<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-K

    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE OF 1934

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

COMMISSION FILE NUMBER 0 - 24180
                       ---------

                           Quality Distribution, Inc.
           (Exact Name of the Registrant as Specified in its Charter)

<TABLE>
<S>                                                 <C>
                   FLORIDA                              59-3239073
        (State or other jurisdiction of               (IRS Employer
         incorporation or organization)             Identification No.)
</TABLE>

                            3802 Corporex Park Drive
                              Tampa, Florida 33619
               (Address of principal executive offices)(zip code)

               Registrant's telephone number, including area code:
                                  813-630-5826

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO | |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

As of December 31, 2001, there were 2,001,128 outstanding shares of the
Registrant's Common Stock, $0.01 par value, all of which were held by
affiliates.

Documents Incorporated by Reference: None.
<PAGE>
PART I

Item 1. BUSINESS

GENERAL

      Quality Distribution, Inc. ("QDI" or "The Company"), is the largest bulk
tank truck carrier in North America based on bulk service revenues. Through a
network of 148 terminals located across the United States, Canada and Mexico, we
transport a broad range of chemical products and provide our customers with
supplementary transportation services such as dry bulk hauling, transloading,
tank cleaning, third-party logistics, intermodal services and leasing. Many of
the chemical and chemical-related consumer products we transport require
specialized trailers and experienced personnel for safe, reliable and efficient
handling. We are a core carrier for many of the Fortune 500 companies who are
engaged in chemical processing, including Dow Chemical, The Procter & Gamble
Company, DuPont and PPG Industries.

      In addition to our own fleet operations, we use affiliates and
owner-operators. Affiliates are independent companies that, through
comprehensive contracts with us, operate their terminals exclusively for us.
Owner-operators are independent contractors who, through contracts with us,
supply one or more tractors and drivers for our own or our affiliate's use.
Management believes that the use of affiliates and owner-operators results in a
more flexible cost structure, increases our asset utilization and increases
return on invested capital. QDI is a holding company and operates principally
through three main transportation subsidiaries: Quality Carriers, Inc ("QCI"),
Transplastics ("TPI") and Levy Transport, Ltee ("Levy"), and through Quala
Systems, Inc. ("QSI") a nation-wide tankwash subsidiary. Through the principal
transportation subsidiaries, as of December 31, 2001, we operated 7,737
trailers, of which 6,446 were owned or leased by us, and 3,394 tractors, of
which 774 were owned or held directly under lease by us.

      The for-hire tank truck industry is highly fragmented and we believe it
consists of approximately 200 tank truck carriers, with the top five carriers
representing approximately $1.2 billion or approximately 24% of estimated 2001
for-hire tank truck industry revenues. The industry continues to experience
consolidation. We believe such consolidation is primarily the result of
economies of scale in the provision of services to a larger customer base,
cost-effective purchasing of equipment, supplies and services by larger
companies, high insurance premiums and the decision by many smaller, capital
constrained operators to sell their trucking businesses rather than make
substantial investments to modernize their fleets. As a result of our leading
market position and decentralized operating structure, we believe we are well
positioned to benefit from these current industry trends.

DEVELOPMENT OF OUR COMPANY

      QCI, is the product of the merger of two large tank truck carriers,
Montgomery Tank Lines, Inc.("MTL") and Chemical Leaman Tank Lines, Inc. ("CLC"
or "CLTL"). QDI, formed in 1994, is a holding company, which operates
principally through its transportation subsidiaries.


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<PAGE>
      QDI is owned principally by Apollo Investment Fund III, LLP. Apollo owns
85.7% of the company's common stock, certain other investors own 7.7%, and
management of QDI owns approximately 6.6%. On a fully diluted basis, Apollo owns
77.1%, certain other investors own 7% and management of QDI owns 15.9% of the
common stock of QDI.

      Our major domestic, direct and indirect subsidiaries, excluding Bulknet,
have guaranteed our borrowings under our credit agreement.

SERVICES PROVIDED

BULK TRANSPORTATION SERVICES

      QDI is primarily engaged in the business of bulk transportation of liquid
and dry chemical products. Business services are provided through Company-owned
and affiliate terminals. As of December 31, 2001, 93 of 148 locations were
company operations and the remaining locations were affiliate operations.
Owner-operators are heavily relied upon to fulfill driver and tractor needs at
both Company and affiliate terminals. QDI believes the combination of the
affiliate program and the emphasis on the use of owner-operators results in an
efficient and flexible operating structure that provides superior customer
service.

AFFILIATE PROGRAM

      Affiliates are established and maintained by their owners as independent
companies with individualized, parochial profit incentives designed to stimulate
and preserve the entrepreneurial motivation common to small business owners.
Each affiliate enters into a comprehensive contract with QCI pursuant to which
the affiliate is required to operate its bulk tank truck enterprise exclusively
for and on behalf of QCI. Each affiliate is supported by our corporate staff and
is linked via computer to central management's information systems located at
the Tampa, Florida headquarters of QDI. New affiliate candidates are ordinarily
selected from the Company's management/employee pool, thereby "jump-starting"
the new business opportunity with an experienced, savvy owner/manager,
significantly reducing "ramp-up" time, while simultaneously improving the
chances for both operating and financial success.

      Affiliates gain multiple benefits from their relationship with the
Company, such as improved equipment utilization through access to our network of
operating terminals, access to and enhancement of our broad national and local
customer relationships, national and local driver recruitment programs,
standardized safety training (for drivers, tankwashers and mechanics) at our
six (6) Safety Schools, expanded marketing and sales resources, combined with
sophisticated marketplace/competitive research. Affiliates gain further value
from QCI's management information systems which provide essential operating and
financial reports, while simplifying daily operating situations with system-wide
technology support (TMW Systems, Incorporated ("TMW") dispatch/billing platforms
and Qualcomm enroute electronic linkage with each vehicle). Affiliates also
derive significant financial benefit through our purchasing leverage on items
such as insurance coverage, tractors, trailers, fuel, tires, health care, and
other significant operating requirements. Finally, our Affiliates have "most
favored" status at the tank truck industry's largest, nationwide tankwash vendor
QSI, and simultaneously enjoy extremely low "professional courtesy rates" for
maintenance services throughout QCI's extensive repair facility network.


                                                                               3
<PAGE>
      Affiliates predominantly operate under the marketing identity of Quality
Carriers and typically receive a percentage of gross revenues from each shipment
they transport. Affiliates are responsible for their own operating expenses,
such as fuel, licenses and worker's compensation insurance. The Company pays
affiliates each week on the basis of completed billings to customers from the
previous week. The Company bears the primary expense of collecting accounts
receivable. Our weekly settlement program automatically deducts any amounts
advanced to affiliates (and their individual drivers) for fuel, insurance, loans
or other miscellaneous operating expenses, including rental charges for the
Company's tank trailers. The Company reimburses affiliates for certain expenses
billed back to customers, including fuel and insurance surcharges, tolls and
scaling charges.

      The Company's contracts with affiliates typically carry a term ranging
from one to five years and thereafter renew on an annual basis, unless
terminated by either party. Affiliate contracts uniformly contain restrictive
covenants prohibiting them from competing directly with the Company for a period
of one year following termination of the contract. In addition, affiliates are
required to meet all QCI standard operating procedures as well as being required
to submit regular financial statements.

      Affiliates engage and/or employ their own drivers and personnel. All
affiliate personnel must meet the Company's operating standards/requirements.

      Affiliates are required to pay for and provide evidence of their own
workers' compensation coverage, which must meet both QDI and statutory coverage
levels. Affiliates are provided, as part of their contract, auto and general
liability insurance, subject to certain deductibles per incident. Expenses
exceeding the prescribed deductible limits of the affiliate are the
responsibility of QCI or its insurer. For an additional fee, a subsidiary of
QDI, Power Purchasing Inc. ("PPI"), makes available additional insurance to
affiliates for physical damage coverage, operating a tractor without a trailer,
health care, life insurance, and garage-keepers insurance.

DRIVERS AND OWNER OPERATORS

      At December 31, 2001, we utilized 3,216 drivers. Of this total, 1,856 were
owner-operators, 736 were affiliate company drivers and 624 were company
drivers.

OWNER-OPERATORS

      QCI terminals and affiliates extensively utilize owner-operators.
Owner-operators are independent contractors who, through an exclusive contract
with QCI, supply one or more tractors and drivers for QCI or affiliate use. QCI
retains owner-operators under contracts generally terminable by either party
upon short notice.

      Owner-operators are generally compensated on the basis of a fixed
percentage of the revenue generated from the shipments they haul. The
owner-operator pays all operating expenses such as fuel, physical damage
insurance, tractor maintenance, fuel taxes and highway use taxes. However, we
reimburse owner-operators for certain expenses passed through to our customers,
such as fuel surcharges, tolls and scaling charges. QCI attempts to enhance the


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<PAGE>
profitability of our owner-operators through purchasing programs that take
advantage of our significant purchasing power. These programs cover such
operating expenses as fuel, tires, occupational accidental and physical damage
insurance.

      Owner-operators utilized by QCI or an affiliate must meet specified
guidelines for driving experience, safety records, tank truck experience and
physical examinations in accordance with U.S. Department of Transportation
("DOT") regulations. We emphasize safety to our independent contractors and
their drivers and maintain driver safety inspection programs, safety awards,
terminal safety meetings and stringent driver qualifications.

DRIVER RECRUITMENT AND RETENTION

      QCI and its affiliates dedicate significant resources to recruiting and
retaining owner-operators and Company drivers. Company drivers and
owner-operators are hired in accordance with specific guidelines regarding
safety records, driving experience and a personal evaluation by our staff. We
employ only qualified tank truck drivers with a minimum of two years of
over-the-road, tractor-trailer experience. These drivers are required to attend
a rigorous training program conducted at one of our six safety schools.

      Driver recruitment and retention is a primary focus for all operations
personnel. Each terminal manager has direct responsibility for hiring drivers.
QDI uses many of the traditional methods of driver recruitment as well as using
many newer methods of driver recruitment, including the use of the Internet and
the efforts of the President's Team.

      The President's Team is a group consisting of up to ten of our very best
drivers, whose mission it is to recruit and retain drivers while promoting the
Company to customers. The equipment utilized by the President's Team
distinguishes these drivers, thereby providing another tool in our continuous
driver recruiting efforts. The President's Team maintains contact with new
candidates throughout the hiring process. They also provide insight on the
issues important to our current drivers and owner-operators. In 2001, a
comprehensive Driver Excellence Program was implemented to reward our best
drivers with recognition and awards based on meeting standards of excellence in
productivity, safety and positive Company image.

OTHER PERSONNEL

      QDI employs 690 support personnel, including 220 employed at our corporate
office in Tampa, FL. Our field operations consist of 470 employees, including 94
mechanics, 195 tank cleaners and 181 other support, clerical and administrative
personnel.

      Where appropriate, the field management is responsible for hiring
mechanics, customer service and tank wash personnel. We provide our employees
with health, dental, vision, life, and other insurance coverages subject to
certain premium sharing and deductible provisions. These and other insurance
programs are available to affiliates and owner-operators for a fee.

UNION LABOR

      At December 31, 2001, we had 313 employees in trucking, maintenance or
cleaning facilities and approximately 85 employees of three affiliate terminals
who were members of the International Brotherhood of Teamsters.


                                                                               5
<PAGE>
CUSTOMER SERVICE, QUALITY ASSURANCE AND BILLING

      Our Quality Assurance Program is designed to enable the achievement of
superior customer service through the development and implementation of
Standardized Operating Procedures for each area within QDI. The procedures
provide guidance in such areas as marketing, contracts, dispatch and terminal
operations, driver hiring, safety and training, trailer operations, tractor
operations, administrative functions, payroll, settlements, insurance, data
processing and fuel tax administration.

      In the year 2000, QDI implemented an Internal Audit Group. It is the
responsibility of this group to audit all phases of our day to day business to
provide management with feedback on the level of compliance to our Standard
Operating Procedures.

      We have also implemented a Quality Corrective Action procedure to
identify, document and correct safety and service non-conformance. This
procedure collects non-conformance data so that all levels of the organization
can better understand where processes breakdown causing a non-conformance. This
information is also reported back to many of our customers in the form of
monthly service reports. Service reporting is required by an increasing number
of chemical shippers.

      During the second quarter of 2001 the Company started an initiative to
centralize the billing function for all Company terminals and some affiliate
terminals in order to gain better quality control over the billing and invoicing
processes. At the same time, the Company is converting to the TMW billing
application, which will integrate the dispatch and billing systems. The
completion of this project is scheduled for mid-2002. See "Technology" section
below.

MOBILE COMMUNICATIONS

      Over 90% of our entire tractor fleet is equipped with the OmniTRACS(R)
mobile satellite communications system. This system provides continuous
monitoring and two-way communications with tractors in transit. The information
generated by this system is used to track load status, optimize the use of
drivers and equipment and respond to emergency situations.

TECHNOLOGY

      In 2001, QCI purchased and began implementing a new operating system for
dispatching trucks. The system was purchased from TMW, a company with over 500
customer installations and a 40% market share in the bulk trucking market. The
full implementation should be completed in mid-2002.

      The TMW software enhances QDI's ability to track its assets,
drivers/trucks/trailers and manage the business better at a tactical level. The
software handles order entry, resource planning, dispatch, communications,
through Qualcomm (Omnitracs) integration and auto-rating of invoices. The
software is another step in the continued upgrading of systems utilized in our
trucking subsidiaries: installation of an IBM storage and multi-server network,
which centralized the data and increased reliability, adding TMW for resource
tracking, completing Qualcomm installation for communications and equipment
location updates, introduction of Imaging at all locations, and the


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<PAGE>
incorporation of all of this data into our website at
http://www.qualitydistribution.com, however, information on this website is not
part of this report. These projects add to the productivity of our employees and
equipment, which we believe result in improved value to our customers.

LEASING

      QDI leases tractors and trailers to affiliates and other third parties,
including shippers. Tractor lease terms range from 12 to 60 months and may
include a purchase option. Trailer lease terms range from 1 to 84 months and do
not include a purchase option. QDI has the largest stainless steel trailer fleet
in North America and derives a portion of its income from leasing these units to
customers and affiliates.

TANK WASH OPERATIONS

      To maximize equipment utilization and efficiency we rely on 33 QSI, 2 TPI
and 5 affiliate tank wash facilities located throughout our operating network.
These facilities allow us to generate additional tank washing fees from
non-affiliated carriers and shippers. Management believes that the availability
of these facilities enables us to provide an integrated service package to our
customers and minimize the risk of cost escalation associated with reliance on
third party tank wash vendors.

INTERMODAL AND BULK RAIL OPERATIONS

      We offer a wide range of intermodal services by transporting liquid bulk
containers on specialized chassis to and from a primary mode of transportation
such as rail, barge or vessel. We also provide rail transloading services that
enable products to be transloaded directly from rail car to trailer. This allows
shippers to combine the economy of long-haul rail transportation with the
flexibility of local truck delivery.

OWNER-OPERATOR AND AFFILIATE SERVICES

      Through PPI we offer insurance products and other services to both our
internal and external fleet and to our owner-operators at favorable prices. By
offering purchasing programs that take advantage of our significant purchasing
power for products and services such as tractors, fuel and tires as well as
automobile, general liability and workers' compensation insurance, we believe we
strengthen our relationship with our owner-operators and improve driver
recruitment. We also actively market these products and services to other
customers.

LOAD BROKERAGE SERVICES

      We provide load brokerage services to enhance our ability to handle our
customers' trucking requirements. To the extent that we do not have the
equipment necessary to service a particular shipment, we will broker the load to
another carrier, thereby meeting the customer's shipping needs and generating
additional revenues for us. Through our relationship with over sixty independent
bulk carriers, we can assure timely response to customer needs.

INTERNET BASED LOGISTICS MANAGEMENT

      We have developed an internet-based system to handle individual loads that
allows shippers to place orders over the Internet to a group of qualified


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<PAGE>
carriers. Carrier selection criteria can be dictated by the shipper based upon
carrier availability, cost, and other parameters of greatest importance to the
shipper. The system is intended to streamline shipper and carrier communication
and order acceptance by providing a uniform methodology to handle shipper and
carrier requirements.

TRACTORS AND TRAILERS

      As of December 31, 2001, Quality Distribution operated a fleet of 7,737
tank trailers. The majority of these tanks are single compartment,
chemical-hauling trailers. The balance of the fleet is made up of
multi-compartment trailers, dry bulk trailers and special use equipment. The
chemical transport units typically have a capacity between 5,000 to 7,000
gallons and are designed to meet DOT specifications for transporting hazardous
materials. Each trailer is designed for a useful service life of 15 to 20 years,
though this can be greatly extended through upgrades and modifications.

      We acquire new tractors with an initial utilization period of five years.
The useful life of a tractor may be extended if restoration or overhaul is
performed. As of December 31, 2001, we operated 3,394 tractors including 774
that were operated by our drivers, 1,868 that were operated by owner-operators,
and 752 that were operated by affiliate drivers.

      Many of our and our affiliate terminals provide preventative maintenance
and receive computer-generated reports that indicate when inspection and
servicing of units are required. Our maintenance facilities are registered with
the DOT and are qualified to perform trailer inspections and repairs for our
fleet and equipment owned by third parties. We also rely on unaffiliated repair
shops for many major repairs.

      The following table shows the age of trailers and tractors we operated
that were in service as of December 31, 2001. All numbers are approximated as of
such date:

<TABLE>
<CAPTION>
                                                                                        (Greater
                    (Less Than)                                                           Than)
TRAILERS (1)           3 YRS        3-5 YRS     6-10 YRS     11-15 YRS     16-20 YRS      20 YRS     TOTAL
                    -----------   ----------   ----------   -----------   -----------   ----------   --------
<S>                 <C>           <C>          <C>          <C>           <C>           <C>          <C>
COMPANY                    162          665        1,385         1,705           980        1,549      6,446
AFFILIATE                   96          318          211           102            72          147        946
SHIPPER                      -          111          110            83            27           14        345

                    -----------   ----------   ----------   -----------   -----------   ----------   --------
Total                      258        1,094        1,706         1,890         1,079        1,710      7,737
</TABLE>

<TABLE>
<CAPTION>
                                                                           (Greater
                    (Less Than)                                              Than)
TRACTORS               3 YRS        3-5 YRS     6-10 YRS     11-15 YRS       15 YRS       TOTAL
                    -----------   ----------   ----------   -----------   -----------   ----------
<S>                 <C>           <C>          <C>          <C>           <C>           <C>
COMPANY                    129           58          527            25            35          774
AFFILIATE                  151          303          259            30             9          752
OWNER-OPERATORS            105          549          983           155            76        1,868

                    -----------   ----------   ----------   -----------   -----------   ----------
Total                      385          910        1,769           210           120        3,394
</TABLE>

(1)   Age based upon original date of manufacture; trailer may be substantially
      refurbished or re-manufactured.

MARKETING

      We conduct our marketing activities at both the national and local levels.
We employ geographically dispersed sales managers who market our services
primarily to national accounts. These sales managers have extensive experience
in marketing specialized tank truck transportation services. The corporate sales
staff also concentrates on developing dedicated logistics opportunities. Our
senior management is actively involved in the marketing


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process, especially in marketing to national accounts. In addition, significant
portions of our marketing activities are conducted locally by our terminal
managers and dispatchers who act as local customer service representatives.
These managers and dispatchers maintain regular contact with shippers and are
well positioned to identify the changing transportation needs of customers in
their respective geographic areas.

CUSTOMERS

      Our client base consists of customers located throughout North America,
including many Fortune 500 companies such as Dow Chemical, Procter & Gamble, PPG
Industries and DuPont. During 2001, Dow Chemical accounted for 12.5% of our
total revenues. For the fiscal year ended December 31, 2001, QDI's 10 largest
customers accounted for 30.3% of revenues.

ADMINISTRATION

      QDI operates 148 facilities throughout the United States, Canada and
Mexico. The Company and affiliate terminals operate as separate profit centers
and terminal managers are responsible and accountable for most operational
decisions. Effective supervision requires maximum personal contact with
customers and drivers. Therefore, to accomplish mutually defined operating
objectives, the functions of customer service, dispatch and general
administration typically rest within each terminal. Cooperation and coordination
is further encouraged by the Company backhaul policy.

      From the corporate offices in Tampa, FL, management constantly monitors
each terminal's operating and financial performance, safety and training record,
accounts receivable and customer service effort. Terminal managers ensure the
terminal remains in strict compliance with safety, maintenance, customer service
and other operating procedures. Senior corporate executives, safety department
personnel and audit department personnel conduct unannounced visits to verify
terminal compliance. QDI strives to achieve uniform service and safety at all
Company and affiliate terminals, while simultaneously affording terminal
managers the freedom to focus on generating business in their region.

COMPETITION

      The tank truck business is extremely competitive and fragmented. We
compete primarily with other tank truck carriers and private carriers in various
states and Canada. With respect to certain aspects of our business, we also
compete with intermodal transportation and railroads. Intermodal transportation
has increased in recent years as reductions in train crew size and the
development of new rail technology have reduced costs of intermodal shipping. In
2001, a major competitor, Matlack Systems, Inc., went bankrupt and ceased
operations.

      Competition for the freight transported by us is based primarily on rates
and service. Management believes that we enjoy significant competitive
advantages over other tank truck carriers because of our low fixed cost
structure, overall fleet size, national terminal network and tank wash
facilities.

      Our largest competitors are Trimac Transportation Services Ltd., Schneider
National, Inc. and Superior Carriers, Inc. There are approximately 195 other
recognized tank truck carriers, most of whom are primarily regional operators.


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<PAGE>
      We also compete with other motor carriers for the services of our drivers
and owner-operators. Our overall size and our reputation for good relations with
affiliates and owner-operators have enabled us to attract a sufficient number of
qualified professional drivers and owner-operators.

      Competition from non-trucking modes of transportation and from intermodal
transportation would likely increase if state or federal fuel taxes were to
increase without a corresponding increase in taxes imposed upon other modes of
transportation.

RISK MANAGEMENT AND INSURANCE/SAFETY

      The primary risks associated with our business are bodily injury and
property damage, workers' compensation claims and cargo loss and damage. We
maintain insurance against these risks and are subject to liability as a
self-insurer to the extent of the deductible under each policy. We currently
maintain liability insurance for bodily injury and property damage in the amount
of $75 million per incident, with a $2 million per incident deductible. There is
no aggregate limit on this coverage.

      We currently maintain a $1 million per incident deductible for workers'
compensation insurance coverage. We are insured over our deductible up to the
statutory requirement by state. We are self-insured for damage or loss to the
equipment we own or lease, and for cargo losses.

      We employ a safety and insurance staff in excess of 30 professionals. In
addition, we employ specialists to perform compliance checks and conduct safety
tests throughout our operations. We conduct a number of safety programs designed
to promote compliance with rules and regulations and to reduce accidents and
cargo claims. These programs include training programs, driver recognition
programs, safety awards, an ongoing Substance Abuse Prevention Program, driver
safety meetings, distribution of safety bulletins to drivers and participation
in national safety associations.

ENVIRONMENTAL MATTERS

      Our activities involve the handling, transportation, storage and disposal
of bulk liquid chemicals, many of which are classified as hazardous materials,
hazardous substances, or hazardous waste. Our tank wash and terminal operations
engage in the storage or discharge of wastewater and storm-water that may have
contained hazardous substances, and from time to time we store diesel fuel and
other petroleum products at our terminals. As such, we are subject to
environmental, health and safety laws and regulation by U.S. federal, state,
local and Canadian government authorities. Environmental laws and regulations
are complex, change frequently and have tended to become more stringent over
time. There can be no assurance that violations of such laws or regulations will
not be identified or occur in the future, or that such laws and regulations will
not change in a manner that could impose material costs to us.

      Facility managers are responsible for environmental compliance.
Self-audits along with audits conducted by our internal audit staff are required
to assess operations, safety training and procedures, equipment and grounds
maintenance, emergency response capabilities and waste management. We may also
contract with an independent environmental consulting firm that conducts
periodic, unscheduled, compliance assessments which focus on conditions with the
potential to result in releases of hazardous substances or petroleum, and which


                                                                              10
<PAGE>
also include screening for evidence of past spills or releases. Our relationship
to our affiliates could, under certain circumstances, result in our incurring
liability for environmental contamination attributable to an affiliate's
operations, although we have not incurred any material derivative liability in
the past. Our environmental management program has been extended to our
affiliates.

      QDI is staffed with environmental experts who manage our environmental
exposure relating to historical operations and develop policies and procedures,
including periodic audits of our terminals and tank cleaning facilities, in an
effort to avoid circumstances that could lead to future environmental exposure.

      As a handler of hazardous substances, we are potentially subject to
strict, joint and several liability for investigating and rectifying the
consequences of spills and other environmental releases of such substances
either under the Comprehensive Environmental Response Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986 ("CERCLA") or comparable state laws. From time to time, we have incurred
remedial costs and regulatory penalties with respect to chemical or wastewater
spills and releases at our facilities and, notwithstanding the existence of our
environmental management program, we cannot assure that such obligations will
not be incurred in the future, nor that such liabilities will not result in a
material adverse effect on our financial condition, results of operations or our
business reputation. As the result of environmental studies conducted at our
facilities in conjunction with our environmental management program, we have
identified environmental contamination at certain sites that will require
remediation.

      We have also been named a potentially responsible party ("PRP"), or have
otherwise been alleged to have some level of responsibility, under CERCLA or
similar state laws for cleanup of off-site locations at which our waste, or
material transported by us, has allegedly been disposed of. We have asserted
defenses to such actions and have not incurred significant liability in the
CERCLA cases settled to date. While we believe that we will not bear any
material liability in any current or future CERCLA matters, there can be no
assurance that we will not in the future incur material liability under CERCLA
or similar laws. See Certain Considerations - Environmental Risk Factors for a
discussion of certain risks of our being associated with transporting hazardous
substances.

      QDI is currently solely responsible for remediation of the following two
federal Superfund sites:

      Bridgeport, New Jersey. During 1991, CLC entered into a Consent Decree
with the EPA filed in the U.S. District Court for the District of New Jersey,
U.S. v. Chemical Leaman Tank Lines, Inc., Civil Action No. 91-2637 (JFG)
(D.N.J.), with respect to its site located in Bridgeport, New Jersey, requiring
CLC to remediate groundwater contamination. The Consent Decree required CLC to
undertake Remedial Design and Remedial Action ("RD/RA") related to the
groundwater operable unit of the cleanup.

      In August 1994, the EPA issued a Record of Decision, selecting a remedy
for the wetlands operable unit at the Bridgeport site at a cost estimated by the
EPA to be approximately $7 million. In October 1998, the EPA issued an
administrative order that requires CLC to implement the EPA's wetlands remedy.
In April 1998, the federal and state natural resource damages trustees indicated
their intention to bring claims against CLC for natural resource damages at the


                                                                              11
<PAGE>
Bridgeport site. CLC has finalized a consent decree with the state and federal
trustees and has resolved the natural resource damages claims. In addition, the
EPA has investigated contamination in site soils. No decision has been made as
to the extent of soil remediation to be required, if any.

      CLC initiated litigation against its insurers to recover its costs in
connection with environmental cleanups at its sites. In a case captioned
Chemical Leaman Tank Lines, Inc. v. Aetna Casualty & Surety Co., et al., Civil
Action No. 89-1543 (SSB) (D.N.J.), Chemical Leaman sought from its insurers
reimbursement of substantially all past and future environmental cleanup costs
at the Bridgeport site. In a case captioned The Aetna Casualty and Surety
Company v. Chemical Leaman Tank Lines, Inc., et al., Civil Action No. 94-CV-6133
(E.D. Pa.), Chemical Leaman sought from its insurers reimbursement of
substantially all past and future environmental cleanup costs at its other
sites. In an agreement dated as of November 18, 1999, Chemical Leaman favorably
resolved these outstanding insurance claims. In early 2000 QDI received
settlement proceeds of approximately $11.0 million.

      West Caln Township, PA. The EPA has alleged that CLC disposed of hazardous
materials at the William Dick Lagoons Superfund Site in West Caln, Pennsylvania.
On October 10, 1995, CLC entered into a Consent Decree with the EPA which
required CLC to:

      (1)   pay the EPA for installation of an alternate water line to provide
            water to area residents;
      (2)   perform an interim groundwater remedy at the site; and
      (3)   conduct soil remediation. US v. Chemical Leaman Tank Lines, Inc.,
            Civil Action No. 95-CV-4264 (RJB) (E.D. Pa.).

      CLC has paid all costs associated with installation of the waterline. CLC
has completed a hydro-geologic study, and has commenced activities for the
design of a groundwater treatment plant to pump and treat groundwater. The EPA
anticipates that CLC will operate the plant for about five years, at which time
the EPA will evaluate groundwater conditions and determine whether a final
groundwater remedy is necessary. Field sampling for soil remediation has been
completed and activities for the design of a soil remediation system have
commenced. The Consent Decree does not cover the final groundwater remedy or
other site remedies or claims, if any, for natural resource damages.

      Other Environmental Matters. CLC has been named as PRP under CERCLA and
similar state laws at approximately 35 former waste treatment and/or disposal
sites including the Helen Kramer Landfill Site where CLC previously settled its
liability. In general, CLC is among several PRP's named at these sites. CLC is
also incurring expenses resulting from the investigation and/or remediation of
certain current and former CLC properties, including its facility in Tonawanda,
New York and its former facility in Putnam County, West Virginia, and its
facility in Charleston, West Virginia. The Company has also favorably settled a
toxic tort claim brought against it and several co-defendants by an uncertified
class of Texas claimants. As a result of our acquisition of CLC, we identified
other owned or formerly owned properties that may require investigation and/or
remediation, including properties subject to the New Jersey Industrial Sites
Recovery Act (ISRA). CLC's involvement at some of the above referenced sites
could amount to material liabilities, and there can be no assurance that costs
associated with these sites, individually or in the aggregate, will not be
material. We have established reserves in the amount of $36.1 million for
liabilities associated with the Helen Kramer Landfill, CLC's facility at
Tonawanda, New York and CLC's former facility in Putnam County, West Virginia.


                                                                              12
<PAGE>
REGULATION

      As a motor carrier, we are subject to regulation. There are additional
regulations specifically relating to the tank truck industry, including testing
and specifications of equipment and product handling requirements. We may
transport most types of freight to and from any point in the United States over
any route selected by us. The trucking industry is subject to possible
regulatory and legislative changes that may affect the economics of the industry
by requiring changes in operating practices or by changing the demand for common
or contract carrier services or the cost of providing truckload services. Some
of these possible changes may include increasingly stringent environmental
regulations, changes in the hours-of-service regulations which govern the amount
of time a driver may drive in any specific period of time, onboard black box
recorder devices or limits on vehicle weight and size. In addition, our tank
wash facilities are subject to stringent local, state and federal environmental
regulations.

      The Federal Motor Carrier Act of 1980 served to increase competition among
motor carriers and limit the level of regulation in the industry. The Federal
Motor Carrier Act also enabled applicants to obtain Interstate Commerce
Commission ("ICC") operating authority more readily and allowed interstate motor
carriers such as ourselves greater freedom to change their rates each year
without ICC approval. The law also removed many route and commodity restrictions
on the transportation of freight. A series of federal acts, including the
Negotiated Rates Act of 1993, the Trucking Industry Regulatory Reform Act of
1994 and the ICC Termination Act of 1995, further reduced regulation applicable
to interstate operations of motor carriers such as ourselves, and resulted in
transfer of interstate motor carrier registration responsibility to the Federal
Highway Administration of DOT. On February 13, 1998, the Federal Highway
Administration published proposed new rules governing registration to operate by
interstate motor carriers. To this point in time adopted changes have not
adversely affected interstate motor carrier operations. During 1999, the Federal
Motor Carrier Safety Improvement Act of 1999 took effect establishing the
Federal Motor Carrier Safety Administration effective January 1, 2000. This
agency's principal assignment is to regulate and maintain safety within the
ranks of motor carriers.

      Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. To a large degree, intrastate motor carrier operations
are subject to safety and hazardous material transportation regulations that
mirror federal regulations. Such matters as weight and dimension of equipment
are also subject to federal and state regulations. DOT regulations mandate drug
testing of drivers. To date, the DOT's national commercial driver's license and
drug testing requirements have not adversely affected the availability of
qualified drivers to us. Alcohol testing rules were adopted by the DOT in
February 1994 and became effective in January 1995 for employers with 50 or more
drivers. These rules require certain tests for alcohol levels in drivers and
other safety personnel. These rules have not adversely affected the availability
of qualified drivers.

      Title VI of The Federal Aviation Administration Authorization Act of 1994,
which became effective on January 1, 1995, largely deregulated intrastate
transportation by motor carriers. This Act generally prohibits individual
states, political subdivisions thereof and combinations of states from
regulating price, entry, routes or service levels of most motor carriers.
However, the states retained the right to continue to require certification of


                                                                              13
<PAGE>
carriers, based upon two primary fitness criteria--safety and insurance--and
retained certain other limited regulatory rights. Prior to January 1, 1995, we
held intra-state authority in several states. Since that date, we have either
been "grandfathered in" or have obtained the necessary certification to continue
to operate in those states. In states in which we were not previously authorized
to operate intra-state, we have obtained certificates or permits allowing us to
operate.

      From time to time, various legislative proposals are introduced including
proposals to increase federal, state, or local taxes, including taxes on motor
fuels. We cannot predict whether, or in what form, any increase in such taxes
applicable to us will be enacted.

SEASONALITY

      Our business is subject to limited seasonality, with revenues generally
declining slightly during winter months, namely the first and fourth fiscal
quarters, and over holidays. Highway transportation can be adversely affected
depending upon the severity of the weather in various sections of the country
during the winter months. Our operating expenses also have been somewhat higher
in the winter months, due primarily to decreased fuel efficiency, increased
utility costs and increased maintenance costs of revenue equipment in colder
months.

2001 DEVELOPMENTS

      In January 2001, we reached an agreement with a CLC preferred shareholder
to repurchase preferred shares of CLC for the stated value of $2.6 million plus
associated costs.

      Our credit agreement was amended June 4, 2001 (the Third Amendment), and
covers the period ending March 31, 2003. The Company paid a $1.1 million fee
which is being amortized as interest expense for the covenant modification
period. The interest rate on the credit agreement was also increased by 150
basis points. The Company's form 8-K dated June 2001 contains full details
relative to this amendment. A technical default, for which a waiver was obtained
in October, 2001, occurred with respect to these covenants.

      The credit agreement was subsequently amended (the fourth Amendment) on
December 14, 2001. The new financial covenants are less restrictive than the
previously existing covenants and cover the covenants for the calendar quarters
through 12/31/2002. The Company currently believes that it will be in
compliance with the covenants. The Company is currently in the process of
negotiating an amendment to the credit agreement with its banks for the periods
subsequent to December 31, 2002, which if granted and if the conditions therein
are met would make the financial covenants which are currently unlikely to be
met for the quarter ending March 31, 2003 easier to satisfy and likely have the
effect of avoiding further amendments to the financial covenants. Although the
Company believes that the banks will agree to this amendment, there can be no
assurance that such agreement will occur, or that if it does occur, that
the Company will be able to satisfy any conditions for covenant relief. In
addition, the Fourth amendment restricts the future availability of the
revolving credit facility to an incremental $15 million above the balance at
the date of the agreement, plus places restrictions on the amount of capital
expenditures allowed. This amendment is included as an exhibit to the Form 10K.
At December 31, 2001 the Company had $17 million available under the revolving
credit facility.


                                                                              14
<PAGE>
ITEM 2. PROPERTIES

      As of December 31, 2001, QDI's operating facilities were located in the
following cities:

<TABLE>
<CAPTION>
QCI OPERATED            QSI                      TPI                      AFFILATE OPERATED
<S>                     <C>                      <C>                      <C>
Albany, NY  **          Albany, NY **            Chicago, IL **           Augusta, GA **
Appleton, WI            Atlanta, GA  **          Columbus, OH             Augusta, GA
Atlanta, GA **          Augusta, GA **           East Rutherford, NJ **   Barberton, OH **
Atlanta, GA **          Barberton, OH **         Essexville, MI **        Baton Rouge, LA
Augusta, GA **          Baton Rough, LA          Greer, SC                Beaumont, TX
Becancour, CDN          Branford, CT **          Laredo, TX               Bridgeport, NJ **
Bessemer, AL            Bridgeport, NJ **        Montreal, Canada         Bristol, PA
Branford, CT **         E. Channelview, TX       North Haven, CT          Bristol, WI
Brunswick, GA           W. Channelview, TX       Palmer, MA **            Chattanooga, TN **
Calvert City, KY **     Charleston, SC **        Port Arthur, TX **       Chattanooga, TN **
Carteret, NJ            Chattanooga, TN **       Saddle Brook, NJ         Chesapeake, VA **
Castleton, VT           Clute, TX **             Sarnia, Canada           Cincinnati, OH **
N. Charleston, SC **    Friendly, WV **          South Point, OH          Columbus, OH
Charleston, SC **       Garden City, GA  **                               Danville, IL
Chesnee, SC **          Hayward, CA                                       Dumfries, VA
Chester, SC **          Houston, TX **                                    Fairfield, OH **
Cincinnati, OH          Kalamazoo, MI **                                  Ft. Worth, TX **
Clute, TX **            Kent, WA  **                                      Garden City, GA
Coteau du Lac, QUE **   Lansing, IL                                       Gary, IN
Fall River, MA **       Luling, LA                                        Glennmoore, PA
Follansbee, WV          Midland, MI **                                    Hagerstown, MD
Greenup, KY             Newark, NJ **                                     Hopewell, VA
Hayward, CA             Pocatello, ID **                                  Houston, TX **
Kalamazoo, MI **        Rahway, NJ                                        Jacksonville, FL
Kelso, WA               Rock Hill, SC **                                  Joliet, IL **
Kent, WA **             Salt Lake City, UT  **                            Kansas City, MO
Ludington, MI **        San Pablo, CA **                                  Lake Charles, LA
Memphis, TN **          South Gate, CA                                    Lansing, IL
Mexico                  Spartanburg, SC  **                               Lima, OH
Midland, MI **          St. Albans, WV  **                                Louisville, KY
Montreal Canada **      St. Gabriel, LA **                                Luling, LA
Newark, NJ **           Sulphur, LA                                       Mediapolis, IA
Oakville, ON            Wilmington, NC **                                 Memphis, TN **
Orlando, FL                                                               Memphis, TN **
Pocatello, ID **                                                          Memphis, TN
Portland, OR **                                                           Morgantown, WV **
Salt Lake City, UT **                                                     Narrows, VA **
San Pablo, CA **                                                          Nazareth, PA
South Gate, CA                                                            New Castle, DE
South Point, OH                                                           New Castle, DE
St. Albans, WV  **                                                        Niagara Falls, NY
St. Gabriel, LA **                                                        Owensboro, KY
Summit, IL **                                                             Oyster Creek, TX **
Tonawanda, NY **                                                          Parker, PA **
Waterford, NY                                                             Pasadena, TX
Whistler, AL **                                                           Pedricktown, NJ
Wilmington, NC **                                                         Roanoke, VA
                                                                          Salisbury, NC
                                                                          St. Gabriel, LA **
                                                                          St. Louis, MO
                                                                          Tampa, FL
                                                                          Toledo, OH
                                                                          Triadelphia, WV
                                                                          Tucker, GA
                                                                          Williamsport, PA**
</TABLE>

**    Indicates the terminal is owned by the Company.


                                                                              15
<PAGE>
      In addition to the properties listed above, we also own property in
Macomb, MI; Security, MD; Croydon, PA; Syracuse, NY; Hartford, WI; and a jointly
owned 3-acre vacant land parcel in Ruskin, FL.

      Our executive and administrative offices are located in Tampa, Florida.

Item 3. LEGAL PROCEEDINGS

      In addition to those items disclosed under "Business - Environmental
Matters," we are from time to time involved in routine litigation incidental to
the conduct of our business. We believe that no litigation currently pending
against us, if adversely determined, would have a material adverse effect on our
consolidated financial position or results of operations.

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

      We did not submit any matters to a vote of our security holders during the
fourth quarter of the year covered by this report.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      There is no established public trading market for our common equity.
There were 33 common stock shareholders as of December 31, 2001. No common
stock dividend has ever been paid. Future common stock dividends are limited
by contractual restrictions.

Item 6. SELECTED FINANCIAL DATA

      The selected historical consolidated financial information set forth below
is qualified in its entirety by reference to, and should be read in conjunction
with our Consolidated Financial Statements and notes thereto included elsewhere
in this report and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

      The consolidated income statement and balance sheet information set
forth below for and as of each of the years in the five-year period ended
December 31, 2001 has been derived from our audited consolidated financial
statements.


                                                                              16
<PAGE>
<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                        -------------------------------------------------------------
                                           1997         1998         1999         2000         2001
                                        ---------    ---------    ---------    ---------    ---------
                                                           (dollars in thousands)
<S>                                     <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA

Operating revenues                      $ 286,047    $ 397,738    $ 586,807    $ 570,785    $ 523,337
                                        ---------    ---------    ---------    ---------    ---------

Costs and expenses:
Operating expenses, excluding
     depreciation and amortization        247,619      343,451      505,520      504,091      459,292
Option expense                                 --       14,678           --           --           --
Depreciation and amortization              17,335       31,043       62,284       37,044       35,125
Interest expense, net                       3,175       19,791       40,452       40,236       40,224
Other expenses (income)                        39         (164)        (134)         (24)          22
                                        ---------    ---------    ---------    ---------    ---------

Total costs and expenses                  268,168      408,799    $ 608,122    $ 581,347    $ 534,663
                                        ---------    ---------    ---------    ---------    ---------

Income (loss) before taxes                 17,879      (11,061)     (21,315)     (10,562)     (11,326)
Provision (benefit) for income taxes        7,396       (4,047)      (5,906)      31,225        1,135
Minority interest                              --          (74)         (21)          --           --
                                        ---------    ---------    ---------    ---------    ---------

Net income (loss) before
     Extraordinary item                 $  10,483    $  (7,088)   $ (15,430)   $ (41,787)   $ (12,461)
                                        =========    =========    =========    =========    =========
Earnings per share before
     Extraordinary items                     2.23        (2.41)       (8.52)      (21.59)       (7.56)
OTHER DATA
Net cash and cash equivalents
     provided by
       Operating activities             $  33,832    $  16,596    $   9,169    $  38,192    $  10,929
Net cash and cash equivalents
     used in investing activities         (31,690)    (289,275)      (8,875)     (18,721)     (34,936)
Net cash and cash equivalents
     (used in) provided by
       Financing activities                (1,503)     271,413          634      (17,081)      25,247
EBITDA (1,2)                               38,428       39,609       81,288       66,693       64,045
EBITDA without adjustments (1,2)           38,428       54,287       81,288       76,636       67,494
Capital expenditures                       35,121       29,765       25,727       23,079       37,412
Number of terminals at end of
     Period                                    80          194          171          152          148
Number of trailers operated at end
     of period                              4,148        8,003        7,625        7,526        7,737
Number of tractors operated at end
     of period                              1,915        3,679        3,943        3,491        3,394

CONSOLIDATED BALANCE SHEET DATA
     AT PERIOD END:
Total assets                            $ 194,036    $ 583,246    $ 542,241    $ 453,073    $ 448,978
Long-term indebtedness, including
     Current maturities                    55,098      441,331      434,156      416,939      443,856
Stockholders' equity (deficit)             79,532      (48,320)     (64,773)    (110,866)    (134,467)
</TABLE>

(1)   EBITDA represents earnings before extraordinary items, net interest
      expense, income taxes, depreciation and amortization, minority interest
      expense and other income (expense). EBITDA is presented because it is a
      widely accepted financial indicator used by certain investors and analysts
      to analyze and compare companies on a basis of operating performance.
      EBITDA is not intended to present cash flows for the period, nor has it
      been presented as an alternative to operating income as an indicator of
      operating performance and should not be considered in isolation or as a
      substitute for measures of performance prepared in accordance with
      generally accepted accounting principles ("GAAP"). EBITDA does not
      necessarily represent cash flow available for discretionary use by
      management. See our Consolidated Financial Statements and the related
      notes appearing elsewhere in this document. EBITDA is not calculated
      under GAAP and therefore is not necessarily comparable to similarly titled
      measures used by other companies.

(2)   We have incurred several charges in the past few years that impact the
      comparability of our financial statements. These include a $14.7 million
      charge related to option expense in 1998 associated with the QDI merger
      transactions, $6.7 million in 2000 related to pre-merger receivables and
      expenses related to the prior operation of CLTL, and $2.4 million in 2001
      related to adverse experience in pre-merger accident claims from
      predecessor companies.

      We have also aggressively cut costs as a result of a recent softening
      economy and the consolidation efforts that began after the merger in 1998.
      These efforts resulted in $3.2 million and $1.0 million in severance and
      benefits expense in 2000 and 2001, respectively. EBITDA is presented both
      with and without these charges for comparative purposes.


                                                                              17
<PAGE>
Item  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

      The following discussion of our results of operations and financial
condition should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this report.

OVERVIEW

      Our revenue is principally a function of the volume of shipments by the
bulk chemical industry, our market share as opposed to that of our competitors
and the amount spent on tank truck transportation as opposed to other modes of
transportation such as rail. The volume of shipments of chemical products are in
turn affected by many other industries, including consumer and industrial
products, automotive, paint and coatings, and paper, and tend to vary with
changing economic conditions. Additionally we also provide leasing, tank
cleaning, and intermodal services presented as other revenue.

      The principal components of our operating costs include purchased
transportation, salaries, wages, benefits, annual tractor and trailer
maintenance costs, insurance and fuel costs. We believe our use of affiliates
and owner-operators provides a more flexible cost structure, increases our asset
utilization and increases our return on invested capital.

      We have historically focused on maximizing cash flow and return on
invested capital. Our affiliate program has greatly reduced the amount of
capital needed for us to maintain and grow our terminal network. In addition,
the extensive use of owner-operators reduces the amount of capital needed to
operate our fleet of tractors, which have shorter economic lives than trailers.
These factors have allowed us to concentrate our capital spending on our trailer
fleet where we can achieve superior returns on invested capital through our
transportation operations and leasing to third parties and affiliates.

      Through several strategic asset purchases during 2001, we were further
able to expand our service capabilities and our geographic coverage. We intend
to continue providing these services and expand upon existing customer
relationships by providing our supplementary services as well as increasing the
fleet size in these markets.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      QDI's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles
("GAAP"). The Company believes the following are the more critical accounting
policies that impact the financial statements, some of which are based on
management's best estimates available at the time of preparation. Actual future
experience may differ from these estimates.

      Environmental liabilities - QDI has reserved for potential environmental
liabilities based on the best estimates of potential clean-up and remediation
estimates for known environmental sites. The Company employs a staff of
environmental experts to administer all phases of our environmental programs,
and uses outside experts where needed. These professionals develop estimates of
potential liabilities at these sites based on projected and known remediation
costs. This analysis requires the Company to make significant estimates, and


                                                                              18
<PAGE>
changes in facts and circumstances could result in material changes in the
environmental accrual.

      Accident claims reserves - The Company carries insurance for auto
liability claims, with a $2 million per occurrence deductible as of September
15, 2001, and worker's compensation with a $1 million per accident deductible.
For cargo claims, we are self-insured. In developing liability reserves, we rely
on professional third party claims administrators, insurance company estimates
and the judgment of our own safety department personnel. This analysis requires
the Company to make significant estimates, and changes in facts and
circumstances could result in material changes in the accident claims reserves.

      Revenue recognition - Transportation revenues and related costs are
recognized on the date the freight is delivered or the tank wash performed.
Other operating revenues, consisting primarily of lease revenues from
affiliates, independent operators and third parties, are recognized as earned.

      Allowance for uncollectible receivables - The allowance for all
potentially uncollectible receivables is based on a combination of historical
data, cash payment trends, specific customer issues, write off trends, general
economic conditions and other factors. These factors are continuously monitored
by management to arrive at the estimate for the amount of accounts receivable
that may be ultimately uncollectible. This analysis requires the Company to make
significant estimates, and changes in facts and circumstances could result in
material changes in the allowance for uncollectible receivables.

NEW ACCOUNTING PRONOUNCEMENTS

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141 Business Combinations and SFAS No. 142 Goodwill and Other
Intangible Assets. SFAS No. 141 requires business combinations initiated after
June 30, 2001, to be accounted for using the purchase method of accounting, and
broadens the criteria for recording intangible assets separate from goodwill.
Recorded goodwill and intangibles will be evaluated against the new criteria and
may result in certain intangibles being subsumed into goodwill, or
alternatively, amounts initially recorded as goodwill may be separately
identified and recognized apart from goodwill. SFAS No. 142 requires the use of
a non-amortization approach to account for purchased goodwill and certain
intangibles. Under a non-amortization approach, goodwill and certain intangibles
will not be amortized into results of operations, but instead would be reviewed
for impairment and written down and charged to results of operations only in the
periods in which the recorded value of goodwill and certain intangibles is more
than its fair value. The provisions for each statement that apply to goodwill
and intangible assets which are acquired prior to June 30, 2001, will be adopted
by the Company on January 1, 2002. We expect the adoption of these accounting
standards to have an impact in reducing our amortization of goodwill and certain
intangibles commencing January 1, 2002; however, impairment reviews may result
in future periodic write-downs. Amortization expense for 1999, 2000 and 2001 was
$4.0 million, $4.5 million and $4.6 million, respectively.

      In July 2001, the FASB issued SFAS 143 Accounting for Asset Retirement
Obligations, which requires that companies recognize a liability for retirement
obligations of long lived assets in the period the liability occurs. This
pronouncement is effective for fiscal years beginning after June 15, 2002. The


                                                                              19
<PAGE>
Company does not anticipate any significant impact on financial results from
adoption of this standard.

      In August 2001, the Financial Accounting Standards Board issued SFAS 144
Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes
SFAS 121. The Company currently assesses whether there has been impairment of
long-lived assets and certain intangibles in accordance with SFAS 121 and will
continue to do so under the guidance provided by SFAS 144 in 2002. The Company
does not anticipate any significant impact on financial results from adoption of
this standard.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

      Revenues for 2001 were $523.3 million, a decrease of $47.5 million or 8.3%
compared to 2000 revenues. The revenue decline was largely attributable to the
sustained weak industrial production demand that began in the third quarter of
2000 and has continued dropping throughout 2001. This decline in demand for bulk
transportation services was due to the overall slowing economic conditions,
downsizing and consolidation in the U.S. chemical industry, and increased
competition from other forms of transportation such as rail. This environment
has also intensified pricing competition in the bulk transportation industry. In
addition, the terrorist attack on the World Trade Center and other locations on
September 11, 2001, pushed overall demand lower in the fourth quarter of 2001.
The revenue decline was mitigated by new business and business acquired through
strategic asset purchases in 2001. The 2000 results include $15.7 million of
fuel surcharge versus $11.9 million in 2001. This decline reflects both overall
volume decreases and the drop in fuel prices towards the end of 2001. The
Company instituted an insurance surcharge in October 2001 in response to
dramatically rising insurance costs.

      We operated 148 terminals at December 31,2001 compared to 152 terminals at
December 31, 2000. The reduction is the result of further consolidation and
rationalization of terminals from cost cutting measures in response to demand,
offset by strategic new terminals acquired in 2001.

      We operated a total of 7,737 trailers and 3,394 tractors at the end of
2001 compared to 7,526 trailers and 3,491 tractors for year ended December 31,
2000. The decline in tractors, many of which are owned by owner-operators, is
largely due to lower demand, offset by new tractor purchases in 2001. The
increase in trailers is due to several strategic asset purchases made in 2001,
offset by disposals of older equipment.

      Operating expenses, excluding depreciation and amortization, totaled
$459.3 million in 2001, a decrease of $44.8 million or 8.9% from 2000. This
decrease in operating expenses was largely due to the lower shipment volume in
2001 that resulted in lower purchased transportation, compensation and other
operating costs due to personnel reductions and cost control. In addition, in
2001 the Company converted several less profitable Company terminals to
affiliate operations. Together, these factors resulted in reducing Company
driver wages ($1.0 million) and reducing purchased transportation expense for
owner-operators ($29.1 million). These decreases were offset by net increases in
purchased transportation for affiliates ($6.6 million) due to the conversions
and the pass through payments of fuel surcharge.


                                                                              20
<PAGE>
      Cost cutting initiatives, volume related declines and the conversion of
Company terminals to affiliate operations reduced overall compensation and
benefit expense in 2001 compared to 2000 by ($6.7 million, or 8.3%), as well as
selling and administrative costs ($4.0 million, or 22.1%). Fuel, supplies and
maintenance decreased $4.9 million in 2001. This decrease was largely the result
of ($1.1 million) decrease in Company fuel expense due to fuel prices dropping
during the second half of the year, plus demand declines. Other volume related
operating expenses declined, including declines in tankwash expense of ($2.2
million) and equipment maintenance and other expenses ($1.6 million). Insurance
and claims increased ($0.3 million) as a result of new vehicle and workers
compensation insurance policies starting in the third quarter of 2001. These
higher insurance costs reflect the current unfavorable insurance market for the
trucking industry. The Company was able to recoup a portion of these increased
costs through implementation of an insurance surcharge.

      The Company's operating expenses have been impacted by several charges in
both 2001 and 2000. We have incurred severance, benefits and other related
expenses from cost cutting measures and consolidating terminals that resulted in
charges of $1.0 million and $3.2 million in 2001 and 2000, respectively. In
addition we had charges related to the prior operation of CLC of $2.4 million
and $6.7 million in 2001 and 2000, respectively. These expenses related
primarily to pre-merger accounts receivable, poor experience on pre-merger
insurance claims and other expenses associated with the operations of the
predecessor companies prior to the merger in 1998. Excluding these charges,
operating expenses would have declined $38.3 million in 2001 versus 2000.

      Depreciation and amortization totaled $35.1 million for 2001, versus $37.0
million in 2000. The decrease is attributable to tractor and trailer equipment
acquired at the time of the merger with CLC that became fully depreciated in
2001, offset by higher capital spending on computer related infrastructure and
acquisitions of equipment in 2001.

      Total operating expenses, including depreciation and amortization, as a
percentage of revenue decreased to 94.5% of revenue in 2001 compared to 94.8% of
revenue in 2000. Excluding the charges and restructuring mentioned above, the
operating ratio would have increased in 2001 to 93.8% versus 93.1% in 2000. This
increase largely relates to the revenue decline in 2001 and the impact on the
Company's fixed costs, along with increases in insurance expense incurred in
2001.

      Interest expense remained unchanged at $40.2 million during 2001 compared
to 2000. This was the result of lower interest rates on variable term debt that
were offset by losses on interest rate swaps on that debt, and additional
expenses associated with amending the credit agreement and increased borrowing.
Total debt increased in 2001 by $26.9 million primarily to finance strategic
terminal and tankwash assets purchased in several areas of the country.

      Income tax expense for 2001 was $1.1 million versus $31.9 million for
2000. In 2000, the Company established a $32.6 million valuation allowance on
net deferred tax assets as a result of cumulative losses in recent years.

      Our net loss was $12.5 million for 2001 versus $41.8 million loss in 2000.
The decrease in the net loss was due primarily to the valuation allowance on net
deferred tax assets and the charges in 2000 discussed above.

RESULTS OF OPERATIONS


                                                                              21
<PAGE>
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31,1999

      Revenues for 2000 were $570.8 million, a decrease of $16.0 million or 2.7%
from 1999 revenues. The revenue decline was largely attributable to the sharp
decrease in demand that began in the third quarter and intensified in the fourth
quarter 2000. This decline in demand for bulk transportation services was due to
the overall slowing economic conditions in the U.S. chemical industry. Reduced
demand also led to aggressive pricing from competitors, especially in the latter
half of the year. Prior year results included $3.4 million in revenue from
Leaman Logistics, a subsidiary that was sold in September 1999. The 2000 results
also include $15.7 million of fuel surcharge in response to rising fuel prices.

      We operated 152 terminals at December 31, 2000 compared to 171 terminals
at December 31, 1999. The reduction in the number of terminals is the result of
further consolidation of terminals after the 1998 CLC merger, and closing of
unprofitable and overlapping terminals and tankwash facilities.

      We operated a total of 7,526 trailers in 2000 compared to 7,625 for year
ended December 31, 1999. The Company also operated a tractor fleet totaling
3,491 units compared to 3,943 units for year ended December 31, 1999. The
decline in tractors, many of which are owned by independent operators, is
largely due to lower demand in the latter half of 2000 and driver turnover as
well as disposals of older equipment.

      Operating expenses, excluding depreciation and amortization, totaled
$504.1 million in 2000, a decrease of $1.4 million or 0.2% from 1999. In 2000,
we recorded restructuring charges ($3.2 million) and a charge related to the
prior operation of CLC of $6.7 million. Excluding these charges, operating
expenses would have been $494.2 million in 2000. This decrease in operating
expenses was largely due to lower volumes in the latter half of 2000 and
conversion of Company terminals to affiliate operations, which lowered Company
driver wages ($2.5 million) and purchased transportation expense for
independent contractors ($28.9 million). These decreases were offset by net
increases in purchased transportation for affiliates ($32.1 million) due to the
conversions and the pass through payments of fuel surcharge. Cost cutting
initiatives and the conversion of Company terminals to affiliate operations
reduced compensation and benefit expense ($12.1 million), as well as selling
and administrative costs ($1.7 million), offset by restructuring charges for
severance and benefits for terminated employees recorded in the third ($2.1
million) and fourth ($1.1 million) quarters of 2000. Operating supplies and
maintenance increased ($1.3 million) in 2000. This increase was the result of
($2.4 million) increase in Company fuel expense due to higher prices and higher
waste removal charges at our tankwash facilities ($0.3 million), partially
offset by the impact of terminal conversions to affiliate operations and
maintenance savings from disposal of older equipment. Insurance and claims
increased ($1.5 million) as a result of higher than anticipated payments of
older claims. Operating results for 2000 were also negatively impacted by a
$6.7 million non-recurring charge related to the operations of CLC. Absent this
charge and the restructuring charges operating expenses would have declined
2.2% versus 1999.

      Depreciation and amortization totaled $37.0 million for 2000, versus $42.2
million in 1999. The decrease is attributable to reduced capital expenditures
for 2000 ($2.7 million) and the sale of Leaman Logistics in 1999. During 1999 we
also had a ($20.1 million) charge in accelerated depreciation charges to
write-off acquired software no longer being used in the business at


                                                                              22
<PAGE>
year end 1999 and to reflect a change in the estimated useful life of certain
revenue equipment.

      Total operating expenses, including depreciation and amortization, as a
percentage of revenue decreased to 94.8% of revenue in 2000 compared to 96.8% of
revenue in 1999. During 2000 we recorded a charge for the operation of CLC.
($6.7 million) and restructuring charges ($3.2 million). During 1999, we wrote
off acquired software and changed the useful life of certain revenue equipment
as described above. Absent these items in 2000 and 1999, operating expenses
would have totaled $531.2 million, or 93.1% of operating revenues in 2000,
compared to $547.7 million or 93.3% of revenue in 1999.

      Interest expense decreased to $40.2 million during 2000 compared to $40.5
million in 1999 as a result of lower average debt balances during 2000, offset
by higher interest rates on variable term debt. We paid down $17.3 million
dollars of total debt in 2000.

      Income tax expense 2000 was $31.2 million versus an income tax benefit of
$5.9 million for 1999. This was primarily due to the establishment of a $32.6
million valuation allowance on net deferred tax assets in 2000 as a result of
cumulative tax losses in recent years, as required by SFAS 109.

      Our net loss was $41.8 million for 2000 versus $15.4 million loss in 1999.
This increase in the net loss was due almost entirely to the valuation allowance
on net deferred tax assets and the charges in 2000 discussed above.

LIQUIDITY AND CAPITAL RESOURCES

      Our primary source of liquidity is cash flow from operations and
availability under our credit agreement. We generated $9.2 million, $38.2
million and $10.9 million from operating activities in 1999, 2000 and 2001,
respectively. The decrease in cash provided by operating activities in 2001
reflects an increase in Days Sales Outstanding ("DSO") of accounts receivables
during 2001, and the payment of severance and termination expenses in addition
to environmental and other liabilities, many of which were associated with the
CLC merger. In addition, in 2000, the Company received $11.0 million of
insurance proceeds for environmental claims.

      Capital expenditures totaled $25.7 million, $23.1 million and $37.4
million in 1999, 2000 and 2001, respectively. As of December 31, 2001 the
Company was committed to purchase OMNITRAC units of $0.5 million. Net cash used
in investing activities in 1999, 2000 and 2001 was $8.9 million, $18.7 million
and $34.9 million, respectively. Net cash used in investing activities during
1999 included capital expenditures offset by proceeds from the sale of Leaman
Logistics and sale of property and equipment. The years 2000 and 2001 consisted
of capital expenditures net of asset dispositions only. In 2001, several major
asset purchases occurred including West Coast terminals and new tank wash
facilities totaling approximately $14.7 million..

      Net cash used in financing activities was $17.1 million as a result of
paying down our debt in 2000. Net cash provided in financing activities in 1999
reflects $8.8 million in principal payments on long-term debt offset by the
release of restricted cash associated with the settlement with the former CLC
shareholders. In 2001, we reached an agreement with a minority interest
shareholder to repurchase shares of CLC preferred stock for the stated value of
$2.6 million plus associated cost. In 2001, we increased our total debt by $26.9
million to finance strategic asset purchases.


                                                                              23
<PAGE>
      In 1998 we were capitalized with $140.0 million principal amount of notes,
a $360.0 million credit agreement, $68.0 million in equity investments by
Apollo, other institutional investors and members of our management and $31.9
million in preferred and common equity investments by certain of our
shareholders, including Apollo. The notes are unsecured senior subordinated
obligations of QDI, ranking subordinate in right of payment to all existing and
future senior debt. Upon consummation of the CLC merger, CLC and its
subsidiaries became guarantors of the notes and guarantors under the new credit
agreement. The credit agreement provides for a term-loan facility consisting of
a $90.0 million Tranche A Term Loan maturing on June 9, 2004, a seven-year
$105.0 million Tranche B Term Loan, an eight-year $90.0 million Tranche C Term
Loan, a $75.0 million revolving credit facility available until June 9, 2004,
and a Tranche D loan of $15 million, due June 9, 2006. The proceeds from the
December 2001 Tranche D loan were used to pay down $5 million each on the
Tranche A, B and C loans. The credit agreement currently restricts future
incremental borrowing under the revolving credit facility to $15 million,
including letters of credit. On December 31, 2001 QDI's total debt, including
current maturities was $443.8 million. As of the end of 2001, $17 million was
available under the revolving credit agreement.

      Our primary cash needs consist of capital expenditures and debt service.
We incur capital expenditures for the purpose of replacing older tractors and
trailers, purchasing new tractors and trailers, and maintaining and improving
infrastructure, including the integration of the information technology system.

      We have historically sought to acquire smaller local operators as part of
our program of strategic growth. We continue to evaluate potential accretive
acquisitions in order to capitalize on the consolidation occurring in the
industry and expect to fund such acquisitions from available sources of
liquidity, including borrowings under the revolving credit facility.

      Our credit agreement includes financial covenants which require certain
ratios to be maintained. Our credit agreement was amended June 4, 2001 ("the
Third Amendment"), and covers the period ending March 31, 2003. The Company paid
a $1.1 million fee which is being amortized as interest expense for the covenant
modification period. The interest rate on the credit agreement was also
increased by 150 basis points. A technical default for which a waiver was
obtained in October, 2001 occurred with respect to the covenants in the credit
agreement.

     The credit agreement was subsequently amended (the fourth Amendment) on
December 14, 2001. The new financial covenants are less restrictive than the
previously existing covenants and cover the calendar quarters through
December 31, 2002. The Company currently believes that it will be in compliance
with the covenants through December 31, 2002. The Company is currently in the
process of negotiating an amendment to the credit agreement with its banks for
the periods subsequent to December 31, 2002; relating to the financial covenants
which are unlikely to be to met for the quarter ending March 31, 2003. Although
the Company believes that the banks will agree to this amendment, there can be
no assurance that such agreement will occur, or that if it does occur, that the
Company will be able to satisfy any conditions for covenant relief. In
addition, the fourth amendment restricts the future availability of the
revolving credit facility to an incremental $15 million above the balance at
the date of the agreement, plus places restrictions on the amount of capital
expenditures allowed. This amendment is included as an exhibit to the Form 10K.
At December 31, 2001 the Company had $17 million available under the revolving
credit facility.

      As of December 31, 2001, no default exists relative to any financial
covenant. However, continued compliance with these requirements could be
effected by changes relating to economic factors, market uncertainties, or other
events as described under FORWARD-LOOKING STATEMENTS AND 2001 DEVELOPMENTS.


                                                                              24
<PAGE>
      While uncertainties relating to environmental, labor and regulatory
matters exist within the trucking industry, management is not aware of any
trends or events likely to have a material adverse effect on liquidity or the
accompanying financial statements. We believe that based on current levels of
operations and anticipated growth, our cash flow from operations, together with
available sources of liquidity, including borrowings under the revolving credit
facility, will be sufficient to fund anticipated capital expenditures and make
required payments of principal and interest on our debt, including obligations
under our credit agreement. The following is a schedule of our long-term
contractual commitments over the periods we expect them to be paid.

<TABLE>
<CAPTION>
                                    Balance
                                  At 12/31/01      2002      2003      2004       2005      After
                                  ---------------------------------------------------------------
<S>                               <C>           <C>      <C>       <C>       <C>        <C>
  Operating Leases                      --       3,301     1,733     1,144      1,191        893
  Long term indebtedness           441,179          --     2,677    81,728    131,751    225,023
  Environmental liabilities         36,136          --     7,678     7,045      7,907     13,506
  Other non-current liabilities     13,744          --     4,957     4,253      3,378      1,156
                                    --------------------------------------------------------------
  Total                            491,059       3,301    17,045    94,170    144,227    240,578
</TABLE>

FORWARD-LOOKING STATEMENTS AND CERTAIN CONSIDERATIONS

      This report along with other documents that are publicly disseminated by
the Company, and oral statements that are made on behalf of the Company contain
or might contain forward-looking statements within the meaning of the Securities
Exchange Act of 1934, as amended. All statements included in this report,
and in any subsequent filings made by the Company with the Commission other
than statements of historical fact, that address activities, events or
developments that the Company or management expect, believe or anticipate will
or may occur in the future are forward-looking statements. These statements
represent the Company's reasonable judgment on the future and are subject to
risks and uncertainties that could cause the Company's actual results and
financial position to differ materially. Examples of forward-looking statements
include: (i) projections of revenue, earnings, capital structure and other
financial items, (ii) statements of the plans and objectives of the Company and
its management, (iii) statements of expected future economic performance and
(iv) assumptions underlying statements regarding the Company or its business.
Forward-looking statements can be identified by, among other things, the use of
forward-looking language, such as "believes," "expects," "estimates," "may,"
"will," "should," "seeks," "plans," "intends," "anticipates," or "scheduled to"
or the negatives of those terms, or other variations of those terms or
comparable language, or by discussions of strategy or other intentions.

      Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions. Important factors that could cause our actual results to be
materially different from the forward-looking statements include general
economic conditions, cost and availability of diesel fuel, adverse weather
conditions and competitive rate fluctuations and the additional cautionary
statements set forth below.

      Substantial Leverage- The Company is highly leveraged, which may impede
its ability to obtain future financing and make it more vulnerable to economic
downturns. In addition, the Fourth Amendment placed restrictions on the amount


                                                                              25
<PAGE>
available under the revolving credit facility (refer to exhibit 4.5 and
"Liquidity and Capital Resources" for further information).

      Economic Factors- The trucking industry has historically been viewed as a
cyclical industry due to various economic factors such as excess capacity in the
industry, the availability of qualified drivers, changes in fuel and insurance
prices, interest rate fluctuations, and downturns in customers business cycles
and shipping requirements.

         Dependence on Affiliates and Owner-Operators- A reduction in the number
of affiliates or owner-operators whether due to capital requirements or the
expense of obtaining, or maintaining equipment or otherwise could have a
material adverse impact on the company's operations and profitability. Likewise,
a continued reduction in rate levels could lessen our ability to attract and
retain owner-operators, affiliates and company drivers.

      Regulation- The Company is regulated by the United States Department of
Transportation ("DOT") and by various state agencies. These regulatory
authorities exercise broad powers, governing activities such as the
authorization to engage in motor carrier operations, safety, financial
reporting, and certain mergers, consolidations and acquisitions. The trucking
industry is also subject to regulatory and legislative changes (such as
increasingly stringent environmental regulations or limits on vehicle weight and
size) that may affect the economics of the industry by requiring changes in
operating practices or by affecting the cost of providing services. A
determination by regulatory authorities that the Company violated applicable
laws or regulations could materially adversely affect the Company's business and
operating results.

      Environmental Risk Factors- The Company has material exposure to both
changing environmental regulations and increasing costs relating to
environmental compliance. While the Company makes significant expenditures
relating to environmental compliance each year, there can be no assurance that
environmental issues will not result in a material adverse effect on the
Company. See "Environmental Matters" for a discussion of the environmental and
regulatory risks to which the Company is exposed.

      Claims Exposure- The Company currently maintains liability insurance for
bodily injury and property damage claims, covering all employees,
owner-operators and affiliates, and worker's compensation insurance coverage on
its employees and company drivers. This insurance includes deductibles of $2
million dollars per incident for auto liability and $1 million dollars for
workers compensation. As such, the Company is subject to liability as a
self-insurer to the extent of these deductibles under the policy. The Company is
self-insured for damage to the equipment it owns or leases, and for cargo
losses. The Company is subject to changing conditions and pricing in the
insurance marketplace and there can be no assurance that the cost or
availability of various types of insurance may not change dramatically in the
future. To the extent these costs can not be passed on by increased freight
rates or surcharges, increases in insurance cost could reduce the Company's
future profitability.

      Important other factors that could cause our actual results to be
materially different from the forward-looking statements include general
economic conditions, cost and availability of diesel fuel, adverse weather
conditions and competitive rate fluctuations.


                                                                              26
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivatives

      We utilize derivative financial instruments to reduce our exposure to
market risk from changes in interest rates and foreign exchange rates. The
instruments primarily used to mitigate these risks are interest rate swaps and
foreign exchange contacts. All derivative instruments held by us are designated
as hedges and, accordingly, the gains and losses from changes in derivative fair
values are recognized as comprehensive income as required by SFAS 133. Gains and
losses upon settlement are recognized in the statement of operations or recorded
as part of the underlying asset or liability as appropriate. We are exposed to
credit related losses in the event of nonperformance by counterparties to these
financial instruments; however, counterparties to these agreements are major
financial institutions; and the risk of loss due to nonperformance is considered
by management to be minimal. We do not hold or issue interest rate swaps or
foreign exchange contracts for trading purposes.

      We currently have approximately $344 million of variable interest debt. We
have entered into interest rate swap agreements designated as a partial hedge of
our portfolio of variable rate debt. The purpose of these swaps is to fix
interest rates on variable rate debt and reduce certain exposures to interest
rate fluctuation.

      On February 26, 2001, we entered into swap agreements on $30 million and
$100 million of our variable interest rate debt. The Company will pay
counterparties interest at fixed rates of 4.96% and 5.155%. The latter is
retroactive to January 1, 2001. Counterparties will pay the Company interest at
a variable rate equal to LIBOR. These agreements mature and renew every three
months and terminate on August 1, 2002 and July 2, 2002, respectively.

      On March 21, 2001, we entered into a swap agreement on $30 million of our
variable interest rate debt. The Company will pay counterparties interest at a
fixed rate of 4.765%. Counterparties will pay the Company interest at a variable
rate equal to LIBOR. This agreement matures and renews every three months and
matures September 22, 2002.

      At December 31, 2001, we had interest rate swaps with a notional amount of
$160 million. The notional amount does not represent a measure of exposure of
the Company.

      We have entered into short-term foreign currency agreements to exchange US
dollars (US $0.3 million) for Canadian dollars (CN $0.48 million). The purpose
of these agreements is to hedge against fluctuations in foreign currency
exchange rates. We are required to make US dollar payments at a 1.59% fixed
exchange rate. The market risk based upon a 10% fluctuation in the exchange rate
is immaterial.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      (a)   Financial statements and exhibits filed under this item are listed
            in the index appearing in Item 13 of this report.

      (b)   Quarterly financial information (in thousands except per share
            amounts).


                                                                              27
<PAGE>
<TABLE>
<CAPTION>
                                                 1st Qtr      2nd Qtr      3rd Qtr      4th Qtr
                                                ---------    ---------    ---------    ---------
<S>                                             <C>          <C>          <C>          <C>
2001

Operating revenues                              $ 130,803    $ 133,618    $ 134,143    $ 124,773
Restructuring                                          --           --          661        2,788
Operating income or (loss)                          8,758        7,552        8,872        3,738
Income or (loss) before taxes                        (670)      (2,080)      (1,614)      (6,962)
Net income or (loss) attributable to
common stockholders                                (1,427)      (2,827)      (2,146)      (8,823)
Diluted net income or (loss) per common share       (0.71)       (1.40)       (1.07)       (4.38)

2000

Operating revenues                              $ 148,572    $ 149,789    $ 141,961    $ 130,463
Restructuring                                          --           --        2,095        7,840
Operating income or (loss)                          9,717       10,981        7,200        1,752
Income or (loss) before taxes                        (432)         973       (2,798)      (8,305)
Net income or (loss) attributable to
common stockholders                                  (576)        (240)      (6,184)     (36,532)
Diluted net income or (loss) per common share       (0.29)       (0.12)       (3.07)      (18.11)

1999

Operating revenues                              $ 144,513    $ 146,911    $ 149,256    $ 146,127
Accelerated depreciation                            5,902        2,920        7,170        4,080
Operating income or (loss)                          4,070        7,964        2,186        4,783
Income or (loss) before taxes                      (5,665)      (1,670)      (7,821)      (6,159)
Net income or (loss) attributable to
common stockholders                                (3,970)      (1,487)      (5,565)      (5,852)
Diluted net income or (loss) per common share       (1.98)       (0.74)       (2.76)       (2.89)
</TABLE>

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      None.

PART III

Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The following table sets forth information regarding the directors and
executive officers of QDI as of December 31, 2001:

<TABLE>
<CAPTION>
NAME                   AGE   POSITION WITH QDI
--------------------   ---   ---------------------------------------------------
<S>                    <C>   <C>
Charles J. O'Brien     63    Director, Chairman of the Board
Thomas L. Finkbiner    49    Director, President, Chief Executive Officer
Dennis R. Farnsworth   49    Senior Vice President and Chief Financial Officer
Doug B. Allen          49    Senior Vice President and Chief Operating Officer
Virgil T. Leslie       46    Senior Vice President Sales and Marketing
Keith J. Margelowsky   46    Senior Vice President of Performance Planning
Michael A. Grimm       54    Executive Vice President - Affiliate Relations
Richard J. Brandewie   47    Director, Executive Vice President
Joshua J. Harris       36    Director
Michael D. Weiner      48    Director
Robert A. Katz         34    Director
Marc J. Rowan          38    Director
John H. Kissick        58    Director
Philip J. Ringo        58    Director
Marc E. Becker         29    Director
Donald C. Orris        60    Director
</TABLE>

      The directors hold office until the next annual meeting of shareholders or
until their successors have been elected and qualified. Officers serve at the
discretion of the Board of Directors.

      CHARLES J. O'BRIEN, JR. joined QDI in 1989 in connection with the
acquisition of Quality-O'Boyle, Inc. He was also elected to the Board of


                                                                              28
<PAGE>
Directors at that time. From 1991 through November 1999 he served as QDI's
President and Chief Executive Officer and as its Chairman of the Board since
September 1998. Prior to joining QDI, he was a controlling shareholder of
Quality-O'Boyle, Inc. from January 1977 to February 1989. Prior to his
association with Quality-O'Boyle, Inc., he held various positions with Matlack
Systems, Inc. from April 1962 through December 1976. He served as Matlack's
Chief Executive Officer from 1969 to 1976 and served as a director of Rollins
International, Inc., Matlack's parent company. As of August 3, 2001, he is
operating as an affiliate of QDI at two trucking terminals.

      THOMAS L. FINKBINER has been employed by QDI since November 1999 as its
President and Chief Executive Officer. He has been a director since March 2000.
Prior to his employment by QDI, he was Vice President, Intermodal for Norfolk
Southern Corporation from 1987 - 1999, Vice President of Marketing and
Administration and Vice President of Sales for North American Van Lines (then an
operating subsidiary of Norfolk Southern) from 1981 - 1987. Prior to these
positions he held various sales and management positions with Airborne Freight
Corporation and Roadway Express, Inc. from 1976 - 1981. Mr. Finkbiner serves as
Chairman of the Board of Directors for Intermodal Transportation Institute,
University of Denver. He is a director of Pacer International, Inc.

      DENNIS R. FARNSWORTH has been employed by QDI since April 2000 as its
Senior Vice President and Chief Financial Officer. Prior to his employment at
QDI, he served in Controller positions at U.S. Express and Overnite
Transportation Company, from September 1996 until April 2000. Prior to these
positions he held various senior financial positions at Union Pacific
Corporation subsidiaries from 1974 until 1996.

      DOUG B. ALLEN joined QCI in December 2000 as Senior Vice President -
Operations and Chief Operating Officer. Prior to joining QCI, he was Senior Vice
President, Allied Automotive Group (AAG) from 1997 to 2000. AAG is the world's
largest transporter of new and used vehicles in North America. Prior to AAG, he
held various positions of increasing responsibility with a major LTL carrier,
Yellow Freight System, Inc. from 1977 to 1997. His most recent position at
Yellow was as Vice President of Operations for 123 terminal facilities in the
Western portion of the U.S. including Canada, Hawaii and Mexico.

      VIRGIL T. LESLIE joined QDI in April 2000 as Senior Vice President of
Sales and Marketing. Prior to joining QDI, he served as Vice President of Sales
with Triple Crown Services in Ft. Wayne, Indiana. Mr. Leslie also spent 16 years
with Roadway Express holding various sales and operating positions.

      KEITH J. MARGELOWSKY joined QDI in April 2000 as Senior Vice President of
Performance Planning and is responsible for improving QDI's systems, procedures
and capabilities. Prior to joining QDI, he led the marketing effort for Werner
Logistics. He was with Werner since 1992 and has extensive pricing and costing
experience. His early experience includes five years in LTL and eleven
additional years in truckload with North American Van Lines and National
Freight.

      MICHAEL A. GRIMM joined QDI in 1989 in connection with the acquisition of
Quality-O'Boyle, Inc. by Montgomery Tank Lines serving as Senior Vice President
of Sales. He is currently serving on QCI's senior staff as Executive Vice
President-Affiliate Relations. Prior to his association with QDI he served in
various positions with O'Boyle Tank Lines.


                                                                              29
<PAGE>
      RICHARD J. BRANDEWIE is a managing general partner of Ballast Point
Ventures, a venture capital partnership. He had previously been employed by QDI
or its predecessor, MTL Inc. as its Senior Vice President, Chief Financial
Officer and Treasurer from June of 1992 through June of 2000. He has served as a
director of QDI and its predecessor, MTL Inc. from 1988 to the present. Prior to
joining QDI, he served as a General Partner of South Atlantic Venture Funds I &
II, where he was employed from November 1985 through June 1992. From June 1980
through November 1985, he served concurrently as Vice President of Doan
Resources Venture Fund and as General Partner of Michigan Investment Fund and
MBW Venture Partners. He also served as an accountant and financial analyst for
the Ford Motor Company from 1977 to 1979.

      JOSHUA J. HARRIS is a partner of Apollo Management, L.P. and has served as
an officer of certain affiliates of Apollo since 1990. Prior to that time, Mr.
Harris was a member of the Mergers and Acquisitions department of Drexel Burnham
Lambert Incorporated. Mr. Harris is also a director of Florsheim Group, Inc.,
NRT, Incorporated, Breuners Home Furnishings Corporation, Pacer International,
Resolution Performance Products, Inc., Resolution Performance Products LLC and
Clark Retail Enterprises, Inc. Mr. Harris became a director of QDI in June 1998.

      MICHAEL D. WEINER is a principal of Apollo and has served as a Vice
President and general counsel of Apollo Management and certain affiliates of
Apollo since 1992. Prior to 1992, Mr. Weiner was a partner in the law firm of
Morgan, Lewis & Bockius LLP, specializing in securities law, public and private
financing, and corporate and commercial transactions. Mr. Weiner is also a
director of NRT, Incorporated, and Florsheim Group, Inc. Mr. Weiner became a
director of QDI in June 1998.

      ROBERT A. KATZ is a senior partner of Apollo and has served as a Vice
President of Apollo Management and certain affiliates of Apollo since 1990.
Prior to that time, Mr. Katz was associated with the Special Restructuring Group
of Smith Barney Harris & Upham Inc. and was a member of the Mergers &
Acquisitions department of Drexel Burnham Lambert Incorporated. Mr. Katz is also
a director of Vail Resorts, Inc., ARIS Industries, Inc., Vinciv Corporation,
Clark Retail Enterprises, Inc. and Horizon PCS, Inc. Mr. Katz became a director
of QDI in June 1998.

      MARC J. ROWAN is a principal of Apollo and has served as a Vice President
of Apollo Management and certain affiliates of Apollo since 1990. From 1985
until 1990, Mr. Rowan was with Drexel Burnham Lambert Incorporated, most
recently as Vice President with responsibilities in high yield financing,
transaction idea generation and merger structure and negotiation. Mr. Rowan is
also a director of Vail Resorts, Inc., AMC Entertainment, National Financial
Partners Corporation, Rare Medium Group, Inc., Samsonite Corporation, Wyndham
International, Inc. and NRT, Incorporated. Mr. Rowan became a director of QDI in
June 1998.

      JOHN H. KISSICK has been a principal since 1991 of Apollo Management and
certain affiliates of Apollo. From 1990 to 1991, Mr. Kissick was a consultant
with Kissick & Associates, an investment advisory firm. Prior to 1990, Mr.
Kissick served as a Senior Executive Vice President of Drexel Burham Lambert
Incorporated, where he began work in 1975, heading its Corporate Finance and
High Yield Bond Departments. Mr. Kissick is also a director of Florsheim Group,
Inc. Mr. Kissick became a director of QDI in June 1998.

      PHILIP J. RINGO has been Chairman and CEO of Rubbernetwork.com since May
2001. He was formerly President and Chief Operating Officer of ChemConnect which
he joined during 1999. He joined QDI in 1998 following the CLC merger, at


                                                                              30
<PAGE>
which time he was appointed Chairman and Chief Executive Officer of CLC. On
November 24, 1998, he was elected to the Board of Directors of QDI. Prior to
joining QDI, from 1995 through August 28, 1998, he was the President and Chief
Executive Officer of Chemical Leaman Tank Lines and a director of CLC. From 1992
through 1995, Mr. Ringo served as President of The Morgan Group, Inc. and Chief
Executive Officer of Morgan Drive Away, Inc., Elkhart, Indiana. He has served as
a director of Genessee and Wyoming Industries since 1978. He is also a director
of the Australia Railroad Group. (Mr. Ringo resigned as director of QDI
effective February 1, 2002.)

      MARC E. BECKER has been associated with Apollo Management, L.P. since
1996. Prior to that time, Mr. Becker was employed by Smith Barney Inc. in the
Financial Entrepreneurs group within its Investment Banking division. Mr. Becker
serves on several boards of directors including National Financial Partners
Corporation, Pacer International, Inc. and WMC Mortgage Corp. Mr. Becker has
been a director of QDI since June 1998.

      DONALD C. ORRIS has been Chairman, President and Chief Executive Officer
of Pacer International, Inc. since May 1999. From Pacer Logistics' inception in
March 1997 until May 1999 he served as Chairman, President and Chief Executive
Officer of Pacer Logistics. Mr. Orris served as President of Pacer International
Consulting LLC, a wholly owned subsidiary of Pacer Logistics since September
1996. From January 1995 to September 1996, Mr. Orris served as President and
Chief Operating Officer, and from 1990 until January 1995, he served as
Executive Vice President, of Southern Pacific Transportation Company. Mr. Orris
was the President and Chief Operating Officer of American Domestic Company and
American President Intermodal Company from 1982 until 1990. Mr. Orris has been a
director of QDI since 1999.


                                                                              31
<PAGE>
Item 10. EXECUTIVE COMPENSATION

      The following table sets forth the total compensation paid by us for
services rendered during the year ended December 31, 2001, by our Chief
Executive Officer and four most highly compensated officers, (the "Named
Executive Officers").

                                               SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                         LONG-TERM
                                                                                       COMPENSATION
                                                                                          AWARDS
    NAME AND PRINCIPAL POSITION                                                         SECURITIES
                                                                                        UNDERLYING            ALL OTHER
                                           YEAR         ANNUAL SALARY       BONUS       OPTIONS (#)       COMPENSATION (2)
                                         ---------    -----------------    --------    --------------     -----------------
<S>                                      <C>          <C>                  <C>         <C>                <C>
Thomas L. Finkbiner                        2001             258,000              --           --               113,569
President and Chief Executive              2000             260,000          75,000       25,000                 7,826
Officer                                    1999              25,638(1)

Douglas B. Allen                           2001            196,923               --           --               92,484
Senior Vice President - Operations

Dennis R. Farnsworth                       2001            188,885               --           --               20,425
Chief Financial Officer

Virgil T. Leslie                           2001            159,115           15,000           --               13,886
Senior Vice President, Sales

Dennis R. Copeland                         2001            153,320           14,042           --               12,929
Vice President, Administration             2000            145,000           20,700           --                5,102
                                           1999            174,192           98,174           --                4,800
</TABLE>

(1)   Thomas L. Finkbiner was hired as President and Chief Executive Officer
      during November 1999.

(2)   Amounts shown represent employer contributions to the profit sharing and
      401(k) plans, automobile allowance and relocation reimbursement.

      We maintain various employee benefits and compensation plans, including an
incentive bonus plan and 401(k) savings plan.

DIRECTOR'S COMPENSATION

      Our directors had not been compensated for their service as directors
through December 1999. Two outside directors have been compensated $1,000 per
month plus $1,500 per meeting. Additionally, both outside directors received
2,000 options each in 2001.

OPTION GRANTS IN LAST FISCAL YEAR

      No options were granted to Named Executive Officers in 2001.


                                                                              32
<PAGE>
YEAR-END OPTION VALUES

      The following sets forth information concerning the value of stock options
in 2001.

<TABLE>
<CAPTION>
                                                                          VALUE OF UNEXERCISED
                                   NUMBER OF UNEXERCISED                  IN-THE-MONEY-OPTIONS
                                    OPTIONS AT YEAR-END                       AT YEAR-END
NAME                          EXERCISABLE       UNEXERCISABLE       EXERCISABLE        UNEXERCISABLE
<S>                           <C>               <C>                 <C>                <C>
Thomas L. Finkbiner                6,250            18,750               0                   0
Douglas B. Allen                   1,250             8,750               0                   0
Dennis R. Copeland                 1,500             2,500               0                   0
Dennis R. Farnsworth               1,250             8,750               0                   0
Virgil T. Leslie                     938             9,062               0                   0
</TABLE>

EMPLOYMENT AND RELATED AGREEMENTS

      Employment Agreements. On November 8, 1999 we entered into an employment
agreement with Thomas L. Finkbiner as President and Chief Executive Officer of
the Company with a base salary of $260,000 per annum. His incentive is based
upon achievement of plan at 50% of base salary with an additional bonus of 25%
of base salary potential, subject to Board evaluation. The employment agreement
provides for a two-year term of service, with an automatic one-year extension on
each anniversary date, unless QDI or Mr. Finkbiner gives notice that the term
will not be so extended.

      On November 27, 2000 we entered into an employment agreement with Douglas
B. Allen to perform the duties of Chief Operating Officer and Senior Vice
President of the Company with a base salary of $190,000 per annum. His incentive
bonus of up to 40% of his annual salary is based on pre-determined performance
standards subject to the Board's discretion. The employment agreement provides
for a one-year term, with an automatic one-year extension on each anniversary
date, unless QDI or Mr. Allen give notice that the term will not be so extended.

      On March 27, 2000 we entered into an employment agreement with Virgil T.
Leslie to perform the duties of Senior Vice President of Sales and Marketing for
the Company with a base salary of $150,000 per annum. His incentive bonus of up
to 35% of his annual salary is based on pre-determined performance standards
subject to the Board's discretion. The employment agreement provides for a
two-year term, with an automatic one-year extension on each anniversary date,
unless QDI or Mr. Leslie give notice that the term will not be so extended.

      On March 21, 2000 we entered into an employment agreement with Dennis R.
Farnsworth to perform the duties of Senior Vice President of Finance and Chief
Financial Officer for the Company with a base salary of $165,000 per annum. His
incentive bonus of up to 40% of his annual salary is based on pre-determined
performance standards subject to the Board's discretion. The employment
agreement provides for a two-year term, with an automatic one-year extension on
each anniversary date, unless QDI or Mr. Farnsworth give notice that the term
will not be so extended.

      On June 23, 1998 we entered into an employment agreement with Dennis R.
Copeland to perform the duties of Vice President of Administration for the
Company with a base salary of $145,000 per annum. His incentive bonus of up to
25% of his annual salary is based on pre-determined performance standards
subject to the Board's discretion. The employment agreement provides for a
two-


                                                                              33
<PAGE>
year term, with an automatic one-year extension on each anniversary date, unless
QDI or Mr. Copeland give notice that the term will not be so extended.

      Each of the employment agreements listed above provide for certain
severance payments to be made if the employment of any such executives is
terminated without "cause" or if such executive resigns for a "good reason,"
such as after the occurrence of one of a number of specified changes in such
executive's employment, including:

      -     a material diminution by Quality Distribution of the executive's
            duties and responsibilities

      -     a material breach by Quality Distribution of its compensation and
            benefit obligations, or

      -     an involuntary relocation by more than 50 miles from Tampa, Florida.

      Under such circumstances:

      -     Mr. Finkbiner would be entitled to receive his base salary for the
            remainder of the term of his employment, a pro rated bonus and
            continued medical and other benefits;

      -     Messrs. Allen and Farnsworth would be entitled to receive each of
            their respective base salaries for the remainder of the term of
            their employment, one year additional salary, a pro rated bonus and
            continued medical and other benefits;

      -     Mr. Copeland would be entitled to receive his base salary for one
            year after such termination and continued medical and other
            benefits.

      Effective October 23, 2001 QDI and Charles J. O'Brien, Jr. modified his
current agreement to provide that Mr. O'Brien's title would change to Special
Assistant to the CEO with a base salary of $52,000 per year through June 30,
2002.

      Effective July 1, 2000 QDI and Richard J. Brandewie modified his current
agreement to provide that Mr. Brandewie's title would change to Executive Vice
President with a base salary of $100,000 per year through June 30, 2002 subject
to the terms of his previous agreement. His bonus incentives remain unchanged,
however, he has returned 11,000 of his 22,000 stock options to the Company.

      Other senior executives hold employment agreements with various terms and
conditions.

      Shareholders' Agreement. Elton E. Babbitt, Charles J. O'Brien, Jr. and
Richard J. Brandewie have entered into a shareholders' agreement with Apollo
governing certain aspects of the relationship among such shareholders and QDI.
The shareholders' agreement contains, among other matters,

      (1)   a provision restricting the rights of Elton E. Babbitt to transfer
            his shares of QDI common stock, subject to certain


                                                                              34
<PAGE>
            permitted or required transfers and a right of first refusal in
            favor of Apollo;

      (2)   certain registration rights in the event we effect a registration of
            our securities;

      (3)   certain preemptive rights with respect to the sale of our common
            stock and equity securities convertible into our common stock; and

      (4)   certain rights of Charles J. O'Brien, Jr., if he is employed by QDI
            at the fourth anniversary of the Merger Date (as defined in the
            Shareholders' Agreement) to cause us to purchase from him such
            number of shares with a value equal to the implied value of his
            investment in our common stock at the Effective Time.

      The shareholders' agreement became effective on June 9, 1998 and will
terminate upon the earlier of

      (a)   the tenth anniversary thereof; and

      (b)   Such time as QDI is a public company with equity securities listed
            on a national securities exchange or publicly traded in the
            over-the-counter market; provided, however, that certain transfer
            restrictions and registration rights will survive notwithstanding
            QDI being a public company.

      Pursuant to the shareholders' agreement, Apollo Management is entitled to
a transaction fee of up to 1.0% of the value of each transaction entered into by
QDI, as determined in the sole discretion of Apollo Management. Such fee is in
addition to the management fees payable to Apollo Management as set forth in the
management agreement between Apollo Management and QDI described below.

      Non-Competition Agreements. Each of Gordon Babbitt and Elton E. Babbitt, a
shareholder holding a 1.5% interest in QDI, has entered into a non-competition
agreement with QDI that contains, among other things, a covenant not to compete
with QDI. Pursuant to such covenant, Elton E. Babbitt has agreed that he will
not, for a period of five years from the Effective Date (as defined in the
Non-Competition Agreement), engage in the bulk transportation services business
or in any related business (the "BTS Business") within any geographic area in
which any member of the QDI Group (as defined in the non-competition agreement)
conducts its business. Ownership of up to 2.0% of a publicly traded enterprise
engaged in a BTS Business, without otherwise participating in such enterprise,
would not be a violation of such covenant not to compete. Gordon Babbitt had
agreed that he will not, for a period of three years from June 9, 1998, engage
in the for-hire, common carrier tank truck transportation business within the
United States and Canada. Ownership of up to 2.0% of a publicly traded
enterprise engaged in such business, without otherwise participating in such
enterprise, would not be a violation of such covenant not to compete.

      In addition, Elton E. Babbitt and Gordon Babbitt have each agreed, for a
period of five years from the Effective Date with respect to Elton E. Babbitt,
and for a period of three years from the Effective Date with respect to Gordon
Babbitt, not to request, induce, attempt to influence or have any other business
contact with


                                                                              35
<PAGE>
      (1)   any distributor or supplier of goods or services to any member of
            the QDI Group to curtail or cancel any business they may transact
            with any member of the QDI Group (as defined in the Non-Competition
            Agreements);

      (2)   any customers of any member of the QDI Group that have done business
            with or potential customers which have been in contact with any
            member of the QDI Group to curtail or cancel any business they may
            transact with any member of the QDI Group;

      (3)   any employee of any member of the QDI Group to terminate his
            employment with such member of the QDI Group or;

      (4)   any governmental entity or regulatory authority to terminate, revoke
            or materially and adversely alter or impair any license, authority
            or permit held, owned, used or reserved for the QDI Group.

      QDI and Apollo Management have entered into a management agreement whereby
we appointed Apollo Management following the consummation of the merger to
provide financial and strategic advice to QDI. Pursuant to the terms of the
management agreement, Apollo Management has agreed at such time to provide
financial and strategic services to us as reasonably requested by our Board of
Directors. As consideration for services to be rendered under the management
agreement, Apollo Management received an initial fee of $2.0 million on June 9,
1998 and thereafter will receive an annual fee of $500,000 until termination of
the management agreement. The management agreement may be terminated upon 30
days' written notice by Apollo Management or us to the other party thereto.

      Marvin Sexton Limited Recourse Secured Promissory Note and Pledge
Agreement. In connection with the completion of the QDI Transactions, we made a
limited recourse secured loan to Marvin Sexton in the amount of $400,000. The
loan is secured by a pledge by Mr. Sexton of all of his QDI common stock and
options to purchase QDI common stock. The principal amount of the loan is due on
June 9, 2006, with mandatory pre-payments due upon, and to the extent of, the
receipt of after-tax proceeds from the sale of Mr. Sexton's pledged securities.

      Thomas Finkbiner signed a Limited Recourse Secured Promissory Note for
$800,000 in conjunction with the purchase of QDI stock. The loan pledge is under
similar terms and conditions as Mr. Sexton's agreement.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information regarding the
beneficial ownership of the QDI common stock as of February 28, 2002, by each
person known by us to be a beneficial owner of more than 5.0% of the outstanding


                                                                              36
<PAGE>
QDI common stock, beneficial ownership of QDI common stock by each director and
named executive officer and all directors and executive officers as a group:

<TABLE>
<CAPTION>
                                               SHARES OF              PERCENTAGE
NAME OF BENEFICIAL OWNER                      COMMON STOCK             OF CLASS
<S>                                           <C>                     <C>
Richard J. Brandewie (1)(5)                        46,041                2.23%
Charles J. O'Brien, Jr. (1)(6)                     35,739                1.73%
Thomas L. Finkbiner (1)(7)                         31,250                1.52%
Donald Orris (1)(8)                                   250                    *
Dennis R. Farnsworth (1)(8)                         2,500                    *
Doug B. Allen (1)(8)                                1,250                    *
Virgil T. Leslie (1)(8)                             2,189                    *
Keith J. Margelowsky (1)(8)                           126                    *
Michael A. Grimm (1)(9)                             7,563                    *
Joshua J. Harris (2)(3)
Marc Becker (2)(3)
Michael D. Weiner (2)(3)
Robert A. Katz (2)(3)
Marc J. Rowan (2)(3)
John H. Kissick (2)(3)
Denny R. Copeland (1)(10)                           5,500                    *
All executive officers and directors              132,407                6.43%
as a group (16 persons)
Apollo Investment Fund III, L.P. (4)            1,778,442               86.30%
c/o Apollo Advisors III, L.P.
Two Manhattanville Road
Purchase, New York 10577
</TABLE>

*     Less than 1.0%.

(1)   The business address for Messrs. Finkbiner, Brandewie, O'Brien, Orris,
      Margelowsky, Grimm, Farnsworth, Allen, Leslie and Copeland is Quality
      Distribution, Inc., 3802 Corporex Park Drive, Tampa, FL 33619.

(2)   The business address for Messrs. Harris, Weiner, Katz, Rowan, Becker and
      Kissick is Apollo Management, L.P., 1301 Avenue of the Americas, New York,
      NY 10019.

(3)   Messrs. Harris, Weiner, Katz, Rowan, Becker and Kissick are each
      principals and officers of certain affiliates of Apollo. Although each of
      Messrs. Harris, Weiner, Katz, Rowan, Becker and Kissick may be deemed to
      beneficially own shares owned by Apollo, each such person disclaims
      beneficial ownership of any such shares.

(4)   Includes shares owned by Apollo Overseas Partners III, L.P., a Delaware
      limited partnership, and Apollo (U.K.) Partners III, L.P., a limited
      partnership organized under the laws of the United Kingdom. Also includes
      63,973 shares owned by two other institutional investors as to which
      Apollo has sole voting power pursuant to the irrevocable proxy granted by
      such institutional investors in the Amended and Restated Common and
      Preferred Stock Purchase and Shareholder Agreement, dated as of August 28,
      1998.

(5)   Includes 5,500 shares which are issuable upon exercise of vested options
      under QDI's 1998 stock option plan.

(6)   Includes 5,500 shares which are issuable upon exercise of vested options
      under QDI's 1998 stock option plan.

(7)   Includes 6,200 shares which are issuable upon exercise of vested options
      under QDI's 1998 stock option plan.

(8)   All shares shown are issuable upon exercise of vested options under QDI's
      1998 stock option plan.

(9)   Includes 2,063 shares which are issuable upon exercise of vested options
      under QDI's 1998 stock option plan.

(10)  Includes 1,500 shares which are issuable upon exercise of vested options
      under QDI's 1998 stock option plan.






                                                                              37


<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      QDI and Apollo Management have entered into a management agreement whereby
we retained Apollo Management to provide financial and strategic advice to us.
Pursuant to the terms of the management agreement, Apollo Management has agreed
at such time to provide financial and strategic services to us as reasonably
requested by our Board of Directors. As consideration for services to be
rendered under the management agreement, Apollo Management received an initial
fee of $2.0 million on June 9, 1998 and thereafter will receive an annual fee of
$500,000 until termination of the management agreement. The management agreement
may be terminated upon 30 days written notice by Apollo Management or us to the
other party thereto. Under this agreement we recognized $500,000 in selling and
administrative expense in 2000 and 2001.

      An executive of the Company owns a minority interest in a firm that
provides information technology services to the company. Total amounts paid by
the Company to the firm during 2000 and 2001 were $344 and $532, respectively.

      In August 2001, QDI entered into an agreement to affiliate facilities in
Bridgeport, NJ and Pedricktown, NJ with a director/ shareholder. The
director/shareholder has been operating these locations under the affiliate
program. The aggregate 2001 revenue for those operations was $4.6 million. As of
December 31, 2001 $0.3 million was owed to the Company in connection with this
affiliate operation.

      During 2001, Apollo and certain members of our management acquired, in
aggregate, $30.5 million of QDI's Series B Notes in the secondary market.

      Pursuant to a Put and Call agreement dated December 14, 2001 between
Apollo and our senior lenders, the administrative agent under our credit
agreement, at the request of any of the Tranche D participating banks (as
defined in the credit agreement) and after certain triggering events, Apollo is
required to purchase all the Tranche D term loans held by such Tranche D banks.
In addition, Apollo has the right, in its sole discretion, to purchase all or
any part of the Tranche D term loans from the Tranche D banks at any time.

      For a description of certain management and other agreements in connection
with the QDI Transactions and the CLC Transactions, see Item 10.


                                                                              38

<PAGE>
                          Rider - Exhibits to the 10-K


<TABLE>
<CAPTION>
   Exhibit No.                           Description
   -----------                           -----------
<S>               <C>
       2.1        Agreement and Plan of Merger, dated as of February 10, 1998,
                  by and among MTL and Sombrero Acquisition Corp.*

       2.2        Agreement and Plan of Merger, dated as of June 9, 1998, by and
                  among Palestra Acquisition Corp., CLC and the shareholders of
                  CLC.*

       2.3        Amendment No. 1 to the Agreement and Plan of Merger, dated as
                  of July 27, 1998, by and among Palestra Acquisition Corp., CLC
                  and the shareholders of CLC.*

       2.4        Amendment No. 2 to the Agreement and Plan of Merger, dated as
                  of August 25, 1998, by and among Palestra Acquisition Corp.,
                  CLC and the shareholders of CLC.*

       3.1        Articles of Incorporation of QDI.*

       3.2        Articles of Amendment dated April 30, 1999 to Articles of
                  Incorporation of QDI.

       3.3        Bylaws of QDI.*

       3.4        Amendment dated November 8, 1999 to the Bylaws of QDI.

       3.5        Articles of Amendment dated February 14, 2002 to the Articles
                  of Incorporation of QDI.

       4.1        Credit Agreement, dated as of June 9, 1998, and amended and
                  restated as of August 28, 1998, between MTL, Levy Transport,
                  Ltd., the lenders party thereto and Credit Suisse First
                  Boston, as administrative agent.*

       4.2        First Amendment to Credit Agreement dated as of September 1,
                  1998.

       4.3        Second Amendment to Credit Agreement dated as of November 19,
                  1999.

       4.4        Third Amendment to Credit Agreement dated as of May 23,
                  2001.**

       4.5        Fourth Amendment to Credit Agreement dated as of December 14,
                  2001.

       4.6        Indenture, dated as of June 9, 1998, by and among MTL, the
                  Guarantors and United States Trust Company, as trustee
                  (including form of 10% Senior Subordinated Notes due 2006 and
                  form of Floating Interest Rate Subordinated Term Securities
                  due 2006.*

       4.7        First Supplemental Indenture, dated as of August 28, 1998, by
                  and among QDI, CLC and its subsidiaries as Guarantors, to the
                  Indenture dated June 9, 1998.*

       4.8        Articles of Amendment for 13.75% Senior Exchangeable Preferred
                  Stock.*

       4.9        Articles of Amendment for 8% Redeemable Preferred Stock.*

      4.10        Exchange Indenture re: 13.75% Senior Exchangeable Preferred
                  Stock.*
</TABLE>


                                                                              39
<PAGE>
<TABLE>
<S>               <C>
      4.11        Form of 10% Senior Subordinated Notes due 2006 (filed as part
                  of Exhibit 4.6).*

      4.12        Form of Floating Interest Rate Subordinated Term Securities
                  due 2006 (filed as part of Exhibit 4.6).*

      4.13        Amended and Restated Shareholders' Agreement, dated as of
                  February 10, 1998, among MTL, Apollo Investment Fund III,
                  L.P., Apollo Overseas Partners III, L.P., Apollo U.K. Fund
                  III, L.P. and certain shareholders of QDI.

      4.14        Amended and Restated Common and Preferred Stock Purchase and
                  Shareholders' Agreement, dated as of August 28, 1998, among BT
                  Investment Partners, Inc., MTL Equity Investors, L.L.C.,
                  Apollo Investment Fund III, L.P., Apollo Overseas Partners
                  III, L.P., Apollo U.K. Fund III, L.P. and MTL.

      4.15        Amended and Restated Registration Rights Agreement, dated as
                  of August 28, 1998, among Apollo Investment Fund III, L.P.,
                  Apollo Overseas Partners III, L.P., Apollo U.K. Fund III, L.P.
                  and MTL.*

      10.1        1998 Stock Option Plan of QDI.*

      10.2        Employment Agreement, dated as of February 10, 1998, between
                  MTL and Richard J. Brandewie.*

      10.3        Employment Agreement, dated November 8, 1999, between QDI and
                  Thomas L. Finkbiner.

      10.4        Employment Agreement, dated November 19, 2000, between QDI and
                  Douglas B. Allen, as revised on November 27, 2000.

      10.5        Employment Agreement, dated March 23, 2000, between QDI and
                  Dennis R. Farnsworth.

      10.6        Employment Agreement, dated March 27, 2000, between QDI and
                  Virgil T. Leslie.

      10.7        Employment Agreement, dated June 23, 1998, between MTL and
                  Dennis R. Copeland.

      10.8        Employment Agreement, dated February 10, 1998, between MTL and
                  Charles J. O'Brien.*

      10.9        Supplemental Letter, dated as of February 10, 1998, between
                  MTL and Charles J. O'Brien.*

      10.10       Amendment dated January 13, 2000 to Employment Agreement
                  between QDI and Charles J. O'Brien.

      10.12       Amendment, dated October 23, 2001, to Employment Agreement
                  dated February 10, 1998 between QDI and Charles J. O'Brien.


</TABLE>


                                                                              40

<PAGE>
<TABLE>
<S>               <C>
      10.13       Stock Option Agreement, dated November 19, 2000, between
                  Douglas B. Allen and QDI.

      10.14       Promissory Note, dated November 8, 1999, issued by Thomas L.
                  Finkbiner to QDI.

      10.15       Pledge Agreement, dated November 8, 1999, between Thomas L.
                  Finkbiner and QDI.

      10.16       Stock Option Agreement, dated November 8, 1999, between Thomas
                  L. Finkbiner and QDI.

      10.19       Non Competition Agreement, dated February 10, 1998, between
                  QDI and Elton E. Babbit.*

      10.20       Non Competition Agreement, dated February 10, 1998, between
                  QDI and Gordon Babbit.*

      10.21       Management Agreement, dated February 10, 1998, between Apollo
                  Management, L.P. and QDI.*

      10.22       Limited Recourse Secured Promissory Note, dated June 9, 1998,
                  issued by Marvin Sexton to QDI and corresponding pledge
                  agreement.*

      10.23       Consulting Agreement, dated February 10, 1998, between MTL and
                  Elton E. Babbit.*

      21.1        List of Subsidiaries.
</TABLE>

*    Incorporated herein by reference to the Company's Registration Statement on
     Form S-4 filed with the Securities and Exchange Commission on November 3,
     1998 Registration No. 333-66711.

**   Incorporated herein by reference to the Company's Current Report on Form
     8-K filed with the Securities and Exchange Commission on June 12, 2001.

SIGNATURES

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


                                        /s/ Charles J. O'Brien, Jr.
                                        ----------------------------------------
                                        Chairman of the Board


                                                                              41
<PAGE>
Date: March 28, 2002

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


<TABLE>
<CAPTION>

Date                       Signature              Title
<S>                <C>                            <C>
March 28, 2002    /s/ Thomas L. Finkbiner         President, Chief Executive
                  --------------------------      Officer and Director
                  Thomas L. Finkbiner             (Principal Executive Officer)


March 28, 2002    /s/ Dennis R. Farnsworth        Senior Vice President and
                  --------------------------      Chief Financial Officer
                  Dennis R. Farnsworth            (Principal Financial and
                                                  Accounting Officer)


March 28, 2002    /s/ Charlie J. O'Brien          Chairman of the Board
                  --------------------------
                  Charlie J. O'Brien


March 28, 2002    /s/ Richard J. Brandewie        Director
                  --------------------------
                  Richard J. Brandewie


March 28, 2002    /s/ Joshua Harris               Director
                  --------------------------
                  Joshua Harris


March 28, 2002    /s/ Michael D. Weiner           Director
                  --------------------------
                  Michael D. Weiner


March 28, 2002    /s/ Robert A. Katz              Director
                  --------------------------
                  Robert A. Katz


March 28, 2002    /s/ Marc J. Rowan               Director
                  --------------------------
                  Marc J. Rowan


March 28, 2002    /s/ John H. Kissick             Director
                  --------------------------
                  John H. Kissick
</TABLE>


                                                                              42
<PAGE>
<TABLE>
<S>                <C>                            <C>
March 28, 2002    /s/ Marc Becker                 Director
                  --------------------------
                  Marc Becker


March 28, 2002    /s/ Don Orris                   Director
                  --------------------------
                  Don Orris
</TABLE>

SUPPLEMENT INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15
(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

      No annual report to security holders covering Registrant's last fiscal
year or proxy statement, form of proxy or other proxy soliciting material has
been sent to security holders during the 2001 fiscal year.


                                                                              43
<PAGE>
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Financial Statements

(b) Financial Statements Schedules

(c) Exhibits

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         PAGE(S)
<S>                                                                      <C>
Report of Independent Certified Public Accountants
     for the three years ended December 31, 2001                            2

Consolidated Balance Sheets as of December 31, 2000 and 2001                3

Consolidated Statements of Operations for the years ended
     December 31, 1999, 2000 and 2001                                       4

Consolidated Statements of Stockholders' Deficit and Comprehensive
     Income (Loss) for the years ended December 31, 1999, 2000 and 2001     5

Consolidated Statements of Cash Flows for the years ended
     December 31, 1999, 2000 and 2001                                       6-7

Notes to Consolidated Financial Statements                                  8-34
</TABLE>

      Financial Statement Schedules are not applicable because the information
has been presented in the footnotes.


                                                                               1
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Quality Distribution, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' deficit and comprehensive
income (loss) and of cash flows present fairly, in all material respects, the
financial position of Quality Distribution, Inc. and its subsidiaries at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.


/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Tampa, Florida
March 15, 2002


                                                                               2
<PAGE>
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 2001 (IN 000'S)

<TABLE>
<CAPTION>
                                                               2000         2001
<S>                                                          <C>          <C>
ASSETS
Current assets:
    Cash and cash equivalents                                $   2,636    $   2,212
    Accounts receivable, net                                    94,755       88,901
    Current maturities of other receivables                        518          891
    Inventories                                                  1,786        1,143
    Prepaid expenses                                             7,391        5,767
    Prepaid tires                                                8,156        8,968
    Income tax recoverable                                         350          306
    Other                                                          650        1,775
                                                             ---------    ---------
      Total current assets                                     116,242      109,963

Property and equipment, net                                    175,516      177,359
Goodwill, net                                                  153,668      152,775
Other assets                                                     7,647        8,881
                                                             ---------    ---------
                                                             $ 453,073    $ 448,978
                                                             =========    =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
    Current maturities of indebtedness                       $   3,619    $   2,677
    Accounts payable                                            16,443       13,417
    Affiliates and owner-operators payable                       7,563        4,930
    Accrued expenses                                            50,654       49,431
    Income taxes payable                                           834        1,092
                                                             ---------    ---------
      Total current liabilities                                 79,113       71,547

Long-term indebtedness, less current maturities                413,320      441,179
Environmental liabilities                                       39,873       36,163
Other non-current liabilities                                   10,926       13,744
Deferred tax                                                     1,182        1,270
                                                             ---------    ---------
      Total liabilities                                        544,414      563,903
                                                             ---------    ---------

Mandatory redeemable common stock (30 shares)                    1,210        1,210
                                                             ---------    ---------
Mandatory redeemable preferred stock                            13,882       16,499
                                                             ---------    ---------
Minority interest in subsidiary                                  4,433        1,833
                                                             ---------    ---------

Commitments and contingencies (Note 14)

Stockholders' deficit:
    Common stock, $.01 par value; 15,000 shares authorized          20           20
    Additional paid-in capital                                 105,656      105,544
    Treasury stock                                                 (32)        (402)
    Accumulated deficit                                        (22,212)     (37,435)
    Stock recapitalization                                    (189,589)    (189,589)
    Other comprehensive loss                                    (2,823)     (10,829)
    Notes receivable                                            (1,886)      (1,776)
                                                             ---------    ---------
      Total stockholders' deficit                             (110,866)    (134,467)
                                                             ---------    ---------
                                                             $ 453,073    $ 448,978
                                                             =========    =========
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                                                               3
<PAGE>
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
(IN 000'S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                         1999         2000         2001
<S>                                                    <C>          <C>          <C>
OPERATING REVENUES:
    Transportation                                     $ 521,746    $ 506,048    $ 459,618
    Other                                                 65,061       64,737       63,719
                                                       ---------    ---------    ---------
      Total operating revenues                           586,807      570,785      523,337
                                                       ---------    ---------    ---------
OPERATING EXPENSES:
    Purchased transportation                             321,219      322,596      300,050
    Compensation                                          92,378       80,296       73,618
    CLC integration                                           --        6,740        2,400
    Restructuring charge                                      --        3,195        1,049
    Fuel, supplies and maintenance                        50,561       51,815       46,952
    Depreciation and amortization                         42,212       37,044       35,125
    Depreciation-accelerated                              20,072           --           --
    Selling and administrative                            19,885       18,133       14,132
    Insurance claims                                       6,803        8,320        8,590
    Taxes and licenses                                     4,752        4,986        4,470
    Communication and utilities                           10,012        8,467        7,932
    (Gain) loss on sale of property and equipment           (290)        (457)          99
                                                       ---------    ---------    ---------
      Total operating expenses                           567,804      541,135      494,417
                                                       ---------    ---------    ---------

Net operating income                                      19,003       29,650       28,920
Interest expense, net                                    (40,452)     (40,236)     (40,224)
Other income (expense)                                       134           24          (22)
                                                       ---------    ---------    ---------

Loss before benefit (provision) for income taxes         (21,315)     (10,562)     (11,326)
Benefit (provision) for income taxes                       5,906      (31,225)      (1,135)
Minority interest                                            (21)          --           --
                                                       ---------    ---------    ---------

Net Loss                                                 (15,430)     (41,787)     (12,461)
Preferred stock dividends and accretions                  (1,444)      (1,745)      (2,762)
                                                       ---------    ---------    ---------

Net Loss attributable to common stockholders           $ (16,874)   $ (43,532)   $ (15,223)
                                                       =========    =========    =========
PER SHARE DATA:
    Basic:
                                                       ---------    ---------    ---------
      Net Loss attributable to common stockholders     $   (8.37)   $  (21.59)   $   (7.56)
                                                       =========    =========    =========
    Diluted:
                                                       ---------    ---------    ---------
      Net Loss attributable to common stockholders     $   (8.37)   $  (21.59)   $   (7.56)
                                                       =========    =========    =========

    Weighted average number of common shares - basic       2,015        2,016        2,013
    Weighted average number of common equivalent
        shares - diluted                                   2,015        2,016        2,013
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                                                               4
<PAGE>
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND
COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
(IN 000'S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                               COMPREHENSIVE                    ADDITIONAL
                                  INCOME      COMMON  TREASURY   PAID-IN    ACCUMULATED
                                  (LOSS)       STOCK   STOCK     CAPITAL     DEFICIT
                               -------------  ------  --------  ----------  -----------
<S>                            <C>            <C>     <C>       <C>         <C>
Balance, December 31,
    1998                              --      $  20       --    $ 104,807    $ 38,495
Net loss                        $(15,430)        --       --           --     (15,430)
Issuance of common
    stock, net                        --         --       --          108          --
Stock subscription
    receipts                          --         --       --           --          --
Preferred stock
    accretion                         --         --       --           --      (1,444)
Minority stock
    dividend                          --         --       --           --        (301)
Translation
    Adjustment                       478         --       --           --          --
                                --------      -----    -----    ---------    --------
Balance, December 31,
    1999                        $(14,952)     $  20       --    $ 104,915    $ 21,320
                                ========
Net loss                        $(41,787)        --       --           --     (41,787)
Issuance of common
    stock, net                        --         --       --          741          --
Stock subscription                    --         --       --           --          --
Acquisition of treasury stock         --         --      (32)          --          --
Preferred stock
    Accretion                         --         --       --           --      (1,444)
Minority stock
    Dividend                          --         --       --           --        (301)
Pension plan minimum
    Liability                     (2,072)        --       --           --          --
Translation adjustment              (574)        --       --           --          --
                                --------      -----    -----    ---------    --------
Balance, December 31,
  2000                          $(44,433)     $  20    $ (32)   $ 105,656    $(22,212)
                                ========
Net loss                        $(12,461)        --       --           --     (12,461)
Issuance of common
    stock, net                        --         --       --         (112)         --
Stock subscription
    receipts                          --         --       --           --          --
Acquisition of treasury stock         --         --     (370)          --          --
Preferred stock
    Accretion                         --         --       --           --      (2,617)
Minority stock
    Dividend                          --         --       --           --        (145)
Translation adjustment              (336)        --       --           --          --
Change in value of
    derivatives                   (3,346)        --       --           --          --
Pension Plan Minimum
    Liability, net                (4,324)        --       --           --          --
                                --------      -----    -----    ---------    --------
Balance, December 31,
  2001                          $(20,467)     $  20    $(402)   $ 105,544    $(37,435)
                                ========      =====    =====    =========    ========
</TABLE>

<TABLE>
<CAPTION>
                                              ACCUMULATED
                                   STOCK        OTHER          STOCK           TOTAL
                                 RECAPITAL-  COMPREHENSIVE  SUBSCRIPTION   STOCKHOLDERS'
                                  IZATION        LOSS        RECEIVABLE   EQUITY (DEFICIT)
                               ------------  -------------  ------------  ----------------
<S>                            <C>           <C>            <C>           <C>
Balance, December 31,
    1998                         $(189,589)    $   (655)      $(1,398)       $ (48,320)
Net loss                                --           --            --          (15,430)
Issuance of common
    stock, net                          --           --            --              108
Stock subscription
    receipts                            --           --           136              136
Preferred stock
    accretion                           --           --            --           (1,444)
Minority stock
    dividend                            --           --            --             (301)
Translation
    Adjustment                          --          478            --              478
                                 ---------     --------       -------        ---------
Balance, December 31,
    1999a                        $(189,589)    $   (177)      $(1,262)       $ (64,773)

Net loss                                --           --            --          (41,787)
Issuance of common
    stock, net                          --           --            --              741
Stock subscription                      --           --          (624)            (624)
Acquisition of treasury stock           --           --            --              (32)
Preferred stock
    Accretion                           --           --            --           (1,444)
Minority stock
    Dividend                            --           --            --             (301)
Pension plan minimum
    Liability                           --       (2,072)           --           (2,072)
Translation adjustment                  --         (574)           --             (574)
                                 ---------     --------       -------        ---------
Balance, December 31,
  2000                           $(189,589)    $ (2,823)      $(1,886)       $(110,866)

Net loss                                --           --            --          (12,461)
Issuance of common
    stock, net                          --           --            --             (112)
Stock subscription
    receipts                            --           --           110              110
Acquisition of treasury stock           --           --            --             (370)
Preferred stock
    Accretion                           --           --            --           (2,617)
Minority stock
    Dividend                            --           --            --             (145)
Translation adjustment(336)             --         (336)           --             (336)
Change in value of
    derivatives                         --       (3,346)           --           (3,346)
Pension Plan Minimum
    Liability, net                      --       (4,324)           --           (4,324)
                                 ---------     --------       -------        ---------
Balance, December 31,
  2001                           $(189,589)    $(10,829)      $(1,776)       $(134,467)
                                 =========     ========       =======        =========
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                                                               5
<PAGE>
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
(IN 000'S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  1999        2000        2001
                                                                --------    --------    --------
<S>                                                             <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                    $(15,430)   $(41,787)   $(12,461)
    Adjustments to reconcile to net cash and cash
        equivalents provided by operating activities:
      Deferred income taxes                                        2,439      30,523          88
      Depreciation and amortization                               62,284      37,044      35,125
      Equity in income from investments                               22          --          --
      (Gain) loss on sale of property and equipment                  (90)       (457)         99
      Minority interest                                               21          --          --
      Changes in assets and liabilities:
        (Increase) decrease in accounts and other receivables    (12,165)     35,105       5,304
        (Increase) decrease in inventories                           238         (23)        643
        (Increase) decrease in prepaid expenses                   (3,303)      3,662       1,625
        (Increase) decrease in prepaid tires                      (2,928)      1,123        (811)
        (Increase) decrease in other assets                        5,593       1,978      (4,409)
        (Decrease) in accounts payable and accrued
             expenses                                            (17,591)    (12,016)     (2,426)
        (Decrease) in affiliates and
             owner-operators payable                                (148)       (629)     (2,633)
        (Decrease) in other liabilities                          (13,668)    (16,315)     (9,516)
        Increase (Decrease) in current income taxes                3,895         (16)        301
                                                                --------    --------    --------
           Net cash and cash equivalents provided by
               operating activities                                9,169      38,192      10,929
                                                                --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                         (25,727)    (23,079)    (37,412)
    Proceeds from sale of subsidiary                               9,251          --          --
    Proceeds from sales of property and equipment                  7,601       4,358       2,476
                                                                --------    --------    --------
           Net cash and cash equivalents used in
               investing activities                               (8,875)    (18,721)    (34,936)
                                                                --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of long-term debt and capital
         lease obligations                                         1,589          --      30,000
    Principal payments on long-term debt and capital
        lease obligations                                         (8,764)    (17,218)     (3,083)
    Restricted cash released                                       7,867          --          --
    Preferred stock redemption                                        --          --      (2,600)
    Other stock transactions                                         243         438       1,075
    Cash dividend                                                   (301)       (301)       (145)
                                                                --------    --------    --------
           Net cash and cash equivalents provided by
               (used in) financing activities                        634     (17,081)     25,247
                                                                --------    --------    --------
Net increase in cash and cash equivalents                            928       2,390       1,240
Effect of translation adjustment on cash                              37        (804)     (1,664)
Cash and cash equivalents, beginning of year                          85       1,050       2,636
                                                                --------    --------    --------
Cash and cash equivalents, end of year                          $  1,050    $  2,636    $  2,212
                                                                ========    ========    ========
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                                                               6
<PAGE>
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
(IN 000'S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                               1999       2000      2001
<S>                                                          <C>         <C>       <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
      Interest                                               $ 38,450    $39,412   $33,914
      Income taxes                                           $    992    $   637       354

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
    Preferred shares issued in connection with acquisition   $ (5,000)        --        --
    Accretion of dividends on preferred stock                $  1,444    $ 1,444   $ 2,617
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                                                               7
<PAGE>
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
(IN 000'S, EXCEPT PER SHARE DATA)

1.    BUSINESS ORGANIZATION

      NATURE OF OPERATIONS

      Quality Distribution, Inc. and subsidiaries (the "Company" or "QDI"), is
      engaged primarily in truckload transportation of bulk chemicals in North
      America. The Company conducts a significant portion of its business
      through a network of company terminals, affiliates and independent
      owner-operators. Affiliates are independent companies, which enter into
      renewable one-year contracts with the Company. Affiliates are responsible
      for paying for their own power equipment (including debt service), fuel
      and other operating costs. Affiliates lease trailers from the Company.
      Owner-operators are independent contractors, which, through a contract
      with the Company, supply one or more tractors and drivers for the
      Company's use. Contracts with owner-operators may be terminated by either
      party on short notice. The Company also charges affiliates and third
      parties for the use of tractors and trailers as necessary. In exchange for
      the services rendered, affiliates and owner-operators are generally paid
      85 percent and 62 percent, respectively, of the revenues generated for
      each load hauled.

2.    LIQUIDITY

      The Company's credit agreement was amended June 4, 2001 (the "Third
      Amendment"), and covers the period ending March 31, 2003. The Company paid
      a $1.1 million fee which is being amortized as interest expense for the
      covenant modification period. The interest rate on the credit agreement
      was also increased by .25%. A technical default, for which a waiver was
      obtained in October, 2001 occurred with respect to these covenants.

      The credit agreement was subsequently amended (the fourth Amendment) on
      December 14, 2001. The new financial covenants are less restrictive than
      the previously existing covenants and cover the calendar quarters through
      December 31, 2002. The Company currently believes that it will be in
      compliance with the covenants through December 31, 2002. The Company is
      currently in the process of negotiating an amendment to the credit
      agreement with its banks for the periods subsequent to December 31, 2002;
      relating to the financial covenants which are unlikely to be to met for
      the quarter ending March 31, 2003. Although the Company believes that the
      banks will agree to this amendment, there can be no assurance that such
      agreement will occur, or if it does occur, that the Company will be able
      to satisfy any conditions for covenant relief. In addition, the Fourth
      amendment restricts the future availability of the revolving credit
      facility to an incremental $15 million above the balance at the date of
      the agreement, plus places restrictions on the amount of capital
      expenditures allowed. At December 31, 2001 the Company had $17 million
      available under the revolving credit facility.



                                                                               8
<PAGE>
3.    SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION

      The consolidated financial statements include the accounts of QDI and its
      subsidiaries. All significant intercompany accounts and transactions have
      been eliminated in consolidation. Minority interest reflects outstanding
      preferred stock held by two Shareholders, of CLC.

      CASH AND CASH EQUIVALENTS

      The Company considers all highly liquid investments with maturities of
      three months or less to be cash equivalents.

      INVENTORIES

      Inventories are stated at the lower of cost (first-in, first-out method)
      or market and consist primarily of tires, parts, fuel and supplies for
      servicing the Company's revenue equipment.

      PROPERTY AND EQUIPMENT

      Property and equipment are recorded at cost. Tractors and trailers under
      capital leases are stated at the present value of the minimum lease
      payments at the inception of the lease. Depreciation, including
      amortization of tractors and trailers under capital leases, is computed on
      a straight-line basis over the estimated useful lives of the assets or the
      lease terms, whichever is shorter, to an estimated salvage value. The
      estimated useful lives are 10-25 years for buildings and improvements,
      5-15 years for tractors and trailers, 7 years for terminal equipment, 3-5
      years for furniture and fixtures, and 3-10 years for other equipment.
      Maintenance and repairs are charged to operating expense when incurred.
      Major improvements that extend the lives of the assets are capitalized. If
      the carrying value of an asset, including associated intangibles, exceeds
      the sum of estimated undiscounted future cash flows, then an impairment
      loss is recognized for the difference between estimated fair value and
      carrying value. When assets are disposed of, the cost and related
      accumulated depreciation are removed from the accounts, and any gains or
      losses are reflected in operating expenses.

      GOODWILL

      Goodwill represents the excess of cost over the fair value of tangible net
      assets acquired and is being amortized on a straight-line basis over its
      estimated useful life which ranges from 15 to 40 years. Accumulated
      amortization was $10,074 and $14,064 at December 31, 2000 and 2001,
      respectively.

      In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
      No. 141 Business Combinations and SFAS No. 142 Goodwill and Other
      Intangible Assets. SFAS No. 141 requires business combinations initiated
      after June 30, 2001 be accounted for using the purchase method of
      accounting, and broadens the criteria for recording intangible assets
      separate from goodwill. SFAS No. 142 requires the use of a
      non-amortization approach to account for purchased goodwill and certain
      intangibles. Under a non-amortization approach, goodwill and certain
      intangibles will not be amortized into results of operations, but instead
      would be reviewed for impairment and written down and charged to results
      of operations only in the periods in which the recorded value of goodwill
      and certain intangibles is more than its fair value. The provisions for
      each statement that apply to goodwill and intangible assets which are
      acquired prior to June 30, 2001, will be adopted by the Company on January
      1, 2002. The Company will no longer amortize goodwill but will evaluate it
      for impairment at least annually. The Company is evaluating the impact of
      adopting this statement. Amortization expense for 1999, 2000 and 2001 was
      $4.0 million, $4.5 million and $4.6 million, respectively.




                                                                               9
<PAGE>
      OTHER ASSETS

      As of December 31, 2001, deferred loan costs of approximately $7,316
      (approximately $6,711 at December 31, 2000) are being amortized over 1 to
      6 years, the estimated lives of the related long-term debt or amendments.

      RECLASSIFICATION

      Certain prior period financial numbers have been reclassified to conform
      to current year presentation.

      NEW ACCOUNTING PRONOUNCEMENTS

      In August 2001, the Financial Accounting Standards Board issued SFAS 144
      "Accounting for the Impairment or Disposal of Long-Lived Assets", which
      supersedes SFAS 121. The Company currently assess whether there has been
      impairment of long-lived assets and certain intangibles in accordance with
      FAS 121 and will continue to do so under the guidance provided by FAS 144
      in 2002. The Company does not anticipate any significant impact on
      financial results from adoption of this standard.

      ACCRUED LOSS, DAMAGE AND ENVIRONMENTAL CLAIMS

      Through September 14, 2001, the Company maintained liability insurance for
      bodily injury and property damage with no deductible. Commencing September
      15, 2001, liability insurance for bodily injury and property damage is
      covered in the amount of $75.0 million per incident, having a $2.0 million
      deductible. There is no aggregate limit on this coverage. The Company
      currently maintains workers' compensation insurance coverage with a $1.0
      million deductible. The Company is self-insured for damage or loss to the
      equipment it owns or leases and for any cargo losses. The Company has
      accrued for the estimated cost of claims reported and losses incurred but
      not reported.

      The Company transports chemicals and hazardous materials and operates tank
      wash facilities. As such, the Company's operations are subject to various
      environmental laws and regulations. The Company has been involved in
      various litigation and environmental matters arising from these
      operations. Reserves have been recognized for probable losses that can be
      reasonably estimated.

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      The carrying amounts reported in the accompanying balance sheets for cash,
      accounts receivable, and accounts payable approximate fair value because
      of the immediate or short-term maturities of these financial instruments.

      The fair value of the Company's debt is estimated based on the quoted
      market prices for the same or similar issues or on the current rates
      offered to the Company for debt of the same remaining maturities. The fair
      value of the Company's Series B senior fixed rate subordinated notes is
      approximately $48.0 million at December 31, 2001. The fair value of the
      Company's Series B floating interest rate subordinated term notes is
      approximately $17.2 million at December 31, 2001. The book value of the
      Company's remaining variable rate debt approximates fair market value at
      December 31, 2001. The fair value of derivative financial instruments at
      December 31, 2000 and 2001 results in an asset of $337 and liability of
      $3,346, respectively.

      REVENUE RECOGNITION

      Transportation revenues and related costs are recognized on the date
      freight is delivered. Other operating revenues, consisting primarily of
      lease revenues from affiliates, owner-operators and third parties, are
      recognized as earned.

      USE OF ESTIMATES

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
      financial statements and the


                                                                              10
<PAGE>
      reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.

      FOREIGN CURRENCY TRANSLATION

      The translation from Canadian dollars to U.S. dollars is performed for
      balance sheet accounts using current exchange rates in effect at the
      balance sheet date and for revenue and expense accounts using a weighted
      average exchange rate in effect during the period. The gains or losses,
      net of income taxes, resulting from such translation are included in
      stockholders' equity. Gains or losses from foreign currency transactions
      are included in other income (expense).

      INCOME TAXES

      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to temporary differences between the financial
      statement carrying amounts of assets and liabilities and their respective
      tax basis. Deferred tax assets also are recognized for credit
      carryforwards. Deferred tax assets and liabilities are measured using the
      enacted rates applicable to taxable income in the years in which the
      temporary differences are expected to reverse. The effect on deferred tax
      assets and liabilities of the change in tax rates is recognized in income
      in the period that includes the enactment date. An assessment is made as
      to whether or not a valuation allowance is required to offset deferred tax
      assets.

      EARNINGS PER SHARE

      The reconciliation of basic EPS and diluted EPS is as follows:

<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                             --------------------------------
                                                              1999          2000         2001
<S>                                                          <C>           <C>          <C>
      Basic weighted average number of common shares         2,015         2,016        2,013
      Diluted effect of options outstanding                     --            --           --
                                                             -----         -----        -----
      Diluted weighted average number of common and common
            equivalent shares                                2,015         2,016        2,013
                                                             =====         =====        =====
</TABLE>

      In 2001, 2000 and 1999 approximately 200 options were anti-dilutive and
      not included in the computation of diluted earnings per share.

4.    DERIVATIVES

      The Company utilizes derivative financial instruments to reduce its
      exposure to market risks from changes in interest rates and foreign
      exchange rates. The instruments primarily used to mitigate these risks are
      interest rate swaps and foreign exchange contracts. All derivative
      instruments held by the Company are designated as hedges. Gains and losses
      upon settlement are recognized in the statement of operations or recorded
      as part of the underlying asset or liability as appropriate. The Company
      is exposed to credit related losses in the event of nonperformance by
      counterparties to these financial instruments; however, counterparties to
      these agreements are major financial institutions and the risk of loss due
      to nonperformance is considered by management to be minimal. The Company
      does not hold or issue interest rate swaps or foreign exchange contracts
      for trading purposes.

      Effective January 1, 2001, the Company adopted the provisions of Statement
      of Financial Accounting Standards No. 133, Accounting for Derivative
      Instruments and Hedging Activities (SFAS 133). SFAS 133 requires that all
      derivative instruments be recorded on the balance sheet at their fair
      value. Changes in the fair value of derivatives are recorded each period
      in current earnings or other comprehensive income, depending on whether a
      derivative is designed as part of a hedge transaction and, if it is, the
      type of hedge transaction.

      The Company has approximately $344 million of variable interest debt. The
      Company has entered into interest rate swap agreements designated as a
      partial


                                                                              11
<PAGE>
      hedge of its variable rate debt. The purpose of these swaps is to fix
      interest rates on variable rate debt and reduce certain exposures to
      interest rate fluctuation.

      On February 26, 2001, the Company entered into swap agreements on $30
      million and $100 million of variable interest rate debt. These swaps are
      designated as partial hedges. The Company will pay counterparties interest
      at fixed rates of 4.96% and 5.155%. The latter is retroactive to January
      1, 2001. Counterparties will pay the Company interest at a variable rate
      equal to LIBOR. These agreements mature and renew every three months and
      mature on August 1, 2002 and July 2, 2002, respectively.

      On March 21, 2001, the Company entered into a swap agreement on $30
      million of variable interest rate debt. This swap is designated as a
      partial hedge. The Company will pay counterparties interest at a fixed
      rate of 4.765%. Counterparties will pay the Company interest at a variable
      rate equal to LIBOR. This agreement matures and renews every three months
      and matures September 22, 2002.

      The Company has entered into short-term foreign currency agreements to
      exchange US dollars (US $.3 million) for Canadian dollars (CN $.48
      million). The purpose of these agreements is to hedge against fluctuations
      in foreign currency exchange rates. We are required to make US dollar
      payments at fixed exchange rate of 1.59%, and as such the market risk
      based upon a 10% fluctuation in the exchange rate is immaterial.

      A reconciliation of current period changes in comprehensive income as it
      relates to derivatives follows:

<TABLE>
<CAPTION>
                                                                   Year
                                                              ended 12/31/01
                                                              --------------
      (In thousands)
<S>                                                           <C>
      Cumulative effect of change in accounting principle         $   337
      Current period declines in fair value                        (5,366)
      Reclassifications to earnings                                 1,683
                                                                  -------
      Balance at end of period                                    $(3,346)
                                                                  =======
</TABLE>

      HEDGES OF FUTURE CASH FLOWS

      The ineffective portion of changes in fair values of hedge positions
      should be reported in earnings. All hedges were effective at December 31,
      2001, and as such, there are no earnings reclassifications at December 31,
      2001 due to ineffective hedges. There were no amounts excluded from the
      measure of effectiveness in 2001 related to the hedge of future cash
      flows.


                                                                              12
<PAGE>
5.    ACCOUNTS RECEIVABLE

      Accounts receivable consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                       2000        2001
                                                       ----        ----
<S>                                                 <C>          <C>
      Trade accounts receivable                     $  95,093    $ 88,999
      Affiliate and owner-operator receivables          4,912       4,981
      Employee receivables                                327          29
      Other                                             4,202       4,164
                                                    ---------    --------
                                                      104,534      98,173
      Less allowance for doubtful accounts             (9,779)     (9,272)
                                                    ---------    --------
                                                    $  94,755    $ 88,901
                                                    =========    ========
</TABLE>

      The activity in the allowance for doubtful accounts for each of the three
      years ended December 31, is as follows:

<TABLE>
<CAPTION>
                                                  1999       2000       2001
                                                  ----       ----       ----
<S>                                             <C>        <C>        <C>
      Balance, beginning of period              $ 3,935    $ 6,438    $ 9,779
      Additions charged to operating expenses     2,623      4,295      1,732
      Write-off of bad debts                       (120)      (954)    (2,239)
                                                -------    -------    -------
      Balance, end of period                    $ 6,438    $ 9,779    $ 9,272
                                                =======    =======    =======
</TABLE>

      As of December 31, 2001 and 2000, approximately 85 percent of trade
      accounts receivable were due from companies in the chemical and bulk food
      products industries, respectively. For 2001, Dow Chemical accounted for
      12.5% of the Company's operating revenues. In 2000 and 1999, Dow Chemical
      accounted for approximately 7.5% of operating revenue.


                                                                              13
<PAGE>
6.    FIXED ASSETS

      Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                   2000            2001
                                                   ----            ----
<S>                                             <C>             <C>
      Land and improvements                     $  10,673       $  13,180
      Buildings and improvements                   15,704          21,420
      Revenue equipment                           274,009         278,435
      Other equipment                              26,603          35,652
      Accumulated depreciation                   (151,473)       (171,328)
                                                ---------       ---------
      Property and equipment, net               $ 175,516       $ 177,359
                                                =========       =========
</TABLE>

      Depreciation expense was $58,341, $32,502 and $30,489 for the periods
      ending December 31, 1999, 2000 and 2001, respectively. During 1999, the
      Company recorded a charge of $11.3 million relating to the reduction in
      the useful life of acquired software used in the trucking operations and a
      charge of approximately $8.8 million due to a change in the estimated
      useful life of certain revenue equipment. During 2001, the Company
      purchased land, building and equipment for $11 million, and tractors for
      approximately $5 million.

      The capitalized cost of equipment under capital leases, which is included
      in tractors and trailers in the accompanying consolidated balance sheets,
      was as follows at December 31:

<TABLE>
<CAPTION>
                                                        2000         2001
                                                        ----         ----
<S>                                                    <C>          <C>
      Tractors and trailers                            $ 377        $ 353
      Less accumulated depreciation                     (207)        (271)
                                                       -----        -----
                                                       $ 170        $  82
                                                       =====        =====
</TABLE>

7.    ACCRUED EXPENSES

      Accrued expenses include the following at December 31:

<TABLE>
<CAPTION>
                                                         2000        2001
                                                         ----        ----
<S>                                                    <C>         <C>
      Bank overdraft                                   $14,582     $17,043
      Loss and damage claims                             3,640       4,906
      Environmental liabilities                         13,365       6,409
      Severance, relocation and integration              1,517       1,714
      Salary, wage and benefits                          6,353       5,052
      Restructure reserve                                1,334         471
      Accrued interest                                   1,484       5,693
      Other                                              8,379       8,143
                                                       -------     -------
                                                       $50,654     $49,431
                                                       =======     =======
</TABLE>

      In connection with the acquisition of CLC in 1998, $17.5 million of
      restructuring related costs was recorded as part of purchase accounting.
      These costs included, $14.0 million of severance, bonuses and other
      termination-related costs to be incurred in connection with identified
      staff reductions, $.5 million costs in connection with the disposition
      (closure) of certain facilities and $3.0 million of other costs. At
      December 31, 2001 approximately $1.7 million of accrued payments remain.

      During 2000, the Company initiated cost cutting measures as part of a
      company-wide reorganization. These costs associated with this
      reorganization include severed employees' wages and benefits. The Company
      accrued $3.2 million in 2000, and $1.1 million in 2001, respectively. The
      reconciliation of the 2001 activity is as follows:


                                                                              14
<PAGE>
<TABLE>
<Caption>
                                                   2000            2001
                                                   ----            ----
<S>                                              <C>              <C>
      Beginning Balance                          $     0          $ 1,334
      Additions                                    3,200            1,049
      Payments                                    (1,866)          (1,912)
                                                 -------          -------
      Ending Balance                             $ 1,334          $   471
                                                 -------          -------
</TABLE>

8.    LONG-TERM INDEBTEDNESS

      Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                                     2000         2001
                                                                                     ----         ----
<S>                                                                               <C>          <C>
Series B senior subordinated notes, principal due in 2006, interest payable
semi-annually at 10% per annum                                                    $ 100,000    $ 100,000

Series B floating interest rate subordinated term notes, principal due in 2006,
interest payable semi-annually at LIBOR plus 4.81%                                   40,000       40,000

Tranche A term loan, principal of $211 due quarterly with the balance due
in 2004                                                                              87,206       81,586

Tranche B term loan, principal of $247 due quarterly with the balance due
in 2005                                                                             101,740       95,184

Tranche C term loan, principal of $211 due quarterly with the balance due
in 2006                                                                              87,206       81,586

Tranche D term loan, balance due in 2006                                             15,000

Revolving credit facility                                                               500       30,500

5% unsecured note payable to former employee, due in annual installments
of $70 through 2001                                                                      67           --
Capitalized equipment leases, interest rates ranging from 6.75% to 11.65%               220           --

Less current maturities of long-term debt                                            (3,619)      (2,677)
                                                                                  ---------    ---------

Long-term debt, less current maturities                                           $ 413,320    $ 441,179
                                                                                  =========    =========
</TABLE>

      SERIES B NOTES

      The Series B Notes are guaranteed on a senior subordinated basis by all of
      the Company's direct and indirect domestic subsidiaries. The guarantees
      are full, unconditional, joint and several obligations of the guarantors.
      The subordinated floating interest rate on Series B Notes was 6.68% at
      December 31, 2001.

      The Company may redeem the Series B fixed rate notes, in whole at any time
      or in part from time to time, on and after June 15, 2002, upon not less
      than 30 nor more than 60 days notice, at the following redemption prices,
      expressed as percentages of the principal amount thereof, if redeemed
      during the twelve-month period commencing on June 15 of the year set forth
      below, plus, in each case, accrued and unpaid interest thereon, if any, to
      the date of redemption:

<TABLE>
<CAPTION>
                  YEAR                                    PERCENTAGE
                  ----                                    ----------
<S>                                                       <C>
                  2002                                      105.0%
                  2003                                      102.5%
                  2004 and thereafter                       100.0%
</TABLE>

      The Company may redeem the Series B floating rate notes, in whole or in
      part from time to time, upon not less than 30 nor more than 60 days notice
      at the following redemption prices, expressed as percentages of the
      principal amount thereof, if redeemed during the twelve-month period
      commencing on June 15 of the year set forth below, plus, in each case,
      accrued and unpaid interest thereon, if any, to the date of redemption:

<TABLE>
<CAPTION>
                  YEAR                                    PERCENTAGE
                  ----                                    ----------
<S>                                                       <C>
                  2001                                      102.0%
                  2002                                      101.0%
                  2003 and thereafter                       100.0%
</TABLE>


                                                                              15
<PAGE>
      TRANCHE A, B, C AND D TERM LOANS

      Tranche A Term Loans bear interest at the option of the Company at (a)
      .75% in excess of the base rate equal to the higher of 1/2 of 1.0% in
      excess of the federal funds rate or the rate that CSFB as the
      administrative agent announces from time to time as its prime lending
      rate, as in effect from time to time (the "Base Rate"), or (b) 3.50% in
      excess of the Eurodollar rate for Eurodollar Loans, in each case, subject
      to adjustment based upon the achievement of certain financial ratios (6.1%
      at December 31, 2001).

      Tranche B Term Loans bear interest at the option of the Company at (a)
      1.25% in excess of the Base Rate and (b) 3.75% in excess of the Eurodollar
      rate for Eurodollar Loans, in each case, subject to adjustment based upon
      the achievement of certain financial ratios (6.34% at December 31, 2001).

      Tranche C Term Loans bear interest at the option of the Company at (a)
      1.50% in excess of the Base Rate and (b) 4.00% in excess of the Eurodollar
      rate for Eurodollar Loans, in each case, subject to adjustment based upon
      the achievement of certain financial ratios (6.6% at December 31, 2001).

      Tranche D Term Loans bear interest at the option of the Company at (a)
      1.00% in excess of the Base Rate and (b) 2.00% in excess of the Eurodollar
      rate for Eurodollar Loans, in each case, subject to adjustment based upon
      the achievement of certain financial ratios (3.90% at December 31, 2001).

      REVOLVING CREDIT FACILITY

      The Company has a $75.0 million revolving credit facility, which may
      include letters of credit, available until June 9, 2004 to be used for,
      among other things, working capital and general corporate purposes of the
      Company and its subsidiaries, including permitted acquisitions. The
      revolving credit facility further provides for a $15,000 sublimit to be
      made available to Levy, an indirect wholly-owned subsidiary of the
      Company. Amounts drawn under the sublimit will be drawn in Canadian
      dollars.

      The credit agreement was amended June 4, 2001 (the Third Amendment), and
      covers the period ending March 31, 2003. The Company paid a $1.1 million
      fee which is being amortized as interest expense for the covenant
      modification period. The interest rate on the credit agreement was also
      increased by 150 basis points.

      The credit agreement was again amended (the Fourth Amendment) on December
      14, 2001. The new financial covenants are less restrictive than the
      previously existing covenants and cover the period through December 31,
      2002. The Fourth Amendment restricts the amount of incremental future
      availability of the revolving credit facility as of the date of the
      Amendment to $15 million, including letters of credit, plus places
      restrictions on the amount of capital expenditures allowed. At December
      31, 2001, the Company had $17 million available under the revolving credit
      facility.

      Voluntary prepayments and commitment reductions will be permitted in whole
      or in part, subject to minimum prepayment or reduction requirements,
      without premium or penalty; provided that voluntary prepayments of
      Eurodollar Loans on a date other than the last day of the relevant
      interest period will be subject to payment of customary breakage costs, if
      any.

      Interest on the Revolving Credit Facility is, at the option of the
      Company, (a) .75% in excess of the Base Rate and (b) 1.75% in excess of
      the Eurodollar rate for Eurodollar Loans, in each case, subject to
      adjustments based upon the achievement of certain financial ratios. The
      interest rate on the Sublimit will be based on Canadian dollar bankers'
      acceptances and the Canadian prime rate (4.00% at December 31, 2001).


                                                                              16
<PAGE>
      The credit agreement provides for payment by the Company in respect of
      outstanding letters of credit of an annual fee equal to the spread over
      the Eurodollar rate for Eurodollar Loans under the revolving credit
      facility from time to time in effect on the aggregate outstanding stated
      amounts of such letters of credit, or a fronting fee equal to 3/8 of 1.0%
      on the aggregate outstanding stated amounts of such letters of credit.

      Levy will pay an acceptance fee equal to the Applicable Margin that would
      be payable on Eurodollar Loans under the revolving credit facility on the
      drawing date of each loan drawn under the sublimit.

      The Company pays a commitment fee equal to 1/2 of 1.0% per annum on the
      undrawn portion of the available commitment under the revolving credit
      facility, subject to decreases based on the achievement of certain
      financial ratios.

      COLLATERAL AND GUARANTEES

      The loans and letters of credit under the revolving credit agreement are
      guaranteed by all of the Company's existing and future direct and indirect
      domestic subsidiaries, excluding Bulknet (collectively, the "Bank
      Guarantors"). The obligations of the Company and the Bank Guarantors are
      secured by a first priority perfected lien on substantially all of the
      properties and assets of the Company and the Bank Guarantors, now owned or
      subsequently acquired, including a pledge of all capital stock and notes
      owned by the Company and the Bank Guarantors, subject to certain
      exceptions; provided that, in certain cases, no more than 65.0% of the
      stock of foreign subsidiaries of the Company are required to be pledged.

      DEBT RETIREMENT

      Under the terms of the Company's credit agreement, the Company is required
      to maintain, among other restrictions, minimum net worth levels, debt to
      net worth ratios and debt service coverage ratios. In addition, the credit
      agreement and the indenture governing the Series B notes contain
      restrictions on debt incurrence, investments, transactions with
      affiliates, creation of liens, asset dispositions and the payment of
      dividends.

      Scheduled maturities of long-term debt and capital lease obligations for
      the next five years and thereafter are as follows:

      YEAR ENDING DECEMBER 31:

<TABLE>
<S>                               <C>
                  2002            $   2,677
                  2003                2,677
                  2004               81,728
                  2005              131,751
                  2006              225,023
                                  ---------
                                  $ 443,856
                                  =========
</TABLE>

9.    INCOME TAXES

      Income taxes from continuing operations consisted of the following for the
      years ended December 31:

<TABLE>
<CAPTION>
                                                   1999        2000       2001
                                                   ----        ----       ----
<S>                                              <C>         <C>        <C>
Current taxes:
    Federal                                      $     --    $     --   $     --
    Foreign                                           219          40        582
    State                                             441         397        449
                                                 --------    --------   --------
                                                      660         437      1,031
                                                 --------    --------   --------
Deferred taxes:
    Federal                                        (4,272)     22,480         --
    Foreign                                           570         348        104
    State                                          (2,864)      7,960         --
                                                 --------    --------   --------
                                                   (6,566)     30,788        104
                                                 --------    --------   --------

Provision (benefit) for income taxes             $ (5,906)   $ 31,225   $  1,135
                                                 ========    ========   ========
</TABLE>


                                                                              17
<PAGE>
      The net deferred tax asset (liability) consisted of the following at
December 31:

<TABLE>
<CAPTION>
                                                                              2000        2001
                                                                              ----        ----
<S>                                                                         <C>         <C>
Deferred tax assets:
    Environmental reserve,                                                  $ 17,946    $ 14,474
    Tax credit carryforwards                                                   2,957       2,946
    Self-insurance reserves                                                    2,443       2,639
    Allowance for doubtful accounts                                            3,004       3,055
    Accrued vacation pay                                                       1,083         328
    Pension                                                                    1,854       3,563
    Bond Discount                                                                 --       4,965
    Net operating loss carryforwards                                          27,309      29,299
    Restructuring accruals                                                     1,209         743
    Other accruals                                                             3,176       2,445
    State taxes, net                                                           7,884       3,798
                                                                            --------    --------
                                                                              68,865      68,255
    Less valuation allowance                                                 (33,755)    (33,960)
                                                                            --------    --------
                                                                              35,110      34,295
                                                                            --------    --------
Deferred tax liabilities:
    Property and equipment basis difference                                  (31,107)    (31,262)
    Capital leases treated as operating leases for tax purposes as lessor     (1,776)     (1,231)
    Deferred Environmental                                                    (2,087)     (1,447)
    Other                                                                     (1,322)     (1,625)
                                                                            --------    --------
                                                                             (36,292)    (35,565)
                                                                            --------    --------

Net deferred tax (liability)                                                  (1,182)     (1,270)
                                                                            --------    --------

Long-term net deferred tax (liability)                                      $ (1,182)   $ (1,270)
                                                                            ========    ========
</TABLE>

      The Company has provided a valuation allowance against net deferred tax
      assets, due to cumulative losses in recent years.


                                                                              18
<PAGE>
      The Company's effective tax rate differs from the federal statutory rate.
      The reasons for those differences are as follows for the years ended
      December 31:

<TABLE>
<CAPTION>
                                                          1999        2000        2001
                                                          ----        ----        ----
<S>                                                    <C>         <C>         <C>
      Tax expense (benefit) at the statutory rate      $ (7,247)   $ (3,591)   $ (3,851)
      State income taxes, net of federal benefit           (720)        397        (411)
      Amortization of goodwill                            1,859       1,294       1,295
      Foreign taxes                                         790         388         313
      Valuation allowance                                    --      32,573       3,208
      Other                                                (588)        164         581
                                                       --------    --------    --------

      Provision (benefit) for income taxes             $ (5,906)   $ 31,225    $  1,135
                                                       ========    ========    ========
</TABLE>

      At December 31, 2001, the Company has approximately $86 million in net
      operating loss carryforwards and $2.9 million in alternative minimum tax
      credit carry forwards. The net operating loss carryforwards will expire in
      the years 2011 through 2021 while the alternative minimum tax credits may
      be carried forward indefinitely. Approximately $28.7 million of net
      operating loss carry forwards and $1.9  million of alternative minimum tax
      credit carryforwards were generated by Chemical Leaman Corporation prior
      to their acquisition. The use of pre-acquisition operating losses and tax
      credit carryforwards is subject to limitations imposed by the Internal
      Revenue Code. The Company has state net operating loss carry forwards
      which expire over the next 2 to 20 years.

      The Company filed for and received a refund of $4.4 million in previously
      paid federal income tax as a result of carrying back a portion of our 1998
      net operating loss. This refund claim is currently under examination by
      the Internal Revenue Service. The Company is uncertain at this time
      whether the Internal Revenue Service will propose any adjustment be made
      with respect to any portion of the refunded income taxes. The Company has
      made no provision in the accounts at this time to reserve for prospective
      additional tax liability should such an assessment be asserted by the
      Internal Revenue Service.

10.   EMPLOYEE BENEFIT PLANS

      The Company maintains two noncontributory defined benefit plans resulting
      from a prior acquisition that cover certain full-time salaried employees
      and certain other employees under a collective bargaining agreement.
      Retirement benefits for employees covered by the salaried plan are based
      on years of service and compensation levels. The monthly benefit for
      employees under the collective bargaining agreement plan is based on years
      of service multiplied by a monthly benefit factor. Assets of the plans are
      invested primarily in equity securities and fixed income investments.
      Pension costs are funded in accordance with the provisions of the
      applicable law.

      Effective November 1, 2001, the Company amended the collective bargaining
      agreement plan to freeze benefit accruals and allow participants to retire
      as early as age 50 with unreduced benefits. Since no prior service cost
      base existed prior to the amendment and the projected benefit obligation
      was not impacted by the change, there was no impact on the accrued pension
      cost.

      The components of net periodic pension cost are as follows:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
           COMPONENTS OF NET PERIODIC PENSION COST        2000           2001
                                                          ----           ----
<S>                                                      <C>            <C>
           Service cost                                  $   252        $   224
           Interest cost                                   2,641          2,717
           Expected Return on plan assets                 (2,721)        (2,518)
                                                         -------         ------
           Net periodic pension cost                     $   172        $   423
                                                         =======        =======
</TABLE>


                                                                              19
<PAGE>
      The actuarial assumptions used in accounting for the plans are as follows:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           2000         2001
                                                         --------     --------
<S>                                                      <C>          <C>
Discount rates                                               7.50%        7.25%
Expected long-term rates of return on plan assets            8.00%        8.00%
</TABLE>

      The following table sets forth the change in the benefit obligation,
      change in plan assets and funded status of the two plans:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           2000         2001
                                                         --------     --------
<S>                                                      <C>          <C>
CHANGE IN BENEFIT OBLIGATION
    Benefit obligation at beginning of year              $ 35,225     $ 37,257
    Service cost                                              252          224
    Interest cost                                           2,641        2,717
    Amendments                                                 --        1,372
    Actuarial (gain)/loss                                   2,348        1,376
    Benefits and expenses paid                             (3,209)      (3,018)
                                                         --------     --------
    Benefit obligation at end of year                    $ 37,257     $ 39,928
                                                         ========     ========
CHANGE IN PLAN ASSETS
    Fair value of plan assets at beginning of year       $ 33,039     $ 31,574
    Actual return on plan assets                             (646)        (502)
    Contributions                                           2,390        2,727
    Benefits and expenses paid                             (3,209)      (3,018)
                                                         --------     --------
    Fair value of plan assets at end of year             $ 31,574     $ 30,782
                                                         ========     ========

UNFUNDING STATUS                                         $ (5,683)    $ (9,146)
    Unrecognized net actuarial (gain) loss                  1,985        6,396
    Unrecognized prior service cost                            --        1,356
    Adjustment to recognize minimum liability              (2,072)      (7,752)
                                                         --------     --------
    Accrued pension expense (included in other
       non-current liability)                            $ (5,770)    $ (9,146)
                                                         ========     ========
</TABLE>

      The Company charged to operations payments to multi-employer pension plans
      required by collective bargaining agreements approximately $1.8 million,
      $2.0 million and $1.6 million for the years ended December 31, 1999, 2000
      and 2001, respectively. These defined benefit plans cover substantially
      all of the Company's union employees not covered under the Company's plan.
      The actuarial present value of accumulated plan benefits and net assets
      available for benefits to employees under these multi-employer plans is
      not readily available.

      In 2001 the Company established a Deferred Compensation Plan for its
      executives and other key employees. The plan is a non-qualified deferral
      plan that allows participants to contribute a portion their wages on a
      pre-tax basis and includes a death benefit.

      The Company may credit participants accounts with a discretionary
      contribution at its sole discretion. No such contribution was made in
      2001.

11.   PREFERRED STOCK

      The Company has authorized 5,000 shares, par value, $.01 per share, of
      "preferred stock." Shares of preferred stock may be issued from time to
      time, in one or more series, with such designation, assigned values,
      preferences and relative, participating, optional or other rights,
      qualifications, limitations or restrictions thereof as the Board of
      Directors of the Company from time to time may adopt by resolution.


                                                                              20
<PAGE>
      No holder of preferred shares of the Company shall have any preferential
      or preemptive right to subscribe for, purchase or receive any share of
      stock, any options or warrants for such shares, any rights to subscribe to
      or purchase such shares or any securities which may at any time or from
      time to time be issued, sold or offered for sale.

      The Board of Directors has authorized the issuance of 13.75% Senior
      Exchangeable Preferred Stock. The designation, assigned values,
      preferences and relative, participating, optional or other rights,
      qualifications, limitations or restrictions on such preferred stock are
      summarized as follows.

      13.75% MANDATORILY REDEEMABLE PREFERRED STOCK

      In 1998, the Company issued 105 shares of 13.75% non-voting Senior
      Exchangeable Preferred Stock with a liquidation preference of $100.
      Dividends are payable quarterly commencing December 15, 1998 and are
      cumulative. Any dividends not paid in cash prior to September 15, 2001 may
      be paid in additional shares of Senior Exchangeable Preferred Stock. All
      shares are mandatorily redeemable on September 15, 2006 at 100% of the
      liquidation preference plus all accrued dividends.

      At its option, the Company may redeem the Senior Exchangeable Preferred
      Stock after September 15, 2003 for a percentage of liquidation preference
      in 2003 at 106.88%, 2004 at 103.44%, 2005 and thereafter at 100%. Prior to
      September 15, 2003, the Company may retire this stock from the proceeds of
      an initial public offering for 113.75% of liquidation preference.

12.   COMMON STOCK

      The Company has 15,000 shares $.01 par value of common stock authorized
      and had 2,014, 2,022 and 2,001 shares outstanding at December 31, 1999,
      2000 and 2001, respectively. One shareholder has the right to "put" 30
      shares to the Company in 2003 for $40 per share. Accordingly, these shares
      are classified as mandatorily redeemable.

      In connection with the recapitalization, the Company made limited recourse
      secured loans to shareholders which bear interest at LIBOR plus 2% (3.9%
      at December 31, 2001). The loans are secured by a pledge of approximately
      44 shares of the Company's common stock and options to purchase 44 shares
      of the Company's common stock. The principal amount of the loans is due on
      June 9, 2006, with mandatory pre-payments due upon, and to the extent of,
      the receipt of after-tax proceeds from the sale of the pledged securities.
      Amounts outstanding for these loans are $1,886 and $1,776 at December 31,
      2000 and 2001, respectively.

13.   INCENTIVE STOCK OPTION PLANS

      The Company uses Accounting Principles Board Opinion No. 25, "Accounting
      for Stock-Based Compensation," and the related interpretations to account
      for the Plan. No compensation cost has been recognized under the Plan, as
      the option price has been greater than or equal to the market price of the
      common stock on the applicable measurement date for all options issued.
      The Company adopted SFAS No. 123, "Accounting for Stock-Based
      Compensation" (SFAS 123), for disclosure purposes in 1996.

      STOCK OPTION PLAN

      The Company adopted an employee stock option plan ("the Plan") pursuant to
      which a total of 222 shares of the Company's common stock will be
      available for grant. Fifty percent of each new option granted vests in
      equal increments over four years. The remaining fifty percent of each new
      option will vest in nine years, subject to acceleration if certain
      per-share equity value targets are achieved or, in the event of a sale of
      the Company. Vesting of the new options occurs only during an employee's
      term of employment. The new options will become fully vested in the event
      of a termination of employment without "cause" or for "good reason" within
      six months following a sale of the Company.


                                                                              21
<PAGE>
      The stock of the Company is no longer traded publicly. The pro forma fair
      value of options granted during 1999, 2000 and 2001 are based upon a model
      using a risk free rate of 6.1% for 1999, and 5.76% for 2000 and 4.86% for
      2001 for options with an expected life of 10 years. The pro forma fair
      value of stock options granted in 1999 is $477, 2000 is $1,049 and 2001 is
      $96. At December 31, 2001, a total of 22.8 authorized shares remain
      available for granting.

      Had compensation cost relating to the Plans been determined based upon the
      fair value at the grant date for awards under the Plans consistent with
      the method described in SFAS 123, the Company's net income (loss) and
      earnings (loss) per share common would have been as follows for the years
      ended December 31:

<TABLE>
<CAPTION>
                                                                  1999          2000          2001
                                                                  ----          ----          ----
<S>                                                            <C>           <C>           <C>
      Net income (loss) attributable to common stockholders;
          As reported                                          $  (16,874)   $  (43,532)   $  (15,223)
          Pro forma                                            $  (17,267)   $  (43,918)   $  (15,669)
      Earnings (loss) per common share:
          As reported                                          $    (8.37)   $   (21.59)   $    (7.56)
          Pro forma                                            $    (8.57)   $   (21.78)   $    (7.78)
</TABLE>

      Stock option activity for the years ended December 31, 1999, 2000 and 2001
      is as follows:

<TABLE>
<CAPTION>
                                                                    RANGE OF     AVERAGE
                                                      NUMBER OF      OPTION      EXERCISE     SHARES      EXPIRATION
                                                       SHARES        PRICES       PRICE       VESTED         DATE
                                                      ---------     --------     --------     ------      ----------
<S>                                                   <C>           <C>          <C>          <C>         <C>
      Options outstanding at December 31, 1998            210       $  40.00     $  40.00         --         2008

      1999 option activity:
           Granted                                         26       $  40.00     $  40.00         --      2008-2009
           Vesting of prior-year options                   --       $  40.00     $  40.00         23      2008-2009
           Canceled                                       (34)      $  40.00     $  40.00         --      2008-2009
                                                          ---                                    ---

      Options outstanding at December 31, 1999            202       $  40.00     $  40.00         23      2008-2009
                                                          ---                                    ---

      2000 option activity:
           Granted                                         61       $  40.00     $  40.00         --         2010
           Vesting of prior-year options                   --       $  40.00     $  40.00         31      2008-2009
           Canceled                                       (55)      $  40.00     $  40.00        (13)     2008-2010
                                                          ---                                    ---

      Options outstanding at December 31, 2000            208       $  40.00     $  40.00         41      2008-2010
                                                          ---                                    ---

      2001 option activity:
           Granted                                          6       $  40.00     $  40.00         --           2011
           Vesting of prior-year options                   --       $  40.00     $  40.00         25      2008-2010
           Canceled                                       (15)      $  40.00     $  40.00         (6)     2008-2011
                                                          ---                                    ---

      Options outstanding at December 31, 2001            199       $  40.00     $  40.00         60      2008-2011
                                                          ===                                    ===
</TABLE>

14.   COMMITMENTS AND CONTINGENCIES

      OPERATING LEASES

      The Company leases revenue and other equipment under operating leases.
      Future minimum lease payments under non-cancelable operating leases at
      December 31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                                  OPERATING
            YEAR ENDING DECEMBER 31,                                LEASES
                                                                  ---------
<S>                                                               <C>
                   2002                                           $  3,301
                   2003                                              1,733
                   2004                                              1,144
                   2005                                              1,191
                   2006                                                893
</TABLE>

      Rent expense under operating leases was $5,051, $6,447 and $4,286 for the
      years ended December 31, 1999, 2000 and 2001, respectively.


                                                                              22
<PAGE>
      GUARANTOR OF CERTAIN LEASE OBLIGATIONS

      In 1995 and 1996, the Company entered into capital leases for tractors and
      trailers with certain affiliates and owner-operators. The Company then
      sold to a third party the lease receivables for which it received $979 in
      1996. The Company is contingently liable as the guarantor for the
      remaining balance of the receivables sold of $1,055 and $196 at December
      31, 1999 and 2000, respectively. These leases are collateralized by the
      equipment related to these leases. As of December 31, 2001, all
      contingencies related to these receivables have been resolved.

      Also, in 1995 and 1996, the Company entered into capital leases for
      tractors and trailers with other affiliates. The Company then sold to a
      third party the lease receivables for which it received $202 in 1996. The
      Company is contingently liable as the guarantor for the remaining balance
      of the receivables sold of $1,144 and $304 at December 31, 1999 and 2000,
      respectively. These leases are collateralized by the equipment related to
      these leases. As of December 31, 2001, all contingencies related to these
      receivables have been resolved.

      ENVIRONMENTAL MATTERS

      The Company's activities involve the handling, transportation, storage,
      and disposal of bulk liquid chemicals, many of which are classified as
      hazardous materials, hazardous substances, or hazardous wastes. The
      Company's tank wash and terminal operations engage in the storage or
      discharge of wastewater and stormwater that may have contained hazardous
      substances, and from time to time the Company stores diesel fuel and other
      petroleum products at terminals. As such, the Company is subject to
      environmental, health and safety laws and regulation by U.S. federal,
      state, local and Canadian government authorities. Environmental laws and
      regulations are complex, change frequently and have tended to become more
      stringent over time. There can be no assurance that violations of such
      laws or regulations will not be identified or occur in the future, or that
      such laws and regulations will not change in a manner that could impose
      material costs to the Company.

      The Company has environmental management programs that it carries out in
      conjunction with its safety program. Facility managers are responsible for
      environmental compliance. Self-audits are required to address operations,
      safety training and procedures, equipment and grounds maintenance,
      emergency response capabilities, and wastewater management. The Company
      also contracts with an independent environmental consulting firm that
      conducts periodic, unscheduled, compliance assessments, which focus on
      conditions with the potential to result in releases of hazardous
      substances or petroleum, and which also include screening for evidence of
      past spills or releases. The Company's relationship to its affiliates
      could, under certain circumstances, result in the Company incurring
      liability for environmental contamination attributable to an affiliate's
      operations, although the Company has not incurred any such derivative
      liability in the past. The Company's environmental management program has
      recently been extended to its affiliates.

      The Company is staffed with environmental experts who manage the Company's
      environmental exposure relating to historical operations and develop
      policies and procedures, including periodic audits of the Company's
      terminals and tank cleaning facilities, in order to minimize the existence
      of circumstances that could lead to future environmental exposure.

      As a handler of hazardous substances, the Company is potentially subject
      to strict, joint and several liability for investigating and rectifying
      the consequences of spills and other environmental releases of such
      substances either under CERCLA or comparable state laws. From time to
      time, the Company has incurred remedial costs and regulatory penalties
      with respect to chemical or wastewater spills and releases at its
      facilities and, notwithstanding the existence of its environmental
      management program, the Company cannot assure that such obligations will
      not be incurred in the future, nor that such liabilities will not result
      in a material adverse effect on the Company's financial condition or
      results of operations or its business reputation. As the result of


                                                                              23
<PAGE>
      environmental studies conducted at its facilities in conjunction with its
      environmental management program, the Company has identified environmental
      contamination at certain of such sites which will require remediation.

      The Company has also been named a potentially responsible party ("PRP"),
      or has otherwise been alleged to have some level of responsibility, under
      CERCLA or similar state laws for cleanup of off-site locations at which
      the Company's waste, or material transported by the Company, has allegedly
      been disposed of. The Company has asserted defenses to such actions and
      has not incurred significant liability in the CERCLA cases settled to
      date. While the Company believes that it will not bear any material
      liability in any current or future CERCLA matters, there can be no
      assurance that the Company will not in the future incur material liability
      under CERCLA or similar laws.

      QDI is currently solely responsible for remediation of the following two
      federal Superfund sites:

      Bridgeport, New Jersey. During 1991, CLC entered into a Consent Decree
      with the EPA filed in the U.S. District Court for the District of New
      Jersey, U.S. v. Chemical Leaman Tank Lines, Inc., Civil Action No. 91-2637
      (JFG) (D.N.J.), with respect to its site located in Bridgeport, New
      Jersey, requiring CLC to remediate groundwater contamination. The Consent
      Decree required CLC to undertake Remedial Design and Remedial Action
      ("RD/RA") related to the groundwater operable unit of the cleanup.

      In August 1994, the EPA issued a Record of Decision, selecting a remedy
      for the wetlands operable unit at the Bridgeport site at a cost estimated
      by the EPA to be approximately $7 million. In October 1998, the EPA issued
      an administrative order that requires CLC to implement the EPA's wetlands
      remedy. In April 1998, the federal and state natural resource damages
      trustees indicated their intention to bring claims against CLC for natural
      resource damages at the Bridgeport site. CLC has finalized a consent
      decree with the state and federal trustees that will resolve the natural
      resource damages claims. CLC has also entered an agreement in principle to
      reimburse the EPA's past costs in investigating and overseeing activities
      at the site over a three year period for which the Company has established
      reserves. In addition, the EPA has investigated contamination in site
      soils. No decision has been made as to the extent of soil remediation to
      be required, if any. CLC initiated litigation against its insurers to
      recover its costs in connection with environmental cleanups at its sites.
      In a case captioned Chemical Leaman Tank Lines, Inc. v. Aetna Casualty &
      Surety Co., et al., Civil Action No. 89-1543 (SSB) (D.N.J.), CLC sought
      from its insurers reimbursement of substantially all past and future
      environmental cleanup costs at the Bridgeport site. In a case captioned
      The Aetna Casualty and Surety Company v. Chemical Leaman Tank Lines, Inc.,
      et al., Civil Action No. 94-CV-6133 (E.D. Pa.), Chemical Leaman sought
      from its insurers reimbursement of substantially all past and future
      environmental cleanup costs at its other sites. In an agreement dated as
      of November 18, 1999, CLC favorably resolved these outstanding insurance
      claims.

      West Caln Township, PA. The EPA has alleged that CLC disposed of Hazardous
      Materials at the William Dick Lagoons Superfund Site in West Caln,
      Pennsylvania. On October 10, 1995, CLC entered a Consent Decree with the
      EPA which required CLC to

      (1)   pay the EPA for installation of an alternate water line to provide
            water to area residents;

      (2)   perform an interim groundwater remedy at the site; and

      (3)   conduct soil remediation. U.S. v. Chemical Leaman Tank Lines, Inc.,
            Civil Action No. 95-CV-4264 (RJB) (E.D. Pa.).

      CLC has paid all costs associated with installation of the waterline. CLC
      has completed a hydro-geologic study, and has commenced activities for
      construction of a groundwater treatment plant to pump and treat
      groundwater. The EPA anticipates that CLC will operate the plant for about
      five years, at which time the EPA will evaluate groundwater conditions and
      determine whether a final


                                                                              24
<PAGE>
      groundwater remedy is necessary. Field sampling for soil remediation
      recently commenced. The Consent Decree does not cover the final
      groundwater remedy or other site remedies or claims, if any, for natural
      resource damages.

      Other Environmental Matters. CLC has been named as PRP under CERCLA and
      similar state laws at approximately 35 former waste treatment and/or
      disposal sites including the Helen Kramer Landfill Site where CLC recently
      settled its liability. In general, CLC is among several PRP's named at
      these sites. CLC is also incurring expenses resulting from the
      investigation and/or remediation of certain current and former CLC
      properties, including its facility in Tonawanda, New York and its former
      facility in Putnam County, West Virginia, and its facility in Charleston,
      West Virginia. The Company has also favorably settled a toxic tort claim
      brought against it and several co-defendants by an uncertified class of
      Texas claimants. As a result of its acquisition of CLC, the Company
      identified other owned or formerly owned properties that may require
      investigation and/or remediation, including properties subject to the New
      Jersey Industrial Sites Recovery Act (ISRA). CLC's involvement at some of
      the above referenced sites could amount to material liabilities, and there
      can be no assurance that costs associated with these sites, individually
      or in the aggregate, will not be material. The Company has established
      reserves to cover amounts associated with the Helen Kramer Landfill, CLC's
      facility at Tonawanda, New York and CLC's former facility in Putnam
      County.

15.   OTHER TRANSACTIONS WITH RELATED PARTIES

      The Company and Apollo Management have entered into a management agreement
      whereby the Company retained Apollo Management to provide financial and
      strategic advice to the Company. Pursuant to the terms of the management
      agreement, Apollo Management has agreed to provide financial and strategic
      services to the Company as reasonably requested by the Company's Board of
      Directors. As consideration for services to be rendered under the
      management agreement, Apollo Management will receive an annual fee of $500
      until termination of the management agreement. The management agreement
      may be terminated upon 30 days written notice by Apollo Management or the
      Company to the other party thereto. Under this agreement the Company
      recognized $500 in selling and administrative expense in 2000 and 2001.

      An executive of the Company owns a minority interest in a firm that
      provides information technology services to the Company. Total amounts
      charged to the Company by the firm during 2000 and 2001 were $344 and
      $532, respectively.

      In August 2001, the Company entered into an agreement to affiliate
      facilities in Bridgeport, NJ and Pedricktown, NJ with a
      director/shareholder. The director/shareholder has been operating these
      locations under the affiliate program. The aggregate 2001 revenue for
      these operations was $4.6 million. As of December 31, 2001 $0.3 million
      was owed to the Company in connection with this affiliate operation.

      During 2001, Apollo and certain members of our management acquired, in
      aggregate, $30.5 million of QDI's Series B Notes in the secondary market.

      Pursuant to a Put and Call agreement dated December 14, 2001 between
      Apollo and the senior lendor, administrative agent under our credit
      agreement, at the request of any of the Tranche D participating banks (as
      defined in the credit agreement) and after certain triggering events,
      Apollo is required to purchase all of the Tranche D term loans held by
      such Tranche D banks. In addition, Apollo has the right, in its sole
      discretion, to purchase all or any part of the Tranche D term loans from
      the Trance D banks at any time.

16.   GEOGRAPHIC SEGMENTS

      The Company's operations are located primarily in the United States,
      Canada, and Mexico. Inter-area sales are not significant to the total
      revenue of any geographic area. Information about the Company's operations
      in different geographic areas for the years ended December 31, 1999, 2000
      and 2001, is as follows:


                                                                              25
<PAGE>
<TABLE>
<CAPTION>
                                                               1999
                               ----------------------------------------------------------------------
                                   U.S.          INTERNATIONAL       ELIMINATIONS      CONSOLIDATED
                               -------------    ----------------    ---------------    --------------
<S>                            <C>              <C>                 <C>                <C>
Operating revenues                 $558,593            $ 28,214          $     --          $ 586,807
Net operating income                 16,203               2,800                --             19,003
Identifiable assets                 523,932              34,321           (16,012)           542,241
Depreciation and amortization        58,597               3,687                --             62,284
Capital expenditures                 20,932               4,795                --             25,727
</TABLE>

<TABLE>
<CAPTION>
                                                               2000
                               ----------------------------------------------------------------------
                                   U.S.          INTERNATIONAL       ELIMINATIONS      CONSOLIDATED
                               -------------    ----------------    ---------------    --------------
<S>                            <C>              <C>                 <C>                <C>
Operating revenues                 $541,724            $ 29,061          $     --          $ 570,785
Net operating income                 28,007               1,643                --             29,650
Identifiable assets                 436,574              32,298           (15,799)           453,073
Depreciation and amortization        33,180               3,864                --             37,044
Capital expenditures                 19,623               3,456                --             23,079
</TABLE>

<TABLE>
<CAPTION>
                                                               2001
                               ----------------------------------------------------------------------
                                   U.S.          INTERNATIONAL       ELIMINATIONS      CONSOLIDATED
                               -------------    ----------------    ---------------    --------------
<S>                            <C>              <C>                 <C>                <C>
Operating revenues                 $499,366            $ 23,971          $     --          $ 523,337
Net operating income                 27,824               1,096                --             28,920
Identifiable assets                 449,248              15,018           (15,288)           448,978
Depreciation and amortization        31,948               3,177                --             35,125
Capital expenditures                 36,631                 781                --             37,412
</TABLE>


17.   GUARANTOR SUBSIDIARIES

The 10% Series B Senior Subordinated Notes due 2006 and Series B Floating
Interest Rate subordinated Term Notes due 2006 issued in June 1998 are
unconditionally guaranteed on a senior unsecured basis pursuant to guarantees by
all the Company's direct and indirect domestic subsidiaries, excluding Bulknet,
(the Guarantors). Each of the Company's direct and indirect subsidiaries is 100%
owned. All non-domestic subsidiaries including Levy Transport, Ltd. are
non-guarantor subsidiaries.

The Company conducts all of its business through and derives virtually all its
income from its subsidiaries. Therefore, the Company's ability to make required
principal and interest payments with respect to the Company's indebtedness
(including the notes) and other obligations depends on the earnings of
subsidiaries and its ability to receive funds from its subsidiaries through
dividends or other payments.

The following condensed consolidating financial information presents:

1. Condensed consolidating balance sheets at December 31, 2000 and 2001 and
condensed consolidating statements of operations and of cash flows for the three
years ended December 31, 1999, 2000 and 2001.

2. The parent company and combined guarantor subsidiaries.

3. Elimination entries necessary to consolidate the parent company and all its
subsidiaries.


                                                                              26
<PAGE>
CONSOLIDATING BALANCE SHEET, DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------    ------------    ------------
<S>                                         <C>          <C>            <C>              <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents                $      --    $      1,909   $         303                    $      2,212
   Accounts receivable, net                                    86,017           2,884                          88,901
   Current maturities and other
       receivables                                                891              --                             891
   Inventories                                                    874             269                           1,143
   Prepaid expenses                                             5,617             150                           5,767
   Prepaid tires                                                8,577             391                           8,968
   Income tax recoverable                                         306              --                             306
   Other                                                        1,775              --                           1,775
                                            ---------    ------------   -------------    ------------    ------------
     Total current assets                          --         105,966           3,997              --         109,963

Property and equipment, net                                   160,998          16,361                         177,359
Intangibles and Goodwill, net                                 151,969             806                         152,775
Insurance proceeds and other
     environmental receivables                                     --              --                              --
Deferred income taxes                                              --              --                              --
Investment in subsidiaries                    227,098              --              --        (227,098)             --
Other assets                                  100,000           8,877               4        (100,000)          8,881
                                            ---------    ------------   -------------    ------------    ------------
                                            $ 327,098    $    427,810   $      21,168    $    327,098    $    448,978
                                            =========    ============   =============    ============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current maturities of
       indebtedness                         $   2,677    $         --   $          --    $         --           2,677
   Accounts payable                                --          11,432           1,985              --          13,417
Inter-company
   Affiliates and                                  --          (1,133)          1,133              --              --
       owner-operators payable                     --           4,902              28              --           4,930
   Accrued expenses                                --          49,431              --              --          49,431
   Income taxes payable                            --             663             429              --           1,092
                                            ---------    ------------   -------------    ------------    ------------
     Total current liabilities                  2,677          65,295           3,575              --          71,547

Long-term debt, less current
     maturities                               441,179              --              --              --         441,179
Environmental liabilities                          --          36,163              --              --          36,163
Other long-term liabilities                        --         113,744              --        (100,000)         13,744
Deferred income tax                                --          (1,189)          2,459              --           1,270
                                            ---------    ------------   -------------    ------------    ------------
     Total liabilities                        443,856          24,013           6,034        (100,000)        563,903
                                            ---------    ------------   -------------    ------------    ------------

Mandatory redeemable common stock               1,210              --              --              --           1,210
                                            ---------    ------------   -------------    ------------    ------------
Mandatory redeemable preferred stock           16,499              --              --              --          16,499
                                            ---------    ------------   -------------    ------------    ------------
Minority interest in subsidiaries                  --           1,833              --              --           1,833
                                            ---------    ------------   -------------    ------------    ------------
Shareholders' equity:
   Common stock and additional
       paid-in capital                        105,564         149,653          15,082        (164,735)        105,564
   Retained earnings (deficit)                (37,435)         62,311           1,195         (63,506)        (37,435)
   Treasury Stock                                (402)             --              --              --            (402)
   Stock recapitalization                    (189,589)             --             (55)             55        (189,589)
   Other comprehensive gain (loss)            (10,829)             --          (1,088)          1,088         (10,829)
   Note receivable                             (1,776)             --              --              --          (1,776)
                                            ---------    ------------   -------------    ------------    ------------
     Total shareholders' equity (deficit)    (134,467)        211,964          15,134        (227,098)       (134,467)
                                            ---------    ------------   -------------    ------------    ------------
                                            $ 327,098    $    427,810   $      21,168    $   (327,098)   $    448,978
                                            =========    ============   =============    ============    ============
</TABLE>


                                                                              27
<PAGE>
CONSOLIDATING BALANCE SHEET, DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------    ------------    ------------
<S>                                         <C>          <C>            <C>             <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents                $      --    $      2,469   $         167              --    $      2,636
   Restricted cash                                 --              --              --              --           1,786
   Accounts receivable, net                        --          85,329           9,426              --          94,755
   Current maturities and other
       receivables                                 --             518              --              --             518
   Inventories                                     --           1,528             258              --              --
   Prepaid expenses                                --           7,249             142              --           7,391
   Prepaid tires                                   --           7,660             496              --           8,156
   Income tax recoverable                          --             350              --              --             350
   Deferred income taxes                           --            (308)            308              --              --
   Other                                           --             650              --              --             650
                                            ---------    ------------   -------------    ------------    ------------
     Total current assets                          --         105,445          10,797              --         116,242

Property and equipment, net                        --         154,065          21,451              --         175,516
Other receivables, less current
   maturities                                      --              --              --              --              --
Intangibles and goodwill                           --         152,748             920              --         153,668
Insurance proceeds receivable                      --              --              --              --              --
Deferred income taxes                              --              --              --              --              --
Investment in subsidiaries                    221,098              --              --        (221,098)             --
Other assets                                  100,000           7,643               4        (100,000)          7,647
                                            ---------    ------------   -------------    ------------    ------------
                                            $ 321,098    $    419,901   $      33,172    $   (321,098)   $    453,073
                                            =========    ============   =============    ============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current maturities of
       Indebtedness                         $   3,619    $         --   $          --    $         --    $      3,619
   Accounts payable                                --          16,128             315              --          16,443
   Inter-company                                   --         (14,225)         14,225              --              --
   Affiliates and
     Owner-operators payable                       --           7,497              66              --           7,563
   Accrued expenses                                --          50,654              --              --          50,654
   Income taxes payable                            --             505             329              --             834
                                            ---------    ------------   -------------    ------------    ------------
     Total current liabilities                  3,619          60,559          14,935              --          79,113

Long term debt, less current
   maturities                                 413,253              --              67              --         413,320
Obligations under capital lease                    --              --              --              --              --
Accrued loss and damage claims                     --              --              --              --              --
Environmental liabilities                          --          39,873              --              --          39,873
Other long-term liabilities                        --         110,926              --        (100,000)         10,926
Deferred income tax                                --          (1,173)          2,355              --           1,182
                                            ---------    ------------   -------------    ------------    ------------
     Total liabilities                        416,872         210,185          17,357        (100,000)        544,414
                                            ---------    ------------   -------------    ------------    ------------

Mandatory redeemable common stock               1,210              --              --              --           1,210
                                            ---------    ------------   -------------    ------------    ------------
Mandatory redeemable preferred stock           13,882              --              --              --          13,882
                                            ---------    ------------   -------------    ------------    ------------
Minority interest in subsidiaries                  --           4,433              --              --           4,433
                                            ---------    ------------   -------------    ------------    ------------
Shareholders' equity:
   Common stock and additional
       paid-in capital                        105,676         142,675          15,082        (157,757)        105,676
   Retained earnings (deficit)                (22,212)         62,608           1,608         (64,216)        (22,212)
   Treasury stock                                 (32)             --              --              --             (32)
   Stock recapitalization                    (189,589)             --             (55)             55        (189,589)
   Other comprehensive gain (loss)             (2,823)             --            (820)            820          (2,823)
   Notes receivable                            (1,886)             --              --              --          (1,886)
                                            ---------    ------------   -------------    ------------    ------------
     Total shareholders' equity (deficit)    (110,866)        205,283          15,815        (221,098)       (110,866)
                                            ---------    ------------   -------------    ------------    ------------
                                            $ 321,098    $    419,901   $      33,172    $   (321,098)   $    453,073
                                            =========    ============   =============    ============    ============
</TABLE>


                                                                              28
<PAGE>
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------    ------------    ------------
<S>                                         <C>          <C>            <C>              <C>             <C>
Operating revenues:
   Transportation                           $      --    $    437,729   $      22,609    $       (720)   $    459,618
   Other                                           --          62,143           1,576              --          63,719
                                            ---------    ------------   -------------    ------------    ------------

     Total revenues                                --         499,872          24,185            (720)        523,337

Operating expenses:
   Purchased transportation                        --         298,098           2,672            (720)        300,050
   Depreciation and amortization                   --          31,848           3,277              --          35,125
   Other operating expenses                        --         141,566          17,676              --         159,242
                                            ---------    ------------   -------------    ------------    ------------

Operating income                                   --          28,360             560              --          28,920

Interest expense, net                         (40,227)             --               3              --         (40,224)
Other expense                                      --             (22)             --              --             (22)
Equity in earnings of subsidiaries             16,596              --              --         (16,596)             --
                                            ---------    ------------   -------------    ------------    ------------

Income (loss) before taxes                    (23,631)         28,338             563         (16,596)        (11,326)

Income taxes                                  (11,170)         11,619             686              --           1,135
                                            ---------    ------------   -------------    ------------    ------------

Net income (loss)                           $ (12,461)   $     16,719   $        (123)   $    (16,596)   $    (12,461)
                                            =========    ============   =============    ============    ============
</TABLE>


                                                                              29
<PAGE>
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------   ------------    ------------
<S>                                         <C>          <C>            <C>             <C>             <C>
Operating revenues:
   Transportation                           $      --    $    478,741   $      26,984   $        323    $    506,048
   Other                                           --          62,525           2,212             --          64,737
                                            ---------    ------------   -------------   ------------    ------------

     Total revenues                                --         541,266          29,196            323         570,785

Operating expenses:
   Purchased transportation                        --         319,096           3,177            323         322,596
   Depreciation and amortization                   --          33,155           3,889             --          37,044
   Other operating expenses                        --         160,195          21,300             --         181,495
                                            ---------    ------------   -------------   ------------    ------------

Operating income                                   --          28,820             830             --          29,650

Interest expense, net                         (39,934)             --            (302)            --         (40,236)
Other income                                       --             (20)             (4)            --             (24)
Equity in earnings of
     Subsidiaries                              17,448              --              --        (17,448)             --
                                            ---------    ------------   -------------   ------------    ------------

Income (loss) before taxes                    (22,486)         28,840             532        (17,448)        (10,562)

Income taxes                                   19,301          11,824             100             --          31,225
Minority interest                                  --              --              --             --              --
                                            ---------    ------------   -------------   ------------    ------------

Net income (loss)                           $ (41,787)   $     17,016   $         432   $    (17,448)   $    (41,787)
                                            =========    ============   =============   ============    ============
</TABLE>


                                                                              30
<PAGE>
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------   ------------    ------------
<S>                                         <C>          <C>            <C>             <C>             <C>
Operating revenues:
   Transportation                           $      --    $    470,081   $      27,572   $         --    $    497,653
   Other                                           --          88,512             642             --          89,154
                                            ---------    ------------   -------------   ------------    ------------

     Total revenues                                --         558,593          28,214             --         586,807

Operating expenses:
   Purchased transportation                        --         317,647           3,572             --         321,219
   Option expense                                  --              --              --             --              --
   Depreciation and amortization                   --          58,597           3,687             --          62,284
   Other operating expenses                        --         166,146          18,155             --         184,301
                                            ---------    ------------   -------------   ------------    ------------

Operating income                                   --          16,203           2,800             --          19,003

Interest expense, net                         (39,810)             --            (642)            --         (40,452)
Other income                                       --             134              --             --             134
Equity in earnings of
     subsidiaries                              10,987              --              --        (10,897)             --
                                            ---------    ------------   -------------   ------------    ------------

Income (loss) before taxes                    (28,823)         16,337           2,158        (10,897)        (21,315)

Income taxes                                  (13,393)          6,698             789             --          (5,906)
Minority interest                                  --             (21)             --             --             (21)
                                            ---------    ------------   -------------   ------------    ------------

Net income (loss)                             (15,430)          9,618           1,369        (10,897)        (15,430)
                                            =========    ============   =============   ============    ============
</TABLE>


                                                                              31
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------   ------------    ------------
<S>                                         <C>          <C>            <C>             <C>             <C>
Cash provided by (used for)
     operating activities:
   Net income (loss)                        $ (12,461)   $     16,719   $        (107)  $    (16,612)   $    (12,461)
   Adjustments for non-cash
     charges                                   12,461          19,424           3,328             --          35,213
   Changes in assets and
     liabilities                                   --         (24,036)         (4,399)        16,612         (11,823)
                                            ---------    ------------   -------------   ------------    ------------
Net cash provided by
     Operating activities                          --          12,107          (1,178)            --          10,929
                                            ---------    ------------   -------------   ------------    ------------
Investing activities:
   Capital expenditures                            --         (36,393)         (1,019)            --         (37,412)
   Proceeds from asset
     dispositions                                  --              78           2,398             --           2,476
   Other                                           --              --              --             --              --
                                            ---------    ------------   -------------   ------------    ------------
Net cash used for investing
     activities                                    --         (36,315)          1,379             --         (34,936)
                                            ---------    ------------   -------------   ------------    ------------
Financing activities:
   Proceeds from issuance of
     long-term debt
     and capital leases                        30,000              --              --             --          30,000
   Payment of debt obligations                 (3,019)             --             (64)            --          (3,083)
   Stock transactions                          (1,670)             --              --             --          (1,670)
   Other                                           --              --              --             --              --
   Net change in intercompany
     balances                                 (25,311)         25,311              --             --              --
                                            ---------    ------------   -------------   ------------    ------------
Net cash provided by financing
     activities                                    --          25,311             (64)            --          25,247
                                            ---------    ------------   -------------   ------------    ------------

Net increase in cash                               --           1,105             135             --           1,240
Effect of exchange rate changes
     on cash                                       --          (1,664)             --             --          (1,664)
Cash, beginning of period                          --           2,469             167             --           2,636
                                            ---------    ------------   -------------   ------------    ------------

Cash, end of period                         $      --    $      1,910   $         302   $         --    $      2,212
                                            =========    ============   =============   ============    ============
</TABLE>


                                                                              32
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------   ------------    ------------
<S>                                         <C>          <C>            <C>             <C>             <C>
Cash provided by (used for)
     operating activities:
   Net income (loss)                        $ (41,787)         17,016            432    $    (17,448)   $    (41,787)
   Adjustments for non-cash
       Charges                                 41,787          21,581          3,742              --          67,110
   Changes in assets and
       liabilities                                 --         (12,880)         8,301          17,448          12,869
                                            ---------    ------------   ------------    ------------    ------------
Net cash provided by
    Operating activities                           --          25,717         12,475              --          38,192
                                            ---------    ------------   ------------    ------------    ------------
Investing activities:
   Acquisition of subsidiary                       --              --             --              --              --
   Capital expenditures                            --         (19,193)        (3,886)             --         (23,079)
   Proceeds from asset
       dispositions                                --           3,334          1,024              --           4,358
   Other                                           --              --             --              --              --
                                            ---------    ------------   ------------    ------------    ------------

Net cash used for investing
    Activities                                     --         (15,858)        (2,863)             --         (18,721)
                                            ---------    ------------   ------------    ------------    ------------
Financing activities:
   Proceeds from issuance of
       long-term debt                            (314)             --            314              --              --
   Payment of debt obligations                     --          (6,573)       (10,645)             --         (17,218)
   Recapitalization expenditures                   --              --             --              --              --
   Issuance of preferred stock, net               470              --             --              --             470
   Issuance of common stock, net                 (301)             --             --              --            (301)
   Other                                           --             (32)            --              --             (32)
   Net change in intercompany
       balances                                   145            (145)            --              --              --
                                            ---------    ------------   ------------    ------------    ------------

Net cash used for by financing
     activities                                    --          (6,750)       (10,331)             --         (17,081)
                                            ---------    ------------   ------------    ------------    ------------

Net increase in cash                               --           3,108           (718)             --           2,390
Effect of exchange rate changes
     on cash                                       --            (804)            --              --            (804)
Cash, beginning of period                          --             165            885              --           1,050
                                            ---------    ------------   ------------    ------------    ------------

Cash, end of period                         $      --    $      2,469   $        167              --    $      2,636
                                            =========    ============   ============    ============    ============
</TABLE>


                                                                              33
<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                           GUARANTOR    NON-GUARANTOR
                                              PARENT     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                            ---------    ------------   -------------   ------------    ------------
<S>                                         <C>          <C>            <C>             <C>             <C>

Cash provided by (used for)
     operating activities:
   Net income (loss)                        $ (15,430)   $      9,618   $       1,369   $    (10,987)   $    (15,430)
   Adjustments for non-cash
     charges                                   15,430          45,528           3,718             --          64,676
   Changes in assets and
     liabilities                                   --         (48,192)         (2,872)        10,987         (40,077)
                                            ---------    ------------   -------------   ------------    ------------
Net cash provided by
     Operating activities                          --           6,954           2,215             --           9,169
                                            ---------    ------------   -------------   ------------    ------------
Investing activities:
   Capital expenditures                            --         (20,932)         (4,795)            --         (25,727)
   Proceeds from asset
     dispositions                                  --           7,018             583             --           7,601
   Other                                           --           9,238              13             --           9,251
                                            ---------    ------------   -------------   ------------    ------------

Net cash used for investing
     activities                                    --          (4,676)         (4,199)            --          (8,875)
                                            ---------    ------------   -------------   ------------    ------------
Financing activities:
   Proceeds from issuance of
     long-term debt
     and capital leases                          (952)             --           2,541             --           1,589
   Payment of debt obligations                     --          (8,706)            (58)            --          (8,764)
   Recapitalization
     expenditures                               7,867              --              --             --           7,867
   Stock transactions                             (58)             --              --             --             (58)
   Other                                           --              --              --             --              --
   Net change in intercompany
     balances                                  (6,857)          6,857              --             --              --
                                            ---------    ------------   -------------   ------------    ------------

Net cash provided (used for)
   financing activities                            --          (1,849)          2,483             --             634
                                            ---------    ------------   -------------   ------------    ------------

Net increase in cash                               --             429             499             --             928
Effect of exchange rate changes
     on cash                                       --             456            (419)            --              37
Cash, beginning of period                          --            (720)            805             --              85
                                            ---------    ------------   -------------   ------------    ------------

Cash, end of period                         $      --    $        165   $         885   $         --    $      1,050
                                            =========    ============   =============   ============    ============
</TABLE>


                                                                              34
<PAGE>
                              Exhibits to the 10-K


<TABLE>
<CAPTION>
   Exhibit No.                           Description
   -----------                           -----------
<S>               <C>
       2.1        Agreement and Plan of Merger, dated as of February 10, 1998,
                  by and among MTL and Sombrero Acquisition Corp.*

       2.2        Agreement and Plan of Merger, dated as of June 9, 1998, by and
                  among Palestra Acquisition Corp., CLC and the shareholders of
                  CLC.*

       2.3        Amendment No. 1 to the Agreement and Plan of Merger, dated as
                  of July 27, 1998, by and among Palestra Acquisition Corp., CLC
                  and the shareholders of CLC.*

       2.4        Amendment No. 2 to the Agreement and Plan of Merger, dated as
                  of August 25, 1998, by and among Palestra Acquisition Corp.,
                  CLC and the shareholders of CLC.*

       3.1        Articles of Incorporation of QDI.*

       3.2        Articles of Amendment dated April 30, 1999 to Articles of
                  Incorporation of QDI.

       3.3        Bylaws of QDI.*

       3.4        Amendment dated November 8, 1999 to the Bylaws of QDI.

       3.5        Articles of Amendment dated February 14, 2002 to the Articles
                  of Incorporation of QDI.

       4.1        Credit Agreement, dated as of June 9, 1998, and amended and
                  restated as of August 28, 1998, between MTL, Levy Transport,
                  Ltd., the lenders party thereto and Credit Suisse First
                  Boston, as administrative agent.*

       4.2        First Amendment to Credit Agreement dated as of September 1,
                  1998.

       4.3        Second Amendment to Credit Agreement dated as of November 19,
                  1999.

       4.4        Third Amendment to Credit Agreement dated as of May 23,
                  2001.**

       4.5        Fourth Amendment to Credit Agreement dated as of December 14,
                  2001.

       4.6        Indenture, dated as of June 9, 1998, by and among MTL, the
                  Guarantors and United States Trust Company, as trustee
                  (including form of 10% Senior Subordinated Notes due 2006 and
                  form of Floating Interest Rate Subordinated Term Securities
                  due 2006.*

       4.7        First Supplemental Indenture, dated as of August 28, 1998, by
                  and among QDI, CLC and its subsidiaries as Guarantors, to the
                  Indenture dated June 9, 1998.*

       4.8        Articles of Amendment for 13.75% Senior Exchangeable Preferred
                  Stock.*

       4.9        Articles of Amendment for 8% Redeemable Preferred Stock.*

      4.10        Exchange Indenture re: 13.75% Senior Exchangeable Preferred
                  Stock.*
</TABLE>



<PAGE>
<TABLE>
<S>               <C>
      4.11        Form of 10% Senior Subordinated Notes due 2006 (filed as part
                  of Exhibit 4.6).*

      4.12        Form of Floating Interest Rate Subordinated Term Securities
                  due 2006 (filed as part of Exhibit 4.6).*

      4.13        Amended and Restated Shareholders' Agreement, dated as of
                  February 10, 1998, among MTL, Apollo Investment Fund III,
                  L.P., Apollo Overseas Partners III, L.P., Apollo U.K. Fund
                  III, L.P. and certain shareholders of QDI.*

      4.14        Amended and Restated Common and Preferred Stock Purchase and
                  Shareholders' Agreement, dated as of August 28, 1998, among BT
                  Investment Partners, Inc., MTL Equity Investors, L.L.C.,
                  Apollo Investment Fund III, L.P., Apollo Overseas Partners
                  III, L.P., Apollo U.K. Fund III, L.P. and MTL.

      4.15        Amended and Restated Registration Rights Agreement, dated as
                  of August 28, 1998, among Apollo Investment Fund III, L.P.,
                  Apollo Overseas Partners III, L.P., Apollo U.K. Fund III, L.P.
                  and MTL.*

      10.1        1998 Stock Option Plan of QDI.*

      10.2        Employment Agreement, dated as of February 10, 1998, between
                  MTL and Richard J. Brandewie.*

      10.3        Employment Agreement, dated November 8, 1999, between QDI and
                  Thomas L. Finkbiner.

      10.4        Employment Agreement, dated November 19, 2000, between QDI and
                  Douglas B. Allen, as revised on November 27, 2000.

      10.5        Employment Agreement, dated March 23, 2000, between QDI and
                  Dennis R. Farnsworth.

      10.6        Employment Agreement, dated March 27, 2000, between QDI and
                  Virgil T. Leslie.

      10.7        Employment Agreement, dated June 23, 1998, between MTL and
                  Dennis R. Copeland.

      10.8        Employment Agreement, dated February 10, 1998, between MTL and
                  Charles J. O'Brien.*

      10.9        Supplemental Letter, dated as of February 10, 1998, between
                  MTL and Charles J. O'Brien.*

      10.10       Amendment dated [January 13, 2000] to Employment Agreement
                  between QDI and Charles J. O'Brien.

      10.12       Amendment, dated October 23, 2001, to Employment Agreement
                  dated February 10, 1998 between QDI and Charles J. O'Brien.


</TABLE>




<PAGE>
<TABLE>
<S>               <C>
      10.13       Stock Option Agreement, dated November 19, 2000, between
                  Douglas B. Allen and QDI.

      10.14       Promissory Note, dated November 8, 1999, issued by Thomas L.
                  Finkbiner to QDI.

      10.15       Pledge Agreement, dated November 8, 1999, between Thomas L.
                  Finkbiner and QDI.

      10.16       Stock Option Agreement, dated November 8, 1999, between Thomas
                  L. Finkbiner and QDI.

      10.19       Non Competition Agreement, dated February 10, 1998, between
                  QDI and Elton E. Babbit.*

      10.20       Non Competition Agreement, dated February 10, 1998, between
                  QDI and Gordon Babbit.*

      10.21       Management Agreement, dated February 10, 1998, between Apollo
                  Management, L.P. and QDI.*

      10.22       Limited Recourse Secured Promissory Note, dated June 9, 1998,
                  issued by Marvin Sexton to QDI and corresponding pledge
                  agreement.*

      10.23       Consulting Agreement, dated February 10, 1998, between MTL and
                  Elton E. Babbit.*

      21.1        List of Subsidiaries.
</TABLE>

*    Incorporated herein by reference to the Company's Registration Statement on
     Form S-4 filed with the Securities and Exchange Commission on November 3,
     1998 Registration No. 333-66711.

**   Incorporated herein by reference to the Company's Current Report on Form
     8-K filed with the Securities and Exchange Commission on June 12, 2001.