PAGE F1

Financial Highlights

(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>


Fiscal Year                                                                             2000            1999           1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>            <C>
Revenue

   LTL Trucking                                                                  $  1,913,675    $ 1,750,309    $ 1,540,162
   TL Trucking                                                                         86,317         44,715         12,877
   Logistics                                                                          276,958        206,881        130,323
   Freight Forwarding                                                                 261,749        225,010        151,531
   Corporate and other                                                                      -              -              -
---------------------------------------------------------------------------------------------------------------------------
Total Revenue                                                                    $  2,538,699    $ 2,226,915    $ 1,834,893
---------------------------------------------------------------------------------------------------------------------------

Income from Operations (loss)
   LTL Trucking                                                                  $    173,539   $   171,910    $   127,242
   TL Trucking                                                                          4,671         3,147          1,138
   Logistics                                                                           16,680        16,873          7,976
   Freight Forwarding                                                                  (4,081)        8,175          4,925
   Corporate and other                                                                (13,578)      (11,237)       (11,848)
---------------------------------------------------------------------------------------------------------------------------
Total Income from Operations                                                     $    177,231   $   188,868    $   129,433
---------------------------------------------------------------------------------------------------------------------------

Interest Expense                                                                 $   (21,282)   $   (14,003)   $    (8,784)
---------------------------------------------------------------------------------------------------------------------------

Net Income                                                                       $    96,798    $    104,240   $    71,445
---------------------------------------------------------------------------------------------------------------------------

Net Income Per Share - Diluted                                                   $      3.61    $       3.79   $      2.70
---------------------------------------------------------------------------------------------------------------------------

Total Assets                                                                     $ 1,351,074    $  1,212,167    $   974,673
---------------------------------------------------------------------------------------------------------------------------

Return on Average Stockholders' Equity                                                  16.2%            20.5%         16.8%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                PAGE F2





MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS

USFreightways  Corporation ("the Company") provides  comprehensive  supply chain
management    services    through   its   operating    subsidiaries.    Regional
less-than-truckload  ("LTL") general commodities  carriers provide overnight and
second-day  delivery  throughout  the United  States and into Canada.  Logistics
subsidiaries  provide  integrated supply chain solutions,  value added logistics
solutions,   reverse  logistics  services  and  complete  warehouse  fulfillment
services to its customers.  The Company also provides domestic and international
freight forwarding,  import and export air and ocean services as well as premium
regional and national  truckload ("TL") service.  Principal  subsidiaries in the
Regional  LTL  group  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  Worldwide  Logistics  consists of Logistics and
Freight  Forwarding  Groups.  The Logistics group consists of USF Logistics Inc.
("Logistics"),  USF Processors Inc ("Processors") and USF Distribution  Services
Inc.  ("Distribution  Services");  the Freight Forwarding group includes several
companies  that all now trade under the name USF Worldwide  Inc.  ("Worldwide");
USF Glen Moore Transport Inc. ("Glen Moore") is the Company's TL carrier.

                                               Results of Operations

Operating  revenue of the Company for 2000 was a record $2.54  billion,  a 14.0%
increase over total  operating  revenue of $ 2.23 billion for 1999.  Income from
operations  decreased by 6.2% from $ 188.9 million in 1999 to $177.2  million in
2000. Net income per share decreased by 4.7% to $3.61 (diluted) in 2000 compared
to $3.79 (diluted) in 1999.

Operating  revenue of the Company for 1999 was $2.23  billion,  a 21.4% increase
over total operating  revenue of $ 1.83 billion for 1998. Income from operations
increased by 45.9% from $ 129.4  million in 1998 to a record  $188.9  million in
1999.  Net  income  per  share  increased  by 40.4% to $3.79  (diluted)  in 1999
compared to $2.70 (diluted) in 1998.

Regional LTL

Revenue in the LTL group for 2000  increased by 9.3% to $1.91 billion from $1.75
billion in 1999. In accordance with guidelines established by the Securities and
Exchange  Commission's  ("SEC") Staff  Accounting  Bulletin  ("SAB")  Number 101
"Revenue  Recognition in Financial  Statements",  beginning with the 2000 fourth
quarter,  the Company  reclassified  fuel  surcharges  invoiced to  customers as
revenue.  Therefore, the Company has restated the fourth quarter of 1999 and the
first three-quarters of 2000 revenue and operating expense figures. Prior to the
2000 fourth  quarter,  the fuel  surcharges were accounted for as a reduction in
fuel costs.  The  implementation  of SAB Number 101 had no effect on net income,
but increased  revenue and operating  expenses by $60.4 million in 2000 and $4.5
million in 1999.  In 2000,  revenue from the LTL group  amounted to 75.4% of the
Company's  operating  revenue  compared to 78.6% in 1999. LTL revenue  increased
9.6%, LTL shipments  increased 4.6%, LTL tonnage  increased 3.8% and LTL revenue
per hundredweight  increased 5.6%. In 2000, the LTL group enacted a general rate
increase of  approximately  5.8% in late  August.  The LTL group  enacted a 5.7%
general  rate  increase  in  October  1999.  General  rate  increases  apply  to
approximately  50% of the LTL group's  revenue  base.  The  remaining 50% of the
revenue base is subject to contractual agreements which normally result in lower
rate increases.

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

Revenue in the LTL group in 1999  increased by 13.6% to $1.75 billion from $1.54
billion in 1998.  In 1999,  revenue from the LTL group  amounted to 78.6% of the
Company's  operating  revenue  compared to 83.9% in 1998. LTL revenue  increased
13.5%, LTL shipments increased 9.8%, LTL tonnage increased 10.9% and LTL revenue
per  hundredweight  increased  2.3%.  The LTL group  enacted a 5.7% general rate
increase in October 1999.

<PAGE>

                                PAGE F3





Operating  income in 1999  increased  by 35.1% to  $171.9  million  from  $127.2
million in 1998. Improvements in operating results were directly attributable to
price stability, a strong US  economy-particularly in the latter half due to the
Y2K inventory  build-up,  increases in market share and a continuing emphasis on
cost reduction.  The LTL group improved its operating ratio to 90.2% compared to
91.7% in 1998.  Salaries,  wages and benefits  improved to 61.1% of 1999 revenue
compared to 63.9% of 1998  revenue as Holland,  Red Star and  Reddaway,  mainly,
continued to improve operational  efficiencies.  Fuel expenses were 3.7% of 1999
revenue  compared to 3.4% of 1998 revenue  primarily due to higher prices in the
fourth quarter of 1999. Depreciation,  terminal rents, operating taxes, licenses
and operating supplies and expenses  collectively improved by approximately 0.6%
to 17.1% of 1999 revenue compared to 17.7% of 1998 revenue.


Approximately  86% of  Holland's  and Red Star's  employees  are  members of the
Teamsters' union and are subject to a collective bargaining agreement.  In 1998,
the Teamsters  ratified a five-year  agreement  that expires at the end of March
2003. This agreement  provided for, among other things,  customary  increases in
wages, pension and health benefits.

Truckload

The  Company's TL carrier,  Glen Moore,  is  headquartered  in Carlisle,  PA and
operates in both regional and nationwide  markets.  Glen Moore contributed $86.3
million in revenue in 2000 and its operating  ratio was 94.6%,  generating  $4.7
million in  operating  profits  compared  to $44.7  million  in  revenue  and an
operating  ratio  of  93.0% in 1999.  TL  operations  accounted  for 3.4% of the
Company's 2000  operating  revenue  compared to 2.0% of 1999 revenue.  Operating
income,  in 1999,  was $3.1  million  and its  operating  ratio was 93.0%.  Glen
Moore's revenue increase is mainly  attributable to its two  acquisitions.  Glen
Moore currently operates 599 tractors and 1,885 trailers.

On January 10, 2000, Glen Moore acquired  Tri-Star  Transportation,  a Tennessee
based TL carrier that operated 170 tractor/trailer units. Though not included in
the Company's 1999 revenue,  Tri-Star generated $28 million in revenue for 1999,
with approximately two-thirds coming from dedicated fleet operations.  On August
2, 1999, Glen Moore acquired Underwood  Trucking  ("Underwood") an Indiana based
TL carrier which was merged into Glen Moore. At its acquisition date,  Underwood
was operating approximately 50 tractors and 250 trailers and was generating
approximately $3.6 million in annual revenue.

Logistics

Revenue in the Logistics group,  comprised of dedicated  carriage,  assembly and
distribution,  supply  chain  management,  contractual  warehousing  and reverse
logistics  services  increased  by $70.1  million (a 33.9%  increase)  to $277.0
million in 2000 compared to $206.9  million in 1999.  Assembly and  distribution
revenue  increased  in 2000  from 1999  primarily  through  growth  at  existing
distribution  centers  coupled  with revenue  from new  distribution  centers in
Baltimore,   MD  and  Oklahoma  City,  OK  and  full  year  revenue  from  other
distribution  centers that were opened in the second half of 1999.  Assembly and
distribution  operating  profits  increased  by 42.9% to $7.3  million  in 2000.
Contractual  and  warehousing  revenue  increased in 2000 to $128.7 million from
$110.2  million in 1999  primarily  through the  addition of new  customers  and
expanded business with existing  customers.  Reverse logistics services revenue,
at USF Processors  ("Processors")  which was acquired in March 1999, amounted to
$70.6  million in 2000 compared to $43.6  million in 1999.  Most of  Processors'
revenue growth came from extraordinary volumes from a major customer.  Increased
spending for  information  technology and higher costs at Processors,  to handle
these extraordinary  volumes,  contributed to the group's diminished profits. In
2000, the Logistics group accounted for 10.9% of the Company's operating revenue
compared to 9.3% in 1999.  Operating income for the Logistics group decreased by
1.1% to $16.7 million from $16.9 million in 1999.  The group's  operating  ratio
was 94.0% in 2000 compared to 91.8% in 1999. Purchased  transportation  expenses
increased  to 11.1% of 2000  revenue  compared  to 7.1% of 1999  revenue  as the
distribution  business  increased  its  dependence  on  outsourced   deliveries.
Operating taxes and licenses  improved to 1.6% of 2000 revenue  compared to 2.1%
in 1999.  Depreciation  increased  to 3.9% of 2000  revenue  compared to 3.6% in
1999.  Building rents increased to 6.4% of 2000 revenue compared to 5.5% in 1999
as the Logistics group used more leased facilities, especially in the Processors
operations.  Salaries,  wages and  benefits  decreased  to 50.0% of 2000 revenue
compared  to  51.7%  in  1999  due in  part to the  change  in the  distribution
dependence  on  outsourced  deliveries  from  employee  deliveries,  but largely
offsetting  this  improvement  was  increased  labor  at  Processors  to  handle
extraordinary volumes from a large customer.  Processors' business is more labor
intensive than other traditional transportation businesses.
<PAGE>


                                PAGE F4




Revenue in the Logistics  group increased by $76.6 million (a 58.8% increase) to
$206.9  million  in 1999  compared  to  $130.3  million  in 1998.  Assembly  and
distribution  revenue  increased in 1999 from 1998  primarily  through growth at
existing distribution centers coupled with revenue from new distribution centers
, along with revenue  obtained  since July 1999 from the  acquisition of Special
Dispatch of Dallas,  a Dallas,  TX based  assembly  and  distribution  business.
Contractual  and  warehousing  revenue  increased  in 1999 from  1998  primarily
through the  addition of new  customers  and  expanded  business  with  existing
customers.  Reverse  logistics  services and software revenue was contributed by
Processors   which  was  acquired  in  March,   1999.   Processors   contributed
approximately  $43.6  million in revenue in 1999. In 1999,  the Logistics  group
accounted for 9.3% of the Company's  operating revenue compared to 7.1% in 1998.
Operating  income for the group  increased by 111.5% to $16.9  million from $8.0
million  in 1998.  The  group's  operating  ratio was 91.8% in 1999 and 93.9% in
1998. Operating expenses and supplies improved to 13.6% of 1999 revenue compared
to 15.3% in 1998.  Operating taxes and licenses improved to 2.1% of 1999 revenue
compared to 3.1% in 1998. Depreciation improved to 3.6% of 1999 revenue compared
to 4.9% in 1998.  Building rents  increased to 5.5% of 1999 revenue  compared to
4.6% in 1998 and salaries, wages and benefits increased to 54.3% of 1999 revenue
compared to 53.4% in 1998.  Most of these changes were brought on as a result of
the Processors'  acquisition.  Processors rents, rather than owns, its operating
sites and has a small amount of depreciable fixed assets.

Freight Forwarding

USF  Worldwide   ("Worldwide")   is  the  trading  name  for  the  domestic  and
international  freight  forwarding  businesses  of the Company that includes USF
Asia ("Asia"),  USF Worldwide Logistics Ltd.("LTD") and the  combination of the
domestic and international  freight forwarding  businesses formed by the
acquisitions of Seko and the Golden  Eagle  Group in 1997 and 1998 respectively.
In  August, 2000, Worldwide acquired LTD (formerly known as Ultimex Global
Logistics PLC) a freight forwarder located in London, England.

Worldwide's  revenue  increased  by $36.7  million (a 16.3%  increase) to $261.7
million from $225.0  million in 1999.  The increase was derived  primarily  from
$11.7 million  generated in Asia and $9.3 million generated from LTD; neither
of which was  included in 1999  revenue.  Worldwide  accounted  for 10.3% of the
Company's  2000  operating  revenue  compared  to  10.1% of the  Company's  1999
operating revenue. Operating income decreased by $12.3 million to a loss of $4.1
million (an operating  ratio of 101.6% in 2000  compared to 96.4% in 1999.  Asia
lost $3.8 million (before minority  interest of 50%) in 2000 as it completed its
major expansion of offices throughout twelve countries in Asia. The domestic and
international  freight forwarding business segment lost $0.5 million in 2000 due
mainly to  deteriorations  in domestic freight volumes and related margins along
with added expenses in information technology  infrastructure in combining seven
freight management systems into a single viable system.

Worldwide's 1999 revenue increased by $73.5 million (a 48.5% increase) to $225.0
million from $151.5  million in 1998.  The increase was derived  primarily  from
international freight forwarding revenue for a full year in 1999 from the Golden
Eagle Group that was acquired in November,  1998. Golden Eagle contributed $64.3
million in 1999 and $9.8 million in 1998.  In October 1999,  Worldwide  formed a
partnership  under the trading name of USF Asia Group.  Worldwide  accounted for
10.1% of the Company's 1999 operating  revenue compared to 8.3% of the Company's
1998 revenue.  Operating  income increased to $8.2 million net of a $0.5 million
charge for costs associated with the startup of USF Asia.  Worldwide's operating
ratio was 96.4% in 1999 compared to 96.7% in 1998.
<PAGE>

                                PAGE F5
                     Interest and Other Non-Operating

Net interest  expense for 2000  amounted to $20.4 million  (interest  expense of
$21.3  million and interest  income of $0.9  million)  compared to $12.9 million
(interest expense of $14.0 million and interest income of $1.1 million) in 1999.
The Company's  average  outstanding debt in 2000 and 1999 was $270.2 million and
$197.2  million,  respectively.  The $73.0  million  increase  in  average  debt
outstanding and the increase in the rate associated with the newly issued notes,
mentioned  below,  were  responsible  for the $7.3 million  increase in interest
expense in 2000 compared to 1999.

The principal debts of the Company are $150 million in 8 1/2% guaranteed  notes,
issued  April 25,  2000,  that mature  April 15, 2010 and $100 million in 6 1/2%
guaranteed  notes,  issued May 1, 1999,  that mature May 1, 2009. In addition to
these notes,  the Company had borrowings  under a $200 million  revolving credit
facility that expires in 2002 and borrowings  under three  uncommitted  lines of
credit ("bank debt").  The average  interest rate on the Company's bank debt for
2000 was approximately 6.6% compared to 5.5% in 1999.

Net interest expense for 1998 amounted to $8.0 million (interest expense of $8.8
million and interest income of $0.8 million).  The average amount of outstanding
debt in 1998 was $117.0 million

Other,  net in 2000 amounted to $2.5 million  compared to a loss in 1999 of $0.4
million.  Included in the 2000 amount were gains from the sales of two terminals
owned by Holland and Reddaway.

                     Liquidity and Capital Resources

The Company  generated  $187.9 million in cash flows from  operating  activities
during 2000. Capital expenditures during the year amounted to $193.2 million, of
which $120.9 million was for revenue equipment,  $42.6 million for terminals and
$29.7 million for other assets.  In addition,  the Company paid $16.4 million in
cash for the  acquisitions of Tri-Star  Transportation,  Inc. and Ultimex Global
Logistics PLC.  Capital  expenditures  for 1999 amounted to $202.5  million,  of
which $111.7 million was for revenue equipment,  $60.9 million was for terminals
and  $29.9  million  for  other  assets  plus  $50.7  million  in  cash  for the
acquisitions of Processors  Unlimited Company,  Ltd., CBL Trucking Inc., Special
Dispatch of Dallas,  Inc., Underwood Trucking Inc. and several small independent
contractors  in the  Freight  Forwarding  group.  In light of  current  business
levels,  management  expects  that capital  expenditures  during the year ending
December  31, 2001 will  approximate  $125  million to $175  million,  excluding
acquisitions.

On January 31, 2000,  the Company filed a Form S-3  registration  statement that
allowed for the sale of up to $400 million in additional guaranteed notes.

On  April  25,  2000,  the  Company  issued  $150  million  of 8 1/2%  unsecured
guaranteed notes that are due April 15,2010. Interest is paid semi-annually. The
notes may be redeemed  prior to maturity and have no sinking fund  requirements.
If the notes are redeemed  prior to maturity,  the purchase price is the greater
of (1) 100% of the principal  amount of the  guaranteed  notes to be redeemed or
(2) the sum of the present  values of the remaining  scheduled  payments on such
guaranteed  notes,  discounted to the redemption date, on a semi-annual basis at
the treasury rate plus 37.5 basis points plus accrued  interest on the principal
amount being redeemed to the redemption  date. Net proceeds from the sale of the
notes  amounted to $149  million.  $100 million of the net proceeds were used to
pay off 6 5/8% notes that matured on May 1, 2000.

The Company  issued  unsecured  guaranteed  notes of $100 million on May 1, 1999
that are due May 1,2009 and bear interest at 6 1/2%, payable semi-annually.  The
notes may be redeemed  prior to maturity and have no sinking fund  requirements.
If the notes are redeemed  prior to maturity,  the purchase price is the greater
of (1) 100% of the principal  amount of the  guaranteed  notes to be redeemed or
(2) the sum of the present  values of the remaining  scheduled  payments on such
guaranteed  notes,  discounted to the redemption date, on a semi-annual basis at
the treasury rate plus 37.5 basis points plus accrued  interest on the principal
amount being redeemed to the redemption  date. Net proceeds from the sale of the
notes amounted to $98.5 million.

The guaranteed notes are fully and  unconditionally  guaranteed,  on a joint and
several basis, on an unsecured  senior basis, by all of the Company's direct and
indirect domestic subsidiaries (the "Subsidiary  Guarantors").  The Company is a
holding company and during the period presented  substantially all of the assets
were the  stock  of the  Subsidiary  Guarantors,  and  substantially  all of the
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 of
the Company on a  consolidated  basis.  Management of the Company  believes that
separate  financial  statements of, and other  disclosures  with respect to, the
Subsidiary Guarantors are not meaningful or material to investors.
<PAGE>
                                PAGE F6

The Company has a $200 million  revolving  credit  facility  with a syndicate of
commercial banks. The facility expires in 2002 and allows up to $100 million for
standby letters of credit to cover the Company's self-insurance program, and has
optional  pricing of interest rates,  including  LIBOR or Prime base rates.  The
facility has an annual fee and contains customary  financial covenants including
maintenance of minimum net worth and funded debt to cash flow.  During 2000, all
borrowings were drawn at LIBOR base rates, with a weighted average interest rate
for the year of 6.3%,  excluding  fees charged on the facility.  At December 31,
2000 the Company had  borrowed $5 million and had $48.4  million in  outstanding
letters of credit under this facility.

In addition to the  revolving  credit  facility,  the  Company  maintains  three
uncommitted lines of credit, which provide $50 million short-term funds at rates
approximating  LIBOR.  These  facilities  are used in concert with a centralized
cash management  system to finance  short-term  working  capital needs,  thereby
enabling the Company to maintain  minimal cash  balances.  At December 31, 2000,
the Company had borrowed $26.1 million under these facilities.

In management's  opinion,  cash flows from operating activities and funding from
its  revolving   credit   facilities  are  adequate  to  finance  the  Company's
anticipated business activity in 2001.

At December 31, 2000 the Company had commitments to purchase  approximately $2.5
million in land and improvements,  $2.5 million for transportation equipment and
$1.4 million for other equipment.

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

During 2000, the Company declared cash dividends of $9.8 million


                        Recent Accounting Pronouncements


In June 1998, the Financial Accounting  Standards Board (FASB),  issued SFAS No.
133. In June 2000, FASB further  clarified SFAS No. 133 through issuance of SFAS
No. 138. SFAS No. 133 and 138 establish  accounting and reporting  standards for
derivative  instruments and for hedging activities.  The effective date for SFAS
Nos.  133 and 138 was January 1, 2001.  Adoption of SFAS Nos. 133 and 138 had no
effect on the Company's financial statements as it has no derivatives or hedging
instruments.

                                  Other
The Company uses underground  storage tanks at certain  terminal  facilities and
maintains a comprehensive policy of testing, upgrading, replacing or eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected,  the Company takes prompt remedial
action to remove the  contaminants.  It is  management's  opinion that the total
costs  related to all known  incidents  have been  provided for in the financial
statements and management is not aware of any potential  contamination incidents
that would have a material effect on the results of the Company.


                                   Market Risk
The Company is exposed to the impact of interest  rate  changes.  The  Company's
exposure to changes in interest  rates is limited to borrowings  under a line of
credit  agreement which has variable  interest rates tied to the LIBOR rate. The
weighted average annual interest rates on borrowings under this credit agreement
were 6.3% and 5.4% in 2000 and 1999 respectively.  In addition,  the Company has
$150 million of unsecured  notes with an 8 1/2% fixed annual  interest  rate and
$100 million of  unsecured  notes with a 6 1/2% fixed  annual  interest  rate at
December  31,  2000.  The  Company  estimates  that the fair  value of the notes
approximated  their  carrying  value at December  31,  2000.  The Company has no
hedging  instruments.  From time to time,  the  Company  invests  excess cash in
overnight money market accounts.
<PAGE>





                                PAGE F7

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders of
USFreightways Corporation:

We have audited the  accompanying  consolidated  balance sheets of USFreightways
Corporation (a Delaware  corporation)  and  subsidiaries as of December 31, 2000
and 1999 and the related  consolidated  statements of operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2000. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of  USFreightways
Corporation  and  subsidiaries as of December 31, 2000 and 1999, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December 31,  2000,  in  conformity  with  accounting  principles
generally accepted in the United States.



Arthur Andersen LLP
Chicago, Illinois
January 23, 2001





<PAGE>


                                PAGE F8

CONSOLIDATED  BALANCE  SHEETS As of  December  31,  2000 and  December  31, 1999
(Thousands of dollars, except per share amounts)
 <TABLE>
<CAPTION>

                                                                          December 31,        December 31,
                                                                                  2000                1999
----------------------------------------------------------------------------------------------------------------------------------
    <S>                                                                           <C>              <C>
ASSETS
Current assets:
   Cash                                                                    $     5,248         $  6,862
   Accounts receivable, less allowances of $11,168 and $10,623                 323,517          293,989
   Operating supplies and prepaid expenses                                      31,977           27,624
   Deferred income taxes (note 4)                                               35,619           34,453
                                                                            -----------         --------
Total current assets                                                           396,361          362,928

Property and equipment:
   Land                                                                         99,330           85,657
   Buildings and leasehold improvements                                        243,501          224,828
   Equipment                                                                   877,240          764,347
   Other                                                                        86,644           70,757
                                                                             ---------          --------
                                                                             1,306,715        1,145,589
   Less accumulated depreciation                                              (556,230)        (485,079)
                                                                             ---------        ----------
Total property and equipment                                                   750,485          660,510
Intangible assets, net of accumulated amortization of $39,053 and $32,210      181,978          174,538
Other assets                                                                    22,250           14,191
                                                                             ---------       ----------
                                                                       $     1,351,074     $  1,212,167
                                                                             ---------        ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current debt (note 3)                                                $       28,991     $     20,561
   Notes payable (note 3)                                                            -          100,000
   Accounts payable                                                             90,741           89,193
   Accrued salaries, wages and benefits                                         90,077           79,156
   Accrued claims and other                                                     82,135           77,310
   Income taxes payable                                                            231            4,124
                                                                               -------       ----------
Total current liabilities                                                      292,175          370,344

Long-term debt, less current maturities (note 3)                                10,137           33,137
Notes payable (note 3)                                                         250,000          100,000
Accrued claims and other                                                        75,948           76,777
Deferred income taxes (note 4)                                                  87,099           73,050
                                                                               -------        ----------
                                                                               715,359          653,308

Minority interest                                                                  539                -

Stockholders' equity:
   Cumulative preferred stock, $0.01 par value per share: 20,000,000 authorized,
    none issued                                                                    -                  -
   Common stock, $0.01 par value per share: 80,000,000 authorized,
    26,746,454 and 26,544,439 issued and 25,881,778 and 26,498,976 outstanding     258              265
Paid in capital                                                                265,634          256,081
Retained earnings                                                              390,040          303,032
Treasury stock, 864,676 and 45,463 shares respectively                         (20,571)            (519)
Accumulated other comprehensive loss                                              (185)               -
                                                                               --------         --------
Total stockholders' equity                                                     635,176           558,859
                                                                               -------         ---------
                                                                       $     1,351,074     $   1,212,167
                                                                             ---------         ---------
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                                PAGE F9

CONSOLIDATED STATEMENTS OF OPERATIONS
Years  ended  December  31,  2000,  December  31,  1999 and  December  31,  1998
(Thousands of dollars, except per share amounts)
 <TABLE>
<CAPTION>



     Year                                                         2000                1999              1998
-------------------------------------------------------------------------------------------------------------
        <S>                                                     <C>                     <C>             <C>
Operating revenue
   LTL Trucking                                         $     1,913,675     $     1,750,309   $     1,540,162
   TL Trucking                                                   86,317              44,715            12,877
   Logistics                                                    276,958             206,881           130,323
   Freight Forwarding                                           261,749             225,010           151,531
   Corporate and other                                               -                   -                  -
                                                       ---------------     ---------------     ---------------
                                                              2,538,699           2,226,915         1,834,893
                                                        ---------------     ---------------    ---------------
Operating expenses
   LTL Trucking                                               1,740,136           1,578,399         1,412,920
   TL Trucking                                                   81,646              41,568            11,739
   Logistics                                                    260,278             190,008           122,347
   Freight Forwarding                                           265,830             216,835           146,606
   Corporate and other                                           13,578              11,237            11,848
                                                        ---------------     ---------------   ---------------
                                                              2,361,468           2,038,047         1,705,460
                                                        ---------------     ---------------   ---------------
Income from operations                                          177,231             188,868           129,433
                                                        ---------------      --------------     -------------
Non-operating income (expense):
   Interest expense                                            (21,282)             (14,003)           (8,784)
   Interest income                                                 894                1,129               757
   Other, net                                                    2,509                 (414)               88
                                                          ------------         -------------     -------------
Total non-operating expense                                    (17,879)             (13,288)           (7,939)
                                                       ---------------         -------------      ------------
Net income before income taxes and minority interest           159,352              175,580           121,494
Income tax expense (note 4)                                    (64,262)             (71,340)          (50,049)
Minority interest                                                1,708                   -                  -
                                                        ---------------     ---------------     ---------------
Net income                                             $        96,798        $     104,240     $      71,445
                                                        --------------          -----------     --------------

Average shares outstanding-basic                            26,337,734           26,416,631        26,209,281
Average shares outstanding-diluted                          26,828,046           27,478,479        26,495,714

Basic earnings per common share:                       $          3.68     $          3.95      $        2.73
Diluted earnings per common share:                     $          3.61     $          3.79      $        2.70
                                                 ---------------------    ----------------      -------------
</TABLE>
See accompanying notes to consolidated financial statements.

<PAGE>











                                        PAGE F10


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years  ended  December  31,  2000,  December  31,  1999 and  December  31,  1998
(Thousands of dollars, except per share amounts)
 <TABLE>
 <CAPTION>


                                                                                                     Accumulated
                                                                                         Compre-     Other             Total
                                    Common      Paid in      Retained      Treasury      hensive     Comprehensive     Stockholders'
                                    Stock       Capital      Earnings      Stock         Income      Income            Equity
------------------------------------------------------------------------------------------------------------------------------------
    <S>                             <C>             <C>         <C>         <C>              <C>           <C>                <C>



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

   Net income                        --             --        71,445           --           71,445                      71,445
   Dividends declared                --             --        (9,790)          --           ______                      (9,790)
   Employee stock transactions
       and other                     --           2,318            --         2,961                                      5,279
                                 ---------------------------------------------------------------------------------------------------

Balance December 31, 1998          $ 265       $253,542    $ 208,662     $  (3,335)                                  $ 459,134

Net income                           --             --       104,240           --          104,240                     104,240
Dividends declared                   --             --        (9,870)          --          _______                      (9,870)
Employee stock transactions
       and other                     --          2,539            --         2,816                                       5,355
                                   -------------------------------------------------------------------------------------------------

Balance December 31, 1999           $ 265    $ 256,081     $ 303,032     $   (519)                                   $ 558,859

Comprehensive income
Net income                             --           --        96,798           --           96,798                      96,798
Unrealized loss on foreign currency                                                           (185)      (185)            (185)
  Transactions                                                                              ------
Comprehensive income                                                                        96,613
Dividends declared                     --           --        (9,790)          --                                       (9,790)
Employee stock transactions            (7)       9,553            --        2,880                                       12,426
   and other
Repurchase of common stock                                                (22,932)                                     (22,932)

                                ----------------------------------------------------------------------------------------------------
Balance December 31, 2000            $ 258   $ 265,634    $   390,040   $ (20,571)                      $ (185)      $ 635,176
                                ---------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>


                                                PAGE F11

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years  ended  December  31,  2000,  December  31,  1999,  and  December  31,1998
(Thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
      Year                                                                 2000          1999          1998
------------------------------------------------------------------------------------------------------------------------------------
                   <S>                                                       <C>       <C>             <C>
Cash flows from operating activities:
   Net income from continuing operations                                 $ 96,798    $104,240    $    71,445
       Reconciliation to net cash provided by operating activities:
           Depreciation and amortization                                  111,822      95,312         81,537
           Gains from sale of property and equipment                       (6,264)     (1,958)        (3,522)
           Deferred taxes                                                  10,899       4,506          3,442
           Changes in assets and liabilities excluding acquisitions:
                Accounts receivable                                       (20,434)    (63,651)       (14,423)
                Other current assets                                       (3,841)     (3,691)           238
                Accounts payable                                           (4,282)      7,707          6,091
                Accrued liabilities                                         2,721      18,311         17,632
                Other, net                                                    469       2,845        ( 9,271)
                                                                           ------      ------         ------
Net cash provided by operating activities                                 187,888     163,621        153,169
                                                                          -------     -------        -------
Cash flows from investing activities:
     Capital expenditures                                                (193,159)   (202,474)      (157,476)
     Proceeds from sale of property and equipment                          16,462       4,933         10,457
     Acquisitions                                                         (16,419)    (50,666)       (42,081)
                                                                         --------    --------       --------
Net cash used in investing activities                                    (193,116)   (248,207)      (189,100)

Cash flows from financing activities:
     Dividends paid                                                        (9,847)     (9,849)        (9,771)
     Proceeds from issuance of common stock                                 8,207       5,355          5,279
     Repurchase of common stock                                           (22,932)
     Net proceeds from sale of notes                                      149,025      98,452             -
     Proceeds from long-term bank debt                                     90,000     155,000         89,500
     Payments on long-term bank debt                                     (210,839)   (163,058)       (50,000)
                                                                          -------     -------         ------
Net cash provided by financing activities                                   3,614      85,900         35,008
                                                                          -------     -------         ------
Net increase (decrease) in cash                                            (1,614)      1,314           (923)

Cash at beginning of year                                                   6,862       5,548          6,471
                                                                          -------     -------         -------
Cash at end of year                                                   $     5,248    $  6,862     $    5,548
                                                                          -------     -------         -------
Supplemental disclosure of cash flow information: Cash paid during the year for:
         Interest                                                     $    17,981    $  12,348    $     8,753
         Income taxes                                                      52,524       66,782         44,558

     Non-cash transactions: equity, notes issued and debt assumed     $     9,769    $   1,388    $    24,298
         in connection with acquisitions
</TABLE>
See accompanying notes to consolidated financial statements.

<PAGE>

                                PAGE F12

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

 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Company Overview

USFreightways  Corporation  ("the  Company"),  a Delaware  corporation is a full
service provider of transportation  services and innovative logistics solutions.
This is  accomplished  through the Company's  operating  subsidiaries.  Regional
less-than-truckload  ("LTL") general commodities  carriers provide overnight and
second-day  delivery  throughout  the United  States and into Canada.  Logistics
subsidiaries   provide  solutions  to  customers'   logistics  and  distribution
requirements.  The Company  also  provides  domestic and  international  freight
forwarding as well as premium regional and national truckload ("TL") service.

Basis of Presentation

The consolidated  financial statements include the accounts of USFreightways and
its  wholly  owned  subsidiaries  (the  Company).   Intercompany   balances  and
transactions  have been  eliminated.  The Company's  consolidated  statements of
operations  for prior years have been  reclassified  to conform with the current
presentation.

Revenue Recognition

Revenue for  less-than-truckload  and truckload  operations  is recognized  when
freight is picked up from the customer.  In the 2000 fourth quarter, the Company
reclassified  fuel  surcharges  invoiced to  customers  as revenue  according to
guidelines  established  under the  Securities and Exchange  Commission's  Staff
Accounting  Bulletin  ("SAB")  Number  101  "Revenue  Recognition  in  Financial
Statements".  Prior  to the  2000  fourth  quarter,  the  fuel  surcharges  were
presented  as a reduction of fuel costs. The Company, therefore, has restated
the  fourth  quarter  1999 and the first  three  quarters  of 2000  revenue  and
expenses in accordance with SAB Number 101 (See note 10). The  implementation of
SAB Number 101 had no effect on income from  operations  or net income.  Freight
forwarding revenue is generally recognized upon shipment. Logistics revenue from
warehousing is recognized  under the terms of the various  contracts and revenue
from dedicated fleet  shipments is recognized upon delivery,  which is generally
the same day as the pickup. In all cases,  estimated  expenses of performing the
total  transportation   services  are  accrued  concurrently  with  the  revenue
recognition.

Cash

The Company  considers demand deposits and highly liquid  investments  purchased
with original maturities of three months or less as cash.

Property and equipment

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

Intangible assets

These costs primarily  represent  goodwill which is amortized on a straight-line
basis up to 40 years. The carrying value of goodwill is reviewed whenever events
or  changes  in  circumstances  indicate  that  the  carrying  value  may not be
recoverable  through  projected  undiscounted  future  operating cash flows.  No
reduction of the carrying value has been required for any year.
<PAGE>
                                        PAGE F13

Earnings Per Share

Basic   earnings  per  share  are  calculated  on  net  income  divided  by  the
weighted-average  number of common shares outstanding during the period. Diluted
earnings   per  share  are   calculated   by   dividing   net   income  by  this
weighted-average  number of common shares outstanding plus the shares that would
have been  outstanding  assuming the issuance of common  shares for all dilutive
potential common shares for the period.  Unexercised  stock options,  calculated
under the treasury  stock  method,  are the only  reconciling  items between the
Company's basic and diluted earnings per share. The number of options,  included
in the  denominator,  used to calculate  diluted earnings per share are 490,312,
1,061,848 and 286,433 for the years 2000, 1999, and 1998 respectively.

Foreign Currency Translation

The  financial  statements of the Company's  foreign  subsidiaries  are measured
using the local currency as the functional  currency.  Assets and liabilities of
these  subsidiaries  are  translated  at exchange  rates as of the balance sheet
date.  Revenue and expenses are  translated at average rates of exchange  during
the period. The resulting cumulative  translation  adjustments,  at December 31,
2000 of ($185), are included in the Company's total stockholders' equity.

Use of Estimates

Management  of the  Company  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. Actual results could differ from those estimates.

New Accounting Standards

In June 1998, the Financial Accounting  Standards Board (FASB),  issued SFAS No.
133. In June 2000, FASB further  clarified SFAS No. 133 through issuance of SFAS
No. 138. SFAS No. 133 and 138 establish  accounting and reporting  standards for
derivative  instruments and for hedging activities.  The effective date for SFAS
Nos.  133 and 138 was January 1, 2001. Adoption of SFAS  Nos. 133 and 138 had no
effect on the Company's financial statements as it has  no derivatives or
hedging instruments.

(2)  OPERATING LEASES

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

The  following is a schedule of future  minimum  rental  payments on leases that
have  initial or remaining  non-cancelable  lease terms in excess of one year at
December 31, 2000:

Year
-----------------------------------------------------------------------------
                                                                 Payments
                                                                 --------

2001                                                       $       22,133
2002                                                               19,694
2003                                                               12,342
2004                                                                7,322
2005                                                                5,298
Subsequent years                                                    8,918
                                                           --------------
                                                           $       75,707
                                                           --------------

Rental  expense in the  accompanying  consolidated  statements of operations for
2000, 1999, and 1998 was $35,798, $29,667 and $22,595, respectively.
<PAGE>
                                PAGE F14

(3)  LONG-TERM DEBT

Long-term  debt at December  31,  2000 and  December  31,  1999  consists of the
following:
<TABLE>
<CAPTION>


                                                                        December 31,                  December 31,

                                                                               2000                          1999
-------------------------------------------------------------------   --------------                 -------------
                        <S>                                                     <C>                         <C>
Unsecured notes (a)                                           $             250,000          $            200,000
Unsecured lines of credit (b)                                                31,100                        46,500
Other                                                                         8,028                         7,198
                                                                          ---------                   ------------
                                                                            289,128                       253,698
Less current maturities                                                      28,991                       120,561
                                                               ---------------------         --------------------
                                                              $             260,137          $            133,137
                                                               ---------------------         --------------------
</TABLE>
(a)  Unsecured  notes  of  $100,000  that  bore  interest  at  6  5/8%,  payable
semi-annually,  were paid in full on May 1, 2000. The Company issued  guaranteed
unsecured  notes of $150,000  on April 25,  2000 that are due April  15,2010 and
bear  interest  at 8 1/2%,  payable  semi-annually.  The  notes are  subject  to
redemption  in whole or part any time prior to maturity and have no sinking fund
requirements.  The Company also issued guaranteed unsecured notes of $100,000 on
May 1,  1999  that are due May  1,2009  and  bear  interest  at 6 1/2%,  payable
semi-annually.  The notes are  subject to  redemption  in whole or part any time
prior  to  maturity  and  have no  sinking  fund  requirements.  Based  upon the
Company's   incremental   borrowing   rates  for  similar   types  of  borrowing
arrangements, the fair value of the notes at December 31, 2000 was approximately
$250,000.

On January 31, 2000,  the Company filed a Form S-3  registration  statement that
allowed for the sale of up to $400,000 in additional  guaranteed  notes. The
guaranteed  notes  are  fully  and  unconditionally  guaranteed,  on a joint and
several basis, on an unsecured  senior basis, by all of the Company's direct and
indirect domestic subsidiaries (the "Subsidiary  Guarantors").  The Company is a
holding company and during the period presented  substantially all of the assets
were the  stock  of the  Subsidiary  Guarantors,  and  substantially  all of the
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 of
the Company on a  consolidated  basis.  Management of the Company  believes that
separate  financial  statements of, and other  disclosures  with respect to, the
Subsidiary Guarantors are not meaningful or material to investors.





(b) The Company has a $200,000  revolving credit facility through a syndicate of
commercial  banks.  The  facility  expires in 2002 and allows up to $100,000 for
standby letters of credit to cover the Company's self-insurance program, and has
optional  pricing of interest rates,  including  LIBOR or Prime base rates.  The
facility has an annual fee and contains customary  financial covenants including
maintenance of minimum net worth and funded debt to cash flow.  During 2000, all
borrowings were drawn at LIBOR base rates, with a weighted average interest rate
for the year of 6.3%,  excluding  fees charged on the facility.  At December 31,
2000 the Company had  borrowed  $5,000 and had  $48,365  outstanding  letters of
credit under this facility.  In addition to the revolving credit  facility,  the
Company  maintains  three  uncommitted  lines of credit,  which provide  $50,000
short-term  funds at rates  approximating  LIBOR.  These  facilities are used in
concert with a centralized cash management system to finance  short-term working
capital needs;  thereby  enabling the Company to maintain minimal cash balances.
At December 31, 2000 the Company had borrowed $26,100 under these facilities.


The aggregate annual maturities of debt at December 31, 2000 are as follows:
<TABLE>
<CAPTION>
                                                                Amount
Year
--------------------------------------------------------------------------------
<S>                                                             <C>
2001                                                   $       28,991
2002                                                            6,012
2003                                                            1,326
2004                                                              637
2005                                                            2,162
Subsequent
years                                                         250,000
                                                        -------------
                                                        $     289,128
</TABLE>                                                -------------
<PAGE>
                                                PAGE F15
 (4) INCOME TAXES
A  reconciliation  of the statutory  Federal  income tax rate with the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
Year:                                                 2000                 1999                 1998
--------------------------------------------------------------------------- --------------- ----- ---------
                <S>                                  <C>                   <C>                  <C>
Federal income tax at statutory rate (35%)  $       55,773        $     61,453               $   42,523
State income tax, net of federal tax benefit         6,646               7,136                    6,115
Goodwill amortization                                1,649               1,536                    1,120
Other                                                  194               1,215                      291
                                                     -----                ----                    -----
Total income tax expense                    $       64,262        $     71,340               $   50,049
                                                    ------              ------                   ------
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year:                                                 2000                  1999                 1998
--------------------------------------------------------------------------------- ------------- -------
        <S>                                             <C>                 <C>                    <C>
Current expense:
     Federal                                   $     43,285         $     56,285          $     36,814
     State                                            8,094               10,549                 8,106
                                                    -------             --------                -------
                                                     51,379               66,834                44,920
                                                     ------               ------                ------
Deferred expense:
     Federal                                    $    10,752         $      7,800           $     3,283
     State                                            2,131               (3,294)                1,846
                                                     ------               ------                 -----
                                                $    12,883         $      4,506                 5,129
                                                     ------                -----                 -----
Total income tax expense                        $    64,262         $     71,340           $    50,049
                                                     ------               ------                ------
</TABLE>
The  following  is a summary of the  components  of the  deferred tax assets and
liabilities at December 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>                                                          December 31, 2000        December 31, 1999
------------------------------------------------------------------------------------------- ---------------------
                <S>                                                           <C>                       <C>
Deferred tax assets:
     Allowance for doubtful accounts and revenue adjustments            $     4,289           $      2,663
     Insurance and claims                                                    40,139                 39,794
     Vacation pay                                                            10,283                  8,840
     Other                                                                    5,208                  6,256
                                                                              -----                 -----
                                                                         $   59,919           $     57,553
                                                                             ------                 ------
Deferred tax liabilities:
   Property and equipment, principally due to accelerated depreciation   $  111,399           $     96,150
                                                                            -------                 ------
Net deferred tax liabilities                                             $   51,480           $     38,597
                                                                            -------                 ------
</TABLE>
(5)  EMPLOYEE BENEFIT PLANS
The Company  maintains a salary deferral 401(k) plan covering  substantially all
employees  who are not  members  of a  collective  bargaining  unit and who meet
specified  service  requirements.  Contributions  are based  upon  participants'
salary  deferrals and  compensation and are made within Internal Revenue Service
limitations.  For 2000, 1999, and 1998,  Company  contributions  for these plans
were  $10,907,  $9,536,  and $8,290,  respectively.  The Company  does not offer
post-employment or post-retirement benefits.

The Company contributes to several union-sponsored multi-employer pension plans.
These  plans  are  not  administered  by  the  Company,  and  contributions  are
determined in accordance  with  provisions of negotiated  labor  contracts.  The
Multi-employer  Pension Plan  Amendments  Act of 1980  established  a continuing
liability to such  union-sponsored  pension plans for an allocated share of each
plan's  unfunded  vested  benefits upon  substantial or total  withdrawal by the
Company or upon  termination  of the pension  plans.  To date,  no withdrawal or
termination has occurred or is contemplated.  For 2000, 1999, and 1998,  Company
contributions  for these  pension  plans were  $84,269,  $72,536,  and  $60,748,
respectively.

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

The  Company  maintains  a  supplemental   executive  retirement  plan  (defined
contribution) to provide benefits to a select group of management who contribute
materially  to the  continued  growth,  development  and future  business of the
Company. In 2000, the Company contributed $1.5 million to this plan. The Company
has  established a grantor  trust (Rabbi Trust) to provide  funding for benefits
payable under the deferred  compensation and supplemental  executive  retirement
plans.

<PAGE>
                                PAGE F16

(6)  COMMON STOCK

The Company  maintains an employee  stock  purchase plan which  provides for the
purchase of an aggregate of not more than 900,000 shares of the Company's common
stock.  Each  eligible  employee  may  designate  the amount of regular  payroll
deductions,  subject to a yearly maximum, that is used to purchase shares at 90%
of the month-end  market price.  At December 31, 2000,  764,171  shares had been
issued under this plan.

The Company  maintains  stock  option  plans that  provide  for the  granting of
options to key employees and non-employee  directors to purchase an aggregate of
not more than  4,710,000  shares of the Company's  common  stock.  Stock options
issued pursuant to the plans are exercisable for periods up to 10 years from the
date an option is  granted.  At  December  31,  2000  there were  61,943  shares
available for granting under the plans.

During 2000,  the Company  issued  337,002 common shares through the exercise of
stock options or the purchase, by employees, through its employee stock purchase
program  and the  Company  repurchased,  under two board  authorized  repurchase
programs,  954,200  common  shares in the open  market for  approximately  $22.9
million. In 1999 and 1998, respectively,  the Company issued 209,632 and 208,885
common  shares  through  the  exercise  of stock  options  or the  purchase,  by
employees, through its employee stock purchase program.


SFAS No. 123  ("Accounting  for Stock Based  Compensation")  establishes  a fair
value based method of accounting for stock  options.  The company has elected to
continue using the intrinsic value method  prescribed  under APB 25 as permitted
by SFAS No. 123. If the Company had elected to recognize compensation cost based
on the fair value of the options  granted at grant date,  as  prescribed by SFAS
No. 123,  net income and  earnings  per share would have been reduced to the pro
forma  amounts  indicated  in the table  below:
<TABLE>
<CAPTION>
Year                                                    2000                1999               1998
-------------------------------------------------------------------------- ----- ------------- ---- ---
         <S>                                            <C>                     <C>             <C>
Net income - as reported                       $       97,798           $    104,240       $    71,445
Net income - pro forma                                 90,531                100,681            69,736

Basic earnings per share - as reported                   3.68                  3.95               2.73
Basic earnings per share - pro forma                     3.44                  3.81               2.66

Diluted earnings per share - as reported                 3.61                  3.79               2.70
Diluted earnings per share - pro forma                   3.44                  3.66               2.63
</TABLE>
As prescribed  under SFAS No. 123, pro forma net income amounts  presented above
reflect only options granted after January 1, 1995 since  compensation costs for
options  granted prior to that date are not  considered.  Compensation  cost for
options  granted  since January 1, 1995 is reflected  over the options'  vesting
periods ranging from two to five years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in fiscal years 2000, 1999, and 1998: dividend yield
ranging from 0.93% to 1.21%; expected volatility ranging from 43.69% to 110.64%;
risk-free interest rates at grant date ranging from 4.97% to 7.42%; and expected
lives ranging from 4.28 to 5.61 years.


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


Year                                                    2000                            1999                            1998
------------------------------------------------------------------------------------------------------------------------------------
                                           Shares       Weighted-avg       Shares       Weighted-avg       Shares    Weighted-avg
                                                      Exercise Price                  Exercise Price                 Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
                <S>                             <C>             <C>             <C>             <C>     <C>             <C>
Outstanding at beginning of year          3,276,890      $   27.92       2,727,790      $   24.13      1,435,730     $  23.67
Granted                                   1,347,500          25.81         693,000          41.05      1,550,000        25.10
Exercised                                  (145,666)         23.08        (135,900)         17.94        (54,290)       16.73
Forfeited                                  (830,784)         27.88          (8,000)         43.30       (203,450)       30.23
                                        ------------                 --- ----------                 -------------
Outstanding at end of year                3,647,940          27.75       3,276,890         27.92       2,727,990        24.13
                                        ------------                 -------------                 -------------

Options exercisable at year end           1,248,990          25.23         671,990         22.27         581,790        20.19
                                        ------------                 -------------                 -------------

Weighted-average fair value of
options granted during the year         $    12.54                   $      16.84                   $   11.66
</TABLE>
<PAGE>



                        PAGE F17





The following table summarizes  information  about stock options  outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                                                              Outstanding Options                        Options Exercisable
                                                        Weighted-Avg
                   Range of                               Remaining                                 Number
                              Number Outstanding      Contractual Life        Weighted-Avg      Exercisable at   Weighted-Avg
            Exercise Prices          at 12/31/00            (years)         Exercise Price         12/31/00     Exercise Price
---------------------------- -------------------- --------------------- ---------------------- ------------------- ----------------
<S>             <C>                     <C>                     <C>                <C>                  <C>             <C>
       $        13.00-15.00               82,000               1.78        $      13.87              82,000      $     13.87
                18.25-19.63              362,500               5.54               19.63             317,700            19.63
                22.50-24.94            1,786,440               7.71               24.59             389,940            24.35
                25.88-27.69              305,000               9.10               26.17              66,250            25.94
                30.50-35.00              621,500               6.83               31.48             344,100            31.45
                42.88-44.69              480,500               8.75               43.76              49,000            42.88
                45.01-46.63               10,000               9.32               46.63                   -                -
                             --------------------                                        -------------------
                                       3,647,940               7.47               27.75           1,248,990            25.23

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

</TABLE>
The Company has a stockholder  rights plan designed to deter  coercive  takeover
tactics and to prevent an acquiror from gaining  control of the Company  without
offering a fair price to all of the  Company's  stockholders.  In the event of a
non-permitted transaction, the Company would declare a distribution of one right
for each share of common stock  outstanding  to  stockholders  and  generally to
shares  issuable  under the  Company's  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 the Company's  common stock.  This would have the effect
of  significantly  diluting the holdings of the  takeover  bidder.  These rights
expire on February 3, 2004.




(7) COMMITMENTS AND CONTINGENCIES

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

At  December  31,  2000,  the  Company  had  capital  purchase   commitments  of
approximately  $2,503  for  land and  improvements,  $2,543  for  transportation
equipment, and $1,374 for other equipment.






(8) ACQUISITIONS

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

<PAGE>





                        PAGE F18



(9) Business Segments

The  Company  has nine  reportable  business  segments:  the five  regional  LTL
trucking  companies , TL trucking,  Logistics,  Freight forwarding and Corporate
and other. The LTL trucking group provides overnight and second-day  delivery of
general commodities  throughout the United States and into Canada. The Company's
TL subsidiary provides premium regional and national TL services.  The Company's
logistics   subsidiaries   provide   solutions  to   customers'   logistics  and
distribution requirements. The Company's freight forwarding subsidiaries provide
domestic and  international air and ocean freight service through both exclusive
and  non-exclusive  agents.  The Corporate and other group  includes  mainly the
costs for the Company's head office and risk management  groups.  The reportable
business  segments are managed  separately  because each  business has differing
customer  requirements,  either as a result of the regional  environment  of the
country or differences in products and services offered.

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



                                                 ----------------   ----------------   ----------------
Year                                                     2000               1999               1998
                                                  ----------------   ----------------   ----------------
        <S>                                             <C>                 <C>                 <C>
Revenue
   LTL Group:
        USF Holland                            $     1,001,250    $       914,920    $       794,012
        USF Reddaway                                   276,915            244,576            215,531
        USF Red Star                                   275,841            250,021            212,365
        USF Dugan                                      204,481            193,844            181,971
        USF Bestway                                    155,188            146,948            136,283
                                                ----------------   ----------------   ----------------
           Total LTL Group                           1,913,675          1,750,309          1,540,162
   TL                                                   86,317             44,715             12,877
   Logistics                                           276,958            206,881            130,323
   Freight forwarding                                  261,749            225,010            151,531
   Corporate and other                                      -                  -                  -
                                                ----------------   ----------------   ----------------
Total Revenue                                   $    2,538,699     $    2,226,915     $    1,834,893
                                                ================   ================   ================

Income From Operations
   LTL Group:
        USF Holland                           $       108,431    $       111,203     $        82,580
        USF Reddaway                                   31,456             28,221              18,909
        USF Red Star                                    8,905              7,275               3,581
        USF Dugan                                      10,554              8,678               6,661
        USF Bestway                                    14,193             16,533              15,511
                                             ----------------   ----------------   ----------------
           Total LTL Group
                                                      173,539            171,910             127,242
   TL                                                   4,671              3,147               1,138
   Logistics                                           16,680             16,873               7,976
   Freight forwarding                                  (4,081)             8,175               4,925
   Corporate and other                                 (6,735)            (4,744)             (7,555)
   Amortization of intangibles                         (6,843)            (6,493)             (4,293)
                                              ----------------   ----------------   ----------------
Total Income from Operations                  $       177,231    $       188,868       $     129,433
                                              ================   ================    ================
</TABLE>
<PAGE>



                                                PAGE F19
<TABLE>
<CAPTION>

Year                                         2000                1999                1998
                                        ------------------  ------------------  ----------
        <S>                                     <C>             <C>                   <C>


Assets
   LTL Group:
        USF Holland                  $       462,469    $       433,887    $       337,477
        USF Reddaway                         151,509            131,254            117,326
        USF Red Star                         159,331            159,804            146,431
        USF Dugan                             97,832             98,212             92,969
        USF Bestway                           93,344             80,347             65,815
                                     ----------------   ----------------   ----------------
           Total LTL Group                   964,485            903,504            760,018
   TL                                         83,287             44,054             32,680
   Logistics                                 143,684            129,809             70,588
   Freight forwarding                        144,551            126,111             97,326
   Corporate and other                        15,067              8,689             14,061
                                      ----------------   ----------------   ----------------
Total Assets                           $   1,351,074      $   1,212,167      $     974,673
                                     ================   ================   ================



                                     ------------------  ------------------  ------------------
Long Lived Asset Expenditures
   LTL Group:
        USF Holland                      $    71,643     $       111,254     $       83,908
        USF Reddaway                          24,613              17,511             21,105
        USF Red Star                          15,489              13,788             16,358
        USF Dugan                              8,826               9,932             13,707
        USF Bestway                           15,935              16,982              9,134
                                      ------------------  ------------------  -----------------
           Total LTL Group                   136,506             169,467            144,212
   TL                                         25,125              10,994              1,844
   Logistics                                  23,807              18,976              9,830
   Freight forwarding                          3,061               1,931                669
   Corporate and other                         4,660               1,106                921
                                    ------------------  ------------------  ------------------
Total Long Lived Asset Expenditures      $   193,159       $     202,474     $      157,476
                                     ==================  ==================  =================

Depreciation Expense
   LTL Group:
        USF Holland                      $    43,021      $       36,669    $         32,662
        USF Reddaway                          12,710              12,048              11,613
        USF Red Star                          10,095               9,748               8,633
        USF Dugan                             11,402              10,857              10,420
        USF Bestway                            6,199               5,540               5,100
                                      ------------------  ------------------  ------------------
           Total LTL Group                    83,427              74,862              68,428
   TL                                          7,698               4,083               1,019
   Logistics                                  10,817               7,799               6,436
   Freight forwarding                          1,888               1,381                 842
   Corporate and other                         1,149                 694                 519
                                      ------------------  ------------------  ------------------
Total Depreciation Expense               $   104,979       $      88,819      $       77,244
                                     ==================  ==================  ==================

</TABLE>



<PAGE>





                                        PAGE F20

(10) QUARTERLY FINANCIAL INFORMATION (unaudited)
<TABLE>
<CAPTION>
Quarters                                           First              Second           Third          Fourth         Total
-----
        <S>                                             <C>             <C>             <C>             <C>
2000
     Operating revenue *                $          618,690  $        634,034  $        642,230  $     643,745   $   2,538,699
     Income from Operations                         40,759            50,593            45,688         40,191         177,231
     Net income                                     22,316            27,498            24,347         22,637          96,798
     Net income per share - basic                     0.84              1.04              0.93           0.87            3.68
     Net income per share - diluted                   0.81              1.01              0.92           0.87            3.61
     Dividends declared per share                   0.0933            0.0933            0.0933         0.0933           .3733
     Market price per share                    28.25-45.94       24.56-46.62       20.75-33.75    19.37-30.08     19.37-46.62

* Included in operating  revenue are the following fuel  surcharges  invoiced to
customers - see note 1.
                                             $     10,469         $  12,155         $   16,183     $  21,591      $    60,398



1999

     Operating revenue *                $          513,229  $        548,856  $        571,946  $     592,884     $ 2,226,915
     Income from Operations                         32,231            47,787            53,304         55,546         188,868
     Net income                                     17,508            26,271            29,723         30,738         104,240
     Net income per share - basic                     0.67              1.00              1.12           1.16            3.95
     Net income per share - diluted                   0.65              0.96              1.07           1.11            3.79
     Dividends declared per share                   0.0933            0.0933            0.0933         0.0933           .3733
     Market price per share                    28.87-34.87       27.31-47.37       42.09-51.75    41.06-49.87     27.31-51.75

* Included in operating  revenue are the following fuel  surcharges  invoiced to
customers - see note 1.
                                      $           -              $       -         $       -        $   4,473      $    4,473
</TABLE>
















<PAGE>


                                        PAGE F21
<TABLE>
<CAPTION>

SELECTED CONSOLIDATED FINANCIAL DATA
(Thousands of dollars, except per share amounts)

                                                                                              (1)            (1)
Year                                 2000               1999                1998          1997            1996
-------------------------------------------------------------------------------------------------------------------
                <S>                     <C>             <C>                     <C>             <C>             <C>
STATEMENTS OF OPERATIONS
Operating Revenue           $     2,538,699       $  2,226,915     $     1,834,893    $  1,565,249    $   1,330,972
Income from operations              177,231            188,868             129,433         105,010           67,128(2)
                                   --------       ------------       ------------       ------------       --------
Interest expense                    (21,282)           (14,003)            (8,784)          (8,461)         (12,144)
Interest income                         894              1,129                757            1,038              649
Other non-operating income
   (expense)                          2,509               (414)                88              (92)            (704)

Net income before income taxes      159,352            175,580             121,494           97,495           54,929
   and minority interest
Minority interest                     1,708                  -                   -                -               -
Income tax expense                  (64,262)           (71,340)            (50,049)         (40,914)         (23,451)
                             -------------------------------------------------------------------------------------------
Net income                   $       96,798       $     104,240       $     71,445     $     56,581         $ 31,478(2)
                             -------------------------------------------------------------------------------------------
Basic Earnings Per Share
Net income per share                   3.68                3.95               2.73             2.21             1.41(2)
Diluted Earnings Per Share
Net  income per share                  3.61                3.79               2.70             2.19             1.40(2)

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

OPERATING STATISTICS
  LTL Trucking Companies
 (in thousands)
Total tons                         10,552                10,220              9,177             8,579           7,732
Total shipments                    15,470                14,797             13,468            12,857          11,590

BALANCE SHEETS
ASSETS:
Current assets              $     396,361        $     362,928        $    279,849      $     237,116      $  203,577
Property and equipment, net       750,485              660,510             544,282            448,315         395,500
Intangible assets, net            181,978              174,538             140,201            104,407          79,559
Other assets                       22,250               14,191              10,341              9,697           9,872
                                --------------------------------------------------------------------------------------
Total assets              $     1,351,074        $  1,212,167         $   974,673       $     799,535      $  688,508

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities       $       292,175        $    370,344         $   228,877        $    181,714      $  144,348
Long-term debt                    260,137             133,137             151,096             115,000         178,000
Other non-current liabilities     163,047             149,827             135,566             110,621          96,900
Minority interest                     539                   -                   -                   -               -
Total stockholders' equity        635,176             558,859             459,134             392,200         269,260
                                ---------------------------------------------------------------------------------------
Total liabilities and
     stockholders' equity$      1,351,074      $    1,212,167       $     974,673       $     799,535  $      688,508
                                ---------------------------------------------------------------------------------------
</TABLE>
1 Fiscal years 1997 and prior were 52/53 weeks ending on the Saturday closest to
December 31st. Fiscal year 1997 included 53 weeks.

2 Income from operations, net income and earnings per share include the Red Star
restructuring  charge of $4,050,  before  income  tax,  equivalent  to $0.10 per
share, net of tax.





<PAGE>
<TABLE>
<CAPTION>

                                             PAGE F22

STATISTICAL INFORMATION

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

Holland        00  $1001.3    89.2%     4,885.7         7,777.2         61        4,227     7,104     9,119
               99   $914.9    87.8%     4,694.6         7,392.1         60        4,163     6,668     9,003
Red Star       00   $275.8    96.8%     1,136.1         2,305.7         34        1,236     2,840     2,407
               99   $250.0    97.1%     1,102.3         2,234.4         34        1,126     2,770     2,441
Reddaway       00   $276.9    88.6%     1,035.9         2,094.5         58        1,203     3,518     2,800
               99   $244.6    88.5%       950.1         1,926.4         56        1,118     3,179     2,666
Bestway        00   $155.2    90.8%       658.4         1,275.1         41          681     2,654     1,591
               99   $146.9    88.7%       658.5         1,269.0         41          660     2,522     1,521
Dugan          00   $204.5    94.8%       960.8         1,761.5         59        1,032     3,318     1,998
               99   $193.8    95.5%       955.4         1,723.4         59        1,062     3,195     2,116
Logistics      00   $277.0    94.0%        NA               NA         119          628     1,661     4,013
               99   $206.9    91.8%        NA               NA          97          598     1,520     3,682
Worldwide      00   $261.7   101.6%        NA               NA          58           NA        NA       711
               99   $225.0    96.4%        NA               NA          59           NA        NA       637
Glen Moore     00   $ 86.3    94.6%        NA               NA           3          599     1,885       823
               99   $ 44.7    93.0%        NA               NA           2          288       864       464



</TABLE>