##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-K



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|           |  |                                                                                                                                                     
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                                                     
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2003        
|or        
|o          |  | 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



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USF Corporation


(Exact name of registrant as specified in its
charter)




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

8550 W. Bryn Mawr Ave., Ste. 700,
Chicago, IL 60631

(Address of principal executive offices) (Zip
Code)


(773) 824-1000

(Registrants telephone number, including
area code)


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®                                  
|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.    Yes þ    No o

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.    o

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

The number of shares of common stock outstanding
at March 1, 2004 was 27,557,589. The aggregate market value
of the voting stock of the registrant as of March 1, 2004
was approximately $980,000,000.

DOCUMENTS INCORPORATED BY REFERENCE

1) Proxy statement to be filed on or about
March 31, 2004 (Only those portions referenced herein are
incorporated in this Form 10-K).



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TABLE OF CONTENTS






|                                                |  |                                                                                           |  |      |    |  |  | 
|----------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- |  |  | 
|Item                                            |  |                                                                                           |  | Page
|                                                |  |                                                                                           |  |     
|PART I                                          |  |                                                                                           |  |      |    | 
|1.                                              |  | Business                                                                                  |  |      | 2  | 
|2.                                              |  | Properties                                                                                |  |      | 6  | 
|3.                                              |  | Legal Proceedings                                                                         |  |      | 6  | 
|4.                                              |  | Submission of Matters to a
    Vote of Security Holders                                   |  |      | 7  | 
|PART II                                         |  |                                                                                           |  |      |    | 
|5.                                              |  | Market for Registrants
    Common Equity and Related Stockholder Matters                 |  |      | 7  | 
|6.                                              |  | Selected Financial Data                                                                   |  |      | 8  | 
|7.                                              |  | Managements Discussion
    and Analysis of Results of Operations and Financial Condition |  |      | 10 | 
|7a.                                             |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |  |      | 18 | 
|8.                                              |  | Financial Statements and
    Supplementary Data                                           |  |      | 20 | 
|9.                                              |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure  |  |      | 42 | 
|9a.                                             |  | Controls and Procedures                                                                   |  |      | 42 | 
|PART III                                        |  |                                                                                           |  |      |    | 
|10.                                             |  | Directors and Executive
    Officers of the Registrant                                    |  |      | 42 | 
|11.                                             |  | Executive Compensation                                                                    |  |      | 43 | 
|12.                                             |  | Security Ownership of
    Certain Beneficial Owners and Management                        |  |      | 43 | 
|13.                                             |  | Certain Relationships and
    Related Transactions                                        |  |      | 45 | 
|14.                                             |  | Principal Accounting Fees
    and Services                                                |  |      | 45 | 
|PART IV                                         |  |                                                                                           |  |      |    | 
|15.                                             |  | Exhibits, Financial
    Statements Schedules and Reports on Form 8-K                      |  |      | 45 | 
|Amended & Restated Certificate of Incorporation
|Bylaws                                         
|Capital Accumulation Plan                      
|Subsidiaries                                   
|Consent of Deloitte & Touche LLP               
|Power of Attorney                              
|302 Certification                              
|302 Certification                              
|906 Certification                              
|906 Certification                              





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##### Table of Contents






PART I

(Thousands of dollars, except share and per
share amounts)



Item 1  Business

General Development of Business



| |                                            
| | -------------------------------------------
| | Continuing Operations  Core
    Businesses

USF Corporation (USF) provides
comprehensive supply chain management services in four business
segments through our operating subsidiaries. In the
less-than-truckload (LTL) segment, carriers provide
regional and inter-regional delivery throughout the United
States (US), certain areas of Canada and throughout
Mexico. Our truckload (TL) segment offers premium
regional and national truckload services. The logistics
(Logistics) segment provides dedicated carriage,
cross-dock operations, supply chain management, contractual
warehousing, domestic ocean freight forwarding and reverse
logistics services. Our corporate and other segment performs
support activities for our business segments including
executive, information technology (IT), corporate
sales and various financial management functions. Principal
subsidiaries in the 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.
Logistics consists of USF Logistics Services Inc. and USF
Processors Inc.

In December 2003, we began offering
transportation and logistics services in Mexico and across the
United States/ Mexico border through a joint venture with the
shareholders of Autolineas Mexicanas S.A. de C.V.
(ALMEX). ALMEX, a nationwide LTL carrier in Mexico,
has a network of 52 terminals providing service to virtually the
entire country.



| |                                         
| | ----------------------------------------
| | Continuing Operations 
    Acquisitions

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;
and Underwood Trucking, an Indiana-based truckload carrier.
Total consideration for all 1999 acquisitions amounted to
approximately $39,000 of cash and debt assumed. During 2000, we
acquired Tri-Star Corporation, Inc., a Tennessee-based
truckload carrier. Total consideration for the 2000 acquisition
amounted to approximately $17,000 of cash and debt assumed.

In February 2003, we acquired the stock of System
81 Express, Inc., a truckload carrier based in Tennessee
that owned or operated approximately 140 tractors and 260
trailers, for approximately $4,700 in cash and assumed debt. In
addition, contingent performance based payments totaling $314
were subsequently made to the former owners of System 81 Express.

In April 2003, we paid $3,000 in cash for certain
assets and the business of Plymouth Rock Transportation
Corporation, a Massachusetts-based LTL carrier that provided
overnight freight service to 11 Northeastern states. Contingent
purchase price payments over four years totaling up to
approximately $3,000 may be made to the former owners of
Plymouth Rock Transportation Corporation if certain revenue
goals are achieved.



| |                                                     
| | ----------------------------------------------------
| | Continuing Operations  Non-Core
    Asia Operations

During the first quarter of 2002 we relinquished
our 50% interest in our consolidated subsidiary, USF Asia
(Asia). We recorded a $12,760 charge, which included
a $10,000 negotiated payment to our former partner. The
remaining $2,760 represented the relinquishment of our net
assets to our former partner. We initiated our commitment to
dispose of our Asia operation in the fourth quarter of 2001.
Accordingly, as required by Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, we
applied the provisions of Accounting Principles Board
(APB) Opinion No. 30, Reporting the
Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions. The
Asia operation was a component of our freight forwarding
segment. APB No. 30 required presentation of

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(Thousands of dollars, except share and per
share amounts)


a business disposal in discontinued operations
only when a company disposed of an entire segment. We therefore
did not present the Asia operation in discontinued operations.



| |                                            
| | -------------------------------------------
| | Discontinued Freight Forwarding
    Segment

From 1997 to 2001 we made several acquisitions in
our freight forwarding segment. Total consideration amounted to
approximately $96,000 of cash and debt assumed.

During 2002, we decided to focus on our core
competencies of providing high value comprehensive supply chain
management services, and in October 2002 disposed of our
non-core freight forwarding business that included several
companies operating domestically under the name USF Worldwide
Inc. (Worldwide) and in Great Britain under the name
USF Worldwide Logistics (UK) Ltd. (LTD). During the
fourth quarter of 2002, we recorded an after-tax charge for the
disposal of Worldwide amounting to $13,239. As a result, our
consolidated financial statements have been restated to reflect
the non-core freight forwarding segment (excluding Asia
operations) as discontinued operations for all periods
presented. Prior to the disposal, year to date 2002 losses
after-tax benefits amounted to $16,978. In December 2002, we
reacquired the ocean freight forwarding businesses of Worldwide
for total consideration of $3,000. These businesses are recorded
in continuing operations in the logistics segment.



| |                                         
| | ----------------------------------------
| | Financial Information About
    Segments

Segment financial information is included in
Note 13 to the Consolidated Financial Statements found
later in this Form 10-K.

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 carriers are generally categorized as
regional, interregional or long-haul carriers, depending on the
distance freight travels from pickup to final delivery. Regional
LTL 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.

Our LTL trucking subsidiaries principally compete
against regional, interregional and long-haul LTL carriers. To a
lesser degree, we 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, tractors and
trailers. LTL is a competitive market with intense pricing
pressure and increasing costs that present a challenge to profit
margins.

Our LTL trucking subsidiaries three primary
service products are USF PremierSM
(Premier), USF PremierPlusSM
(PremierPlus) and USF GuaranteedSM
(Guaranteed). Premier service is overnight and
second-day deliveries generally within each of our LTL trucking
subsidiaries regional service areas. PremierPlus service
is interregional longer haul service between two of our LTL
trucking subsidiaries. Guaranteed service includes deliveries
within our regional and interregional service areas with a
guaranteed

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(Thousands of dollars, except share and per
share amounts)


date of delivery. Revenue for our Premier,
PremierPlus and Guaranteed services accounted for approximately
87%, 12% and 1%, respectively, of the total LTL trucking revenue
in 2003. Our Premier and PremierPlus revenue included both LTL
and TL shipments. The average length of haul, for combined
inter- and intra-regional service was approximately
493 miles.

Holland is the largest of our operating
subsidiaries, transporting LTL shipments interstate throughout
the Central US, Eastern Canada and into the Southeastern US.
Holland operates from 57 terminals and uses predominantly single
48 and 53 foot trailers. Its average length of Premier line-haul
in 2003 was approximately 385 miles.

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. Full
truckload freight is picked up from the customer and delivered
to its final destination by either an employee driver or an
independent owner-operator under a leasing agreement.

Glen Moore transports TL shipments interstate
throughout the US generally from the Northeastern and
Southeastern states to the West Coast and into the North Central
states. It also operates over shorter distances in certain of
its dedicated customer lanes. At the end of 2003, Glen Moore
operated 857 tractors and 3,001 trailers. The company
primarily utilizes sleeper line-haul tractors and 53 foot
trailers. Its average length of haul in 2003 was approximately
200 miles for its short haul dedicated business and
approximately 700 miles for its traditional long-haul
business.

Logistics Subsidiaries

Logistics provides dedicated carriage, cross-dock
operations, supply chain management, contractual warehousing,
domestic ocean freight forwarding and reverse logistics services
to the retail and industrial markets with a focus on
consolidation/distribution and fulfillment programs.

Logistics has grown through acquisitions in the
warehousing industry and start up operations designed to serve
large customers special needs in the steel industry,
wholesale food industry, specialized retail customers and other
freight management operations. Our cross-docking operation,
which accounts for 41% of Logistics revenue, has increased
in size through a combination of geographic acquisitions and
internal expansion to meet the needs of its retail customers. It
operates out of 19 centers in the larger metropolitan areas of
the US.

Seasonality

Our results, consistent with the trucking
industry in general, typically show seasonal patterns with
tonnage and revenue declining during the winter months. Also,
inclement weather in the winter months can negatively affect our
results.

Customers

We are not dependent upon any particular
industry. We provide services to a wide variety of customers
including many large, publicly held companies. For the year
ended December 31, 2003, no single customer accounted for
more than 3.5% of our revenue and our 50 largest customers as a
group accounted for approximately 30% of total revenue.

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 assess a fuel
surcharge to offset increases in

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(Thousands of dollars, except share and per
share amounts)


fuel prices. 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

We operate under regulatory requirements from the
Department of Transportation, the Environmental Protection
Agency and various other federal and state agencies. These
regulations include driver hours of service rules, drug testing,
emission standards, and underground storage tank testing and
monitoring. Regulatory and legislative changes may influence
operating practices of the trucking industry, the demands for
services to shippers, and the costs of providing those services.

Effective January 1, 2004, the federal
government instituted new hours of service rules changing the
number of hours drivers can work in a 24 hour day. We have
implemented procedures to ensure compliance with the law, as
well as to minimize the effect to our cost of operations. We
expect minimal impact on our LTL business because of the shorter
length of haul.

Insurance and Safety

We are effectively self-insured on our
significant operations up to $5,000 per occurrence for
cargo loss and damage, bodily injury and property damage, and up
to $2,500 per occurrence for workers compensation
claims. Additionally, we have obtained third-party insurance for
workers compensation claims for amounts in excess of
$2,500 per occurrence and all other losses in excess of
$5,000. As of December 31, 2003, our financial statements
included an estimated total liability of $126,314 with respect
to these exposures.

Each of our operating subsidiaries employs safety
specialists and maintains safety programs. In addition, we
employ specialists to perform compliance checks and conduct
safety tests throughout our operations.

Our insurance expense as a percentage of revenue
over the last three years was as follows:

|                                         |  |      |      |      |  |      |      |  |  |  |      | 
|---------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- | 
|Year                                     |  | 2003 |      | 2002 |  | 2001
|                                         |  |      |      |      |  |     
|Cargo, bodily injury and property damage |  |      | 1.9% |      |  |      | 1.9% |  |  |  | 2.0% | 
|Workers compensation                    |  |      | 2.1% |      |  |      | 1.8% |  |  |  | 1.6% | 

Employees

At December 31, 2003, we employed
approximately 21,000 people, of whom approximately 48% were
members of unions. Of these union workers, approximately 90%
were employed by Holland or Red Star and belonged to the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America (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
2008.

Forward-Looking Statements

Certain statements contained in this document or
in documents that we incorporate by reference are
forward-looking statements as outlined in the
Private Securities Litigation Reform Act of 1995, such as
statements relating to managements views with respect to
future events and financial performance. These statements are
subject to risks, uncertainties and other factors that could
cause actual results to differ materially from historical
experience or from future results expressed or implied by them.
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,

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(Thousands of dollars, except share and per
share amounts)


intends or plans or by
discussions of strategies, intentions or outlook. Potential
risks and uncertainties include, but are not limited to:



| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General economic conditions and specific
    conditions in the markets in which we operate, which can affect
    demand for our services.            
|
| |  | The costs and difficulties in execution of
    certain of our sales, marketing, and IT functions.                                                    
|
| |  | Competition from other transportation and
    logistics services providers.                                                                          
|
| |  | Our ability to adapt to technological change and
    to compete with new or improved services offered by our
    competitors.                        
|
| |  | Increases in motor fuel prices (see
    Fuel).                                                                                                     
|
| |  | Work stoppages, strikes or slowdowns by our
    employees.                                                                                           
|
| |  | Changes in government regulation (see
    Regulation).                                                                                             
|
| |  | Effects of weather.                                                                                                                                  
|
| |  | Availability of financing on terms acceptable to
    us.                                                                                             
|
| |  | Other uncertainties detailed herein and at
    various times in Securities and Exchange Commission filings and
    press releases of USF Corporation.

We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise except as required
by applicable laws and regulations.

Available Information

We make available free of charge on or through
our Web site at www.usfc.com, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports as
soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and
Exchange Commission.




Item 2 
Properties

Our executive offices are located at 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.

Our network of 249 terminals (125 are owned and
124 are leased) is a key element in the operation of our LTL
trucking subsidiaries. The terminals vary significantly in size
according to the markets served. Sales personnel at each
terminal are involved in the solicitation of 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 dockworkers, line-haul drivers
and administrative personnel. Certain of our larger and
geographically located terminals 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.

Our TL subsidiary operates from 3 terminals (2
are owned and 1 is leased), and our logistics subsidiaries
operate from 65 facilities (8 are owned and 57 are leased).




Item 3  Legal
Proceedings

Our trucking subsidiaries are parties to a number
of proceedings brought under the Comprehensive Environmental
Response, Compensation and Liability Act, (CERCLA). They have
been made parties 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

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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


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. It is not
feasible to predict or determine the outcome of these or similar
proceedings brought by state agencies or private litigants. We
believe such liability, if any, would not materially adversely
affect our financial condition or results of operations.

Our Dugan subsidiary was the subject of a
criminal investigation by the City of Houston and an
administrative investigation by the Texas Commission on
Environmental Quality arising from inadvertent diesel releases
from Dugans Northfield facility located in Houston, Texas.
The City of Houston and State of Texas filed a misdemeanor
complaint against Dugan that has been resolved as of
November 12, 2003 based upon Dugans payment of the
sum of $70 plus court costs. Dugan has taken and continues to
take measures to respond to the environmental effects of these
releases and to curtail further releases. Dugan has also brought
suit against the environmental consultant who reviewed the
Northfield facility prior to Dugans acquisition of the
property in 1998.

On December 23, 2003, Idealease
Services, Inc. (Idealease) filed a complaint
against Logistics, in the Circuit Court of Cook County in
Chicago, Illinois. Idealease is asking the court to require
Logistics to specifically perform an alleged contractual
obligation to buy back from Idealease a fleet of vehicles it
claims is valued at approximately $14,500 or to pay Idealease
that amount. Idealease also contends that Logistics is liable
for $557 in lease payments and that certain riders to a lease
agreement are invalid due to a lack of consideration. Logistics
denies the material allegations in the Idealease complaint and
plans to vigorously contest the lawsuit in court.

We are involved in other litigation arising in
the ordinary course of business, primarily involving claims for
bodily injury, property damage, and workers compensation.
We believe the ultimate recovery or liability, if any, resulting
from such litigation, individually or in total, would 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 March 4, 2004,
there were approximately 14,000 beneficial holders of our common
stock. For the high and low sales prices of our common stock for
each full calendar quarter for 2003 and 2002, see
Item 7  Managements Discussion and
Analysis.

Since July 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.
See Managements Discussion and Analysis of Results
of Operations and Financial Condition  Liquidity and
Capital Resources.

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(Thousands of dollars, except share and per
share amounts)






|         |                        
|-------- | -----------------------
|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.

Selected Consolidated Financial Data

|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |      | 
|------------------------------------------------------------------------------- | --------------------------------- | ---- | --------- | ---- |  | ---- | --------- | ----- | - | ---- | --------- | ---- |  | - | --------- | ---- |  | - | --------- | ---- | 
|Year                                                                            |                                   | 2003 |           | 2002 |  | 2001 |           | 2000  |   | 1999
|                                                                                |                                   |      |           |      |  |      |           |       |   |     
|Statements of operations                                                        |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Revenue                                                                         |                                   | $    | 2,292,139 |      |  | $    | 2,250,526 |       |   | $    | 2,220,974 |      |  | $ | 2,288,613 |      |  | $ | 2,001,905 |     
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Income from operations                                                          |                                   |      | 95,592    |      |  |      | 80,854    |       |   |      | 103,336   |      |  |   | 182,673   |      |  |   | 182,016   |     
|Interest expense                                                                |                                   |      | (20,900   | )    |  |      | (20,516   | )     |   |      | (20,964   | )    |  |   | (21,090   | )    |  |   | (13,653   | )   
|Interest income                                                                 |                                   |      | 1,867     |      |  |      | 2,708     |       |   |      | 2,278     |      |  |   | 638       |      |  |   | 997       |     
|Other non-operating expense                                                     |                                   |      | (1,274    | )    |  |      | (1,054    | )     |   |      | (499      | )    |  |   | (926      | )    |  |   | (313      | )   
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Income from continuing operations before income
    taxes and minority interest |                                   |      | 75,285    |      |  |      | 61,992    |       |   |      | 84,151    |      |  |   | 161,295   |      |  |   | 169,047   |     
|Minority interest                                                               |                                   |      |          |      |  |      |          |       |   |      | (1,100    | )    |  |   | 1,708     |      |  |   |          |     
|Income tax expense                                                              |                                   |      | (31,184   | )    |  |      | (28,724   | )     |   |      | (33,074   | )    |  |   | (64,962   | )    |  |   | (69,165   | )   
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Income from continuing operations                                               |                                   |      | 44,101    |      |  |      | 33,268    |       |   |      | 49,977    |      |  |   | 98,041    |      |  |   | 99,882    |     
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Income/(loss) on discontinued operations, net of
    tax                        |                                   |      | (338      | )    |  |      | (30,217   | )     |   |      | (11,589   | )    |  |   | (1,243    | )    |  |   | 4,358     |     
|Cumulative effect of change in accounting for
    revenue recognition           |                                   |      | (1,467    | )    |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Cumulative effect of change in accounting for
    goodwill                      |                                   |      |          |      |  |      | (70,022   | )     |   |      |          |      |  |   |          |      |  |   |          |     
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Net income/(loss)                                                               |                                   | $    | 42,296    |      |  | $    | (66,971   | )     |   | $    | 38,388    |      |  | $ | 96,798    |      |  | $ | 104,240   |     
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Basic earnings per share                                                        |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|                                                                                | Income from continuing operations |      | $         | 1.62 |  |      | $         | 1.23  |   |      | $         | 1.90 |  |   | $         | 3.72 |  |   | $         | 3.78 | 
|Diluted earnings per share                                                      |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|                                                                                | Income from continuing operations |      |           | 1.61 |  |      |           | 1.22  |   |      |           | 1.87 |  |   |           | 3.65 |  |   |           | 3.63 | 
|Basic earnings per share                                                        |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|                                                                                | Net income/(loss) per share       |      |           | 1.55 |  |      |           | (2.49 | ) |      |           | 1.46 |  |   |           | 3.68 |  |   |           | 3.95 | 
|Diluted earnings per share                                                      |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|                                                                                | Net income/(loss) per share       |      |           | 1.55 |  |      |           | (2.45 | ) |      |           | 1.43 |  |   |           | 3.61 |  |   |           | 3.79 | 
|Cash dividends declared per share                                               |                                   |      | 0.37      |      |  |      | 0.37      |       |   |      | 0.37      |      |  |   | 0.37      |      |  |   | 0.37      |     
|Balance Sheets (excluding discontinued
    operations)                          |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Assets:                                                                         |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Current assets                                                                  |                                   | $    | 459,239   |      |  | $    | 410,007   |       |   | $    | 384,011   |      |  | $ | 335,762   |      |  | $ | 310,806   |     
|Property and equipment, net                                                     |                                   |      | 753,902   |      |  |      | 760,153   |       |   |      | 724,465   |      |  |   | 744,848   |      |  |   | 655,428   |     
|Goodwill                                                                        |                                   |      | 100,808   |      |  |      | 100,504   |       |   |      | 100,504   |      |  |   | 107,420   |      |  |   | 107,742   |     
|Other assets                                                                    |                                   |      | 44,139    |      |  |      | 24,607    |       |   |      | 26,459    |      |  |   | 21,215    |      |  |   | 13,555    |     
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     
|Total assets                                                                    |                                   | $    | 1,358,088 |      |  | $    | 1,295,271 |       |   | $    | 1,235,439 |      |  | $ | 1,209,245 |      |  | $ | 1,087,531 |     
|                                                                                |                                   |      |           |      |  |      |           |       |   |      |           |      |  |   |           |      |  |   |           |     

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share amounts)


|                                          |  |      |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|----------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|Year                                      |  | 2003 |         | 2002 |  | 2001 |         | 2000 |  | 1999
|                                          |  |      |         |      |  |      |         |      |  |     
|Liabilities and Stockholders
    Equity: |  |      |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Current liabilities                       |  | $    | 252,467 |      |  | $    | 240,068 |      |  | $    | 228,797 |  |  | $ | 261,696 |  |  | $ | 332,964 | 
|Long-term debt                            |  |      | 250,087 |      |  |      | 252,129 |      |  |      | 252,515 |  |  |   | 260,017 |  |  |   | 132,960 | 
|Other non-current liabilities             |  |      | 190,745 |      |  |      | 183,943 |      |  |      | 172,470 |  |  |   | 161,893 |  |  |   | 145,299 | 
|Minority interest                         |  |      |        |      |  |      |        |      |  |      | 1,855   |  |  |   | 539     |  |  |   |        | 
|Total stockholders equity                |  |      | 664,789 |      |  |      | 619,131 |      |  |      | 687,652 |  |  |   | 635,176 |  |  |   | 558,859 | 

In January 2002, we relinquished our interest in
USF Asia and incurred a charge of $12,760, which was included in
income from continuing operations. In addition, $6,000 in loans
were made to USF Asia, which were subsequently written off in
the fourth quarter of 2002. Also in 2002, upon adoption of
SFAS No. 142, we recorded a goodwill impairment charge
of $70,022 at USF Worldwide, our discontinued freight forwarding
segment. The charge was shown as a cumulative effect of change
in accounting principle.

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|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|Item 7  | Managements Discussion and Analysis
    of Results of Operations and Financial Condition

EXECUTIVE SUMMARY

2003 was a challenging year for USF. We
experienced softness in the US economy, increases in our costs
of labor and insurance, intense pricing pressure, and geographic
expansion of our competitors. Despite these conditions, we
earned $44,101 in income from continuing operations and
generated a net increase in cash of $67,501. However, we
recognized that within a changing, more competitive marketplace,
our business model needed to be changed to remain competitive
and grow the business. Under the direction of our leadership
team, we will be focused in 2004 on becoming a company of
one, projecting a common face to our customers so that in
their dealings with any combination of companies within the USF
system, the operations appear to be seamless. The opportunity is
to capitalize on the strength of the operating companies by
availing ourselves of the synergies normally found in a company
the size of USF Corporation. Initiatives to be implemented in
2004 include:



| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The deployment of a best practices
    group aimed at increasing productivity across operating
    companies as well as providing for significant cost reductions.                                                         
|
| |  | Placing a stronger focus on both corporate
    accounts and the cross-selling of regional and inter-regional
    products across all operating units.                                                                        
|
| |  | A more rigorous budget process with heightened
    awareness of capital spending levels along with stronger profit
    and loss accountability across all operating units.                                                   
|
| |  | A new product, USF MexicoSM, will
    increase cross-border opportunities for the LTL, TL and
    Logistics businesses and also provide USF with a significant
    competitive advantage over other transportation companies.
|
| |  | More focused IT plans and structure that will be
    better aligned with strategic initiatives.                                                                                                                              

While we remain confident that USF will be a more
focused and competitive company by the end of 2004, there are
risks and uncertainties that are inherent in the transportation
and logistics markets that may impact our results. Examples
include fuel costs, industry consolidation, regulatory issues,
general economic weakness, weather, customer failures and others.

CONSOLIDATED RESULTS

Our revenue and net income (loss) for 2001
through 2003 was as follows:

|                  |  |      |           |      |  |      |           |   |  |   |           | 
|----------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | 
|Year              |  | 2003 |           | 2002 |  | 2001
|                  |  |      |           |      |  |     
|Revenue           |  | $    | 2,292,139 |      |  | $    | 2,250,526 |   |  | $ | 2,220,974 | 
|Net Income (loss) |  |      | 42,296    |      |  |      | (66,971   | ) |  |   | 38,388    | 

The following comments provide an understanding
of significant items that were included in net income (loss)
during each of the three years presented.



| |   |                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our net loss for 2002 included a goodwill
    impairment charge of $70,022 at USF Worldwide, our discontinued
    freight forwarding segment. The charge resulted from the
    adoption of SFAS No. 142.                                                                                                               
|
| |  | Our net income (loss) for 2003 and 2002 was
    negatively impacted by our losses from discontinued freight
    forwarding operations of $338 and $16,978, respectively.                                                                                                                                               
|
| |  | Our net loss for 2002 included a loss of $13,239
    related to the disposal of our freight forwarding segment. The
    disposal of this segment was the result of taking the action
    necessary to better focus on our core competencies of providing
    high value comprehensive supply chain management services.

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(Thousands of dollars, except share and per
share amounts)




| |   |                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our net loss for 2002 included a charge of
    $12,760 related to the relinquishment of our interest in USF
    Asia to better focus on our core competencies. There were also
    loans of $6,000 that were forgiven in 2002 related to the
    relinquishment.                                             
|
| |  | Our net income for 2003 was negatively impacted
    by $1,467 due to a change in the accounting for revenue and
    expense recognition. This change was made to recognize the
    increase in our average length of haul of freight, which
    resulted from our implementation of new marketing strategies.
|
| |  | Our net income for 2003 included a gain of
    approximately $6,100 from the sale of our Red Star Newark
    terminal.                                                                                                                                                                                       

Our consolidated financial statements have been
restated to reflect the non-core freight forwarding segment as
discontinued operations. Unless otherwise indicated, the
following discussion relates to our continuing operations.

RESULTS OF OPERATIONS

LTL Group

Our revenue, income from operations and operating
ratios for 2001 through 2003 for our LTL group was as follows:

|                       |  |      |           |      |  |      |           |   |  |   |           |  
|---------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|Year                   |  | 2003 |           | 2002 |  | 2001
|                       |  |      |           |      |  |     
|Total Revenue          |  | $    | 1,898,668 |      |  | $    | 1,866,892 |   |  | $ | 1,816,204 |  
|Income from operations |  |      | 110,555   |      |  |      | 105,172   |   |  |   | 108,620   |  
|Operating Ratio        |  |      | 94.2      | %    |  |      | 94.4      | % |  |   | 94.0      | %

Our LTL segment includes our LTL operating
companies, each of which generates revenue from LTL and TL
shipments. Revenue from LTL shipments represents approximately
94% of the revenue in the LTL segment. LTL statistics presented
in the table below only include revenue from LTL shipments.

|     |  |                |           |             |  |             |         |            |  |        |          |          |  |         |        |  |  |   |       |  |  |  |       |  |  |  |     | 
|---- |  | -------------- | --------- | ----------- |  | ----------- | ------- | ---------- |  | ------ | -------- | -------- |  | ------- | ------ |  |  | - | ----- |  |  |  | ----- |  |  |  | --- | 
|     |  |               
|     |  | LTL Statistics
|     |  |               
|     |  |                |           | Revenue     |  | Revenue per |         |           
|     |  |                |           | per         |  | Hundred-    |         | Weight per |  | Length
|     |  | Revenue        |           | Tons        |  | Shipments   |         | Shipment   |  | weight |          | Shipment |  | of Haul
|     |  |                |           |             |  |             |         |            |  |        |          |          |  |        
|     |  | (Thousands)    |           | (Thousands) |  | (Thousands) |         |            |  |        |          | (Pounds) |  | (Miles)
|2003 |  | $              | 1,801,382 |             |  |             | 7,959.5 |            |  |        | 14,019.8 |          |  | $       | 128.49 |  |  | $ | 11.32 |  |  |  | 1,135 |  |  |  | 493 | 
|2002 |  |                | 1,758,871 |             |  |             | 8,140.1 |            |  |        | 14,425.9 |          |  |         | 121.92 |  |  |   | 10.80 |  |  |  | 1,129 |  |  |  | 488 | 
|2001 |  |                | 1,681,767 |             |  |             | 8,189.2 |            |  |        | 14,701.6 |          |  |         | 114.39 |  |  |   | 10.27 |  |  |  | 1,114 |  |  |  | 487 | 

2003 Compared to 2002

In 2003 our LTL segments total revenue and
income from operations increased from 2002 by 1.7% and 5.1%,
respectively. The following provides an understanding of the
factors that impacted our operating results:



| |   |                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | LTL tonnage increased at Reddaway 6.3% resulting
    in a 9.0% increase in LTL revenue.                                                                                                                                                                                                                                                                       
|
| |  | Revenue increased by 2.4% at Holland. A difficult
    industrial economy for most of 2003, particularly in the
    Midwest, and increased competition impacted our ability
    to grow.                                                                                                                                                                       
|
| |  | Revenue at Red Star decreased by 13.5% following
    our strategic decision to exit business with a large customer
    ($26,000) and the closure of terminals in the Carolinas and
    Atlanta ($14,000). These decreases were partially offset by the
    acquisition of a small Northeastern carrier and its contribution
    of $14,630 to revenue in 2003.

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| |   |                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The general rate increase of 5.9% that was
    implemented during the 2nd quarter of 2003. Its
    implementation occurred three weeks earlier in the year than
    2002s 5.9% increase.                                                                                                                                                                   
|
| |  | Revenue from fuel surcharges increased $28,941
    due to rising fuel costs.                                                                                                                                                                                                                                                                                
|
| |  | PremierPlus revenue increased 12.5% as a result
    of our marketing and service efforts. This revenue represented
    12.6% and 11.4% of LTL revenue in 2003 and 2002, respectively.                                                                                                                                                                       
|
| |  | Income from operations for 2003 included a gain
    of $10,000 from the sale of our Red Star Newark terminal.                                                                                                                                                                                                                                               
|
| |  | Income from operations was also impacted by the
    effect of increased insurance costs of 14.3% or $11,238, which
    reflects the continued escalation of insurance premiums and the
    medical cost-driven inflation of workers compensation, and
    continued pricing pressures in the Midwest and Southwest, which
    affected Holland and Bestway.
|
| |  | We were able to increase our revenue per shipment
    and revenue per hundredweight through increased focus on yield
    in our pricing decisions.                                                                                                                                                                                                          

Holland, our largest subsidiary, accounted for
52% of our LTL segments total revenue and 61% of its
income from operations. Hollands total revenue and income
from operations in 2003 were $983,830 and $67,466, an increase
of $23,438 and a decrease of $4,302, respectively. Although
Hollands income from operations and margins decreased from
2002, margins improved during the latter part of 2003 as result
of increased focus on managing yield and costs. Also during
2003, Holland was negatively impacted by increased contractual
benefit and workers compensation costs.

2002 Compared to 2001

The following provides an understanding of the
factors that impacted our operating results:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenue and income from operations were lower
    during the first eight months of 2002 compared to the first
    eight months of 2001.                                                                                                                                                                                                                                                                             
|
| |  | In early September 2002, Consolidated Freightways
    (CF) filed for bankruptcy and our LTL segment
    captured a portion of CFs former revenue which contributed
    to our fourth quarter 2002 revenue increase of 11.1% compared to
    the fourth quarter of 2001.                                                                                                                                          
|
| |  | In late June 2002, our LTL segment enacted a 5.9%
    general rate increase, the same as in June 2001.                                                                                                                                                                                                                                                                                                              
|
| |  | Pricing pressures continued throughout the year,
    but rates held in the fourth quarter, as evidenced by the
    increase in our LTL revenue per hundredweight compared to 2001.                                                                                                                                                                                                                                  
|
| |  | The increase in our LTL segments operating
    ratio was primarily attributed to an increase in labor, union
    health care, and equipment maintenance expense.                                                                                                                                                                                                                                                   
|
| |  | Workers compensation and other insurance
    were generally flat in both years. This cost control was
    achieved as the LTL segment managed increases in insurance
    premiums by increasing our level of self-insured risks.
    Reductions in cargo claims in 2002 offset the increases in
    workers compensation and third-party liability expenses.                                                      
|
| |  | At Holland, our largest subsidiary, revenue
    increased to $960,392 in 2002 compared to $937,150 in 2001, and
    income from operations declined to $71,800 in 2002 from $75,000
    in 2001. Even though Holland showed increased business volumes
    (tonnage and shipments grew by 2.9% and 4.1%, respectively), its
    average revenue per shipment decreased 1.5%, resulting in a
    decrease in margins.

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(Thousands of dollars, except share and per
share amounts)


Truckload

|                       |  |      |         |      |  |      |         |   |  |   |         |  
|---------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Year                   |  | 2003 |         | 2002 |  | 2001
|                       |  |      |         |      |  |     
|Revenue                |  | $    | 128,093 |      |  | $    | 114,151 |   |  | $ | 100,439 |  
|Income from operations |  |      | 4,663   |      |  |      | 5,311   |   |  |   | 2,887   |  
|Operating Ratio        |  |      | 96.4    | %    |  |      | 95.3    | % |  |   | 97.1    | %

The following provides an understanding of the
factors that impacted our operating results:



| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The increase in revenue in 2003 from 2002 was
    primarily due to the acquisition of System 81
    Express, Inc., a truckload carrier based in Tennessee that
    contributed $8,000.                                                                          
|
| |  | Increases in revenue per mile, increased business
    volumes with new customers and our regional LTL carriers
    (performing the intercompany substitute line-haul for our
    PremierPlus service product) also contributed to the 2003
    revenue increase.
|
| |  | The decline in the TL segments 2003 income
    from operations was primarily due to substantially higher fuel
    costs compared to 2002, which were partially offset by our
    improved loaded revenue per mile.                                             
|
| |  | The improvement in the operating ratio in 2002
    from 2001 was mainly attributable to reduced labor and purchased
    transportation expense as a percent of revenue as a result of
    improved driver productivity, as well as lower fuel prices.           

Logistics

|                       |  |      |         |      |  |      |         |   |  |   |         |  
|---------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Year                   |  | 2003 |         | 2002 |  | 2001
|                       |  |      |         |      |  |     
|Revenue                |  | $    | 276,441 |      |  | $    | 278,161 |   |  | $ | 277,393 |  
|Income from operations |  |      | 9,270   |      |  |      | 12,603  |   |  |   | 11,185  |  
|Operating Ratio        |  |      | 96.7    | %    |  |      | 95.5    | % |  |   | 96.0    | %

The following provides an understanding of the
factors that impacted our operating results:



| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Revenue from our cross-dock operations increased
    $4,200 in 2003, primarily through growth at existing
    distribution centers.                                                                                             
|
| |  | Revenue from our dedicated carriage and warehouse
    operations decreased $30,300 in 2003 due in large part to our
    customer, The Fleming Companies, bankruptcy in April 2003.                                              
|
| |  | Revenue from our reverse logistics services
    decreased $4,900 resulting from the loss of a major customer in
    early 2003.                                                                                                 
|
| |  | These revenue decreases were partially offset by
    $26,800 in revenue from the domestic ocean freight forwarding
    operations that we acquired in late 2002 from Seko Worldwide.                                            
|
| |  | A bad debt write off of $2,000 was recorded in
    2003 as a result of The Fleming Companies bankruptcy.                                                                                                                        
|
| |  | Revenue in our cross-dock business increased by
    $9,800 in 2002, primarily through growth at existing
    distribution centers along with full year revenue from
    distribution centers that opened late in 2001.          
|
| |  | Reverse logistics services revenue decreased
    $15,100 in 2002. Most of this revenue decline came from the loss
    of significant volumes from a major customer that, while
    declining in 2001, were non-existent in 2002.
|
| |  | In 2001, there was a $1,600 charge related to
    employee costs from combining certain administrative functions
    within the segment.                                                                                        

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(Thousands of dollars, except share and per
share amounts)


Corporate and Other

|                  |  |      |         |      |  |      |         |   |  |   |         |  
|----------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Year              |  | 2003 |         | 2002 |  | 2001
|                  |  |      |         |      |  |     
|Corporate & Other |  | $    | (28,896 | )    |  | $    | (29,472 | ) |  | $ | (16,545 | )

The following provides an understanding of the
factors that impacted our operating results:



| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In 2003, several major software projects that
    were begun in 2002 and were in the non-capitalizable phase moved
    into the phase where the development costs were capitalized.                                         
|
| |  | 2003 included a $621 restructuring charge as a
    result of staff reductions of 29 employees to streamline the IT
    organization.                                                                                        
|
| |  | Corporate office expense (non-IT) increased in
    2003 primarily due to retirement costs of approximately $2,100
    for a former CEO.                                                                                     
|
| |  | Amortization of intangible assets increased by
    $1,134 in 2003, which resulted from the acquisitions of System
    81 Express, Inc. and Plymouth Rock Transportation
    Corporation.                                    
|
| |  | In 2002 IT expense increased due to our
    significant investment in IT initiatives, which resulted in the
    need for additions to our employee staff as well as the
    utilization of outsourced labor and consultants.
|
| |  | Amortization of intangible assets decreased by
    $4,211 in 2002 as a result of adopting SFAS No. 142,
    which required us to cease amortization of goodwill in 2002.                                                    

Non-operating Income and Expense

Interest expense principally includes interest on
our guaranteed unsecured notes of $250,000. We had cash invested
in interest bearing instruments during all of 2003 and 2002. For
2003 and 2002, interest income also included $886 and $1,261
from the settlement of tax related matters. At the end of 2003
and 2002, we had cash and cash equivalents of $121,659 and
$54,158, respectively.

Income Taxes

Our effective tax rate on income from continuing
operations for 2003 was 41.4% compared with 46.3% in 2002 and
39.3% in 2001. The current year effective tax rate is lower than
that of the prior year because a net tax benefit was not
recognized for the Asia exit costs in the prior year, resulting
in an increase in the rate for that year.

Outlook  Unknown Trends or
Uncertainties

We expect improvement in our operating results in
2004 as a result of an improved economy and our strategic
initiatives. We believe our 2004 initiatives will provide
increased revenue opportunities and generate cost savings
through operational efficiencies. We believe achieving improved
operating results are dependent on us executing our strategic
initiatives, the level of competition, and the extent of the
improvement in the US economy.

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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


LIQUIDITY AND CAPITAL RESOURCES

The following is a table of our contractual
obligations and other commercial commitments as of
December 31, 2003 (See also Notes 3, 4 & 9 to
the Consolidated Financial Statements of this Form 10-K):

|                              |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 
|----------------------------- |  | ----- | ------- | -------------------------------- |  | ----- | ------ | ----- |  | ------- | ------ |  |  | - | ----- |  |  | - | ------- | 
|                              |  |       |         |                                 
|                              |  |       |         | Payments & Commitments by Period
|                              |  |       |         |                                 
|                              |  |       |         | Less than                        |  | 2-3   |        | 4-5   |  | After  
|                              |  | Total |         | 1 Year                           |  | Years |        | Years |  | 5 Years
|                              |  |       |         |                                  |  |       |        |       |  |        
|Contractual Obligations       |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 
|Long-Term Debt                |  | $     | 250,147 |                                  |  | $     | 60     |       |  | $       | 87     |  |  | $ |      |  |  | $ | 250,000 | 
|Operating Leases              |  |       | 65,453  |                                  |  |       | 25,157 |       |  |         | 26,778 |  |  |   | 8,658 |  |  |   | 4,860   | 
|                              |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 
|Total Contractual Obligations |  | $     | 315,600 |                                  |  | $     | 25,217 |       |  | $       | 26,865 |  |  | $ | 8,658 |  |  | $ | 254,860 | 
|                              |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 
|Other Commitments             |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 
|Mexico Loan(1)                |  | $     | 5,365   |                                  |  | $     | 5,365  |       |  |         |       |  |  |   |      |  |  | $ |        | 
|Purchase Commitments(2)       |  |       | 9,997   |                                  |  |       | 8,922  |       |  |         | 1,059  |  |  |   | 16    |  |  |   |        | 
|                              |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 
|Total Commitments             |  | $     | 15,362  |                                  |  | $     | 14,287 |       |  | $       | 1,059  |  |  | $ | 16    |  |  | $ |        | 
|                              |  |       |         |                                  |  |       |        |       |  |         |        |  |  |   |       |  |  |   |         | 



---



|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of December 31, 2003, we invested $5,365
    in the form of a loan, which can be increased to $10,000.                                                            
|   
|(2) | At December 31, 2003 our capital purchase
    commitments included $7,380 for land and improvements and $2,569
    for other information technology related projects.

We believe that projected cash flows from
operating activities and funding from our committed credit
facilities will be adequate to finance our anticipated cash
needs for 2004.

Sources and Uses of Cash



| |           
| | ----------
| | Operations

Our primary sources and uses of cash result from
the realization of trade accounts receivable and settlement of
payroll, trade accounts payable, and operating accruals,
including insurance and claims. During the three years ended
December 31, 2003, the aging of our receivables remained
substantially constant and our cash operating expenses (i.e.,
operating expenses less depreciation and amortization) as a
percentage of revenue were 91.3%, 91.9%, and 90.6%, respectively.

We maintain an appropriate level of tractors and
trailers to ensure the effectiveness of our operations.
Purchases of tractors and trailers have been, and are expected
to be, our most significant type of capital expenditure. These
purchases can be deferred or accelerated in order for us to
respond to changes in economic conditions and the market for
these assets. Purchases of tractors and trailers and total
capital expenditures were $34,549, $86,958, $11,262 and
$116,081, $141,322 and $89,495 during 2003, 2002, and 2001,
respectively.

We received cash of $12,970 from the sale of our
Newark terminal, and made a $5,365 loan related to our Mexican
joint venture.

There have not been, and we do not expect, any
material changes to the underlying drivers of our operating cash
flows. We believe that cash generated from our core operations
and, if needed, our credit facilities to be sufficient to fund
our operations.



| |          
| | ---------
| | Financing

We have a $200,000 committed credit facility that
expires in October 2005. The facility allows up to $125,000 for
standby letters of credit to cover our self-insurance programs
and other miscellaneous letter of credit requirements. In
addition to our committed credit facility, we maintain an
uncommitted line of credit,

15



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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


which provides $10,000 of short-term funds. At
December 31, 2003, we had no borrowings under these
facilities and had $87,974 of outstanding standby letters of
credit under the revolving credit facility.

Our external debt financing arrangements are
discussed in Note 4 to the Consolidated Financial
Statements found later in this Form 10-K.



| |                                                        
| | -------------------------------------------------------
| | Debt Instruments, Guarantees, and Related
    Covenants

Our financing arrangements include covenants that
require us to comply with certain financial ratios including net
worth and funded debt to adjusted cash flows. We are in
compliance with these covenants and do not believe these
covenants would restrict us from securing additional financing,
if necessary.



| |                
| | ---------------
| | Cash Management

At December 31, 2003, cash increased by
$67,501 from December 31, 2002. Excess cash after working
capital and investing requirements were primarily invested in
short term interest bearing instruments.

DIVIDENDS AND STOCK REPURCHASE

Our quarterly dividend rate is .0933 per
share. During 2003, we paid cash dividends totaling $10,135.

During 2003, we repurchased 14,000 shares
for $336 under a Board authorized repurchase program. There were
no shares repurchased in 2002 and 2001. At December 31,
2003, we had authorization to purchase an additional
500,000 shares.

Table of Share Price by Quarter:

|                       |      |       |   |             |  |       |   |             |  |      |   |             |  |  |   |             |  |  |   |             | 
|---------------------- | ---- | ----- | - | ----------- |  | ----- | - | ----------- |  | ---- | - | ----------- |  |  | - | ----------- |  |  | - | ----------- | 
|                       |      | First |   | Second      |  | Third |   | Fourth      |  | Year
|                       |      |       |   |             |  |       |   |             |  |     
|Market price per share
|                       | 2003 |       | $ | 22.56-30.13 |  |       | $ | 25.59-31.22 |  |      | $ | 27.09-34.50 |  |  | $ | 31.92-35.45 |  |  | $ | 22.56-35.45 | 
|                       | 2002 |       |   | 31.15-38.95 |  |       |   | 33.02-38.75 |  |      |   | 26.50-37.70 |  |  |   | 28.10-34.46 |  |  |   | 26.50-38.95 | 

CRITICAL ACCOUNTING ESTIMATES

Revenue Recognition

At the beginning of 2003, we changed our method
of accounting for revenue and expense recognition for our LTL
and TL segments. Under the new accounting method, we recognize
revenue for our LTL and TL operations by the allocation of
revenue between reporting periods based on the relative transit
time in each reporting period with expenses recognized as
incurred. In 2002 and 2001, revenue for our LTL and TL
operations was recognized when freight was picked up from the
customer. This change was made to more precisely reflect revenue
earned, and expenses incurred, as of our reporting dates in
response to the increase in our length of haul of freight, which
resulted from the implementation of our new marketing strategies.

The estimation of a shipments relative
transit time at the end of a period is accomplished utilizing
the estimated percentage-of-completion of each shipment based on
its location status as provided by our freight management
systems. This estimation technique reasonably approximates the
in-transit times of shipments. Although there are inherent
limitations in the methodology and estimation utilized under
this accounting method, the amount of revenue recognized that
relates to shipments in-transit at the end of a given quarterly
period has been less than 2% of total revenue for that quarter.
Accordingly, we believe that our revenue recognition method
provides an accurate measurement of our quarterly and annual
revenue.

16



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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


Insurance and Claims

Casualty claim reserves represent
managements estimates of liability for property damage,
public liability and workers compensation. We have
processes in place to capture claims on a timely basis and we
manage these claims with the assistance of a third-party
administrator along with our insurers. Our reserves for claims
are significant and can involve a high degree of judgment. We
therefore utilize various historical data and trends to compute
estimated reserve ranges. These ranges, along with other known
facts on individually significant outstanding claims, are
utilized to best estimate our liability. We continuously monitor
our reserves and their underlying estimation methodologies. We
believe that our processes and methodologies sufficiently
minimize the possibility of the final resolution of claims being
materially different than our recorded reserves and our
estimates have historically been reasonably accurate. However,
our estimated reserves are inherently sensitive to differences
between our actual future settlement of liability and our
estimation methodologies utilized in the preparation of the
current financial statements.

Allowance for Doubtful Accounts

We follow credit and collection procedures to
ensure the customer credit risk is assessed and follow up is
performed on delinquent accounts. With the diversity of needs
for our service offerings, particularly in the LTL segment, we
serve a wide range of customers. Our procedures therefore must
be flexible and consider the cost and benefit of providing
services to customers to whom there is a higher risk of
uncollectible accounts. There can be significant write-offs that
occur which are not predictable, such as customer bankruptcies.
Our allowance for doubtful accounts is computed by applying
factors based on historical write-off activity to our
outstanding balances. We believe that our credit and collection
procedures, fairly predictable write-off results, and the
estimation methodology utilized to compute our allowance for
doubtful accounts, minimize the possibility of our actual bad
debts being materially different than the amount recorded in our
allowance for doubtful accounts. However, our allowance is
inherently sensitive to differences between the actual future
realization of outstanding customer accounts receivable balances
and amounts as computed under our estimation methodology, which
is utilized in the preparation of the current financial
statements.

Goodwill

At the beginning of 2002, under
SFAS No. 142, goodwill and other intangible assets
with indefinite lives are no longer amortized, but are subject
to an annual impairment test. The test involves the application
of estimation techniques to determine fair values. The test that
we utilize compares the present value of our expected future
cash flows to the carrying value of our reporting units. The
expected future cash flows are determined from our budgetary
process. We believe that our budgetary process, which includes
various assumptions concerning future operating activities but
at the same time a sufficient level of objectivity and scrutiny,
provides us with a reasonable estimate of projected future cash
flows. However, our actual results will ultimately determine the
valuation of goodwill.

Additional information concerning our accounting
policies for the critical accounting estimates discussed above
is discussed in Notes 1 and 8 to the Consolidated Financial
Statements found later in this Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

On November 25, 2002, the Financial
Accounting Standards Board (FASB) issued
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others, which
elaborates on the disclosures to be made by a guarantor about
its obligations under certain guarantees issued. The
Interpretation also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. The Interpretation expands on the accounting guidance
of Interpretation No. 5, Accounting for Contingencies,
SFAS No. 57 Related Party Disclosures, and
SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. The Interpretation also incorporates,
without change, the provisions of Interpretation

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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


No. 34, Disclosure of Indirect Guarantees of
Indebtedness of Others, which it supersedes. The Interpretation
does identify several situations where the recognition of a
liability at inception for a guarantors obligation is not
required. The initial recognition and measurement provisions of
this Interpretation apply on a prospective basis to guarantees
issued or modified after December 31, 2002, regardless of
the guarantors fiscal year-end. The disclosures are
effective for financial statements of interim or annual periods
ending after December 15, 2002. Adoption of this
Interpretation did not have an impact on our financial
statements and related disclosures.

In December 2002, the FASB issued
SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure 
an amendment of SFAS No. 123. This Statement
amends SFAS No. 123, Accounting for Stock-Based
Compensation to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. Finally, this Statement
amends APB Opinion No. 28, Interim Financial
Reporting, to require disclosure about those effects in
interim financial information. The amendments to
SFAS No. 123 in paragraphs 2(a) - 2(e) of this
Statement are effective for financial statements for fiscal
years ending after December 15, 2002. The amendment to
SFAS No. 123 in paragraph 2(f) of this Statement and
the amendment to Opinion No. 28 in paragraph 3 of this
statement were effective for financial reports containing
condensed financial statements for interim periods beginning
after December 15, 2002. As is allowed, we have adopted the
disclosure requirements under SFAS No. 148.

In March 2003, the FASB issued Interpretation
No. 46. This Interpretation of Accounting Research Bulletin
No. 5, Consolidated Financial Statements, addresses
consolidation by business enterprises of variable interest
entities. This Interpretation applies to variable interest
entities created after January 1, 2002, and to variable
interest entities in which an enterprise obtains an interest
after that date. We have no investments in variable interest
entities and therefore, this Interpretation has no impact on our
financial statements and related disclosures.

In May 2003, the FASB issued
SFAS No. 150  Accounting for Certain
Financial Instruments with Characteristics of both Liabilities
and Equity. This Statement provides guidance as to the
appropriate classification of certain financial statement
instruments that have characteristics of both liabilities and
equity. This statement is effective at the beginning of the
first interim period after June 15, 2003. Adoption of this
Statement did not have an impact on our financial statements and
related disclosures.



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, if any, under our line of credit that has variable
interest rates tied to the LIBOR rate and our investments in
short-term interest bearing instruments. We had no borrowings
under the credit agreement in 2002 or 2003. In addition, we had
$150,000 of unsecured notes with an 8.5% fixed annual interest
rate and $100,000 of unsecured notes with a 6.5% fixed annual
interest rate at December 31, 2003. Because these notes
have a relatively long maturity feature, any sudden change in
market interest rates would not affect our operating results or
cash flows to any significant degree. We estimate that the fair
value of the notes exceeded by approximately 13% their carrying
value at December 31, 2003. We have no outstanding
derivative contracts.

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 financial
statements. We believe that separate financial statements of our
Subsidiary Guarantors, and other disclosures relating to them,
are not

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(Thousands of dollars, except share and per
share amounts)


meaningful or material to our investors. Our
subsidiaries, other than the Subsidiary Guarantors, are minor.
There are no restrictions on our ability to obtain funds from
our subsidiaries by dividend or loan. We, therefore, are not
required to present separate financial statements of our
Subsidiary Guarantors, and other disclosures relating to them.

19



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##### Table of Contents








|         |                                                
|-------- | -----------------------------------------------
|Item 8  | Financial Statements and Supplementary
    Data

(Thousands of dollars, except share and per
share amounts)

INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders of

USF Corporation


Chicago, IL


We have audited the accompanying consolidated
balance sheets of USF Corporation and subsidiaries (the
Company) as of December 31, 2003 and 2002 and
the related consolidated statements of operations,
stockholders equity and cash flows for each of the three
years in the period ended December 31, 2003. Our audits
also included the financial statement schedule listed in the
Index under Part IV, Item 15(a)(2). These
financial statements and the financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. 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, such consolidated financial
statements present fairly, in all material respects, the
financial position of USF Corporation and subsidiaries at
December 31, 2003 and 2002 and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note 1, effective
January 1, 2003, the Company changed its method of
accounting for revenue and expense recognition for its
less-than-truckload and truckload segments.

As discussed in Note 8, effective
January 1, 2002, the Company changed its method of
accounting for goodwill and intangible assets upon adoption of
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets.



|                          | 
|------------------------- | 
|/s/ DELOITTE & TOUCHE LLP | 
|                          | 
|Deloitte
    & Touche LLP | 

Chicago, Illinois

March 12, 2004


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##### Table of Contents



USF CORPORATION

CONSOLIDATED BALANCE SHEETS

(Thousands of dollars, except share and per
share amounts)


|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |          |  
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | --------- | -------- | - | - | --------- | -------- | -
|                                           |                                                                                                                                                                  |                  
|                                           |                                                                                                                                                                  | As of December 31
|                                           |                                                                                                                                                                  |                  
|                                           |                                                                                                                                                                  | 2003              |           | 2002    
|                                           |                                                                                                                                                                  |                   |           |         
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           | Cash                                                                                                                                                             |                   | $         | 121,659  |   |   | $         | 54,158   |  
|                                           | Accounts receivable, less allowances of $11,030
    and $13,586, respectively                                                                                    |                   |           | 271,849  |   |   |           | 269,583  |  
|                                           | Operating supplies and prepaid expenses                                                                                                                          |                   |           | 32,014   |   |   |           | 33,180   |  
|                                           | Deferred income taxes                                                                                                                                            |                   |           | 33,717   |   |   |           | 53,086   |  
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|Total current assets                       |                                                                                                                                                                  |                   | 459,239   |          |   |   | 410,007   |         
|Property and equipment:                    |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           | Land                                                                                                                                                             |                   |           | 114,531  |   |   |           | 116,240  |  
|                                           | Buildings and leasehold improvements                                                                                                                             |                   |           | 297,808  |   |   |           | 291,138  |  
|                                           | Equipment                                                                                                                                                        |                   |           | 925,677  |   |   |           | 928,392  |  
|                                           | Other                                                                                                                                                            |                   |           | 120,997  |   |   |           | 92,079   |  
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           |                                                                                                                                                                  |                   | 1,459,013 |          |   |   | 1,427,849 |         
|                                           | Less accumulated depreciation                                                                                                                                    |                   |           | (705,111 | ) |   |           | (667,696 | )
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|Total property and equipment               |                                                                                                                                                                  |                   | 753,902   |          |   |   | 760,153   |         
|Goodwill                                   |                                                                                                                                                                  |                   | 100,808   |          |   |   | 100,504   |         
|Other assets                               |                                                                                                                                                                  |                   | 44,139    |          |   |   | 24,607    |         
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           |                                                                                                                                                                  |                   | 1,358,088 |          |   |   | 1,295,271 |         
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                          
|LIABILITIES AND STOCKHOLDERS
    EQUITY  
|Current liabilities:                       |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           | Current debt                                                                                                                                                     |                   |           | 60       |   |   |           | 367      |  
|                                           | Accounts payable                                                                                                                                                 |                   |           | 62,511   |   |   |           | 59,691   |  
|                                           | Accrued salaries, wages and benefits                                                                                                                             |                   |           | 87,777   |   |   |           | 89,765   |  
|                                           | Accrued insurance and claims                                                                                                                                     |                   |           | 52,772   |   |   |           | 55,174   |  
|                                           | Other                                                                                                                                                            |                   |           | 49,347   |   |   |           | 35,071   |  
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|Total current liabilities                  |                                                                                                                                                                  |                   | 252,467   |          |   |   | 240,068   |         
|Notes payable and long-term debt           |                                                                                                                                                                  |                   | 250,087   |          |   |   | 252,129   |         
|Accrued insurance and claims               |                                                                                                                                                                  |                   | 80,707    |          |   |   | 72,744    |         
|Other                                      |                                                                                                                                                                  |                   | 14,377    |          |   |   | 11,335    |         
|Deferred income taxes                      |                                                                                                                                                                  |                   | 95,661    |          |   |   | 99,864    |         
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           |                                                                                                                                                                  |                   | 693,299   |          |   |   | 676,140   |         
|Commitments and contingencies
    (Note 9) |                                                                                                                                                                  |                   |           |          |   |   |           |         
|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, 27,453,217 and 26,994,915 issued and
    27,447,475 and 26,989,173 outstanding, respectively |                   |           | 275      |   |   |           | 270      |  
|                                           | Paid in capital                                                                                                                                                  |                   |           | 290,833  |   |   |           | 277,298  |  
|                                           | Retained earnings                                                                                                                                                |                   |           | 373,681  |   |   |           | 341,563  |  
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|Total stockholders equity                 |                                                                                                                                                                  |                   | 664,789   |          |   |   | 619,131   |         
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         
|                                           |                                                                                                                                                                  | $                 | 1,358,088 |          |   | $ | 1,295,271 |         
|                                           |                                                                                                                                                                  |                   |           |          |   |   |           |         

See accompanying notes to consolidated financial
statements.

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USF CORPORATION

CONSOLIDATED STATEMENTS OF
OPERATIONS

(Thousands of dollars, except share and per
share amounts)


|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |           |  
|---------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------- | ---------- | --------- | - | ---- | ---------- | --------- | - | - | ---------- | --------- | -
|                                                                                                                             |                                                                                         |                        
|                                                                                                                             |                                                                                         | Years Ended December 31
|                                                                                                                             |                                                                                         |                        
|                                                                                                                             |                                                                                         | 2003                    |            | 2002      |   | 2001
|                                                                                                                             |                                                                                         |                         |            |           |   |     
|Revenue:                                                                                                                     |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | LTL Trucking                                                                            |                         | $          | 1,898,668 |   |      | $          | 1,866,892 |   |   | $          | 1,816,204 |  
|                                                                                                                             | TL Trucking                                                                             |                         |            | 128,093   |   |      |            | 114,151   |   |   |            | 100,439   |  
|                                                                                                                             | Logistics                                                                               |                         |            | 276,441   |   |      |            | 278,161   |   |   |            | 277,393   |  
|                                                                                                                             | Asia Operations                                                                         |                         |            |          |   |      |            |          |   |   |            | 26,938    |  
|                                                                                                                             | Intercompany eliminations                                                               |                         |            | (11,063   | ) |      |            | (8,678    | ) |   |            |          |  
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             |                                                                                         |                         | 2,292,139  |           |   |      | 2,250,526  |           |   |   | 2,220,974  |          
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Operating expenses:                                                                                                          |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | LTL Trucking                                                                            |                         |            | 1,788,113 |   |      |            | 1,761,720 |   |   |            | 1,707,584 |  
|                                                                                                                             | TL Trucking                                                                             |                         |            | 123,430   |   |      |            | 108,840   |   |   |            | 97,552    |  
|                                                                                                                             | Logistics                                                                               |                         |            | 267,171   |   |      |            | 265,558   |   |   |            | 266,208   |  
|                                                                                                                             | Asia Operations                                                                         |                         |            |          |   |      |            |          |   |   |            | 29,749    |  
|                                                                                                                             | Freight Forwarding  Asia exit costs                                                    |                         |            |          |   |      |            | 12,760    |   |   |            |          |  
|                                                                                                                             | Corporate and Other                                                                     |                         |            | 28,896    |   |      |            | 29,472    |   |   |            | 16,545    |  
|                                                                                                                             | Intercompany eliminations                                                               |                         |            | (11,063   | ) |      |            | (8,678    | ) |   |            |          |  
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             |                                                                                         |                         | 2,196,547  |           |   |      | 2,169,672  |           |   |   | 2,117,638  |          
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Income from operations                                                                                                       |                                                                                         |                         | 95,592     |           |   |      | 80,854     |           |   |   | 103,336    |          
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Non-operating income (expense):                                                                                              |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | Interest expense                                                                        |                         |            | (20,900   | ) |      |            | (20,516   | ) |   |            | (20,964   | )
|                                                                                                                             | Interest income                                                                         |                         |            | 1,867     |   |      |            | 2,708     |   |   |            | 2,278     |  
|                                                                                                                             | Other, net                                                                              |                         |            | (1,274    | ) |      |            | (1,054    | ) |   |            | (499      | )
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Total non-operating expense                                                                                                  |                                                                                         |                         | (20,307    | )         |   |      | (18,862    | )         |   |   | (19,185    | )        
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Income from continuing operations before income
    taxes, minority interest and cumulative effect of accounting
    changes |                                                                                         |                         | 75,285     |           |   |      | 61,992     |           |   |   | 84,151     |          
|Income tax expense                                                                                                           |                                                                                         |                         | (31,184    | )         |   |      | (28,724    | )         |   |   | (33,074    | )        
|Minority interest                                                                                                            |                                                                                         |                         |           |           |   |      |           |           |   |   | (1,100     | )        
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Income from continuing operations before
    cumulative effect of accounting changes                                         |                                                                                         |                         | 44,101     |           |   |      | 33,268     |           |   |   | 49,977     |          
|Discontinued operations (freight forwarding
    segment):                                                                    |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | Loss from operations, net of tax benefits of
    $239, $6,907, and $6,518, respectively |                         |            | (338      | ) |      |            | (16,978   | ) |   |            | (11,589   | )
|                                                                                                                             | Loss from disposal, net of tax benefit of $29,060                                       |                         |            |          |   |      |            | (13,239   | ) |   |            |          |  
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Loss from discontinued operations                                                                                            |                                                                                         |                         | (338       | )         |   |      | (30,217    | )         |   |   | (11,589    | )        
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Income before cumulative effect of accounting
    changes                                                                    |                                                                                         |                         | 43,763     |           |   |      | 3,051      |           |   |   | 38,388     |          
|Cumulative effect of change in accounting for
    revenue recognition, net of tax benefits of $1,064                         |                                                                                         |                         | (1,467     | )         |   |      |           |           |   |   |           |          
|Cumulative effect of change in accounting for
    goodwill                                                                   |                                                                                         |                         |           |           |   |      | (70,022    | )         |   |   |           |          
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Net income/(loss)                                                                                                            |                                                                                         | $                       | 42,296     |           |   | $    | (66,971    | )         |   | $ | 38,388     |          
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Income per share from continuing operations:                                                                                 |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | Basic                                                                                   |                         | $          | 1.62      |   |      | $          | 1.23      |   |   | $          | 1.90      |  
|                                                                                                                             | Diluted                                                                                 |                         |            | 1.61      |   |      |            | 1.22      |   |   |            | 1.87      |  
|Loss per share from discontinued operations:                                                                                 |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | Basic                                                                                   |                         |            | (0.01     | ) |      |            | (1.12     | ) |   |            | (0.44     | )
|                                                                                                                             | Diluted                                                                                 |                         |            | (0.01     | ) |      |            | (1.11     | ) |   |            | (0.44     | )
|Loss per share  cumulative effect of
    accounting changes:                                                                |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|                                                                                                                             | Basic                                                                                   |                         |            | (0.06     | ) |      |            | (2.60     | ) |   |            |          |  
|                                                                                                                             | Diluted                                                                                 |                         |            | (0.05     | ) |      |            | (2.56     | ) |   |            |          |  
|Net income/(loss) per share  basic                                                                                          |                                                                                         |                         | 1.55       |           |   |      | (2.49      | )         |   |   | 1.46       |          
|Net income/(loss) per share  diluted                                                                                        |                                                                                         |                         | 1.55       |           |   |      | (2.45      | )         |   |   | 1.43       |          
|                                                                                                                             |                                                                                         |                         |            |           |   |      |            |           |   |   |            |          
|Average shares outstanding  basic                                                                                           |                                                                                         |                         | 27,207,392 |           |   |      | 26,900,311 |           |   |   | 26,309,107 |          
|Average shares outstanding  diluted                                                                                         |                                                                                         |                         | 27,348,711 |           |   |      | 27,331,890 |           |   |   | 26,765,861 |          

See accompanying notes to consolidated financial
statements.

22



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##### Table of Contents



USF CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(Thousands of dollars)


|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ------- | ------ | ------ |  | ------- | --- | -------- |  | -------- | ------- | ------------- |  | ------------- | ------- | ------------- |  | - | ------- | - |  | - | ------- | - |  | - | ---- | - |  | - | ------- | -
|                                                                               |  | Number  |        |        |  |         |     |          |  |          |         |               |  | Accumulated   |         |              
|                                                                               |  | of      |        |        |  |         |     |          |  |          |         |               |  | Other         |         | Total        
|                                                                               |  | Shares  |        | Common |  | Paid In |     | Retained |  | Treasury |         | Comprehensive |  | Comprehensive |         | Stockholders
|                                                                               |  | (000s) |        | Stock  |  | Capital |     | Earnings |  | Stock    |         | Income/(Loss) |  | Income/(Loss) |         | Equity       
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |              
|Balance January 1, 2001                                                        |  |         | 25,882 |        |  | $       | 259 |          |  | $        | 265,633 |               |  | $             | 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 and director stock transactions                                       |  |         | 796    |        |  |         | 8   |          |  |          | 5,303   |               |  |               |        |               |  |   | 18,775  |   |  |   |         |   |  |   |      |   |  |   | 24,086  |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Balance December 31, 2001                                                      |  |         | 26,678 |        |  | $       | 267 |          |  | $        | 270,936 |               |  | $             | 418,585 |               |  | $ | (1,796  | ) |  |   |         |   |  | $ | (340 | ) |  | $ | 687,652 |  
|Net loss                                                                       |  |         |        |        |  |         |    |          |  |          |        |               |  |               | (66,971 | )             |  |   |        |   |  | $ | (66,971 | ) |  |   |      |   |  |   | (66,971 | )
|Recognition of previously unrealized loss on
    foreign currency transactions |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   | 340     |   |  |   | 340  |   |  |   | 340     |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Comprehensive loss                                                             |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  | $ | (66,631 | ) |  |   |      |   |  |   |         |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Dividends declared                                                             |  |         |        |        |  |         |    |          |  |          |        |               |  |               | (10,051 | )             |  |   |        |   |  |   |         |   |  |   |      |   |  |   | (10,051 | )
|Employee and director stock transactions                                       |  |         | 317    |        |  |         | 3   |          |  |          | 6,362   |               |  |               |        |               |  |   | 1,796   |   |  |   |         |   |  |   |      |   |  |   | 8,161   |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Balance December 31, 2002                                                      |  |         | 26,995 |        |  | $       | 270 |          |  | $        | 277,298 |               |  | $             | 341,563 |               |  | $ |        |   |  |   |         |   |  | $ |     |   |  | $ | 619,131 |  
|Net income                                                                     |  |         |        |        |  |         |     |          |  |          |         |               |  |               | 42,296  |               |  |   |         |   |  | $ | 42,296  |   |  |   |      |   |  |   | 42,296  |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Comprehensive income                                                           |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  | $ | 42,296  |   |  |   |      |   |  |   |         |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Dividends declared                                                             |  |         |        |        |  |         |     |          |  |          |         |               |  |               | (10,178 | )             |  |   |         |   |  |   |         |   |  |   |      |   |  |   | (10,178 | )
|Employee and director stock transactions                                       |  |         | 458    |        |  |         | 5   |          |  |          | 13,535  |               |  |               |        |               |  |   |        |   |  |   |         |   |  |   |      |   |  |   | 13,540  |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  
|Balance December 31, 2003                                                      |  |         | 27,453 |        |  | $       | 275 |          |  | $        | 290,833 |               |  | $             | 373,681 |               |  | $ |        |   |  |   |         |   |  | $ |     |   |  | $ | 664,789 |  
|                                                                               |  |         |        |        |  |         |     |          |  |          |         |               |  |               |         |               |  |   |         |   |  |   |         |   |  |   |      |   |  |   |         |  

See accompanying notes to consolidated financial
statements.

23



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##### Table of Contents



USF CORPORATION

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Thousands of dollars)


|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |         |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | --------------------------------------- | ------- | -------- | ------ | ---- | -------- | -------- | ------- | - | ------- | ------- | ------ | -
|                                                                                                                                                     |                                                         |                                        
|                                                                                                                                                     |                                                         | Years Ended December 31                
|                                                                                                                                                     |                                                         |                                        
|                                                                                                                                                     |                                                         | 2003                                    |         | 2002     |        | 2001
|                                                                                                                                                     |                                                         |                                         |         |          |        |     
|Cash flows from operating activities:                                                                                                                |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Net (loss)/income                                                                                                                                    |                                                         | $                                       | 42,296  |          |        | $    | (66,971  | )        |         | $ | 38,388  |        
|Net loss from discontinued operations                                                                                                                |                                                         |                                         | 338     |          |        |      | 30,217   |          |         |   | 11,589  |        
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Income/(loss) from continuing operations after
    cumulative effect of accounting changes                                                           |                                                         |                                         | 42,634  |          |        |      | (36,754  | )        |         |   | 49,977  |        
|Adjustments to reconcile net income/(loss) from
    continuing operations after accounting changes to net cash
    provided by operating activities: |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|                                                                                                                                                     | Depreciation of property and equipment                  |                                         |         | 100,770  |        |      |          | 99,873   |         |   |         | 100,564 |       
|                                                                                                                                                     | Cumulative effect of accounting changes, net of
    tax |                                         |         | 1,467    |        |      |          | 70,022   |         |   |         |        |       
|                                                                                                                                                     | Amortization of intangible assets                       |                                         |         | 2,369    |        |      |          | 1,235    |         |   |         | 5,446   |       
|                                                                                                                                                     | Deferred taxes                                          |                                         |         | 16,468   |        |      |          | (1,232   | )       |   |         | 2,444   |       
|                                                                                                                                                     | Gains on sale of property and equipment                 |                                         |         | (14,119  | )      |      |          | (1,350   | )       |   |         | (2,154  | )     
|                                                                                                                                                     | Increase in accrued claims and other                    |                                         |         | 11,005   |        |      |          | 8,244    |         |   |         | 1,260   |       
|                                                                                                                                                     | Changes in working capital affecting operations:        |                                         |         |          |        |      |          |          |         |   |         |         |       
|                                                                                                                                                     |                                                         | Accounts receivable                     |         |          | (329   | )    |          |          | (21,709 | ) |         |         | 21,138 |  
|                                                                                                                                                     |                                                         | Operating supplies and prepaid expenses |         |          | 1,447  |      |          |          | (2,073  | ) |         |         | (885   | )
|                                                                                                                                                     |                                                         | Accounts payable                        |         |          | 2,069  |      |          |          | (2,500  | ) |         |         | (7,417 | )
|                                                                                                                                                     |                                                         | Accrued liabilities                     |         |          | 8,124  |      |          |          | 14,386  |   |         |         | 2,423  |  
|                                                                                                                                                     | Other non-current assets, net                           |                                         |         | (15,166  | )      |      |          | (1,238   | )       |   |         | (2,059  | )     
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Net cash provided by operating activities                                                                                                            |                                                         |                                         | 156,739 |          |        |      | 126,904  |          |         |   | 170,737 |        
|Cash flows from investing activities:                                                                                                                |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|                                                                                                                                                     | Acquisitions                                            |                                         |         | (4,883   | )      |      |          |         |         |   |         |        |       
|                                                                                                                                                     | Mexico loan                                             |                                         |         | (5,365   | )      |      |          |         |         |   |         |        |       
|                                                                                                                                                     | Capital expenditures                                    |                                         |         | (116,081 | )      |      |          | (141,322 | )       |   |         | (89,495 | )     
|                                                                                                                                                     | Proceeds from sale of property and equipment            |                                         |         | 38,829   |        |      |          | 7,111    |         |   |         | 11,468  |       
|                                                                                                                                                     | Disposition of USF Asia                                 |                                         |         |         |        |      |          | (6,000   | )       |   |         |        |       
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Net cash used in investing activities                                                                                                                |                                                         |                                         | (87,500 | )        |        |      | (140,211 | )        |         |   | (78,027 | )      
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|                                                                                                                                                     | Cash flows from financing activities:                   |                                         |         |          |        |      |          |          |         |   |         |         |       
|                                                                                                                                                     | Dividends paid                                          |                                         |         | (10,135  | )      |      |          | (10,010  | )       |   |         | (9,781  | )     
|                                                                                                                                                     | Proceeds from the issuance of common stock              |                                         |         | 13,540   |        |      |          | 8,161    |         |   |         | 24,086  |       
|                                                                                                                                                     | Proceeds from long-term bank debt                       |                                         |         |         |        |      |          |         |         |   |         | 5,000   |       
|                                                                                                                                                     | Payments on long-term bank debt                         |                                         |         | (5,143   | )      |      |          | (1,042   | )       |   |         | (40,470 | )     
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Net cash used in financing activities                                                                                                                |                                                         |                                         | (1,738  | )        |        |      | (2,891   | )        |         |   | (21,165 | )      
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Net cash used in discontinued operations                                                                                                             |                                                         |                                         |        |          |        |      | (1,749   | )        |         |   | (1,703  | )      
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Net increase/(decrease) in cash                                                                                                                      |                                                         |                                         | 67,501  |          |        |      | (17,947  | )        |         |   | 69,842  |        
|Cash at beginning of year                                                                                                                            |                                                         |                                         | 54,158  |          |        |      | 72,105   |          |         |   | 2,263   |        
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Cash at end of year                                                                                                                                  |                                                         | $                                       | 121,659 |          |        | $    | 54,158   |          |         | $ | 72,105  |        
|                                                                                                                                                     |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|Supplemental disclosure of cash flow information:                                                                                                    |                                                         |                                         |         |          |        |      |          |          |         |   |         |        
|                                                                                                                                                     | Cash paid during the year for:                          |                                         |         |          |        |      |          |          |         |   |         |         |       
|                                                                                                                                                     |                                                         | Interest                                |         | $        | 19,566 |      |          | $        | 19,481  |   |         | $       | 20,107 |  
|                                                                                                                                                     |                                                         | Income taxes                            |         |          | 7,389  |      |          |          | 11,437  |   |         |         | 25,603 |  

See accompanying notes to consolidated financial
statements.

24



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Thousands of dollars, except share and per
share amounts)



|    |                                               
|--- | ----------------------------------------------
|(1) | Summary of Significant Accounting
    Policies



| |                      
| | ---------------------
| | Basis of Presentation

Our consolidated financial statements include the
accounts of USF and its wholly owned subsidiaries. Intercompany
balances and transactions have been eliminated. We report on a
calendar year basis. Our quarters consist of thirteen weeks that
end on a Saturday either before or after the end of March, June
and September.



| |                    
| | -------------------
| | Revenue Recognition

Effective January 1, 2003, we changed our
method of accounting for revenue and expense recognition for our
less-than-truckload (LTL) and truckload
(TL) segments. Under the new accounting method, we
recognize revenue for LTL and TL operations by the allocation of
revenue between reporting periods based on the relative transit
time in each reporting period with expenses recognized as
incurred. This change in the method of accounting was made to
recognize the increase in our length of haul of freight, which
resulted from implementation of our new marketing strategies. We
believe that the new method of recognizing revenue and expense
is preferable. The cumulative effect of change in accounting
principle on prior years resulted in an after-tax charge to
income of $1,467 (net of income taxes of $1,064) in the first
quarter of 2003.

As a result of the change in revenue and expense
recognition pro forma income from continuing operations and net
income/(loss) for the years ended 2003, 2002, and 2001 follows:

|                                                                                                |                      |      |   |        |  |      |   |         |   |  |   |        | 
|----------------------------------------------------------------------------------------------- | -------------------- | ---- | - | ------ |  | ---- | - | ------- | - |  | - | ------ | 
|Year                                                                                            |                      | 2003 |   | 2002   |  | 2001
|                                                                                                |                      |      |   |        |  |     
|Income from continuing operations before
    cumulative effect of accounting changes:           |                      |      |   |        |  |      |   |         |   |  |   |       
|                                                                                                | As reported          |      | $ | 44,101 |  |      | $ | 33,268  |   |  | $ | 49,977 | 
|                                                                                                | Pro forma            |      |   | 44,101 |  |      |   | 32,728  |   |  |   | 50,312 | 
|Net income/(loss):                                                                              |                      |      |   |        |  |      |   |         |   |  |   |       
|                                                                                                | As reported          |      |   | 42,296 |  |      |   | (66,971 | ) |  |   | 38,388 | 
|                                                                                                | Pro forma            |      |   | 43,763 |  |      |   | (67,511 | ) |  |   | 38,723 | 
|Income per share from continuing operations
    before cumulative effect of accounting changes: |                      |      |   |        |  |      |   |         |   |  |   |       
|                                                                                                | As reported, basic   |      | $ | 1.62   |  |      | $ | 1.23    |   |  | $ | 1.90   | 
|                                                                                                | Pro forma, basic     |      |   | 1.62   |  |      |   | 1.22    |   |  |   | 1.91   | 
|                                                                                                | As reported, diluted |      |   | 1.61   |  |      |   | 1.22    |   |  |   | 1.87   | 
|                                                                                                | Pro forma, diluted   |      |   | 1.61   |  |      |   | 1.20    |   |  |   | 1.88   | 
|Net income/(loss) per share:                                                                    |                      |      |   |        |  |      |   |         |   |  |   |       
|                                                                                                | As reported, basic   |      |   | 1.55   |  |      |   | (2.49   | ) |  |   | 1.46   | 
|                                                                                                | Pro forma, basic     |      |   | 1.61   |  |      |   | (2.51   | ) |  |   | 1.47   | 
|                                                                                                | As reported, diluted |      |   | 1.55   |  |      |   | (2.45   | ) |  |   | 1.43   | 
|                                                                                                | Pro forma, diluted   |      |   | 1.60   |  |      |   | (2.47   | ) |  |   | 1.45   | 

Logistics revenue from warehousing is recognized
upon the performance of services. Revenue from dedicated fleet
shipments is recognized upon delivery, which is generally the
same day as the day of pickup. Domestic ocean freight forwarding
transportation revenue is recognized at the time freight is
tendered to an ocean going vessel at origin.

We periodically engage owner-operator drivers to
deliver freight in our LTL business as well as our TL and
logistics businesses. In all cases, we remain the primary
obligor with our customers and act as the

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(Thousands of dollars, except share and per
share amounts)


principal in the transaction. In addition, we
select the owner-operators to provide these services. We also
maintain the risks associated with freight delivery such as
losses for damaged or lost freight. As a result, revenue in our
LTL, TL, and Logistics segments that is related to freight and
other transportation services provided on our behalf by other
carriers is reported on a gross basis.



| |     
| | ----
| | Cash

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



| |                                    
| | -----------------------------------
| | Allowance for Doubtful
    Accounts

Our operating segments have credit and
collections procedures that are followed to determine which
customers are extended credit for services provided. Services
provided to customers where we are not able to determine their
creditworthiness are done so on a cash on delivery basis. We
have developed a methodology based on write-off history that we
apply to our open accounts receivable to assess the adequacy of
our allowance for doubtful accounts. Our analysis provides for
allowance needs that we may have for large customers that may be
experiencing financial difficulty, as well as the overall
conditions in the economy.



| |                
| | ---------------
| | Casualty Claims

Casualty claim reserves represent
managements estimates of claims for property damage,
public liability and workers compensation. We manage
casualty claims with the assistance of a third-party
administrator (TPA) along with our insurers. We currently
have a retention/deductible of $5,000 for public liability and
$2,500 for workers compensation. Extensive analysis
enables us to estimate casualty reserves, provide for incurred
but not reported cases, and development patterns of cases
consistently and adequately. At December 31, 2003 and 2002
we had reserve balances for casualty claims of $120,852 and
$113,352, respectively.



| |             
| | ------------
| | Cargo Claims

Our operating procedures are designed to minimize
freight from being lost or damaged while in our care. We have
developed reporting procedures to monitor the claims activity at
each of our terminals and have developed a methodology to assess
our accrual needs for cargo claims. This methodology is based on
historical payment activity and lag times for reported claims.
Our accrual includes an estimation of payments to be made for
claims reported, claims incurred but not reported and specific
estimations for any unusually large claims. Our accrual at
December 31, 2003 and 2002 for these types of claims was
$5,462 and $6,035, respectively.



| |                       
| | ----------------------
| | 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 equipment and 30 years for
buildings. Maintenance and repairs are charged to operations
when incurred, while expenditures that add to the life of the
equipment are capitalized. When tractors and trailers are
disposed, a gain or loss is recognized. Amortization of
leasehold improvements is recognized over the lesser of the life
of the lease or the life of the improvement. Other assets mainly
include computer hardware and software, and are depreciated
using periods ranging from two to seven years.

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

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(Thousands of dollars, except share and per
share amounts)


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.



| |         
| | --------
| | Goodwill

Goodwill was amortized on a straight-line basis
up to 40 years through December 31, 2001. Upon
adoption of Statement of Financial Accounting Standards
(SFAS) No 142, amortization ceased and we
recorded an impairment charge of $70,022. The carrying value of
goodwill is reviewed on an annual basis during the fourth
quarter or whenever events or changes in circumstances indicate
that the carrying value may be impaired. (See Note 8).



| |              
| | -------------
| | Concentration

We are not dependent upon any particular
industry. We provide services to a wide variety of customers
including many large, publicly held companies. For the year
ended December 31, 2003, no single customer accounted for
more than 3.5% of our revenue and our 50 largest customers as a
group accounted for approximately 30% of total revenue.



| |                          
| | -------------------------
| | Earnings/(Loss) Per Share

Basic earnings/(loss) per share are calculated on
net income divided by the weighted-average number of common
shares outstanding during the year. 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 year. Unexercised
stock options are the only reconciling items between our basic
and diluted earnings per share.

The following table presents information
necessary to calculate basic and diluted earnings per share and
common equivalent shares:

|                                                                       |  |      |            |      |  |      |            |  |  |  |            | 
|---------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  |  | ---------- | 
|Year                                                                   |  | 2003 |            | 2002 |  | 2001
|                                                                       |  |      |            |      |  |     
|Weighted-average shares outstanding 
    basic                        |  |      | 27,207,392 |      |  |      | 26,900,311 |  |  |  | 26,309,107 | 
|Common stock equivalents                                               |  |      | 141,319    |      |  |      | 431,579    |  |  |  | 456,754    | 
|                                                                       |  |      |            |      |  |      |            |  |  |  |            | 
|Weighted-average shares and
    equivalents  diluted                  |  |      | 27,348,711 |      |  |      | 27,331,890 |  |  |  | 26,765,861 | 
|                                                                       |  |      |            |      |  |      |            |  |  |  |            | 
|Anti-dilutive unexercised stock options excluded
    from calculations |  |      | 862,850    |      |  |      | 1,113,100  |  |  |  | 485,500    | 



| |                         
| | ------------------------
| | Stock-based Compensation

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
Accounting Principles Board (APB) No. 25 as
permitted by SFAS No. 123. If we had elected to
recognize compensation cost based on the fair value of the
options at grant date, as prescribed by SFAS No. 123,
our net

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(Thousands of dollars, except share and per
share amounts)


income and earnings per share would have been
reduced to the pro forma amounts indicated in the table below:

|                                                                                                                                                  |  |      |        |      |  |      |         |   |  |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------ | 
|Year                                                                                                                                              |  | 2003 |        | 2002 |  | 2001
|                                                                                                                                                  |  |      |        |      |  |     
|Net income/(loss)  as reported                                                                                                                   |  | $    | 42,296 |      |  | $    | (66,971 | ) |  | $ | 38,388 | 
|Less: total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects |  |      | 4,817  |      |  |      | 5,523   |   |  |   | 4,718  | 
|                                                                                                                                                  |  |      |        |      |  |      |         |   |  |   |        | 
|Net income/(loss)  pro forma                                                                                                                     |  |      | 37,479 |      |  |      | (72,494 | ) |  |   | 33,670 | 
|Basic earnings/(loss) per share  as
    reported                                                                                                 |  |      | 1.55   |      |  |      | (2.49   | ) |  |   | 1.46   | 
|Basic earnings/(loss) per share  pro
    forma                                                                                                   |  |      | 1.38   |      |  |      | (2.69   | ) |  |   | 1.28   | 
|Diluted earnings/(loss) per share  as
    reported                                                                                               |  |      | 1.55   |      |  |      | (2.45   | ) |  |   | 1.43   | 
|Diluted earnings/(loss) per share  pro
    forma                                                                                                 |  |      | 1.37   |      |  |      | (2.65   | ) |  |   | 1.26   | 



| |                             
| | ----------------------------
| | Foreign Currency Translation

The financial statements of our former foreign
subsidiaries (see Note 2) were measured using the local
currency as the functional currency. Assets and liabilities of
these subsidiaries were translated at exchange rates as of the
balance sheet date. Revenue and expenses were translated at
average rates of exchange during the year. The resulting
cumulative translation adjustment at December 31, 2001 is
included in our consolidated statements of 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
United States of America. Actual results could differ from
those estimates.

Reclassifications

Certain reclassifications have been made to prior
year amounts to conform to the current year presentation.

Recent
Accounting Pronouncements

On November 25, 2002, the Financial
Accounting Standards Board (FASB) issued
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, which elaborates on
the disclosures to be made by a guarantor about its obligations
under certain guarantees issued. The Interpretation also
clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The
Interpretation expands on the accounting guidance of
Interpretation No. 5, Accounting for Contingencies,
SFAS No. 57 Related Party Disclosures, and
SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. The Interpretation also incorporates,
without change, the provisions of Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others,
which it supersedes. The Interpretation does identify several
situations where the recognition of a liability at inception for
a guarantors obligation is not required. The initial
recognition and measurement provisions of this Interpretation
apply on a prospective basis to guarantees issued or modified
after December 31, 2002, regardless of the guarantors
fiscal year-end. The disclosures are effective for financial
statements of interim or annual periods ending after
December 15, 2002. Adoption of this Interpretation did not
have an impact on our financial statements and related
disclosures.

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(Thousands of dollars, except share and per
share amounts)


In December 2002, the FASB issued
SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and
Disclosure  an amendment of
SFAS No. 123. This Statement amends
SFAS No. 123, Accounting for Stock-Based
Compensation to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. Finally, this Statement
amends APB Opinion No. 28, Interim Financial
Reporting, to require disclosure about those effects in
interim financial information. The amendments to
SFAS No. 123 in paragraphs 2(a) - 2(e) of this
Statement are effective for financial statements for fiscal
years ending after December 15, 2002. The amendment to
SFAS No. 123 in paragraph 2(f) of this Statement and
the amendment to Opinion No. 28 in paragraph 3 of this
statement were effective for financial reports containing
condensed financial statements for interim periods beginning
after December 15, 2002. As is allowed, we have adopted the
disclosure requirements under SFAS No. 148.

In March 2003, the FASB issued Interpretation
No. 46. This Interpretation of Accounting Research Bulletin
No. 5, Consolidated Financial Statements, addresses
consolidation by business enterprises of variable interest
entities. This Interpretation applies to variable interest
entities created after January 1, 2002, and to variable
interest entities in which an enterprise obtains an interest
after that date. We have no investments in variable interest
entities and therefore, this Interpretation has no impact on our
financial statements and related disclosures.

In May 2003, the FASB issued
SFAS No. 150  Accounting for Certain
Financial Instruments with Characteristics of both Liabilities
and Equity. This Statement provides guidance as to the
appropriate classification of certain financial statement
instruments that have characteristics of both liabilities and
equity. This statement is effective at the beginning of the
first interim period after June 15, 2003. Adoption of this
Statement did not have an impact on our financial statements and
related disclosures.



|    |                        
|--- | -----------------------
|(2) | Discontinued Operations

On October 30, 2002, we sold our freight
forwarding businesses, USF Worldwide Inc. and USF Worldwide
Logistics (UK) Ltd. (the Companies) to GPS
Logistics, LLC and Seko Worldwide Acquisition LLC (the
Transferees) pursuant to a Share Transfer Agreement
dated October 17, 2002 through the transfer of the shares
of the Companies. As a condition to the transfer and in
consideration of Transferees obligation to assume
ownership of the stock of the Companies, we agreed to contribute
$17,000 in cash to USF Worldwide Inc. As part of the agreement,
the Transferees had the option for a period of up to
six months from closing to return its interest in certain
assets to us for $3,000 in cash. In December 2002, the
Transferees exercised their option to return their interest in
those certain assets which are the ocean freight forwarding
businesses.

During the year ended December 31, 2002, we
recognized a loss of $13,239 net of tax benefits on the
transfer of our freight forwarding businesses. The calculation
of the loss is summarized as follows:

|                                            |  |   |        | 
|------------------------------------------- |  | - | ------ | 
|Net assets transferred                      |  | $ | 14,556 | 
|Cash paid                                   |  |   | 20,000 | 
|Write-off of notes receivable               |  |   | 6,000  | 
|Transaction fees and expenses               |  |   | 1,743  | 
|                                            |  |   |        | 
|Loss on transfer before income tax benefits |  |   | 42,299 | 
|Income tax benefits                         |  |   | 29,060 | 
|                                            |  |   |        | 
|Loss, net of income tax benefits            |  | $ | 13,239 | 
|                                            |  |   |        | 

The disposal of our freight forwarding businesses
represents the disposal of a component of an entity under
SFAS No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets. Accordingly, the

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(Thousands of dollars, except share and per
share amounts)


financial position and results of operations of
the freight forwarding segment have been classified as
discontinued operations and all periods prior to 2003 have been
restated.

Loss from discontinued operations consisted of
the following:

|                                       |  |      |      |      |  |      |         |   |  |   |         |  
|-------------------------------------- |  | ---- | ---- | ---- |  | ---- | ------- | - |  | - | ------- | -
|Year                                   |  | 2003 |      | 2002 |  | 2001
|                                       |  |      |      |      |  |     
|Revenue                                |  | $    |     |      |  | $    | 187,638 |   |  | $ | 237,673 |  
|Loss from operations                   |  |      | (577 | )    |  |      | (23,885 | ) |  |   | (18,107 | )
|Income tax benefits                    |  |      | 239  |      |  |      | 6,907   |   |  |   | 6,518   |  
|                                       |  |      |      |      |  |      |         |   |  |   |         |  
|Loss from operations, net              |  |      | (338 | )    |  |      | (16,978 | ) |  |   | (11,589 | )
|                                       |  |      |      |      |  |      |         |   |  |   |         |  
|Loss on disposal                       |  |      |     |      |  |      | (42,299 | ) |  |   |        |  
|Income tax benefits on disposal        |  |      |     |      |  |      | 29,060  |   |  |   |        |  
|                                       |  |      |      |      |  |      |         |   |  |   |         |  
|Loss on disposal, net                  |  |      |     |      |  |      | (13,239 | ) |  |   |        |  
|                                       |  |      |      |      |  |      |         |   |  |   |         |  
|Loss from discontinued operations, net |  | $    | (338 | )    |  | $    | (30,217 | ) |  | $ | (11,589 | )
|                                       |  |      |      |      |  |      |         |   |  |   |         |  

During the first quarter of 2002 we relinquished
our 50% interest in our consolidated subsidiary,
USF Asia. We recorded a $12,760 charge, which included a
$10,000 negotiated payment to our former partner. The
remaining $2,760 represented the relinquishment of our net
assets to our former partner. We initiated our commitment to
dispose of our Asia operation in the fourth quarter of 2001.
Accordingly, as required by SFAS No. 144, we applied
the provisions of APB Opinion No. 30. The Asia operation
was a component of our freight forwarding segment. APB
No. 30 required presentation of a business disposal in
discontinued operations only when a company disposed of an
entire segment. We therefore did not present the Asia operation
in discontinued operations.



|    |                 
|--- | ----------------
|(3) | Operating leases

We lease certain terminals, warehouses, vehicles
and data processing equipment under long-term lease agreements
that expire in various years through 2039.

The following is a schedule of future minimum
rental payments on leases that had initial or remaining
non-cancelable lease terms in excess of one year at
December 31, 2003.

|                 |  |   |        | 
|---------------- |  | - | ------ | 
|Year             |  |  
|                 |  |  
|2004             |  | $ | 25,157 | 
|2005             |  |   | 17,305 | 
|2006             |  |   | 9,473  | 
|2007             |  |   | 5,090  | 
|2008             |  |   | 3,568  | 
|Subsequent years |  |   | 4,860  | 
|                 |  |   |        | 
|                 |  | $ | 65,453 | 
|                 |  |   |        | 

Rental expense in our accompanying consolidated
statements of operations for 2003, 2002, and 2001 was $27,718,
$29,406 and $30,257, respectively.

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(Thousands of dollars, except share and per
share amounts)




|    |               
|--- | --------------
|(4) | Long-Term Debt

Long-term debt consists of the following:

|                             |  |      |         |      |  |   |         | 
|---------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                             |  | 2003 |         | 2002
|                             |  |      |         |     
|Unsecured notes(a)           |  | $    | 250,000 |      |  | $ | 250,000 | 
|Unsecured lines of credit(b) |  |      |        |      |  |   |        | 
|Other                        |  |      | 147     |      |  |   | 2,496   | 
|                             |  |      |         |      |  |   |         | 
|                             |  |      | 250,147 |      |  |   | 252,496 | 
|Less current maturities      |  |      | 60      |      |  |   | 367     | 
|                             |  |      |         |      |  |   |         | 
|                             |  | $    | 250,087 |      |  | $ | 252,129 | 
|                             |  |      |         |      |  |   |         | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | We issued guaranteed unsecured notes of $150,000
    on April 25, 2000 that are due April 15, 2010 and bear
    interest at 8.5%. The notes are redeemable in whole or part any
    time before 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 6.5 %. The notes are redeemable in whole or part any time
    before 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, 2003 was approximately $283,000.                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | Our guaranteed notes are fully and
    unconditionally guaranteed, on a joint and several basis, on an
    unsecured senior basis, by substantially all of our direct and
    indirect domestic subsidiaries (the Subsidiary
    Guarantors). All of the assets were owned by 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 financial statements. Our subsidiaries, other than
    the Subsidiary Guarantors, are minor. There are no restrictions
    on our ability to obtain funds from our subsidiaries by dividend
    or loan. We, therefore, are not required to present separate
    financial statements of our Subsidiary Guarantors, and other
    disclosures relating to them.                                                                                                   
|   
|    |  | 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, 2003, $250,000 of notes may be issued under
    this shelf registration statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(b) |  | We have a $200,000 committed credit facility
    through a syndicate of commercial banks. In October 2002, we
    replaced our $200,000 credit facility that was to expire in
    November 2002 with a $200,000 credit facility that expires in
    October of 2005. The facility allows up to $125,000 for standby
    letters of credit to be utilized in our self-insurance program,
    and other letter of credit requirements. The facility has an
    annual fee and contains customary financial covenants including
    maintenance of minimum net worth and funded debt to cash flow.
    At December 31, 2003, we had no borrowings and had $87,974
    in outstanding letters of credit under this facility. In
    addition to our committed credit facility, we maintained a
    $10,000 uncommitted line of credit that had no outstanding
    borrowings at December 31, 2003. These facilities are used
    in conjunction with a centralized cash management system to
    finance our short-term working capital needs thereby assisting
    us and managing our cash balances.

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(Thousands of dollars, except share and per
share amounts)


The aggregate annual maturities of our debt at
December 31, 2003 were as follows:

|                 |  |        |         | 
|---------------- |  | ------ | ------- | 
|Year             |  | Amount
|                 |  |       
|2004             |  | $      | 60      | 
|2005             |  |        | 64      | 
|2006             |  |        | 23      | 
|2007             |  |        |        | 
|2008             |  |        |        | 
|Subsequent years |  |        | 250,000 | 
|                 |  |        |         | 
|                 |  | $      | 250,147 | 
|                 |  |        |         | 



|    |             
|--- | ------------
|(5) | Income Taxes

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

|                                             |  |      |        |      |  |      |        |  |  |   |        | 
|-------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|Year                                         |  | 2003 |        | 2002 |  | 2001
|                                             |  |      |        |      |  |     
|Federal income tax at statutory rate (35%)   |  | $    | 26,350 |      |  | $    | 21,697 |  |  | $ | 29,453 | 
|State income tax, net of federal tax benefit |  |      | 2,991  |      |  |      | 2,861  |  |  |   | 2,214  | 
|Asia exit costs                              |  |      |       |      |  |      | 3,500  |  |  |   |       | 
|Goodwill amortization                        |  |      |       |      |  |      |       |  |  |   | 784    | 
|Other                                        |  |      | 1,843  |      |  |      | 666    |  |  |   | 623    | 
|                                             |  |      |        |      |  |      |        |  |  |   |        | 
|Total income tax expense                     |  | $    | 31,184 |      |  | $    | 28,724 |  |  | $ | 33,074 | 
|                                             |  |      |        |      |  |      |        |  |  |   |        | 

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

|                         |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------ |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|Year                     |  | 2003 |        | 2002 |  | 2001
|                         |  |      |        |      |  |     
|Current expense:         |  |      |        |      |  |      |        |   |  |   |        |  
|Federal                  |  | $    | 10,063 |      |  | $    | 25,163 |   |  | $ | 28,598 |  
|State                    |  |      | 4,653  |      |  |      | 4,793  |   |  |   | 2,032  |  
|                         |  |      |        |      |  |      |        |   |  |   |        |  
|                         |  |      | 14,716 |      |  |      | 29,956 |   |  |   | 30,630 |  
|                         |  |      |        |      |  |      |        |   |  |   |        |  
|Deferred expense:        |  |      |        |      |  |      |        |   |  |   |        |  
|Federal                  |  |      | 16,519 |      |  |      | (841   | ) |  |   | 3,381  |  
|State                    |  |      | (51    | )    |  |      | (391   | ) |  |   | (937   | )
|                         |  |      |        |      |  |      |        |   |  |   |        |  
|                         |  |      | 16,468 |      |  |      | (1,232 | ) |  |   | 2,444  |  
|                         |  |      |        |      |  |      |        |   |  |   |        |  
|Total income tax expense |  | $    | 31,184 |      |  | $    | 28,724 |   |  | $ | 33,074 |  
|                         |  |      |        |      |  |      |        |   |  |   |        |  

32



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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


The following is a summary of the components of
our deferred income tax assets and liabilities at
December 31, 2003 and December 31, 2002:

|                                                                        |  |      |         |      |  |   |         | 
|----------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                                                        |  | 2003 |         | 2002
|                                                                        |  |      |         |     
|Deferred tax assets:                                                    |  |      |         |      |  |   |         | 
|Deferred compensation                                                   |  | $    | 7,450   |      |  | $ | 5,711   | 
|Insurance and claims                                                    |  |      | 50,840  |      |  |   | 46,951  | 
|Vacation pay                                                            |  |      | 10,941  |      |  |   | 11,178  | 
|Tax loss credit and carry forwards                                      |  |      | 3,459   |      |  |   | 15,700  | 
|Other                                                                   |  |      | (237    | )    |  |   | 4,111   | 
|                                                                        |  |      |         |      |  |   |         | 
|                                                                        |  |      | 72,453  |      |  |   | 83,651  | 
|                                                                        |  |      |         |      |  |   |         | 
|Deferred tax liabilities:                                               |  |      |         |      |  |   |         | 
|Software development costs                                              |  |      | 12,221  |      |  |   | 3,875   | 
|Property and equipment, principally due to
    accelerated depreciation |  |      | 122,176 |      |  |   | 126,554 | 
|                                                                        |  |      |         |      |  |   |         | 
|Net deferred tax liabilities                                            |  | $    | 61,944  |      |  | $ | 46,778  | 
|                                                                        |  |      |         |      |  |   |         | 



---



|      |                                                                                                                                                                                       
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | Certain deferred tax asset and liability amounts
    for the year 2002 have been reclassified to be consistent with
    our 2003 presentation. Total deferred taxes were not affected.

Goodwill is no longer a reconciling item with
respect to our effective income tax rate due to the adoption of
SFAS No. 142 Goodwill and Other Intangible
Assets. Our deferred tax assets included tax loss carry
forwards, which expire in 2022.



|    |                       
|--- | ----------------------
|(6) | 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 2003, 2002 and 2001, our
contributions for these plans were $11,844, $11,623 and $11,207,
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. Approximately 64% of
our contributions are made to the Central States Pension Fund
which has suffered significant investment losses in recent
years. 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. The amount of
liability has not been determined, but we would expect that it
would be material. To date, no withdrawal or termination has
occurred or is contemplated. For 2003, 2002 and 2001, our
contributions to these pension plans were $86,147, $87,894 and
$82,914, 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 also maintain a
supplemental executive retirement plan (defined contribution) to
provide benefits to a select group of our management who
contribute significantly to our continued growth, development
and future business. In 2003, 2002 and 2001, we contributed
$1,656, $1,579 and $1,625, respectively, to this plan. We have
established a grantor trust (Rabbi Trust) to provide funding for
benefits payable under our deferred compensation and
supplemental executive retirement plans.

33



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(Thousands of dollars, except share and per
share amounts)




|    |             
|--- | ------------
|(7) | Common Stock

We maintain two employee stock purchase plans,
which provide for the purchase of an aggregate of not more than
1,225,000 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
a discount from the month-end market price. At December 31,
2003, 1,041,010 shares had been issued under these plans.

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
5,235,000 shares of our common stock. Stock options issued
under these plans are exercisable for periods up to ten years
from the date an option is granted. At December 31, 2003
there were 1,563,666 shares available for granting under
the plans. For all stock options that have been granted by us,
the exercise prices of all the stock options were equal to the
market prices of the underlying stock on the grant dates,
therefore no compensation was recognized.

In 2003, 2002 and 2001, we issued 458,302,
303,377 and 796,260 common shares, respectively, through the
exercise of stock options or the purchase, by employees, through
our stock option and stock purchase programs. In 2003, we
repurchased 14,000 common shares in the open market for
approximately $336 under a board authorized repurchase program.
There were no shares repurchased in 2002 and 2001. At
December 31, 2003 we had authorization to repurchase
approximately 500,000 additional shares. Repurchased shares were
included in Treasury Stock and were the first shares
to be used in our employee stock purchase plans or when
employees exercised stock options. The repurchased shares were
recorded at cost and when issued for employee stock purchase
plan allocations or when employees exercise stock options the
value of treasury stock was reduced at the average cost per
share of all shares available in the treasury stock account. If
allocations under the employee stock purchase plans or employee
stock option exercises (on a per share price basis) exceeded the
current treasury stock average price per share, the excess was
recorded as paid in capital.

We estimated the fair value of each option on the
date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for 2003, 2002
and 2001: dividend yield ranging from 1.17% to 1.42%; expected
volatility ranging from 32.38% to 51.02%; risk-free interest
rates at grant date ranging from 2.48% to 4.75%; and expected
lives ranging from 4.35 to 6.89 years.

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

|                                                                   |  |        |           |           |  |        |       |           |  |        |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|------------------------------------------------------------------ |  | ------ | --------- | --------- |  | ------ | ----- | --------- |  | ------ | --------- | --------- |  | - | ----- |  |  | - | --------- | - |  | - | ----- | 
|                                                                   |  |        |           |           |  |       
|Year                                                               |  | 2003   |           | 2002      |  | 2001  
|                                                                   |  |        |           |           |  |       
|                                                                   |  |        |           | Weighted- |  |        |       | Weighted- |  |        |           | Weighted-
|                                                                   |  |        |           | Average   |  |        |       | Average   |  |        |           | Average  
|                                                                   |  |        |           | Exercise  |  |        |       | Exercise  |  |        |           | Exercise 
|                                                                   |  | Shares |           | Price     |  | Shares |       | Price     |  | Shares |           | Price    
|                                                                   |  |        |           |           |  |        |       |           |  |        |           |          
|Outstanding at beginning of year                                   |  |        | 3,133,886 |           |  | $      | 29.82 |           |  |        | 2,659,113 |           |  | $ | 28.48 |  |  |   | 3,647,940 |   |  | $ | 27.75 | 
|Granted                                                            |  |        | 366,200   |           |  |        | 29.80 |           |  |        | 928,110   |           |  |   | 32.45 |  |  |   | 65,000    |   |  |   | 30.85 | 
|Exercised                                                          |  |        | (372,143  | )         |  |        | 24.83 |           |  |        | (228,721  | )         |  |   | 22.90 |  |  |   | (694,827  | ) |  |   | 24.91 | 
|Forfeited                                                          |  |        | (611,100  | )         |  |        | 30.54 |           |  |        | (224,616  | )         |  |   | 31.93 |  |  |   | (359,000  | ) |  |   | 28.34 | 
|                                                                   |  |        |           |           |  |        |       |           |  |        |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|Outstanding at end of year                                         |  |        | 2,516,843 |           |  |        | 30.23 |           |  |        | 3,133,886 |           |  |   | 29.82 |  |  |   | 2,659,113 |   |  |   | 28.48 | 
|                                                                   |  |        |           |           |  |        |       |           |  |        |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|Options exercisable at year end                                    |  |        | 1,594,386 |           |  |        | 29.22 |           |  |        | 1,424,497 |           |  |   | 28.03 |  |  |   | 1,122,419 |   |  |   | 26.24 | 
|                                                                   |  |        |           |           |  |        |       |           |  |        |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|Weighted-average fair value of options granted
    during the year |  | $      | 7.05      |           |  |        |       |           |  | $      | 11.81     |           |  |   |       |  |  | $ | 13.40     |   |  |   |       | 
|                                                                   |  |        |           |           |  |        |       |           |  |        |           |           |  |   |       |  |  |   |           |   |  |   |       | 

34



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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


The following table summarizes information about
stock options outstanding at December 31, 2003:

|                |  |                     |           |                  |  |                |      |                     |  |                |       |  |  |  |           |  |  |   |       | 
|--------------- |  | ------------------- | --------- | ---------------- |  | -------------- | ---- | ------------------- |  | -------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                |  |                     |           |                  |  |               
|                |  | Outstanding Options |           |                  |  |               
|                |  |                     |           |                 
|                |  |                     |           | Weighted-        |  |                |      | Options Exercisable
|                |  |                     |           | Average          |  |                |      |                    
|                |  | Number              |           | Remaining        |  | Weighted-      |      | Number              |  | Weighted-     
|Range of        |  | Outstanding         |           | Contractual Life |  | Average        |      | Exercisable at      |  | Average       
|Exercise Prices |  | at 12/31/03         |           | (Years)          |  | Exercise Price |      | 12/31/03            |  | Exercise Price
|                |  |                     |           |                  |  |                |      |                     |  |               
|$13.83-$24.06   |  |                     | 433,450   |                  |  |                | 5.66 |                     |  | $              | 22.64 |  |  |  | 277,450   |  |  | $ | 21.89 | 
|24.94-27.69     |  |                     | 721,925   |                  |  |                | 5.04 |                     |  |                | 25.22 |  |  |  | 686,258   |  |  |   | 25.13 | 
|28.92-34.30     |  |                     | 608,618   |                  |  |                | 7.64 |                     |  |                | 30.95 |  |  |  | 236,218   |  |  |   | 30.50 | 
|35.00-46.63     |  |                     | 752,850   |                  |  |                | 6.99 |                     |  |                | 38.84 |  |  |  | 394,460   |  |  |   | 40.72 | 
|                |  |                     |           |                  |  |                |      |                     |  |                |       |  |  |  |           |  |  |   |       | 
|                |  |                     | 2,516,843 |                  |  |                | 6.36 |                     |  | $              | 30.23 |  |  |  | 1,594,386 |  |  | $ | 29.22 | 
|                |  |                     |           |                  |  |                |      |                     |  |                |       |  |  |  |           |  |  |   |       | 

We have a stockholder rights plan designed to
deter coercive takeover tactics and to prevent an acquirer 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
January 31, 2014.



|    |                                     
|--- | ------------------------------------
|(8) | Goodwill and Other Intangible Assets

Under SFAS No. 142 Goodwill and
Other Intangible Assets, previously recorded goodwill and
other intangible assets with indefinite lives are no longer
amortized but are subject to impairment tests annually. In 2001,
we amortized $4,207 of goodwill. As a result of implementing
this new standard on January 1, 2002 we no longer amortize
goodwill and recorded an impairment charge of $70,022 at USF
Worldwide, our discontinued freight forwarding segment. The
charge was shown as a cumulative effect of change in accounting
for goodwill in the first quarter of 2002. Goodwill was not
impaired under SFAS No. 121 which was effective
through December 31, 2001. Goodwill and other intangible
assets consist of the following:

|                                                                        |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  
|----------------------------------------------------------------------- |  | ---------- | - | -------- |  | ------------ | ------- | -------- |  | ------------ | ------- | - |  | - | ------- |  |  | - | ------- | -
|                                                                        |  |            |   |          |  |             
|Year                                                                    |  |            |   | 2003     |  | 2002        
|                                                                        |  |            |   |          |  |             
|                                                                        |  |            |   | Gross    |  |              |         | Gross    |  |             
|                                                                        |  | Average    |   | Carrying |  | Accumulated  |         | Carrying |  | Accumulated 
|                                                                        |  | Life (Yrs) |   | Amount   |  | Amortization |         | Amount   |  | Amortization
|                                                                        |  |            |   |          |  |              |         |          |  |             
|Amortized intangible assets:                                            |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  
|Customer lists                                                          |  |            | 5 |          |  | $            | 9,444   |          |  | $            | (7,411  | ) |  | $ | 6,073   |  |  | $ | (5,078  | )
|Non-competes                                                            |  |            | 5 |          |  |              | 5,347   |          |  |              | (5,184  | ) |  |   | 5,156   |  |  |   | (5,156  | )
|                                                                        |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  
|Total                                                                   |  |            |   |          |  | $            | 14,791  |          |  | $            | (12,595 | ) |  | $ | 11,229  |  |  | $ | (10,234 | )
|                                                                        |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  
|Intangible assets not subject to amortization:                          |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  
|Goodwill                                                                |  |            |   |          |  | $            | 100,808 |          |  | $            |        |   |  | $ | 100,504 |  |  | $ |        |  
|                                                                        |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  
|Aggregate amortization expense for the year ended
    December 31, 2003 |  |            |   |          |  | $            | 2,369   |          |  |              |         |   |  |   |         |  |  |   |         |  
|                                                                        |  |            |   |          |  |              |         |          |  |              |         |   |  |   |         |  |  |   |         |  

35



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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


Estimated amortization expense for each of the
years ending December 31 is as follows:

|     |       |   |     |       | 
|---- | ----- | - | --- | ----- | 
|Year |       |  
|     |       |  
|2004 |       | $ | 774 |      
|2005 |       |   | 569 |      
|2006 |       |   | 530 |      
|2007 |       |   | 323 |      
|     |       |   |     |      
|     | Total |   | $   | 2,196 | 
|     |       |   |     |      

The changes in the carrying amount of goodwill
during 2003, and the goodwill balances by operating segment as
of December 31, 2003 are as follows:

|                                |  |     |        |    |  |           |        |       |  |   |        |  |  |   |         | 
|------------------------------- |  | --- | ------ | -- |  | --------- | ------ | ----- |  | - | ------ |  |  | - | ------- | 
|                                |  | LTL |        | TL |  | Logistics |        | Total
|                                |  |     |        |    |  |           |        |      
|Balance as of December 31, 2002 |  | $   | 57,273 |    |  | $         | 10,574 |       |  | $ | 32,657 |  |  | $ | 100,504 | 
|Additions                       |  |     |        |    |  |           | 304    |       |  |   |        |  |  |   | 304     | 
|                                |  |     |        |    |  |           |        |       |  |   |        |  |  |   |         | 
|Balance as of December 31, 2003 |  | $   | 57,273 |    |  | $         | 10,878 |       |  | $ | 32,657 |  |  | $ | 100,808 | 
|                                |  |     |        |    |  |           |        |       |  |   |        |  |  |   |         | 

The following tables adjust earnings and earnings
per share for the adoption of SFAS No. 142:

|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |            | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ---- | ------ | ---------- |  | ---- | ------ | ---------- |  | - | ------ | ---------- | 
|Year                                                                                          |                                                                                                    | 2003 |        | 2002       |  | 2001
|                                                                                              |                                                                                                    |      |        |            |  |     
|Income from continuing operations before
    cumulative effect of accounting changes          |                                                                                                    | $    | 44,101 |            |  | $    | 33,268 |            |  | $ | 49,977 |           
|Add back goodwill amortization, net of tax                                                    |                                                                                                    |      |       |            |  |      |       |            |  |   | 4,207  |           
|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|Adjusted income from continuing operations before
    cumulative effect of accounting changes |                                                                                                    | $    | 44,101 |            |  | $    | 33,268 |            |  | $ | 54,184 |           
|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|Basic earnings per share:                                                                     |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|                                                                                              | Reported basic EPS from continuing operations
    before cumulative effect of accounting changes   |      | $      | 1.62       |  |      | $      | 1.23       |  |   | $      | 1.90       | 
|                                                                                              | Add back goodwill amortization, net of tax                                                         |      |        |           |  |      |        |           |  |   |        | 0.16       | 
|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|                                                                                              | Adjusted basic EPS from continuing operations
    before cumulative effect of accounting changes   |      | $      | 1.62       |  |      | $      | 1.23       |  |   | $      | 2.06       | 
|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|Diluted earnings per share:                                                                   |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|                                                                                              | Reported diluted EPS from continuing operations
    before cumulative effect of accounting changes |      | $      | 1.61       |  |      | $      | 1.22       |  |   | $      | 1.87       | 
|                                                                                              | Add back goodwill amortization, net of tax                                                         |      |        |           |  |      |        |           |  |   |        | 0.16       | 
|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|                                                                                              | Adjusted diluted EPS from continuing operations
    before cumulative effect of accounting changes |      | $      | 1.61       |  |      | $      | 1.22       |  |   | $      | 2.03       | 
|                                                                                              |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|Weighted-average shares:                                                                      |                                                                                                    |      |        |            |  |      |        |            |  |   |        |           
|                                                                                              | Basic                                                                                              |      |        | 27,207,392 |  |      |        | 26,900,311 |  |   |        | 26,309,107 | 
|                                                                                              | Diluted                                                                                            |      |        | 27,348,711 |  |      |        | 27,331,890 |  |   |        | 26,765,861 | 

36



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##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


|                                           |                                             |      |        |            |  |      |         |            |   |   |        |            | 
|------------------------------------------ | ------------------------------------------- | ---- | ------ | ---------- |  | ---- | ------- | ---------- | - | - | ------ | ---------- | 
|Year                                       |                                             | 2003 |        | 2002       |  | 2001
|                                           |                                             |      |        |            |  |     
|Net income/(loss)                          |                                             | $    | 42,296 |            |  | $    | (66,971 | )          |   | $ | 38,388 |           
|Add back goodwill amortization, net of tax |                                             |      |       |            |  |      |        |            |   |   | 6,478  |           
|                                           |                                             |      |        |            |  |      |         |            |   |   |        |           
|Adjusted net income/(loss)                 |                                             | $    | 42,296 |            |  | $    | (66,971 | )          |   | $ | 44,866 |           
|                                           |                                             |      |        |            |  |      |         |            |   |   |        |           
|Basic earnings per share:                  |                                             |      |        |            |  |      |         |            |   |   |        |           
|                                           | Reported basic EPS from net income/(loss)   |      | $      | 1.55       |  |      | $       | (2.49      | ) |   | $      | 1.46       | 
|                                           | Add back goodwill amortization, net of tax  |      |        |           |  |      |         |           |   |   |        | 0.25       | 
|                                           |                                             |      |        |            |  |      |         |            |   |   |        |           
|                                           | Adjusted basic EPS from net income/(loss)   |      | $      | 1.55       |  |      | $       | (2.49      | ) |   | $      | 1.71       | 
|                                           |                                             |      |        |            |  |      |         |            |   |   |        |           
|Diluted earnings per share:                |                                             |      |        |            |  |      |         |            |   |   |        |           
|                                           | Reported diluted EPS from net income/(loss) |      | $      | 1.55       |  |      | $       | (2.45      | ) |   | $      | 1.43       | 
|                                           | Add back goodwill amortization, net of tax  |      |        |           |  |      |         |           |   |   |        | 0.24       | 
|                                           |                                             |      |        |            |  |      |         |            |   |   |        |           
|                                           | Adjusted diluted EPS from net income/(loss) |      | $      | 1.55       |  |      | $       | (2.45      | ) |   | $      | 1.67       | 
|                                           |                                             |      |        |            |  |      |         |            |   |   |        |           
|Weighted-average shares:                   |                                             |      |        |            |  |      |         |            |   |   |        |           
|                                           | Basic                                       |      |        | 27,207,392 |  |      |         | 26,900,311 |   |   |        | 26,309,107 | 
|                                           | Diluted                                     |      |        | 27,348,711 |  |      |         | 27,331,890 |   |   |        | 26,765,861 | 



|    |                              
|--- | -----------------------------
|(9) | 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, is $52,772 and $80,707, respectively, in
2003 and $55,174 and $72,744, respectively, in 2002 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, 2003, we had capital
purchase commitments of approximately $7,380 for land and
improvements, $48 for transportation equipment, and $2,569 for
other IT related projects.

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. We take prompt remedial action whenever any
contamination is detected.



|     |                
|---- | ---------------
|(10) | Related Parties

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. We believe
that the consulting fees billed to us for these services were at
market rates. We paid $690 for consulting fees in 2001 to
DiamondCluster.

In 2002, we made a $700 loan to Douglas R.
Waggoner, Senior Vice President Strategic Marketing, pursuant to
our executive relocation program. The loan was due on
December 31, 2002 and has been repaid.

William N. Weaver, Jr., a former director,
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. We believe that the legal
fees billed to us for these services were at market rates. We
paid $653, $725 and $379 in 2003, 2002 and 2001, respectively,
to Sachnoff & Weaver, Ltd.

37



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(Thousands of dollars, except share and per
share amounts)




|     |             
|---- | ------------
|(11) | Acquisitions

In February 2003, we acquired the stock of
System 81 Express, Inc., a truckload carrier based in
Tennessee that owned or operated approximately 140 tractors
and 260 trailers, for approximately $1,900 in cash and
$2,800 in assumed debt. In addition, contingent payments
totaling $314 were subsequently made to the former owners of
System 81 Express. Goodwill and other intangible assets of $304
and $461, respectively, were recorded under the acquisition. The
acquisition contributed approximately $8,000 to revenue for 2003.

On April 14, 2003, we paid $3,000 in cash
for certain assets and the business of Plymouth Rock
Transportation Corporation, a Massachusetts-based LTL carrier
that provided overnight freight service to 11 Northeastern
states. Contingent purchase price payments may be made to the
former owners of Plymouth Rock Transportation Corporation if
certain retained revenue goals are achieved. The earliest
contingent purchase price payment would be made in the third
quarter of 2004. The acquisition contributed approximately
$14,630 to revenue for 2003.



|     |              
|---- | -------------
|(12) | Joint Venture

In December, 2003 we began offering
transportation and logistics services in Mexico and across the
United States/ Mexico border through a joint venture with
the shareholders of Autolineas Mexicanas S.A. de C.V.
(ALMEX). As of December 31, 2003, we had
invested $5,365 in the form of a loan with a commitment to
increase to $10,000, which can be converted to equity at our
option. We have the option to eventually own a majority position.



|     |                  
|---- | -----------------
|(13) | Business Segments

We have four reportable business segments:
(1) LTL trucking, (2) TL trucking, (3) Logistics
and (4) Corporate and Other. Our regional LTL trucking
segment provides regional and inter-regional delivery of goods
throughout the US, to certain areas of Canada and throughout
Mexico via our joint venture with ALMEX. Our TL subsidiary
provides premium regional and national TL services. Our
logistics subsidiaries provide solutions to customers
logistics and distribution requirements and domestic ocean
freight services. The Corporate and Other segment performs
support activities to our operating segments including
executive, IT, corporate sales and various financial
management functions. Our reportable business segments are
managed separately because each business has different customer
requirements and service offerings.

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
income or loss from operations. We

38



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(Thousands of dollars, except share and per
share amounts)


evaluate performance based on income or loss from
operations before income taxes, interest, amortization of
intangibles and other non-operating income (expenses).

|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|Year                                                                                                                         |  | 2003 |           | 2002 |  | 2001
|                                                                                                                             |  |      |           |      |  |     
|Revenue                                                                                                                      |  |      |           |      |  |      |           |   |  |   |           |  
|LTL:                                                                                                                         |  |      |           |      |  |      |           |   |  |   |           |  
|Holland                                                                                                                      |  | $    | 983,830   |      |  | $    | 960,392   |   |  | $ | 937,150   |  
|Reddaway                                                                                                                     |  |      | 296,064   |      |  |      | 274,368   |   |  |   | 266,206   |  
|Red Star                                                                                                                     |  |      | 228,539   |      |  |      | 264,279   |   |  |   | 255,722   |  
|Dugan                                                                                                                        |  |      | 232,362   |      |  |      | 216,256   |   |  |   | 206,660   |  
|Bestway                                                                                                                      |  |      | 157,873   |      |  |      | 151,597   |   |  |   | 150,466   |  
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|Total LTL                                                                                                                    |  |      | 1,898,668 |      |  |      | 1,866,892 |   |  |   | 1,816,204 |  
|TL                                                                                                                           |  |      | 128,093   |      |  |      | 114,151   |   |  |   | 100,439   |  
|Logistics                                                                                                                    |  |      | 276,441   |      |  |      | 278,161   |   |  |   | 277,393   |  
|Asia Operations                                                                                                              |  |      |          |      |  |      |          |   |  |   | 26,938    |  
|Intercompany eliminations                                                                                                    |  |      | (11,063   | )    |  |      | (8,678    | ) |  |   |          |  
|Corporate and Other                                                                                                          |  |      |          |      |  |      |          |   |  |   |          |  
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|Total Revenue from Continuing
    Operations                                                                                 |  | $    | 2,292,139 |      |  | $    | 2,250,526 |   |  | $ | 2,220,974 |  
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|Income From Operations                                                                                                       |  |      |           |      |  |      |           |   |  |   |           |  
|LTL:                                                                                                                         |  |      |           |      |  |      |           |   |  |   |           |  
|Holland                                                                                                                      |  | $    | 67,466    |      |  | $    | 71,768    |   |  | $ | 75,000    |  
|Reddaway                                                                                                                     |  |      | 32,240    |      |  |      | 29,500    |   |  |   | 24,855    |  
|Red Star                                                                                                                     |  |      | 1,029     |      |  |      | (6,728    | ) |  |   | (3,422    | )
|Dugan                                                                                                                        |  |      | 3,034     |      |  |      | 1,301     |   |  |   | 4,619     |  
|Bestway                                                                                                                      |  |      | 6,786     |      |  |      | 9,331     |   |  |   | 7,568     |  
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|Total LTL                                                                                                                    |  |      | 110,555   |      |  |      | 105,172   |   |  |   | 108,620   |  
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|TL                                                                                                                           |  |      | 4,663     |      |  |      | 5,311     |   |  |   | 2,887     |  
|Logistics                                                                                                                    |  |      | 9,270     |      |  |      | 12,603    |   |  |   | 11,185    |  
|Asia Operations                                                                                                              |  |      |          |      |  |      |          |   |  |   | (2,811    | )
|Freight Forwarding  Asia exit costs                                                                                         |  |      |          |      |  |      | (12,760   | ) |  |   |          |  
|Corporate and Other                                                                                                          |  |      | (26,527   | )    |  |      | (28,237   | ) |  |   | (11,099   | )
|Amortization of intangibles                                                                                                  |  |      | (2,369    | )    |  |      | (1,235    | ) |  |   | (5,446    | )
|Interest expense                                                                                                             |  |      | (20,900   | )    |  |      | (20,516   | ) |  |   | (20,964   | )
|Interest income                                                                                                              |  |      | 1,867     |      |  |      | 2,708     |   |  |   | 2,278     |  
|Other, net                                                                                                                   |  |      | (1,274    | )    |  |      | (1,054    | ) |  |   | (499      | )
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  
|Income from continuing operations before
    income taxes, minority interest and cumulative effect of
    accounting changes |  | $    | 75,285    |      |  | $    | 61,992    |   |  | $ | 84,151    |  
|                                                                                                                             |  |      |           |      |  |      |           |   |  |   |           |  

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(Thousands of dollars, except share and per
share amounts)


|                           |  |      |           |      |  |      |           |  |  |   |           | 
|-------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|Year                       |  | 2003 |           | 2002 |  | 2001
|                           |  |      |           |      |  |     
|Assets                     |  |      |           |      |  |      |           |  |  |   |           | 
|LTL:                       |  |      |           |      |  |      |           |  |  |   |           | 
|Holland                    |  | $    | 458,732   |      |  | $    | 431,607   |  |  | $ | 424,054   | 
|Reddaway                   |  |      | 164,120   |      |  |      | 152,825   |  |  |   | 141,139   | 
|Red Star                   |  |      | 154,011   |      |  |      | 151,748   |  |  |   | 152,730   | 
|Dugan                      |  |      | 106,123   |      |  |      | 106,138   |  |  |   | 93,217    | 
|Bestway                    |  |      | 122,116   |      |  |      | 109,991   |  |  |   | 96,111    | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Total LTL                  |  |      | 1,005,102 |      |  |      | 952,309   |  |  |   | 907,251   | 
|TL                         |  |      | 93,523    |      |  |      | 87,336    |  |  |   | 77,426    | 
|Logistics                  |  |      | 142,958   |      |  |      | 154,153   |  |  |   | 151,223   | 
|Asia Operations            |  |      |          |      |  |      |          |  |  |   | 8,262     | 
|Corporate and Other        |  |      | 116,505   |      |  |      | 101,473   |  |  |   | 91,277    | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Total Assets               |  | $    | 1,358,088 |      |  | $    | 1,295,271 |  |  | $ | 1,235,439 | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Capital Expenditures       |  |      |           |      |  |      |           |  |  |   |           | 
|LTL:                       |  |      |           |      |  |      |           |  |  |   |           | 
|Holland                    |  | $    | 18,214    |      |  | $    | 33,001    |  |  | $ | 14,577    | 
|Reddaway                   |  |      | 22,184    |      |  |      | 21,871    |  |  |   | 10,682    | 
|Red Star                   |  |      | 1,931     |      |  |      | 5,849     |  |  |   | 10,177    | 
|Dugan                      |  |      | 11,418    |      |  |      | 20,530    |  |  |   | 4,415     | 
|Bestway                    |  |      | 18,253    |      |  |      | 18,082    |  |  |   | 13,111    | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Total LTL                  |  |      | 72,000    |      |  |      | 99,333    |  |  |   | 52,962    | 
|TL                         |  |      | 7,858     |      |  |      | 18,194    |  |  |   | 6,152     | 
|Logistics                  |  |      | 6,197     |      |  |      | 15,324    |  |  |   | 23,764    | 
|Corporate and Other        |  |      | 30,026    |      |  |      | 8,471     |  |  |   | 6,617     | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Total Capital Expenditures |  | $    | 116,081   |      |  | $    | 141,322   |  |  | $ | 89,495    | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Depreciation Expense       |  |      |           |      |  |      |           |  |  |   |           | 
|LTL:                       |  |      |           |      |  |      |           |  |  |   |           | 
|Holland                    |  | $    | 33,394    |      |  | $    | 33,509    |  |  | $ | 37,383    | 
|Reddaway                   |  |      | 12,780    |      |  |      | 12,482    |  |  |   | 12,523    | 
|Red Star                   |  |      | 9,584     |      |  |      | 10,243    |  |  |   | 10,599    | 
|Dugan                      |  |      | 9,799     |      |  |      | 9,870     |  |  |   | 10,064    | 
|Bestway                    |  |      | 7,443     |      |  |      | 6,622     |  |  |   | 6,358     | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Total LTL                  |  |      | 73,000    |      |  |      | 72,726    |  |  |   | 76,927    | 
|TL                         |  |      | 10,985    |      |  |      | 10,900    |  |  |   | 9,524     | 
|Logistics                  |  |      | 11,998    |      |  |      | 12,208    |  |  |   | 11,581    | 
|Asia Operations            |  |      |          |      |  |      |          |  |  |   |          | 
|Corporate and Other        |  |      | 4,787     |      |  |      | 4,039     |  |  |   | 2,532     | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 
|Total Depreciation Expense |  | $    | 100,770   |      |  | $    | 99,873    |  |  | $ | 100,564   | 
|                           |  |      |           |      |  |      |           |  |  |   |           | 

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(Thousands of dollars, except share and per
share amounts)




|     |                                                
|---- | -----------------------------------------------
|(14) | Quarterly Financial Information
    (unaudited)

|                                         |  |       |         |        |  |       |         |        |  |       |         |  |  |   |         |   |  |   |           |  
|---------------------------------------- |  | ----- | ------- | ------ |  | ----- | ------- | ------ |  | ----- | ------- |  |  | - | ------- | - |  | - | --------- | -
|Quarters                                 |  | First |         | Second |  | Third |         | Fourth |  | Total
|                                         |  |       |         |        |  |       |         |        |  |      
|2003                                     |  |       |         |        |  |       |         |        |  |       |         |  |  |   |         |   |  |   |           |  
|Revenue                                  |  | $     | 593,702 |        |  | $     | 567,085 |        |  | $     | 584,705 |  |  | $ | 546,647 |   |  | $ | 2,292,139 |  
|Income from Continuing Operations        |  |       | 4,240   |        |  |       | 8,114   |        |  |       | 13,091  |  |  |   | 18,656  |   |  |   | 44,101    |  
|Net income                               |  |       | 2,766   |        |  |       | 8,076   |        |  |       | 12,961  |  |  |   | 18,493  |   |  |   | 42,296    |  
|Net income per share  basic             |  |       | 0.10    |        |  |       | 0.30    |        |  |       | 0.47    |  |  |   | 0.67    |   |  |   | 1.55      |  
|Net income per share  diluted           |  |       | 0.10    |        |  |       | 0.30    |        |  |       | 0.47    |  |  |   | 0.67    |   |  |   | 1.55      |  
|Dividends declared per share             |  |       | 0.0933  |        |  |       | 0.0933  |        |  |       | 0.0933  |  |  |   | 0.0933  |   |  |   | 0.37330   |  
|                                        
|2002                                     |  |       |         |        |  |       |         |        |  |       |         |  |  |   |         |   |  |   |           |  
|Revenue                                  |  | $     | 520,165 |        |  | $     | 571,187 |        |  | $     | 578,485 |  |  | $ | 580,689 |   |  | $ | 2,250,526 |  
|Income/(Loss) from Continuing Operations |  |       | (6,801  | )      |  |       | 12,981  |        |  |       | 13,446  |  |  |   | 13,642  |   |  |   | 33,268    |  
|Net income/(loss)                        |  |       | (77,685 | )      |  |       | 5,940   |        |  |       | 5,319   |  |  |   | (545    | ) |  |   | (66,971   | )
|Net income/(loss) per share  basic      |  |       | (2.89   | )      |  |       | 0.22    |        |  |       | 0.20    |  |  |   | (0.02   | ) |  |   | (2.49     | )
|Net income/(loss) per share  diluted    |  |       | (2.84   | )      |  |       | 0.22    |        |  |       | 0.19    |  |  |   | (0.02   | ) |  |   | (2.45     | )
|Dividends declared per share             |  |       | 0.0933  |        |  |       | 0.0933  |        |  |       | 0.0933  |  |  |   | 0.0933  |   |  |   | 0.3733    |  

41



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(Thousands of dollars, except share and per
share amounts)






|         |                                                                                         
|-------- | ----------------------------------------------------------------------------------------
|Item 9  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

Effective May 29, 2002, based on the
recommendation of our Audit Committee and with the approval of
our Board of Directors, we dismissed Arthur Andersen LLP as our
independent auditors and engaged Deloitte & Touche LLP
as our new independent auditors.

In 2001 and 2000, Arthur Andersen LLPs
report on our financial statements did not contain an adverse
opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope, or accounting
principles.

During our last two years, there were no
disagreements with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused them to make reference to the subject matter
of the disagreement in connection with their reports.

None of the reportable events described under
Item 304 (a) (1) (v) of Regulation S-K occurred
within two years or within the interim period through
May 29, 2002.

We have a letter from Arthur Andersen LLP stating
its agreement with the statements made by us in our Report on
Form 8-K announcing the change in auditors.

During the two years and the subsequent interim
period through May 29, 2002, neither us or anyone on our
behalf has consulted with Deloitte & Touche LLP
regarding any of the matters or events set forth in
Item 304 (a) (2) (i) and (ii) of
Regulation S-K.






|          |                        
|--------- | -----------------------
|Item 9A  | Controls and Procedures

In order to ensure information for disclosure in
our filings of periodic reports with the Securities and Exchange
Commission is identified, recorded, processed, summarized and
reported on a timely basis, we have adopted disclosure controls
and procedures. Our Chief Executive Officer, Richard P.
DiStasio, and our Chief Financial Officer, Thomas E. Bergmann,
have reviewed and evaluated our disclosure controls and
procedures as of March 8, 2004 and have concluded that our
disclosure controls and procedures were adequate as of that date.

There were no changes in our internal controls
over financial reporting identified in connection with the
foregoing evaluation that occurred during 2003 that has
materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.




PART III






|          |                                                       
|--------- | ------------------------------------------------------
|Item 10  | Directors and Executive Officers of the
    Registrant

With the exception of the information set forth
below, the information concerning our directors and executive
officers required by Item 10 of this Annual Report on
Form 10-K, including the Audit Committee Financial Expert,
is incorporated by reference from our definitive proxy statement
to be filed pursuant to Regulation 14A. The following table
sets forth certain information as of December 31, 2003
concerning our executive officers:

|                     |  |     |    |          |  |                                                                        
|-------------------- |  | --- | -- | -------- |  | -----------------------------------------------------------------------
|Name                 |  | Age |    | Position
|                     |  |     |    |         
|Richard P. DiStasio  |  |     | 49 |          |  | President and Chief Executive Officer                                  
|Christopher L. Ellis |  |     | 58 |          |  | Senior Vice President, Finance, Treasurer &
    Chief Financial Officer
|John A. Niemzyk      |  |     | 53 |          |  | Senior Vice President & Chief Information
    Officer                  
|Douglas R. Waggoner  |  |     | 45 |          |  | Senior Vice President, Strategic Marketing                             

42



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(Thousands of dollars, except share and per
share amounts)


Richard P. DiStasio was appointed as our
President and Chief Executive Officer on September 15,
2003. Prior to joining the Company, Mr. DiStasio was
President and CEO of The Martin-Brower Co., L.L.C. since June
2001. From October 1999 until June 2001, Mr. DiStasio was
President, U.S. of The Martin-Brower Co., L.L.C. Prior to that,
Mr. DiStasio was Chief Financial Officer of Reyes Holdings,
L.L.C.

Christopher L. Ellis, has been our Senior Vice
President, Finance, Treasurer and Chief Financial Officer since
June 1991. Mr. Ellis has over 20 years of experience
in the transportation industry. Effective February 1, 2004,
Mr. Ellis retired as our Senior Vice President, Finance,
Treasurer and Chief Financial Officer.

John A. Niemzyk, 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.
Before 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.

Douglas R. Waggoner, was appointed as our Senior
Vice President, Strategic Marketing on January 16, 2002.
Mr. Waggoner has over 20 years of experience in the
trucking industry. Before joining USF, Mr. Waggoner was
President and Chief Operating Officer of Daylight Transport,
Inc. from 1998 to 2002. Prior to that, Mr. Waggoner worked
for Yellow Freight in various positions.

The information concerning compliance with
Section 16(a) of the Securities Exchange Act of 1934, as
amended, required by Item 10 of this Annual Report on
Form 10-K is incorporated by reference from our definitive
proxy statement under the heading entitled
Section 16(a) Beneficial Ownership Reporting
Compliance to be filed pursuant to
Regulation 14A

The information concerning the Companys
code of ethics is incorporated by reference from our definitive
proxy statement under the heading entitled Corporate
Governance to be filed pursuant to Regulation 14A.
Our Code of Conduct and Code of Ethics for the Chief Executive
Officer and Senior Financial Officers of the Company are located
on our web site at www.usfc.com.






|          |                       
|--------- | ----------------------
|Item 11  | Executive Compensation

The information required by Item 11 of this
Annual Report on Form 10-K is incorporated by reference
from our definitive proxy statement under the headings entitled
Management Compensation, Compensation
Committee Report on Executive Compensation and
Compensation Committee Interlocks and Insider
Participation respectively to be filed pursuant to
Regulation 14A.






|          |                                                                   
|--------- | ------------------------------------------------------------------
|Item 12  | Security Ownership of Certain Beneficial
    Owners and Management

With the exception of the equity compensation
plan table presented below, the information required by
Item 12 of this Annual Report on Form 10-K is
incorporated by reference from our definitive proxy statement
under the heading entitled Security Ownership of Principal
Holders and Management to be filed pursuant to
Regulation 14A.

43



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(Thousands of dollars, except share and per
share amounts)




| |                                   
| | ----------------------------------
| | Equity Compensation Plan
    Table

The following table contains information, as of
December 31, 2003, about our Common Stock that may be
issued upon the exercise of options, warrants and rights under
all of our existing equity compensation plans.

|                                                                  |       |                      |           |                      |  |                       |       |       |  |  |           |           | 
|----------------------------------------------------------------- | ----- | -------------------- | --------- | -------------------- |  | --------------------- | ----- | ----- |  |  | --------- | --------- | 
|                                                                  |       |                      |           |                      |  | (c)                  
|                                                                  |       |                      |           |                      |  | Number of securities 
|                                                                  |       |                      |           |                      |  | remaining available  
|                                                                  |       | (a)                  |           |                      |  | for future issuance  
|                                                                  |       | Number of securities |           | (b)                  |  | under equity         
|                                                                  |       | to be issued         |           | Weighted-average     |  | compensation plans   
|                                                                  |       | upon exercise of     |           | exercise price of    |  | (excluding securities
|                                                                  |       | outstanding options, |           | outstanding options, |  | reflected in         
|Plan category                                                     |       | warrants and rights  |           | warrants and rights  |  | column (a))          
|                                                                  |       |                      |           |                      |  |                      
|Equity compensation plans approved by security
    holders(1)     |       |                      | 2,516,843 |                      |  | $                     | 30.23 |       |  |  | 1,563,666 | (3)      
|Equity compensation plans not approved by
    security holders(2) |       |                      | 0         |                      |  |                       | 0     |       |  |  | 228,605   | (4)      
|                                                                  |       |                      |           |                      |  |                       |       |       |  |  |           |          
|                                                                  | TOTAL |                      |           | 2,516,843            |  |                       | $     | 30.23 |  |  |           | 1,792,271 | 
|                                                                  |       |                      |           |                      |  |                       |       |       |  |  |           |          



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of the Long-Term Incentive Plan, the
    Employee Stock Purchase Plan, the Directors Option Plan,
    and the 1992 Stock Option Plan. Under the Employee Stock
    Purchase Plan, purchases are made on the last day of each month
    and, accordingly, as of the close of business on
    December 31, 2003, no purchase rights remain outstanding.
    The securities reflected in column (a) do not include
    10,000 shares of restricted stock that have been issued, but are
    not yet vested.
|   
|(2) | Consists of the Directors Compensation Plan
    and the Non-Qualified Employee Stock Purchase Plan. Under the
    Non-Qualified Employee Stock Purchase Plan, purchases are made
    on the last day of each month and, accordingly, as of the close
    of business on December 31, 2003, no purchase rights
    remained outstanding.                                                                                                                                                                          
|   
|(3) | 300,000 remaining shares may be issued as
    restricted stock awards under our Long-Term Incentive Plan and
    no shares remain available for issuance under our Employee Stock
    Purchase Plan.                                                                                                                                                                                                                                                                                                              
|   
|(4) | Includes 212,654 shares available for issuance
    under our Non-Qualified Employee Stock Purchase Plan and 15,951
    shares available for grants under the Directors Compensation
    Plan.                                                                                                                                                                                                                                                                                                                     

Directors Compensation Plan

In July 2002, the Company adopted the USF
Corporation Directors Compensation Plan (the
Directors Compensation Plan). The
Directors Compensation Plan provides for the payment of
annual compensation to the non-employee members of our Board
consisting of (i) a cash payment of $15; and
(ii) equity compensation equal to a number of shares of our
Common Stock having a fair market value equal to $20. The
Directors Compensation Plan also permits the Board to pay
such additional amounts in the form of stock options, as it
deems appropriate to the non-employee directors in exchange for
their attendance at meetings and service on committees. Only
non-employee members of our Board may participate in the
Directors Compensation Plan. A maximum of 25,000 shares
have been reserved for issuance under the Directors
Compensation Plan and, accordingly, the Directors
Compensation Plan is exempt from the stockholder approval
requirements for stock plans under The Nasdaq® National
Stock Market listing requirements. As such, we did not seek
stockholder approval of the Directors Compensation Plan.

Non-Qualified Employee Stock Purchase
Plan

In August 2002, the Company adopted the USF
Corporation Non-Qualified Employee Stock Purchase Plan (the
Non-Qualified Plan). The purpose of the
Non-Qualified Plan is to enable our employees to purchase Common
Stock through payroll deductions. The Non-Qualified Plan
authorizes the granting of purchase rights to purchase up to
300,000 shares of our Common Stock.

44



---



##### Table of Contents



(Thousands of dollars, except share and per
share amounts)


All of our employees (other than employees who
are officers or directors or who are covered by a collective
bargaining agreement) and, if designated by our Board, employees
of our subsidiaries, who customarily work more than twenty hours
per week, are eligible to participate in the Non-Qualified Plan.
Participants in the Non-Qualified Plan may elect to have
deductions of between 3% and 10% made to their compensation
which deductions will be used to purchase Common Stock under the
Non-Qualified Plan. The purchase price of the Common Stock is
equal to 85% (or such other amount as may be determined by the
committee that administers the Non-Qualified Plan, but in no
event less than 85%) of the fair market value of the Common
Stock on the purchase date, which is typically the last business
day of each calendar month. Since its inception, 87,346 shares
of common stock have been purchased under the Non-Qualified
Plan. The Non-Qualified Plan excludes officers and directors
from participation and is, therefore, exempt from the
stockholder approval requirements under the Nasdaq®
National Stock Market listing requirements. As such, we did not
seek stockholder approval of the Non-Qualified Plan.






|          |                                                   
|--------- | --------------------------------------------------
|Item 13  | Certain Relationships and Related
    Transactions

The information required by Item 13 of this
Annual Report on Form 10-K is incorporated by reference
from our definitive proxy statement under the heading entitled
Certain Relationships and Related Transactions to be
filed pursuant to Regulation 14A.






|          |                                           
|--------- | ------------------------------------------
|Item 14  | Principal Accounting Fees and
    Services

The information required by Item 14 of this
Annual Report on Form 10-K is incorporated by reference
from our definitive proxy statement under the headings entitled
Principal Accounting Firm Fees and Audit
Committee Charter and Pre-Approval Policy for Audit and
Non-Audit Services to be filed pursuant to
Regulation 14A.



PART IV






|     |                                                                          
|---- | -------------------------------------------------------------------------
|Item | 15  Exhibits, Financial
    Statements Schedules and Reports on Form 8-K

(a) (1) Financial Statements

(2) Financial Statement Schedule:

Schedule II  Valuation
and Qualifying Accounts

USF Corporation

Three Years ended December 31,
2003


|                                                                                 |  |                        |        |            |  |            |       |               |  |         |   |  |  |   |       |  |  |   |        | 
|-------------------------------------------------------------------------------- |  | ---------------------- | ------ | ---------- |  | ---------- | ----- | ------------- |  | ------- | - |  |  | - | ----- |  |  | - | ------ | 
|                                                                                 |  |                       
|                                                                                 |  | Additions             
|                                                                                 |  |                       
|                                                                                 |  | Balance at             |        | Charges to |  | Charged to |       |               |  | Balance
|                                                                                 |  | Beginning              |        | Costs and  |  | Other      |       |               |  | at End 
|Description                                                                      |  | of Year                |        | Expenses   |  | Accounts   |       | Deductions(1) |  | of Year
|                                                                                 |  |                        |        |            |  |            |       |               |  |        
|                                                                                 |  |                       
|                                                                                 |  | (Dollars in thousands)
|Year ended December 31, 2001                                                     |  |                        |        |            |  |            |       |               |  |         |   |  |  |   |       |  |  |   |        | 
|Accounts receivable allowances for revenue
    adjustments and doubtful accounts |  | $                      | 9,254  |            |  | $          | 7,941 |               |  | $       |  |  |  | $ | 5,589 |  |  | $ | 11,606 | 
|Year ended December 31, 2002                                                     |  |                        |        |            |  |            |       |               |  |         |   |  |  |   |       |  |  |   |        | 
|Accounts receivable allowances for revenue
    adjustments and doubtful accounts |  | $                      | 11,606 |            |  | $          | 9,373 |               |  | $       |  |  |  | $ | 7,393 |  |  | $ | 13,586 | 
|Year ended December 31, 2003                                                     |  |                        |        |            |  |            |       |               |  |         |   |  |  |   |       |  |  |   |        | 
|Accounts receivable allowances for revenue
    adjustments and doubtful accounts |  | $                      | 13,586 |            |  | $          | 6,777 |               |  | $       |  |  |  | $ | 9,333 |  |  | $ | 11,030 | 
|                                                                                 |  |                        |        |            |  |            |       |               |  |         |   |  |  |   |       |  |  |   |        | 



---



|    |                                                                   
|--- | ------------------------------------------------------------------
|(1) | Primarily uncollectible accounts written off net
    of recoveries

45



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(Thousands of dollars, except share and per
share amounts)


(3) Exhibits

|        |       |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ----- | -------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                     
|Number  |       | Document Description
|        |       |                     
|        | 3.1   |                      |  | Amended and Restated Certificate of Incorporation
    of USF Corporation (incorporated by reference from
    Exhibit 3.1 to USF 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 USF Corporation Annual
    Report on Form 10-K for the year ended January 1,
    1994); Certificate of Amendment of Restated Certificate of
    Incorporation of USF Corporation (filed with this Annual Report
    on Form 10-K).
|        | 3.2   |                      |  | Bylaws of USF Corporation, as restated as of
    October 22, 2003 (filed with this Annual Report on
    Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4.1   |                      |  | Indenture, dated as of May 5, 1999 among USF
    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 USF Corporation
    Current Report on Form 8-K, filed on May 11, 1999).                                                                                                                                                                                                                                                                                                         
|        | 4.2   |                      |  | First Supplemental Indenture, dated as of
    January 31, 2000 among USF 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 USF Corporation Registration Statement on
    Form S-3, filed on January 31, 2000, Registration
    No. 333-95777).                                                                                                                                                                                                                                     
|        | 10.1  |                      |  | USF Stock Option Plan (incorporated by reference
    from Exhibit 10.18 to USF Corporation Transition Report on
    Form 10-K from June 29, 1991 to December 28,
    1991).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.2  |                      |  | Stock Option Plan for Non-Employee Directors
    amended and restated as of March 14, 2003 (incorporated by
    reference from Exhibit 10.1 to USF Corporation Quarterly
    Report on Form 10-Q for the quarter ended July 5,
    2003).                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.3  |                      |  | Employment Agreement of Christopher L. Ellis
    dated December 16, 1991 (incorporated by reference from
    Exhibit 10(g) to USF Corporation Annual Report on
    Form 10-K for the year ended January 1, 1994).                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10.4  |                      |  | Form of Election of Deferral (incorporated by
    reference from Exhibit 10(h) to USF Corporation Annual
    Report on Form 10-K for the year ended December 31,
    1994).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.5  |                      |  | USF Long-Term Incentive Plan amended and restated
    as of May 2, 2003 (incorporated by reference from
    Exhibit 10.2 to USF Corporation Quarterly Report on
    Form 10-Q for the quarter ended July 5, 2003).                                                                                                                                                                                                                                                                                                                                                                                              
|        | 10.6  |                      |  | $200,000 Credit Agreement dated as of
    October 24, 2002 among USF Corporation, the banks named
    therein and Harris Trust and Savings Bank, as administrative
    agent (incorporated by reference from Exhibit 10.6 to USF
    Corporation Annual Report on Form 10-K for the year ended
    December 31, 2002).                                                                                                                                                                                                                                                                                          
|        | 10.7  |                      |  | Form of Irrevocable Guaranty and Indemnity
    relating to the Credit Agreement described in Exhibit 10(m)
    (incorporated by reference from Exhibit 10(l) to USF
    Corporation Annual Report on Form 10-K for the year ended
    January 3, 1998).                                                                                                                                                                                                                                                                                                                                                         
|        | 10.8  |                      |  | USF Corporation Non-Qualified Deferred
    Compensation Plan (incorporated by reference from
    Exhibit 10(q) to USF Corporation Annual Report on
    Form 10-K for the year ended December 31, 1998).                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.9  |                      |  | Retirement Agreement of Samuel K. Skinner dated
    as of April 22, 2003 (incorporated by reference from
    Exhibit 10.4 to USF Corporation Quarterly Report on
    Form 10-Q for the quarter ended July 5, 2003).                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10.10 |                      |  | 6 1/2% Guaranteed Note due May 1, 2009
    (incorporated by reference from Exhibit 4.2 to USF
    Corporation Current Report on Form 8-K, filed on
    May 11, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.11 |                      |  | 8 1/2% Guaranteed Note due on April 15,
    2010 (incorporated by reference from Exhibit 4.1 to USF
    Corporation Current Report on Form 8-K, filed on
    April 26, 2000).                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10.12 |                      |  | Consulting Agreement and Release of John Campbell
    Carruth dated as of October 27, 2000 (incorporated by
    reference from Exhibit 10(o) to USF Corporation Annual
    Report on Form 10-K for the year ended December 31,
    2000).                                                                                                                                                                                                                                                                                                                                                                       

46



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(Thousands of dollars, except share and per
share amounts)


|        |       |                      |  |                                                                                                                                                                                                                             
|------- | ----- | -------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                     
|Number  |       | Document Description
|        |       |                     
|        | 10.13 |                      |  | USF Corporation Supplemental Executive Retirement
    Plan (incorporated by reference from Exhibit 10(p) to USF
    Corporation Annual Report on Form 10-K for the year ended
    December 31, 2000).                       
|        | 10.14 |                      |  | Employment Agreement of Richard P. DiStasio dated
    as of September 15, 2003 (incorporated by reference from
    Exhibit 10.1 to USF Corporation Quarterly Report on
    Form 10-Q for the quarter ended October 4, 2003).
|        | 10.15 |                      |  | USF Corporation Capital Accumulation Plan (filed
    with this Annual Report on Form 10-K).                                                                                                                                 
|        | 21    |                      |  | Subsidiaries of USF Corporation (filed with this
    Annual Report on Form 10-K).                                                                                                                                           
|        | 23    |                      |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                           
|        | 24    |                      |  | Power of Attorney.                                                                                                                                                                                                          
|        | 31.1  |                      |  | Certifications Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                
|        | 31.2  |                      |  | Certifications Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                
|        | 32.1  |                      |  | Certifications Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                
|        | 32.2  |                      |  | Certifications Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                                                                

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

(b) Reports on Form 8-K

1. On October 31, 2003, the Company
filed a Current Report on Form 8-K announcing the
Companys Third Quarter earnings.

47



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##### Table of Contents



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 March 11, 2004.



| |                
| | ---------------
| | USF CORPORATION



| |     |                       
| | --- | ----------------------
| | By: | /s/ THOMAS E. BERGMANN

| |                                              
| | ---------------------------------------------
| |                                              
| | Thomas E. Bergmann                           
| | Senior Vice President, Finance,
    Treasurer
| | 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.

|                                                                        |  |                                                                                          |  |                |  | 
|----------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                                                        |  |                                                                                          |  |               
|Signature                                                               |  | Title                                                                                    |  | Date          
|                                                                        |  |                                                                                          |  |               
|                                                                       
|/s/ RICHARD P. DISTASIORichard P. DiStasio                              |  | President and Chief Executive Officer and
    Director
    (Principal Executive Officer) |  | March 11, 2004
|                                                                       
|/s/ MORLEY KOFFMAN*Morley Koffman                                       |  | Director                                                                                 |  | March 11, 2004
|                                                                       
|/s/ STEPHEN W. LILIENTHAL*Stephen W. Lilienthal                         |  | Director                                                                                 |  | March 11, 2004
|                                                                       
|/s/ NEIL A. SPRINGER*Neil A. Springer                                   |  | Director                                                                                 |  | March 11, 2004
|                                                                       
|/s/ PAUL J. LISKA*Paul J. Liska                                         |  | Director                                                                                 |  | March 11, 2004
|                                                                       
|/s/ ROBERT V. DELANEY*Robert V. Delaney                                 |  | Director                                                                                 |  | March 11, 2004
|                                                                       
|/s/ ANTHONY J. PAONI*Anthony J. Paoni                                   |  | Director                                                                                 |  | March 11, 2004
|                                                                       
|/s/ THOMAS E. BERGMANNThomas E. Bergmann                                |  | Chief Financial Officer
    (Principal Financial Officer)                                |  | March 11, 2004
|                                                                       
|/s/ JAMES T. CASTROJames T. Castro                                      |  | Controller
    (Principal Accounting Officer)                                            |  | March 11, 2004
|                                                                       
|/s/ THOMAS E. BERGMANN*By: Thomas E.
    Bergmann      Attorney-in-Fact |  |                                                                                          |  |