------------------------------------------------------------------------------------------------------------------------------
 <S>                                                                                   <C>                 <C>                 
Assets
Current assets:
   Cash                                                                               6,471     $      4,090
   Accounts receivable, less allowances of $10,067 and $7,186                       187,554          157,874
   Operating supplies and prepaid expenses                                           21,176           19,096
   Deferred income taxes (note 4)                                                    21,915           22,517
------------------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                237,116          203,577

Property and equipment:
   Land                                                                              56,542           53,904
   Buildings and leasehold improvements                                             131,543          114,513
   Equipment                                                                        563,732          486,860
   Other                                                                             48,892           39,935
                                                                                    800,709          695,212
   Less accumulated depreciation                                                   (352,394)        (299,712)
------------------------------------------------------------------------------------------------------------------------------------
Total property and equipment                                                        448,315          395,500

Intangible assets, net of accumulated amortization                                  104,407           79,559
Other assets                                                                          9,697            9,872
------------------------------------------------------------------------------------------------------------------------------------
                                                                               $    799,535     $    688,508

Liabilities and Stockholders' Equity
Current liabilities:
   Current bank debt (note 3)                                                  $        650     $        333
   Accounts payable                                                                  62,895           41,734
   Accrued salaries, wages and benefits                                              55,166           49,528
   Accrued claims and other                                                          61,059           50,442
   Income taxes payable                                                               1,944            2,311
------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                           181,714          144,348

Long-term bank debt, less current maturities (note 3)                                15,000           78,000
Notes payable (note 3)                                                              100,000          100,000
Accrued claims and other                                                             58,057           50,303
Deferred income taxes (note 4)                                                       52,564           46,597
                                                                                    407,335          419,248
Stockholders' equity:
   Cumulative preferred stock, $0.01 par value per share:
      20,000,000 shares authorized, none issued                                           -               -
   Common stock, $0.01 par value per share:
      80,000,000 shares authorized, 26,080,459 and 22,594,890 issued                    265             234
   Paid in capital                                                                  251,224         180,269
   Retained earnings                                                                147,007         100,108
   Treasury stock, 463,949 and 844,518 shares                                        (6,296)        (11,351)
------------------------------------------------------------------------------------------------------------------------------------

Total stockholders' equity                                                          392,200         269,260
------------------------------------------------------------------------------------------------------------------------------------
                                                                               $    799,535     $   688,508

</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                                             PAGE F8

Consolidated Statements of Operations
Fiscal years ended January 3, 1998, December 28, 1996 and December 30, 1995
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>


Fiscal Year                                                                1997            1996             1995
------------------------------------------------------------------------------------------------------------------------------------
        <S>                                                                <C>             <C>                 <C>      
Operating revenue                                                  $  1,565,249    $  1,330,972     $  1,144,458
------------------------------------------------------------------------------------------------------------------------------------

Operating expenses:
   Salaries, wages and benefits                                         972,526         847,285          733,441
   Other operating expenses                                             304,772         277,983          233,783
   Purchased transportation                                              84,388          49,412           43,763
   Insurance and claims                                                  28,413          22,523           17,556
   Depreciation and amortization                                         70,140          62,591           48,372
   USF Red Star restructuring charge (note 8)                                 -           4,050                -
------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses                                              1,460,239       1,263,844        1,076,915

Income from operations                                                  105,010          67,128           67,543
------------------------------------------------------------------------------------------------------------------------------------

Non-operating income (expense):
   Interest expense                                                      (8,461)        (12,144)          (8,884)
   Interest income                                                        1,038             649              707
   Other, net                                                               (92)           (704)            (878)
------------------------------------------------------------------------------------------------------------------------------------

Total non-operating expense                                              (7,515)        (12,199)          (9,055)
------------------------------------------------------------------------------------------------------------------------------------

Net income before income taxes                                           97,495          54,929           58,488
Income tax expense (note 4)                                             (40,914)        (23,451)         (25,150)
------------------------------------------------------------------------------------------------------------------------------------


Net income                                                         $     56,581    $     31,478     $     33,338
------------------------------------------------------------------------------------------------------------------------------------

Average shares outstanding-basic                                     25,544,240      22,249,499       21,912,851
Average shares outstanding-diluted                                   25,830,674      22,451,280       22,122,590


Basic earnings per common share:                                   $       2.21    $       1.41     $       1.52
------------------------------------------------------------------------------------------------------------------------------------

Diluted earnings per common share:                                 $       2.19    $       1.40     $       1.51
------------------------------------------------------------------------------------------------------------------------------------


</TABLE>
See accompanying notes to consolidated financial statements.



<PAGE>
                                             PAGE F9

Consolidated Statements of Stockholders' Equity
Fiscal Years ended January 3, 1998, December 28, 1996 and December 30, 1995
(Thousands of dollars)
<TABLE>
<CAPTION>                                                                                                                      
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Total   
                                                        Common         Paid in         Retained        Treasury     Stockholders'
                                                         Stock         Capital         Earnings           Stock           Equity
------------------------------------------------------------------------------------------------------------------------------------
     <S>                                                  <C>              <C>            <C>            <C>                <C>    
Balance January 1, 1995                           $        234    $    175,287     $     51,779    $    (19,206)    $    208,094

   Net income                                                -               -           33,338               -           33,338
   Dividends declared                                        -               -           (8,172)              -           (8,172)
   Purchase of common stock                                  -               -                -          (3,921)          (3,921)
   Employee stock transactions and other                     -           1,091                -           2,722            3,813
------------------------------------------------------------------------------------------------------------------------------------

Balance December 30, 1995                                  234         176,378           76,945         (20,405)         233,152

   Net income                                                -               -           31,478               -           31,478
   Dividends declared                                        -               -           (8,315)              -           (8,315)
   Employee stock transactions and other                     -           3,891                -           9,054           12,945
------------------------------------------------------------------------------------------------------------------------------------


Balance December 28, 1996                                  234         180,269          100,108         (11,351)         269,260

   Net income                                                -               -           56,581               -           56,581
   Dividends declared                                        -               -           (9,682)              -           (9,682)
   Issuance of common stock                                 31          69,400                                            69,431
   Employee stock transactions and other                     -           1,555                -           5,055            6,610
------------------------------------------------------------------------------------------------------------------------------------


Balance January 3, 1998                           $        265    $    251,224     $    147,007    $     (6,296)    $    392,200
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
                                                  PAGE F10


Consolidated Statements of Cash Flows
Fiscal years ended January 3, 1998, December 28, 1996 and December 30, 1995
(Thousands of dollars)
<TABLE>
<CAPTION>

Fiscal Year                                                                        1997            1996             1995
------------------------------------------------------------------------------------------------------------------------------------
         <S>                                                                        <C>              <C>               <C>
Cash flows from operating activities:
   Net income from continuing operations                                    $     56,581    $     31,478     $     33,338
      Reconciliation to net cash provided by operating activities:
         Depreciation and amortization                                            70,140          62,591           48,372
         Deferred taxes                                                            6,569           3,298            5,216
         Changes in assets and liabilities excluding acquisitions:
                 Accounts receivable                                             (29,680)        (39,767)          (7,752)
                 Other current assets                                             (2,080)            455           (4,298)
                 Accounts payable                                                 21,161           5,525            3,458
                 Accrued liabilities                                              23,317          21,923            9,654
                 Other, net                                                       (8,950)          2,096            1,161
------------------------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                        137,058          87,599           89,149
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
   Capital expenditures                                                         (128,809)        (94,057)        (116,675)
   Proceeds from sale of property and equipment                                   12,887           4,246            3,792
   Acquisitions                                                                  (22,756)        (31,265)               -
------------------------------------------------------------------------------------------------------------------------------------

Net cash used in investing activities                                           (138,678)       (121,076)        (112,883)
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
   Dividends paid                                                                 (9,357)         (8,252)          (8,172)
   Purchase of common stock                                                            -               -           (3,921)
   Net proceeds from sale of common stock                                         69,431               -                -
   Proceeds from sale of treasury stock                                            6,610           3,445            3,813
   Proceeds from long-term bank debt                                              15,000          41,000           38,000
   Payments on long-term bank debt                                               (77,683)           (333)          (6,334)
------------------------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                          4,001          35,860           23,386
------------------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash                                                    2,381           2,383             (348)

Cash at beginning of year                                                          4,090           1,707            2,055
------------------------------------------------------------------------------------------------------------------------------------

Cash at end of year                                                         $      6,471    $      4,090     $      1,707
------------------------------------------------------------------------------------------------------------------------------------

Supplemental disclosure of cash flow information:
   Cash paid during the year for:
      Interest                                                              $      8,508    $     11,715     $      8,390
      Income taxes                                                                32,389          18,105           20,507

   Noncash transactions: equity and notes issued in connection 
        with acquisitions                                                     $    4,023     $     9,500               -
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>
                                   PAGE F11

Notes to Consolidated Financial Statements (Thousands of dollars, except per 
share amounts)

1: Summary of Significant Accounting Policies

Basis  of  Presentation  The  consolidated  financial  statements  include  the
accounts  of  USFreightways  and its  wholly  owned subsidiaries  (the Company).
The Company's  operations  are further  discussed in periodic SEC filings.
Intercompany  balances and transactions have been eliminated.

The Company  reports on a 52/53-week  fiscal year basis  concluding  on the 
Saturday  nearest to December 31. The three fiscal years covered in the
consolidated  financial statements ended on January 3, 1998,  December 28, 1996 
and December 30, 1995,  respectively (Fiscal 1997, 1996 and 1995).

Revenue  Recognition  Transportation  revenue is recognized  when freight is 
picked up from the customer,  at which time the related estimated expenses of
performing the total transportation services are accrued.

Cash The Company  considers  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 ten years for the 
majority of equipment  and 30 years for buildings.  Maintenance and repairs are
charged to current operations,  while expenditures that add to the life of the
equipment are  capitalized.  When revenue  equipment is traded,  a gain or loss
on the trade of the equipment is recognized and netted against depreciation 
expense.

Intangible  assets  These costs  primarily  represent  goodwill  which is 
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.

Earnings Per Share Basic and diluted  earnings per share are calculated  under
guidelines of FASB Statement No. 128. Basic earnings per share are  calculated
on income  available  to common  stockholders  divided by the  weighted-average
number of common  shares outstanding  during the period.  Diluted  earnings per
share are calculated  using earnings  available to each share of common stock
outstanding  during the period and to each share that would have been  
outstanding  assuming the  issuance of common  shares for all dilutive potential
common shares outstanding during the reporting period.  Unexercised stock 
options,  calculated under the treasury stock method,  is the only  reconciling 
item between the Company's  basic and diluted  weighted  earnings per share.  
The number of options,  included in the  denominator,  used to calculate 
diluted  earnings per share are 286,434,  201,781 and 209,739 for fiscal
years 1997, 1996 and 1995, respectively.

Use of  Estimates  Management  of the Company has made a number of estimates 
and  assumptions  relating to the  reporting of assets and  liabilities and the
disclosure of contingent  assets and  liabilities to prepare these financial 
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

                                   
2: Operating Leases

The Company leases certain  terminals,  vehicles and data  processing  equipment
under  long-term  lease  agreements that expire in various years through 2011.

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
January 3, 1998.

Fiscal Year                                                            Payments
-------------------------------------------------------------------------------

1998                                                               $     20,014
1999                                                                     14,853
2000                                                                      9,045
2001                                                                      5,050
2002                                                                      2,528
Subsequent years                                                          2,832
-------------------------------------------------------------------------------
                                                                   $     54,322
-------------------------------------------------------------------------------

Rental expense in the accompanying  consolidated statements of operations for 
fiscal years 1997, 1996 and 1995 was $21,863,  $20,396and $19,804, respectively.
<PAGE>
                              PAGE F12

Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)

3: Long-term Debt

Long-term debt at January 3, 1998 and December 28, 1996 consists of the 
following:

                                                    January 3,     December 28,
                                                         1998             1996
------------------------------------------------------------------------------

Unsecured notes (a)                               $    100,000     $    100,000
Unsecured lines of credit (b)                           15,650           78,000
Other                                                        0              333
-------------------------------------------------------------------------------
                                                       115,650          178,333
Less current maturities                                    650              333
-------------------------------------------------------------------------------
                                                  $    115,000     $    178,000
-------------------------------------------------------------------------------

(a) Unsecured  notes of $100,000 are payable on May 1, 2000 and bear interest at
6 5/8%,  payable  semi-annually.  The notes are not subject to  redemption
prior to maturity and have no sinking fund  requirements.  Based upon the  
Company's  incremental  borrowing rates for similar types of borrowing
arrangements, the fair value of the notes at January 3, 1998 was 
approximately $100,000.

(b) In November 1997, the Company  replaced its existing  $160,000  revolving 
credit facility with a new $200,000  revolving credit facility  through a 
syndicate of commercial  banks.  The new facility  expires in 2002 and allows up
to $100,000 for standby letters of credit to cover the Company's 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 Fiscal 1997, all borrowings were drawn at LIBOR base rates,  with
a weighted average interest rate for the year of 5.9%,  excluding fees charged
on the facility.  At January 3, 1998 the Company had borrowed  $15,000 and had
$47,439 outstanding  letters of credit under this  facility.  In addition to the
revolving  credit  facility,  the Company  maintains  four uncommitted  lines of
credit,  which provide $39,000  short-term funds at rates  approximating  LIBOR.
These facilities are used in concert with a centralized  cash management  system
to finance  short-term  working capital needs,  thereby enabling the Company to 
maintain minimal cash balances.

The aggregate annual maturities of debt at January 3, 1998 are as follows:

Fiscal Year                                                              Amount
-------------------------------------------------------------------------------

1998                                                               $        650
1999                                                                          0
2000                                                                    100,000
2001                                                                          0
2002                                                                     15,000
-------------------------------------------------------------------------------
                                                                   $    115,650
-------------------------------------------------------------------------------

The company had an interest rate cap contract, which was solely for interest 
rate protection, that expired in August 1997.

<PAGE>
                         PAGE F13


Notes to Consolidated Financial Statements (Thousands of dollars, except per 
share amounts)



   4: Income Taxes

A reconciliation of the statutory Federal income tax rate with the effective 
income tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal Year                                                             1997            1996             1995
------------------------------------------------------------------------------------------------------------------------------------
     <S>                                                              <C>            <C>                 <C>
Federal income tax at statutory rate                            $     34,123    $     19,225     $     20,471
State income tax                                                       4,489           2,724            3,195
Goodwill amortization                                                    955             823              766
Other                                                                  1,347             679              718
------------------------------------------------------------------------------------------------------------------------------------
Total income tax expense                                        $     40,914    $     23,451     $     25,150

</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Fiscal Year                                                               1997            1996             1995
------------------------------------------------------------------------------------------------------------------------------------
     <S>                                                                   <C>            <C>            <C>
Current expense:
   Federal                                                        $     28,427    $     15,610     $     16,024
   State                                                                 5,918           4,543            3,910
---------------------------------------------------------------------------------------------------------------
                                                                        34,345          20,153           19,934
Deferred expense:
   Accelerated depreciation                                              9,099           8,555            8,499
   Allowance for doubtful accounts and revenue adjustments               3,798            (601)            (532)
   Insurance and claims                                                 (4,659)         (5,036)          (1,841)
   Vacation pay                                                         (1,053)            597           (1,111)
   Other                                                                  (616)           (217)             201
---------------------------------------------------------------------------------------------------------------
                                                                         6,569           3,298            5,216
---------------------------------------------------------------------------------------------------------------
Total income tax expense                                          $     40,914    $     23,451     $     25,150

</TABLE>
The following is a summary of the components of the deferred tax assets and
liabilities at January 3, 1998 and December 28, 1996:
<TABLE>
<CAPTION>
                                                                     January 3,     December 28,
                                                                          1998             1996
-----------------------------------------------------------------------------------------------
     <S>                                                                   <C>            <C>
Deferred tax assets:
   Allowance for doubtful accounts and revenue adjustments        $      1,027     $      4,825
   Insurance and claims                                                 30,953           26,294
   Vacation pay                                                          7,196            6,143
   Other                                                                 3,872            2,670
-----------------------------------------------------------------------------------------------
                                                                  $     43,048     $     39,932
-----------------------------------------------------------------------------------------------
Deferred tax liabilities:
   Property and equipment, principally due to accelerated
   depreciation                                                   $     73,697     $     64,012
-----------------------------------------------------------------------------------------------


</TABLE> 


<PAGE>
                                        PAGE F14

Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)



5: Employee Benefit Plans

The Company  maintains a salary  deferral  401(k) plan  covering  substantially
all  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 the  fiscal  years  1997,  1996 
and 1995,  Company contributions  for these  plans were  $6,550,  $5,715 and 
$4,876,  respectively.  The  Company  does not offer  post-employment  or
post-retirement benefits.

The Company contributes to several  union-sponsored  multi-employer  pension
plans. These plans are not administered by the Company, 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
the Company or upon  termination of the pension plans. To date,  no  withdrawal
or  termination  has  occurred  or is  contemplated.  For the  fiscal  years 
1997,  1996 and  1995,  Company contributions for these pension plans were
$54,041, $45,094 and $39,428, respectively.

6: Common Stock

The Company  maintains  an employee  stock  purchase  plan which  provides for
the purchase of an aggregate of not more than 900,000 shares of the Company's
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 January 3, 1998;  493,110 
shares had been issued under this plan.

The Company  maintains  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 3,760,000  shares of the Company's  common stock.  Stock
options issued pursuant to the plans are  exercisable  for  periods up to 10
years from the date an option is  granted.  At January 3, 1998 there were
1,787,200  shares available for granting under the plans.

In accordance  with the  provisions of SFAS No. 123, the Company  applies APB 
Opinion 25 and related  interpretations  in accounting for its stock  option 
plans,  and  accordingly,  does not  recognize  compensation  cost.  If the
Company had elected to  recognize compensation  cost based on the fair value of
the  options  granted at grant date,  as  prescribed  by SFAS No. 123,  net
income and earnings per share would have been reduced to the pro forma amounts
indicated in the table below:
<TABLE>
<CAPTION>

Fiscal Year                                                                1997            1996             1995
----------------------------------------------------------------------------------------------------------------
     <S>                                                                   <C>            <C>                 <C>
Net income - as reported                                           $     56,581    $     31,478     $     33,338
Net income - pro forma                                                   55,808          31,049           33,163

Basic earnings per share - as reported                                     2.21            1.41             1.52
Basic earnings per share - pro forma                                       2.18            1.40             1.51

Diluted earnings per share - as reported                                   2.19            1.40             1.51
Diluted earnings per share - pro forma                                     2.16            1.38             1.50
</TABLE>

As prescribed  under SFAS No. 123, pro forma net income amounts  presented above
reflect only options granted in 1997, 1996 and 1995 since compensation  costs 
for options granted prior to January 1, 1995 are not considered.  Compensation
cost for options granted in 1997, 1996 and 1995 is reflected over the options'
vesting periods ranging from two to five years.

The fair  value of each  option  grant is  estimated  on the date of grant 
using the  Black-Scholes  option-pricing  model with the following  
weighted-average  assumptions used for grants in fiscal years 1997, 1996 and 
1995: dividend yield of 1.58% for all years; expected  volatility ranging  from 
35.69% to 37.07%;  risk-free  interest  rates at grant date  ranging from 6.07% 
to 7.46%;  and expected lives ranging from 5.69 to 6.40 years.



<PAGE>
                                   PAGE F15

Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)



A summary of the status of the Company's stock option plans is presented below:
<TABLE>
<CAPTION>

Fiscal Year                                               1997                            1996                              1995
-----------------------------------------------------------------------------------------------------------------------------------

                                                     Weighted-                        Weighted-                        Weighted-
                                                       Average                          Average                          Average
                                                      Exercise                         Exercise                         Exercise
                                       Shares            Price          Shares            Price          Shares            Price
-----------------------------------------------------------------------------------------------------------------------------------
          <S>                           <C>            <C>                 <C>            <C>            <C>                 <C>  
Outstanding at beginning of year    1,107,250     $      17.84         758,800     $      16.21         823,400     $      15.72
Granted                               623,500            29.93         479,000            19.49          58,500            22.80
Exercised                            (279,520)           14.98         (92,900)           13.65         (79,700)           13.53
Forfeited                             (15,500)           16.52         (37,650)           16.16         (43,400)           20.47
                                       ______                           ______                           ______
Outstanding at end of year          1,435,730            23.67       1,107,250            17.84         758,800           16.21
                                       ______                           ______                           ______

Options exercisable at year end       402,690            17.74         448,220            15.65         399,330            15.19
                                       ______                           ______                           ______

Weighted-average fair value of
   options granted
      during the year             $     11.80                     $       8.18                     $       9.59
</TABLE>

The following table summarizes information about stock options outstanding
at January 3, 1998:
 <TABLE>
<CAPTION>
                                                                  Outstanding Options                        Options Exercisable
------------------------------------------------------------------------------------------------------------------------------------

                                              Weighted Average
                                  Number             Remaining             Weighted-                Number             Weighted-
          Range of           Outstanding     Contractual Life                Average           Exercisable               Average
  Estimated Prices           at 01/03/98               (years)        Exercise Price           at 01/03/98        Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
          <C>                      <C>                      <C>                 <C>                 <C>                      <C>
$    13.00 - 15.00               184,350                  4.80    $            13.80               181,350    $            13.78
     18.25 - 19.63               463,000                  8.49                 19.48               114,300                 19.32
     22.50 - 24.00               214,880                  7.11                 23.05               107,040                 22.77
     25.94 - 32.00               573,500                  9.93                 30.45                     0                     0
                                 _______                                                           _______               _______
                               1,435,730                  8.38                 23.67               402,690                 17.74
                                 _______                                                           _______               _______

</TABLE>
In February,  1994 the Board of Directors  approved a stockholder  rights plan
designed to deter  coercive  takeover  tactics and to prevent an acquirer  from
gaining  control of the Company  without  offering a fair price to all of the 
Company's  stockholders.  At that time,  the  Company  declared a  distribution 
of one right for each share of common  stock outstanding  (effected  as a stock
dividend) to  stockholders  of record as of February 11, 1994 and generally to
shares  issuable after that date. Each right entitles holders  to buy  
one-hundredth  (1/100)  of a share of the  Company's  newly  designated  Series
A Junior  Participating  Cumulative Preferred  Stock,  $0.01 par value per 
share,  for a  purchase  price of  $110.00.  Each  right is  exercisable  ten
days after the acquisition  of 15% or more of the  Company's  voting  stock,  
or the  commencement  of a tender or  exchange  offer under which the offeror 
would own 19.9% or more of the Company's stock. In the event of a proposed 
takeover  meeting  certain  additional  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 the  Company's  common  stock.  This 
would have the effect of significantly diluting the holdings of the takeover
bidder. These rights expire on February 3, 2004.

In February  1997,  the Company sold  3,105,000 of its shares in a public 
offering.  The net proceeds  from the sale,  amounting to approximately
$69,000,000, were initially used to repay outstanding debt under the Company'
revolving credit facility.


<PAGE> 
                                   PAGE F16

Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)



7: Commitments and Contingencies

The  Company is  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.  In the opinion of 
management,  the  outcome of these  matters is not  expected to have any 
material  adverse  effect on the  consolidated financial position or results of
operations of the Company and have been adequately provided for in the financial
statements.

At January 3, 1998, the Company had capital purchase  commitments of 
approximately  $12,778 for land and  improvements,  $30,671 for transportation
equipment, and $679 for other equipment.

8: Restructuring Charge

During  the  fourth  quarter  1996,  management  authorized  a  restructuring 
charge at its USF Red Star  subsidiary.  The  pre-tax restructuring  charge of
$4,050 relates  primarily to ongoing lease  commitments for terminals no longer
occupied and severance paid in connection with the reduction of personnel.  The 
Company  anticipates that no additional  charges against its future  operations
will be incurred as a result of this restructuring charge.

9: Acquisitions

During 1997,  under the purchase  method of accounting,  the Company  acquired 
all of the  outstanding  shares of USF Seko Worldwide Inc.,  an  airfreight 
forwarding  company and the  general  commodities  business of Mercury  
Distribution  Carriers,  Inc.  for an aggregate amount of $26,779 of cash and 
debt incurred.

During 1996, under the purchase method of accounting,  the Company acquired all
the outstanding shares of Interamerican, a contract warehousing company and the
general commodities business of Transus for an aggregate amount of $40,765 of
cash and equity issued.

10: Business Segments

The Company has elected to adopt early SFAS No. 131 "Disclosures About Segments
of an Enterprise and Related Information".

The Company has seven reportable segments:  LTL trucking group (five regional 
carriers),  logistics and freight forwarding.  The LTL trucking group provides
overnight and second-day delivery of general  commodities throughout the United
States and into Canada. The Company's logistics subsidiaries  provide solutions
to customers'  logistics and distribution  requirements.  The Company's freight
forwarding  subsidiaries  provide domestic and  international air and ocean 
freight service through both exclusive and non-exclusive agents. The reportable 
segments are managed  separately  because each business has differing  customer 
requirements,  either as a result of the regional environment of the country or 
differences in products and services offered.

The  accounting  policies of the  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. The Company  evaluates performance based on profit or
loss from operations before income taxes, interest, amortization of intangibles
and other non-operating income (expenses).


<PAGE>
                                                  PAGE F17

Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)
<TABLE>
<CAPTION>

Fiscal Year                                                                                1997            1996             1995
------------------------------------------------------------------------------------------------------------------------------------
     <S>                                                                                  <C>            <C>                 <C>
Revenue
   LTL Group:
      USF Holland                                                                  $    711,137    $    595,378     $    527,371
      USF Reddaway                                                                      198,714         177,998          163,506
      USF Red Star                                                                      194,823         196,399          200,674
      USF Dugan                                                                         170,962         148,527           76,459
      USF Bestway                                                                       133,450         113,058          107,646
------------------------------------------------------------------------------------------------------------------------------------
         Sub total LTL Group                                                          1,409,086       1,231,360        1,075,656
   Logistics subsidiaries                                                               106,299          85,601           64,093
   Freight forwarding                                                                    44,340           8,400            4,639
   Corporate and other                                                                    5,524           5,611               70
------------------------------------------------------------------------------------------------------------------------------------
Total Revenue                                                                      $  1,565,249     $ 1,330,972     $  1,144,458

Income From Operations
   LTL Group:
      USF Holland                                                                  $     65,244    $     51,362     $     43,684
      USF Reddaway                                                                       13,457           9,262           11,019
      USF Red Star                                                                          871          (7,999)          (2,137)
      USF Dugan                                                                           6,145           3,237            5,239
      USF Bestway                                                                        17,433          12,014           10,102
------------------------------------------------------------------------------------------------------------------------------------
         Sub total LTL Group                                                            103,150          67,876           67,907
   Logistics subsidiaries                                                                 6,414           2,655            3,010
   Freight forwarding                                                                     1,289              33              (33)
   Corporate and other                                                                   (2,936)           (959)            (758)
   Amortization of intangibles                                                           (2,907)         (2,477)          (2,583)
------------------------------------------------------------------------------------------------------------------------------------
Total Income from Operations                                                       $    105,010     $    67,128      $    67,543
------------------------------------------------------------------------------------------------------------------------------------

Assets
   LTL Group:
      USF Holland                                                                  $    276,810     $   232,003       $  207,737
      USF Reddaway                                                                      108,979         104,608           87,181
      USF Red Star                                                                      137,336         133,014          139,896
      USF Dugan                                                                          93,737          86,849           46,631
      USF Bestway                                                                        64,266          54,287           53,535
------------------------------------------------------------------------------------------------------------------------------------
         Sub total LTL Group                                                            681,128         610,761          534,980
   Logistics subsidiaries                                                                59,458          62,753           33,767
   Freight forwarding                                                                    52,232           2,080            1,102
   Corporate and other                                                                    6,717          12,914            8,345
------------------------------------------------------------------------------------------------------------------------------------
Total Assets                                                                       $    799,535     $   688,508      $   578,194
</TABLE>
<PAGE>
                                        PAGE F18


Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)
<TABLE>


Fiscal Year                                                                                1997            1996             1995
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          <S>                                                                             <C>                <C>             <C>
Long Lived Asset Expenditures
   LTL Group:
      USF Holland                                                                  $     66,637    $     43,504     $     49,252
      USF Reddaway                                                                       19,421          14,865           15,799
      USF Red Star                                                                       10,439           1,755           19,075
      USF Dugan                                                                          18,134           9,070           11,338
      USF Bestway                                                                         8,463           6,978            2,854
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         Sub total LTL Group                                                            123,094          76,172           98,318
   Logistics subsidiaries                                                                 4,799          13,573           10,025
   Freight forwarding                                                                       280             107              123
   Corporate and other                                                                      636           4,205            8,209
------------------------------------------------------------------------------------------------------------------------------------
Total Long Lived Asset Expenditures                                                $    128,809     $    94,057      $   116,675

Depreciation Expense
   LTL Group:
      USF Holland                                                                  $     28,704    $     23,063     $     19,005
      USF Reddaway                                                                       10,280           8,588            7,617
      USF Red Star                                                                        7,262           7,829            7,521
      USF Dugan                                                                           9,919          10,213            5,129
      USF Bestway                                                                         5,054           4,658            4,568
------------------------------------------------------------------------------------------------------------------------------------
         Sub total LTL Group                                                             61,219          54,351           43,840
   Logistics subsidiaries                                                                 5,870           4,760            3,446
   Freight forwarding                                                                       278              66               30
   Corporate and other                                                                    1,825           2,220              431
------------------------------------------------------------------------------------------------------------------------------------
Total Depreciation Expense                                                         $     69,192     $    61,397      $    47,747
</TABLE>

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                                                       PAGE F19


11: Quarterly Financial Information (unaudited)
<TABLE> 
Quarters                                                 First          Second            Third          Fourth       Total Year
------------------------------------------------------------------------------------------------------------------------------------
     <S>                                                    <C>            <C>            <C>            <C>            <C>
Fiscal 1997:
   Operating revenue                             $     355,817    $    380,763    $     393,462   $     435,207    $   1,565,249
   Income from operations                               19,071          26,915           31,905          27,119          105,010
   Net income                                            9,750          14,541           17,542          14,748           56,581
   Net income per share-basic                             0.40            0.56            0.68             0.57             2.21
   Net income per share-diluted                           0.40            0.56             0.67            0.56             2.19
   Dividends declared per share                         0.0933          0.0933           0.0933          0.0933            .3733
   Market price per share (calendar quarter)     22.87 - 28.00    23.12 - 29.00   25.75 - 34.50   29.37 - 36.75    22.87 - 36.75

Fiscal 1996:
   Operating revenue                             $     313,705    $    332,089    $     343,203   $     341,975    $   1,330,972
   Income from operations                               10,412          17,231           22,528          16,957           67,128
   Net income                                            4,349           8,137           11,024           7,968           31,478
   Net income per share-basic                             0.20            0.37            0.49             0.35             1.41
   Net income per share-diluted                           0.20            0.37             0.48            0.35             1.40
   Dividends declared per share                         0.0933          0.0933           0.0933          0.0933            .3733
   Market price per share (calendar quarter)     18.25 - 23.25    19.37 - 24.25   16.75 - 22.50   19.50 - 28.25    16.75 - 28.25

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                             PAGE F20

STATISTICAL INFORMATION

               Operating Operating LTL Tons       LTL            Terminals Tractors  Trailers  Employees
               Revenue   Ratio                    Shipments
          YR.  (million)           (thousands)    (thousands)
          __   _________ _________ ___________    ___________    _________ ________  ________  _________
  <S>     <C>      <C>        <C>       <C>            <C>            <C>       <C>       <C>       <C>  

Holland   97   $711.1    90.8%     3,826.9         6,163.6         51        3,448     5,998     7,322
          96    595.4    91.4      3,291.2         5,347.3         48        2,751     5,265     6,167  
Red Star  97   $194.8    99.6%       898.0         1,887.4         26        1,007     2,190     2,108
          96    196.4   104.1        940.1         1,968.1         26          925     2,132     2,254
Reddaway  97   $198.7    93.2%       835.1         1,741.9         55        1,064     2,781     2,369
          96    178.0    94.8        751.2         1,585.3         55          938     2,519     2,225
Bestway   97   $133.5    86.9%       630.8         1,211.1         26          590     2,142     1,439
          96    113.1    89.4        545.7         1,027.4         25          548     1,785     1,271
Dugan     97   $171.0    96.4%       877.4         1,642.3         59          961     2,924     2,056
          96    148.5    97.8        777.1         1,471.9         57          818     2,504     1,923
Logistics 97   $106.3    94.0%        NA               NA          NA          491     1,163     1,534
          96     85.6    96.9         NA               NA          NA          431     1,091     1,256
Seko      97   $ 31.8    96.5%        NA               NA          NA          NA        NA        148
          




</TABLE>