<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

COMMISSION FILE NUMBER  0 - 24180


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


                FLORIDA                                        59-3239073
    (State or other jurisdiction of                          (IRS Employer
     incorporation or organization)                        Identification No.)


                            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, 2000, there were 2,020,552 outstanding shares of the
Registrant's Common Stock, $0.01 par value.

Documents Incorporated by Reference: None.


<PAGE>   2


PART I

Item 1.       BUSINESS

GENERAL

              Quality Distribution, Inc. ("QDI", formerly known as MTL, Inc.) is
the largest bulk tank truck carrier in the United States based on revenues.
Through a network of 152 terminals located across the United States and Canada,
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, Union Carbide, Allied Signal, 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 Quala Systems, Inc.
("QSI") a nation-wide tankwash company. Through the principal transportation
subsidiaries, as of December 31, 2000, we operated 7,526 trailers, of which
6,551 were owned or leased by us, and 3,491 tractors, of which 822 were owned or
held directly under lease by us.

              On June 9, 1998, QDI was recapitalized through a merger with a
corporation controlled by Apollo Investment Fund III, LP ("Apollo") and certain
related companies. On August 28, 1998, we completed our acquisition of Chemical
Leaman Corporation and its subsidiaries ("CLC"). The combination of CLC and QDI
has united two of the leading bulk transportation service providers under one
holding company.

              The for-hire tank truck industry is highly fragmented and we
believe it consists of in excess of 200 tank truck carriers, with the top five
carriers representing approximately $1.4 billion or approximately 24% of
estimated 2000 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, 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 was founded in 1965. QDI is a holding company, and operates
principally through its transportation subsidiaries. We have grown over the


                                       2
<PAGE>   3

past five years from 53 terminals to 152 terminals and have expanded our area of
geographic coverage. Much of this growth has been accomplished through strategic
acquisitions. We plan to continue to grow both our core business and the variety
of services we provide to our customers.

              On June 9, 1998, Sombrero Acquisition Corp., a Florida Corporation
and wholly owned subsidiary of Apollo, merged with and into QDI with QDI as the
surviving corporation. In this merger, the holders of the outstanding shares of
common stock of QDI, other than certain exempted shares, received $40 in cash
for each share of the common stock of QDI held. The total consideration that was
paid to shareholders of QDI in connection with the merger consisted of $194.6
million and included payments to holders of certain options of QDI, net of the
option exercise proceeds, and the implied value of shares which were retained by
management. We treated such merger as a recapitalization for accounting
purposes. Immediately following the merger, Apollo owned 85.4% of the company's
common shares, certain other investors owned 4.4%, and management of QDI owned
approximately 10.2% of the common stock of QDI. Immediately following such
merger, on a fully diluted basis, Apollo owned 76.9%, certain other investor
owned 4% and management of QDI owned 19.1% of the common stock of QDI.

              The QDI merger, the private offering of notes, the credit
agreement and the equity investment are collectively referred to herein as the
"QDI Transactions."

              On August 28, 1998 we acquired CLC. The shareholders of CLC
received an aggregate of $70.7 million in cash, $10.75 million of such amount
was placed in an escrow account for CLC shareholders' indemnification
obligations, and $5.0 million stated value of redeemable preferred stock. A
portion of the shares held by certain shareholders of CLC who are officers of
CLC, having a value of $1.1 million based on the per share consideration, were
converted into shares of QDI common stock.

              On February 3, 1999, we entered into a settlement agreement with
former shareholders of CLC regarding the remaining consideration owed in the CLC
acquisition. The agreement called for a payment of $3 million to the former
shareholders as a settlement of final payment of amounts owed under the merger
agreement and a cancellation of the 50 preferred shares issued in connection
with the acquisition.

              Our major domestic, direct and indirect subsidiaries, excluding
Bulknet, have guaranteed our borrowings under the new credit agreement and CLC
and its subsidiaries have executed a supplemental indenture to become guarantors
of the notes pursuant to the terms of the indenture.

              The CLC merger, the related tender offer for certain notes of CLC,
the refinancing of the credit agreement in connection with such transactions,
the preferred and common equity investments made in connection with the
acquisition of CLC and the related borrowings under the new credit agreement are
collectively referred to as the "CLC Transactions."


                                       3
<PAGE>   4


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, 2000, 57 of 152
locations were affiliate terminals. Owner-operators are relied upon heavily to
fulfill tractor needs at 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 as independent companies
to preserve the entrepreneurial motivation common to small businesses. Each
affiliate enters into a comprehensive contract with us pursuant to which the
affiliate is required to operate its terminal(s) exclusively for and on behalf
of the company. Each affiliate is supported by our corporate staff and is linked
via computer to our central management information system located at our Tampa,
Florida headquarters. Affiliate facilities are frequently staffed and managed by
former QDI employees with the operating experience and management capability to
be an effective affiliate.

              Affiliates obtain various benefits from their relationship with
QDI, such as greater equipment utilization through participation in our backhaul
program, access to and enhancement of customer relationships, driver
recruitment, safety training, expanded marketing resources and access to
sophisticated management information systems. Affiliates also benefit from our
purchasing leverage for insurance coverage, tractors, trailers, fuel, tires, and
other significant operating requirements.

              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. We pay our affiliates weekly on the basis of completed billings to
customers. We collect all accounts receivable and deduct any amounts advanced
for fuel, insurance, or other miscellaneous expenses, including charges, as
applicable, for QDI's tank trailers, from these weekly billing settlements.

              Contracts with affiliates typically carry a one-year term,
renewable on an annual basis unless terminated by either party. Contracts
between ourselves and our affiliates also contain restrictive covenants that
prohibit affiliates from competing directly with us in a specific geographic
area for a period of one year following termination of a contract. In addition,
we require our affiliates to meet certain operating and financial disclosure
standards.

              Affiliates engage their own drivers and personnel as well as
utilize the services of owner-operators who must meet our operating standards.
The affiliate assumes all operating expenses such as fuel, licenses, fuel taxes
and tank cleaning. However, we reimburse affiliates for certain expenses passed
through to our customers, such as fuel surcharges, tolls and scaling charges.

             Affiliates are required to pay for their own workers' compensation
coverage, which must meet both QDI and statutory coverage levels. Affiliates
retain responsibility for liabilities up to a contractual amount per incident


                                       4
<PAGE>   5

arising from accidents, spills or contamination incurred while transporting a
load. Liability beyond the obligations of the affiliate is the responsibility of
QDI or its insurer. We make additional insurance coverage available to our
affiliates for physical damage, running a tractor without a trailer, health and
life, and garage-keepers insurance for additional fees.

DRIVERS AND OWNER OPERATORS

              At December 31, 2000 we utilized 3,422 drivers. Of this total
there were 2,121 owner operators, 612 affiliate company drivers and 689 company
drivers.

OWNER-OPERATORS

              Affiliates and QDI terminals extensively utilize owner-operators.
Owner-operators are independent contractors who, through a contract with QCI,
supply one or more tractors and drivers for QDI or affiliate use. QDI retains
owner-operators under contracts generally terminable by either party upon short
notice. However, they may be terminated immediately under certain circumstances.
All owner operator equipment is leased to QDI.

              Owner-operators are 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, insurance, maintenance, 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. QDI
attempts to enhance the profitability of our owner-operators through purchasing
programs that take advantage of our significant purchasing power. Programs cover
such operating expense items as fuel, tires and insurance.

              Owner-operators utilized by either QDI or an affiliate must meet
specified guidelines relating to 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

              QDI 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 of 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 five safety schools.

              Driver recruitment and retention is one of the primary focuses for
all operations personnel. Each terminal manager has direct responsibility for
hiring drivers. QDI uses many of the traditional methods of driver recruitment
and in 2000 QDI began using many newer methods of driver recruitment, including
the use of the internet and the implementation 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. The
equipment utilized by the President's Team distinguishes these drivers, thereby
providing another tool in our driver recruiting efforts. The President's Team
maintains


                                       5
<PAGE>   6

contact with new candidates throughout the hiring process. They also provide
insight relating to the issues that our current drivers and owner operators feel
are important.

OTHER PERSONNEL

              QDI employs 873 other support personnel. These include 254
employed at our corporate office in Tampa, FL. Our field operations consist of
619 employees; 118 mechanics, 187 tank cleaners and 314 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 coverage 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

              As of December 31, 2000, we had 368 employees in trucking,
maintenance or cleaning facilities and approximately 70 employees of three
affiliate terminals who were members of the International Brotherhood of
Teamsters.

CUSTOMER SERVICE AND QUALITY ASSURANCE

              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.
This includes marketing and contracts, dispatch and terminal operations, safety,
driver hiring and training, trailer operations, tractor operations, procedures
for administrative functions, payroll and settlement, insurance, sales, data
processing, and fuel tax and permits.

              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 Standard
Operating Procedures.

              We have also implemented a Quality Corrective Action procedure
that is intended 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 reporting. Service reporting is required by an
increasing number of chemical shippers.

MOBILE COMMUNICATIONS

              Over 50% 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.

              In 2000 QDI began testing alternative options to the OmniTRACS(R)
system in an effort to insure competitiveness and cost efficiency. Additionally,
QDI


                                       6
<PAGE>   7

has begun testing TrailerTRACS(R) in order to provide tracking of the QDI
trailer fleet.

LEASING

              QDI leases tractors and trailers to affiliates and other third
parties, including shippers and believes the leasing program is one of the
largest in the industry. 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.

TANK WASH OPERATIONS

              To maximize equipment utilization, we rely on 40 QDI and 5
affiliate tank wash facilities, as well as the services of other commercial tank
wash facilities located throughout our operating network. Our Company and
affiliate 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.

              Through the CLC merger, we have expanded the range of
transportation-related services we provide to include the following:

OWNER-OPERATOR SERVICES

              We offer, through our subsidiary, Power Purchasing, Inc., products
and 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.

CAPACITY MANAGEMENT SYSTEMS

              We provide load brokerage services in order 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.

BULKNET

              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


                                        7
<PAGE>   8

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, 2000, Quality Distribution operated a fleet of
7,526 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 generally acquire new tractors with a utilization period of
approximately five years. Our general philosophy is to purchase new trailers and
utilize a routine general maintenance program that will allow trailers to
achieve an expected useful life of 15 to 20 years. In many cases, we have
invested significantly in the refurbishment or re-manufacturing of trailers in
order to lengthen the expected useful life of these trailers beyond 15 - 20
years.

              As of December 31, 2000, we operated 3,491 tractors including 851
that were operated by our drivers, 1,997 that were operated by independent
contractors, and 643 that were operated by affiliate drivers.

              In 2000, we entered into a purchase agreement with Mack Trucks,
Inc. of Allentown, PA to purchase 100 new tractors. This included 61 sleeper
cabs, model CX613 and 39 daycabs, model CH613. Delivery of these units began in
October 2000 and carried over into 2001. Each of these tractors is equipped with
a satellite communication system. By standardizing with one manufacturer, we
expect to reduce mechanic training and parts inventory costs.

              The majority of our and our affiliate terminals provide preventive
maintenance and service and receive computer-generated reports that indicate
when inspection and/or servicing of units are required. Most major repairs are
performed by unaffiliated third parties. Our maintenance facilities are
registered with DOT and are qualified to perform trailer inspections and repairs
for our fleet and equipment owned by third parties.


                                       8
<PAGE>   9


              The following table shows the age of trailers and tractors we
operated that were in service as of December 31, 2000. All numbers are
approximated as of such date:

<TABLE>
<CAPTION>

TRAILERS                   < 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                        184          1,080          1,136          1,952            838          1,361          6,551
AFFILIATE                      163            272            155            118             56             91            855
SHIPPER                          6             18             46              4             21             25            120
                           -------        -------        -------        -------        -------        -------        -------
Total                          353          1,370          1,337          2,074            915          1,477          7,526

<CAPTION>

TRACTORS                   < 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                        132            356            212            100             18              4            822
AFFILIATE                      346            188             72             14              1              0            621
OWNER OPERATORS                638            721            496            158             22             13          2,048
                           -------        -------        -------        -------        -------        -------        -------
Total                        1,116          1,265            780            272             41             17          3,491
</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
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, Union Carbide, PPG Industries, and DuPont. During 2000, no single
customer accounted for more than 7.5% of our total revenues. For the fiscal year
ended December 31, 2000, QDI's 10 largest customers accounted for 27.3%, of
revenues.

CUSTOMER SERVICE AND QUALITY ASSURANCE

              In order to achieve our goal of providing to our customers the
highest quality service and creating the highest level of customer and employee
satisfaction, we have implemented a quality assurance program at all levels of
the organization. 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.
This includes marketing and contracts, dispatch and terminal operations, safety,
driver hiring and training, trailer operations, tractor operations, procedures
for administrational functions, payroll and settlement, insurance, sales, data
processing, and fuel tax and permits.


                                       9
<PAGE>   10

              We have developed and implemented a statistical measurement tool
called the Terminal Safety Ranking Profile. This profile establishes a uniform
method of evaluating, measuring and comparing the safety performance of all
field operation facilities. Through utilization of this tool, individual
facilities and regions of QDI can be evaluated for performance trends or areas
of deficiency needing improvement.

              We have also implemented a Quality Corrective Action procedure
that is intended to identify, document and correct safety and service
non-conformance. In addition, we have established cross-functional teams known
as Continuous Process Improvement teams which have been charged with the
responsibility of identifying ways in which to improve our processes as well as
to manage the implementation of such improvements.

              Over 50% of our tractor fleet, including both our owned,
affiliate-owned and owner-operator owned tractors, are equipped with
OmniTRACS(R) mobile satellite communications systems which provide continuous
monitoring and two-way communications with tractors in transit. This information
is used to track load status, optimize the use of drivers and equipment and
respond to emergency situations.

ADMINISTRATION

              QDI operates 152 facilities throughout the United States, Canada
and Mexico. The 95 Company and 57 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 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 and safety
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. The Company has initiated a
comprehensive internal audit function, to ensure compliance with company
procedures and policy.

COMPETITION

              The tank truck business is extremely competitive and fragmented.
We compete primarily with other tank truck carriers and private carriers in
various states. 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.

              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.


                                       10
<PAGE>   11

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

              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 $100 million per incident, having no deductible. There is no aggregate limit
on this coverage.

              We currently maintain first dollar workers' compensation insurance
coverage. 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 contain 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 address operations, safety training and procedures, equipment and grounds


                                       11
<PAGE>   12

maintenance, emergency response capabilities, and wastewater management. We 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
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.

              Our wholly-owned subsidiary, Quality Carriers, Inc., 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 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," 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.

              CLC 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



                                       12
<PAGE>   13

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 into 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 we have 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.), 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.

              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 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 40 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


                                       13
<PAGE>   14

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 for liabilities associated with the Helen
Kramer Landfill, CLC's facility at Tonawanda, New York and CLC's former facility
in Putnam County.

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 agencies 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


                                       14
<PAGE>   15

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
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 and
increased maintenance costs of revenue equipment in colder months.

RECENT DEVELOPMENTS

              Effective November 8, 2000, Elton E. Babbitt agreed to sell his
QDI common shares to the Company. These shares will be repurchased in increments
over the 24 month period starting December 15, 2000.

              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.


                                       15
<PAGE>   16


ITEM 2.       PROPERTIES

              As of December 31, 2000, QDI's operating facilities were located
in the following cities:

<TABLE>
<CAPTION>

QCI OPERATED                            QSI                          TPI                           AFFILIATE OPERATED

<S>                                     <C>                          <C>                           <C>
Albany, NY                              Albany, NY **                Chicago, IL **                Alexandria, LA
Appleton, WI                            Atlanta, GA                  Columbus, OH                  Ashtabula, OH
Atlanta, GA **                          Augusta, GA **               East Rutherford, NJ **        Augusta, GA **
Atlanta, GA **                          Barberton, OH **             Essexville, MI **             Augusta, GA **
Augusta, GA **                          Branford, CT **              Greer, SC **                  Austin, MN **
Baton Rouge, LA                         Bridgeport, NJ **            Laredo, TX **                 Barberton, OH **
Branford, CT **                         Channelview, TX              Montreal, Canada **           Baton Rouge, LA
Bridgeport, NJ **                       Charleston, SC **            North Haven, CT               Beaumont, TX
Calvert City, KY **                     Chattanooga, TN **           Palmer, MA **                 Bessemer, AL
Carteret, NJ                            Clute, TX **                 Port Arthur, TX **            Bristol, PA
Castleton, VT                           Friendly, WV **              Saddle Brook, NJ              Chattanooga, TN **
Charleston, SC **                       Garden City, GA              Sarnia, Canada                Chattanooga, TN **
Chesnee, SC **                          Hayward, CA                  South Point, OH               Chesapeake, VA **
Chester, SC **                          Houston, TX **                                             Chesapeake, VA **
Clute, TX **                            Kalamazoo, MI **                                           Columbus, OH
Concord, NC **                          Lansing, IL                                                Custer City, PA
Coteau du Lac, QUE **                   Louisville, KY                                             Danville, IL
Fall River, MA **                       Luling, LA                                                 Dumfries, VA
Follansbee, WV                          Memphis, TN **                                             Fairfield, OH **
Friendly, WV **                         Midland, MI **                                             Fairforest, SC
Geneva, NY                              Newark, NJ **                                              Fayetteville, NC **
Greenup, KY                             Pedricktown, NJ                                            Ft. Worth, TX **
Hayward, CA                             Rahway, NJ                                                 Garden City, GA
Houston, TX **                          Rock Hill, SC **                                           Gary, IN **
Kalamazoo, MI **                        Savannah, GA **                                            Glennmoore, PA
Kelso, WA                               South Gate, CA **                                          Hagerstown, MD
Lansing, IL                             St. Albans, WV                                             Houston, TX **
Ludington, MI **                        St. Gabriel, LA **                                         Jacksonville, FL
Memphis, TN **                          Tonawanda, NY **                                           Joliet, IL **
Mexico                                  Wilmington, NC **                                          Lake Charles, LA
Midland, MI **                                                                                     Lansing, IL
Montreal Canada **                                                                                 Lexington, NC **
Morgantown, WV **                                                                                  Lima, OH
Murdochville, Canada                                                                               Louisville, KY
Nazareth, PA                                                                                       Luling, LA
Newark, NJ **                                                                                      Mediapolis, IA
Oakville, ON                                                                                       Memphis, TN **
Orlando, FL                                                                                        Memphis, TN **
Pedricktown, NJ                                                                                    Narrows, VA **
Pointe-aux Trembles, Canada                                                                        New Castle, DE **
Quebec City, Canada                                                                                New Castle, DE **
Sarnia, Canada                                                                                     New Castle, DE **
South Gate, CA **                                                                                  Niagara Falls, NY
South Point, OH                                                                                    Ostrander, OH **
St. Albans, WV                                                                                     Owensboro, KY
St. Gabriel, LA **                                                                                 Oyster Creek, TX **
Summit, IL **                                                                                      Parker, PA **
Tonawanda, NY **                                                                                   Pasadena, TX
Ville Becancour, Canada **                                                                         Pleasant Prairie, WI **
Walbridge, OH                                                                                      Roanoke, VA
Waterford, NY                                                                                      St. Gabriel, LA **
Whistler, AL **                                                                                    St. Louis, MO
                                                                                                   Tampa, FL
                                                                                                   Triadelphia, WV
                                                                                                   Tucker, GA
                                                                                                   Williamsport, PA**
                                                                                                   Wilmington, NC**
</TABLE>


**       Indicates the terminal is owned by the company


                                       16
<PAGE>   17

              In August 1996, we entered into a modified affiliate relationship
with Transportes Especializados Antonio de la Torre e Hijos, S.A. de C.V. and
operates from its two terminals in Guadalajara and Mexico City, Mexico.

              In addition to the properties listed above, we also own property
in Macomb, Mississippi; Atwater, OH; Security, MD; Croydon, PA; Syracuse, NY;
Hartford, WI; a tank wash facility in Philadelphia, PA and a jointly owned
3-acre vacant land parcel in Ruskin, Florida.

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

Item 2.       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 3.       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 4.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS

              There is no established public trading market for our common
equity.

Item 5.       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 financial information set forth below for and as
of each of the years in the five-year period ended December 31, 2000 has been
derived from our audited consolidated financial statements.


                                       17
<PAGE>   18


<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                           -------------------------------------------------------------------------
                                              1996            1997            1998            1999            2000
                                           ---------       ---------       ---------       ---------       ---------
                                                                     (dollars in thousands)
<S>                                        <C>             <C>             <C>             <C>             <C>
INCOME STATEMENT DATA

Operating revenues                         $ 235,599       $ 286,047       $ 397,738       $ 586,807       $ 570,785
                                           ---------       ---------       ---------       ---------       ---------

Costs and expenses:
Operating expenses, excluding
     depreciation and amortization           203,487         247,619         343,451         505,520         504,091
Option expense                                    --              --          14,678              --              --
Depreciation and amortization                 13,892          17,335          31,043          62,284          37,044
Interest expense, net                          3,494           3,175          19,791          40,452          40,236
Other expenses (income)                         (214)             39            (164)           (134)            (24)
                                           ---------       ---------       ---------       ---------       ---------

Total costs and expenses                     220,659         268,168         408,799       $ 608,122       $ 581,347
                                           ---------       ---------       ---------       ---------       ---------

Income (loss) before taxes                    14,940          17,879         (11,061)        (21,315)        (10,562)
Provision (benefit) for income taxes           6,103           7,396          (4,047)         (5,906)         31,225
Minority interest                                 --              --             (74)            (21)             --
                                           ---------       ---------       ---------       ---------       ---------

Net income (loss) before
     Extraordinary item                    $   8,837       $  10,483       $  (7,088)      $ (15,430)      $ (41,787)
                                           =========       =========       =========       =========       =========

OTHER DATA
Net cash provided by
     Operating activities                  $  22,304       $  33,832       $  16,596       $   9,169       $  38,192
Net cash used in investing activities        (21,780)        (31,690)       (289,275)         (8,875)        (18,721)
Net cash (used in) provided by
     Financing activities                       (135)         (1,503)        271,413             634         (17,081)
Ratio of earnings to fixed charges              4.1x            4.8x            n.a.            n.a.             n.a.
EBITDA(1,2,3)                                 32,112          38,428          39,609          81,288          66,693
EBITDA without adjustments (1,2)              32,112          38,428          54,287          81,288          76,636
Total assets                               $ 173,604       $ 194,036       $ 583,246       $ 542,241       $ 453,073
Capital expenditures                          20,577          35,121          29,765          25,727          23,079
Number of terminals at end of
     Period                                       70              80             194             171             152
Number of trailers operated at end
     of period                                 3,728           4,148           8,003           7,625           7,526
Number of tractors operated at end
     of period                                 1,649           1,915           3,679           3,943           3,491

CONSOLIDATED BALANCE SHEET DATA
     AT PERIOD END:
Long-term obligations, including
     Current portion                          57,329          55,098         441,331         434,156         416,939
Stockholders' equity (deficit)                68,913          79,532         (48,320)        (64,773)       (110,866)
</TABLE>

                  (1)      During the year ended December 31, 1998, we incurred
                           a non-recurring expense related to the purchase of
                           options of our stock in connection with the QDI
                           Transactions. Excluding this expense, EBITDA would
                           have been $54.3 million for the year ended December
                           31, 1998.

                  (2)      During the year ended December 31, 2000, we incurred
                           non-recurring charges of $6.7 million related to the
                           prior operations of Chemical Leaman Corp., and $3.2
                           million of restructuring charges for severance and
                           benefits as part of overall cost reduction efforts.
                           Excluding these non-recurring charges EDITDA would
                           have been $76.6 million for the year ended December
                           31, 2000.

                  (3)      EBITDA represents earnings before extraordinary
                           items, net interest expense, income taxes,
                           depreciation and amortization, minority interest
                           expense and other operating 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


                                       18
<PAGE>   19

                           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. 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.

Item 6.       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 our acquisition of CLC in August 1998, 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.


                                       19
<PAGE>   20


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31,1999

              Revenues for 2000 were $570.8 million, a decrease of $16 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 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 non-recurring
charge related to the prior operation of CLC of $6.7 million. Absent these
charges operating expenses would have been $494.2 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 $2.4
million increase in Company fuel expense due to higher prices and higher waste
removal charges at our tankwash facilities ($.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 Chemical Leaman Corp. 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 non-recurring ($20.1 million) charge in accelerated


                                       20
<PAGE>   21

depreciation charges to write-off acquired software no longer being used in the
business at 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 non-recurring charge for the
operation of Chemical Leaman Corp. ($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
non-recurring 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 $30.9 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 non-recurring charges in 2000.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

              Revenues for 1999 were $586.8 million, an increase of $189.1
million or 47.5% over 1998 revenues. The increase in revenues is due to the
inclusion of CLC revenues for the full year 1999 compared to only four months
during 1998. On a comparable basis, adjusting for the sale of Leaman Logistics
in 1999, both load counts and revenue were lower during 1999 than 1998 primarily
due to strong rail related revenue in 1998 and the company's decision to exit
certain marginally profitable business during the integration process. The
company's best estimate is that this has resulted in transportation revenues
being approximately $30 million lower during 1999 than 1998. During 1999,
transportation revenues accounted for approximately 89% of revenues while
supplementary services such as tank cleaning, leasing, freight brokerage and
other services accounted for approximately 11% of revenue.

              We operated 171 terminals at December 31, 1999 compared to 194
terminals at December 31, 1998. The reduction in the number of terminals is the
result of the integration of CLC transportation subsidiaries Fleet Transport and
Chemical Leaman Tank Lines and the elimination of redundant facilities during
1999. We also operated a total of 7,625 trailers at year-end 1999 compared to
8,003 at year-end 1998. The company also operated a tractor fleet totaling 3,943
units at year-end 1999 compared to 3,488 at year-end 1998.

              Operating expenses, excluding depreciation and amortization
totaled $505.5 million or 86.2% of revenue in 1999 compared to $358.1 million or
90.0% of revenue in 1998. The improvement in operating expense levels was more
than offset by increases in depreciation and interest expense discussed below.
The increase in operating cost of $147.4 million or 41.2% compared to 1998 was
due


                                       21
<PAGE>   22

to the inclusion of CLC results for the full year 1999 compared to only four
months during 1998.

              Depreciation and amortization expense totaled $62.3 million during
1999 compared to $31.0 million for 1998. The increase during 1999 is
attributable to the inclusion of depreciation and goodwill amortization
associated with the CLC transaction for the full year 1999 versus four months of
1998. Additionally, we took $20.1 million in accelerated depreciation charges in
1999 to write-off acquired software no longer being used in the business at 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 96.8% of revenue in 1999 compared to
97.9% of revenue in 1998. During 1998, we recorded $14.7 million of option
related expense associated with the QDI and CLC transactions. During 1999, we
wrote off acquired software and changed the useful life of certain revenue
equipment as described above. Absent these one-time items in 1998 and 1999,
operating expenses would have totaled $547.7 million, or 93.3% of operating
revenues in 1999 compared to $374.5 million or 94.2% of revenue in 1998.

              Interest expense increased to $40.6 million during 1999 compared
to $19.8 million in 1998 as a result of higher average debt balances during 1999
compared with 1998. The additional debt was incurred in connection with both the
QDI and CLC Transactions.

              An income tax benefit of $5.9 million was recorded in 1999,
compared to income tax benefit of $4.0 million recorded in the same period in
1998. This resulted from the pre-tax loss of $21.3 million in 1999 compared to
pre-tax loss of $11.1 million in 1998.

              Our net loss was $15.4 million, compared to a net loss of $10.2
million in 1998. This increased loss of $5.2 million was largely attributable to
the additional depreciation expense in 1999 compared to 1998 as well as a full
year of interest expense relating to the CLC acquisition during 1999 compared to
only four months inclusion during 1998.

LIQUIDITY AND CAPITAL RESOURCES

              Our primary source of liquidity is cash flow from operations and
availability under our credit agreement. We generated $16.6 million, $9.2
million and $38.2 million from operating activities in 1998, 1999 and 2000,
respectively. The increase in cash provided by operating activities in 2000
reflects the decrease of accounts and insurance receivables during 2000 offset
by the payment of severance and termination expenses related to the CLC
Transactions during 1999 and payment of environmental liabilities. As of
December 31, 2000 we had $67 million available under our current $75 million
credit facility.

              Capital expenditures totaled $29.8 million, $25.7 million and
$23.1 million in 1998, 1999 and 2000 respectively. As of December 31, 2000 the
Company is committed to purchase the balance of the Mack Tractor order of $4.7
million.

              Net cash used in investing activities in 1998, 1999 and 2000 was
$289.3 million, $8.9 million, and $18.7 million respectively. The large increase
in cash used in investing activities in 1998 was a result of the CLC
acquisition. Net cash used in investing activities during 1999 included capital
expenditures


                                       22
<PAGE>   23

offset by proceeds from the sale of Leaman Logistics and sale of property and
equipment. The year 2000 consisted of capital expenditures net of asset
dispositions only.

              Net cash used in financing activities was $17.1 million as a
result of paying down our debt in 2000. Net cash provided by financing
activities was $271.4 million in 1998 while net cash provided by financing
activities in 1999 was $.6 million. The large increase in financing activity in
1998 was due to the issuance of debt related to the QDI Transactions and the CLC
Transactions. 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 June 1998, we underwent a recapitalization, which provided the
necessary capital resources to support future growth opportunities. In August
1998, we completed the acquisition of CLC. After giving effect to the QDI
Transactions and CLC Transactions, we are capitalized with $140.0 million
principal amount of notes, a $360.0 million new credit agreement, $68.0 million
in equity investments by Apollo and affiliates of two of the initial purchasers
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 new 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 and a $75.0 million revolving credit facility
available until June 9, 2004. On December 31, 2000 QDI's long term debt,
including current maturities was $416.9 Million.

              Our primary cash needs consist of capital expenditures and debt
service. We incur capital expenditures for the purpose of maintaining our fleet
of owned tractors and trailers, 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. Following the CLC merger, 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 agreements include financial covenants which require
minimum or maximum ratios to be maintained. As of December 31, 2000, no default
existed relative to these covenants. 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.

              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


                                       23
<PAGE>   24

required payments of principal and interest on our debt, including obligations
under our credit agreement.

FORWARD-LOOKING STATEMENTS

              Some of the statements contained in this report discuss future
expectations, contain projections or results of operation or financial condition
or state other "forward-looking" information. Those 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.

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 both statements of historical fact and
forward-looking statements. 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. The cautionary
statements set forth below discuss important factors that could cause actual
results to differ materially from any forward-looking statements.

              Substantial Leverage- The company is highly leveraged which may
impede both its ability to obtain future financing and make it more vulnerable
to economic downturns.

              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, operating and maintaining equipment could have a
material adverse 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 truckload services. A
determination by regulatory authorities that the Company violated applicable


                                       24
<PAGE>   25

laws or regulations could materially adversely affect the Company's business and
operating results.

              Environmental Risk Factors- The Company has material exposure to
the 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 affect on the
Company. See Environmental Matters for a discussion of the risks to which the
Company is exposed within the current environmental and regulatory environment.

              Claims Exposure- The Company currently maintains liability
insurance for bodily injury and property damage claims and worker's compensation
insurance coverage on its employees and company drivers. 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 in increased freight rates, increases in
insurance cost could reduce the Company's future profitability.


                                       25
<PAGE>   26

Item 7.       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).

<TABLE>
<CAPTION>
                                                      1st Qtr           2nd Qtr           3rd Qtr           4th Qtr
                                                     ---------         ---------         ---------         ---------
2000

<S>                                                  <C>               <C>               <C>               <C>
Operating revenues                                   $ 148,572         $ 149,789         $ 141,961         $ 130,463
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)             (.12)            (3.07)           (18.11)

1999

Operating revenues                                   $ 144,513         $ 146,911         $ 149,256         $ 146,127
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)

1998

Operating revenues                                   $  72,379         $  76,243         $ 106,843         $ 142,273
Operating income or (loss)                               5,354            (7,408)            5,282             5,338
Income or (loss) before taxes                            4,593            (9,936)           (1,302)           (4,416)
Net income or (loss) attributable to
common stockholders                                      2,709            (6,416)           (3,397)           (3,642)
Diluted net income or (loss) per common share             0.57             (1.67)            (1.84)            (1.82)
</TABLE>

              Fluctuations in the second, third and fourth quarters of 1998 are
primarily due to our recapitalization on June 9, 1998 and acquisition of CLC on
August 28, 1998. The fourth quarter 2000 includes the charge to income tax
expense resulting from the establishment of the tax asset valuation reserve.
Additionally, the third quarter of 2000 contains a non-recurring charge of $2.1
million and the fourth quarter of 2000 contains non-recurring charges totaling
$7.8 million.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivatives

              We utilize derivative financial instruments to reduce our 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 us are designated
as hedges and accordingly, the gains and losses from changes in derivative fair
values are deferred. 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 $316 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. At December 31, 2000 and 1999, we had interest rate
swaps with a notional amount of $65 million and $100 million. The notional
amounts do not represent a measure of exposure of the Company. The Company will
pay the counterparties interest at a fixed rate ranging from 5.41% to 5.48%, and
the counterparties will pay the Company interest at a variable rate equal to
LIBOR. The LIBOR rate applicable to these agreements at December 31, 1999 was
5.51% and at December 31, 2000 was 6.715%. These agreements mature and renew
every three months and expire on September 2, 2001. A 10% fluctuation in
interest rates would have a $2.5 million impact net of interest rate swap
agreements, on future annual earnings.

              We have entered into short-term foreign currency agreements to
exchange US dollars (US $6.0 million) for Canadian dollars (CN $8.9 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 rates ranging from 1.47 to 1.48, and as such the market risk based upon
a 10% fluctuation in the exchange rate is immaterial.

              On February 26, 2001, we entered into new swap agreements on $30
million and $100 million of our 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 rate 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, we entered into a new swap agreement on $30
million of our 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.
These agreements mature and renew every three months and mature on September 22,
2002.

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

              None.

                                       26
<PAGE>   27
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, 2000:

<TABLE>
<CAPTION>
NAME                                 AGE        POSITION WITH QDI
--------------------------------     ------     -------------------------------------------------
<S>                                  <C>        <C>
Charles J. O'Brien                   62         Director, Chairman of the Board
Thomas L. Finkbiner                  48         Director, President, Chief Executive Officer
Dennis R. Farnsworth                 48         Senior Vice President and Chief Financial Officer
Doug B. Allen                        48         Senior Vice President and Chief Operating Officer
Bo T. Leslie                         45         Senior Vice President Sales and Marketing
Keith J. Margelowsky                 45         Senior Vice President of Performance Planning
Michael A. Grimm                     53         Executive Vice President - Affiliate Relations
Richard J. Brandewie                 46         Director, Executive Vice President
Joshua J. Harris                     35         Director
Michael D. Weiner                    47         Director
Robert A. Katz                       33         Director
Marc J. Rowan                        37         Director
John H. Kissick                      57         Director
Philip J. Ringo                      57         Director
Marc E. Becker                       28         Director
Donald C. Orris                      59         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
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.

         THOMAS L. FINKBINER has been employed by QDI since November 1999 as its
President and Chief Executive Officer. 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.

         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 July 1996 until April 2000. Prior to these
positions he held various senior financial positions at Union Pacific
Corporation subsidiaries from 1974 until 1996.


                                       27
<PAGE>   28

         DOUG B. ALLEN joined QCI in December 2000 as Senior Vice President -
Operations and COO. 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.

         BO 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 lead 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.

         RICHARD J. BRANDEWIE has been employed by QDI as Chief Financial
Officer and Treasurer from 1992 through 1996. He was then appointed Senior Vice
President of Finance and most recently Executive Vice President in 2000. He
served as a director of QDI from 1988 to now. Prior to joining QDI, he served as
a General Partner of South Atlantic Venture Fund I & II, Limited Partnerships
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. Prior to his venture capital experience, he served as an
accountant and financial analyst for the Ford Motor Company from 1977 to 1979.

         JOSHUA J. HARRIS is a principal of Apollo and has served as a Vice
President of Apollo Management and Apollo Advisors, LP, an affiliated investment
manager ("Apollo Advisors"), 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, and Clark Retail Enterprises. 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 Apollo Advisors, 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, Continental Graphics Holdings, Inc. and Florsheim Group Inc. Mr.
Weiner became a director of QDI in June 1998.


                                       28
<PAGE>   29

         ROBERT A. KATZ is a principal of Apollo and has served as a Vice
President of Apollo Management and Apollo Advisors 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., Clark Retail Enterprises and
Horizon PCS. 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 Apollo Advisors 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., National Financial Partners Corporation, Rare Medium Group,
Inc., Samsonite Corporation, Wydham International and NRT, Incorporated. Mr.
Rowan became a director of QDI in June 1998.

         JOHN H. KISSICK is a principal of Apollo and has served as a Vice
President of Apollo Management and Apollo Advisors since 1991. 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 Burnham Lambert Incorporated, where he began work in 1975,
heading its Corporate Finance and High Yield Bond Departments. Mr. Kissick is
also a director Continental Graphics Holdings Inc., and Florsheim Group, Inc.
Mr. Kissick became a director in June 1998.

         PHILIP J. RINGO is President and Chief Operating Officer of ChemConnect
which he joined during 1999. He joined QDI in 1998 following the CLC merger, at
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.

         MARC E. BECKER has been associated with Apollo 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 QDI.

         DONALD C. ORRIS has been Chairman, President and Chief Executive
Officer of Pacer International 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.



                                       29
<PAGE>   30
Item 10. EXECUTIVE COMPENSATION

         The following table sets forth the total compensation paid by us for
services rendered during the year ended December 31, 2000, by our Chief
Executive Officer and four most highly compensated officers.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                     LONG-TERM
                                                                                    COMPENSATION
                                                      ANNUAL                         SECURITIES
                                                   COMPENSATION                      UNDERLYING
NAME AND PRINCIPAL POSITION            YEAR           SALARY           BONUS           OPTIONS         COMP. (3)
---------------------------            ----        ------------        -----       --------------       ---------
<S>                                    <C>         <C>               <C>           <C>                  <C>
Thomas L. Finkbiner                     2000          260,000           75,000            --                7,826
President and Chief Executive           1999           25,638(1)                      25,000
Officer

Richard J. Brandewie                    2000         150,500           340,000            --               10,500
Executive Vice President                1999         201,858            19,464                              4,800
                                        1998         178,555           116,002        22,000            3,903,829(2)

Dennis R. Copeland                      2000         145,000            20,700            --                5,102
Vice President, Administration          1999         174,192            98,174            --                4,800

Robert E. Johnson                       2000         150,000            47,500            --                5,268
President, TPI

Leon F. Palmer                          2000         139,400            82,700            --                6,738
Vice President, Operations
</TABLE>


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

(2)      Amounts shown in other primarily represent payments for cancellation of
         stock options in the QDI transaction.

(3)      Amounts shown represent employer contributions to the profit sharing
         and 401(k) plans.

         We maintain various employee benefit 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 $2,000 per meeting effective January 1, 2000. Additionally, both
outside directors received 2,000 options each.

OPTION GRANTS IN LAST FISCAL YEAR

         No options were granted to named Executive Officers in 2000.



                                       30
<PAGE>   31
YEAR-END OPTION VALUES

              The following sets forth information concerning the value of stock
options in 2000.

<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              3,125              21,875               0                   0
Richard J. Brandewie             5,500               5,500               0                   0
Dennis R. Copeland               1,000               3,000               0                   0
Robert E. Johnson                1,000               3,000               0                   0
Leon F. Palmer                   1,000               3,000               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 contract
includes an option to purchase 25,000 shares and a $75,000 signing bonus. The
employment agreement provides for a two-year term of service, with an automatic
one-year extension on each anniversary date, unless QDI or the executive officer
gives notice that the term will not be so extended.

         The employment agreements also 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, such executive 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. In addition, the employment
agreement grants options to purchase 22,000 shares of QDI common stock under the
new stock option plan.

         Effective December 31, 1999 QDI and Charles J. O'Brien, Jr. modified
his current agreement to provide that Mr. O'Brien's title would change to
Chairman of the Board with a base salary of $100,000 per year through December
31, 2001 subject to the terms of his previous agreement. His bonus incentives
remain unchanged, however, he has returned 8,250 of his 22,000 stock options to
the company.

         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

                                       31
<PAGE>   32
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
                  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 Effective Time, 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 Elton E. Babbitt and Gordon
Babbitt, a shareholder holding an 3.3% 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 Time, 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

                                       32
<PAGE>   33

covenant not to compete. Gordon Babbitt has 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 Time with respect to Elton E. Babbitt,
and for a period of three years from the Effective Time with respect to Gordon
Babbitt, not to request, induce, attempt to influence or have any other business
contact with

         (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;

         (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.


                                       33
<PAGE>   34

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, 2000, by each
person known by us to be a beneficial owner of more than 5.0% of the outstanding
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)                                                 40,541                         2.0%
Charles J. O'Brien, Jr. (1)                                              30,239                         1.5%
Marvin Sexton (1)                                                        35,135                         1.7%
Thomas L. Finkbiner (1)                                                  25,000                         1.2%
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)
Philip J. Ringo (1)                                                       4,000                           *
Denny R. Copeland (1)                                                     4,000                           *
All executive officers and directors                                    138,915                         6.9%
as a group (12 persons)
Apollo Investment Fund III, L.P. (4)                                  1,714,470                        84.9%
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,
         Palmer, Johnson and Copeland is Quality Distribution, Inc., 3802
         Corporex Park Drive, Tampa, FL 33619 and the business address for Mr.
         Ringo is ChemConnect, 44 Montgomery Street, Suite 250 San Francisco, CA
         94104.

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

(3)      Messrs. Harris, Weiner, Katz, Rowan and Kissick are each principals and
         officers of certain affiliates of Apollo. Although each of Messrs.
         Harris, Weiner, Katz, Rowan 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.

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

                                       34
<PAGE>   35

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 1999 and 2000.

         On December 15, 1998, we sold our corporate headquarters and the
adjoining trailer manufacturing facility to a former shareholder for
approximately $.75 million. We purchased tank trailers for $4,442,000 in 1998
from a tank trailer manufacturing company owned by the former shareholder. Also,
the related company provided repair, maintenance, design, engineering,
transloading, intermodal and other services to the Company totaling $367,000
during the year ended December 31, 1998. The former shareholder ceased to be a
related party or director in 1999.

         An executive of the Company owns a minority interest in a firm that
provides services to the Company. Total amounts charged to the Company by the
firm during 2000 were $344 ($268 during 1999).

         For a description of certain management and other agreements in
connection with the QDI Transactions and the CLC Transactions, see Item 11.





                                       35
<PAGE>   36
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      Financial Statements

(b)      Financial Statements Schedules

(c)      Exhibits




                                       36
<PAGE>   37
                  QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

                               TABLE OF CONTENTS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                         PAGE(S)
<S>                                                                      <C>
Report of Independent Certified Public Accountants
     for the two years ended December 31, 2000                              F-2

Consolidated Balance Sheets as of December 31, 1999 and 2000                F-3

Consolidated Statements of Operations for the years ended
     December 31, 1998, 1999 and 2000                                       F-4

Consolidated Statements of Stockholders' Equity and Comprehensive
     Income for the years ended December 31, 1998, 1999 and 2000            F-5

Consolidated Statements of Cash Flows for the years ended
     December 31, 1998, 1999 and 2000                           F-6 through F-7

     Notes to Consolidated Financial Statements                F-8 through F-37
</TABLE>


                                      F-1
<PAGE>   38
               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' equity and comprehensive
income and of cash flows present fairly, in all material respects, the financial
position of Quality Distribution, Inc. and its subsidiaries at December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States 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 the opinion expressed above.


/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Tampa, Florida
March 21, 2001








                                      F-2
<PAGE>   39


QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 2000 (IN 000'S)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                         1999                2000
                                                                       ---------           --------
<S>                                                                    <C>                <C>
ASSETS
Current assets:
    Cash and cash equivalents                                          $   1,050          $   2,636
    Accounts receivable, net                                             116,100             94,755
    Current maturities of other receivables                                2,159                518
    Inventories                                                            1,763              1,786
    Prepaid expenses                                                      11,053              7,391
    Prepaid tires                                                          9,279              8,156
    Income tax recoverable                                                   354                350
    Deferred income taxes                                                 15,214                 --
    Other                                                                    689                650
                                                                       ---------           --------
      Total current assets                                               157,661            116,242

Property and equipment, net                                              188,757            175,516
Goodwill, net                                                            158,414            153,668
Insurance and other environmental receivables                             11,403                 --
Deferred income taxes                                                     14,127                 --
Other assets                                                              11,879              7,647
                                                                       ---------           --------
                                                                       $ 542,241          $ 453,073
                                                                       =========          =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
    Current maturities of indebtedness                                  $  3,026          $   3,619
    Accounts payable                                                      18,272             16,443
    Affiliates and independent owner-operators payable                     8,191              7,563
    Accrued expenses                                                      58,849             50,654
    Income taxes payable                                                     854                834
                                                                       ---------          ---------
      Total current liabilities                                           89,192             79,113

Long-term indebtedness, less current maturities                          431,130            413,320
Environmental liabilities                                                 49,346             39,873
Other noncurrent liabilities                                              19,265             10,926
Deferred tax                                                                  --              1,182
                                                                       ---------          ---------
      Total liabilities                                                  588,933            544,414
                                                                       ---------          ---------

Mandatorily redeemable common stock (30 shares)                            1,210              1,210
                                                                       ---------          ---------
Mandatorily redeemable preferred stock                                    12,077             13,882
                                                                       ---------          ---------
Minority interest in subsidiary                                            4,794              4,433
                                                                       ---------          ---------

Commitments and contingencies (Note 13)

Stockholders' equity (deficit):
    Common stock, $.01 par value; 15,000 shares authorized                    20                 20
    Additional paid-in capital                                           104,915            105,656
    Treasury stock                                                            --                (32)
    Retained earnings (deficit)                                           21,320            (22,212)
    Stock recapitalization                                              (189,589)          (189,589)
    Other comprehensive loss                                                (177)            (2,823)
    Notes receivable                                                      (1,262)            (1,886)
                                                                       ---------          ---------
      Total stockholders' equity (deficit)                               (64,773)          (110,866)
                                                                       ---------          ---------
                                                                       $ 542,241          $ 453,073
                                                                       =========          =========
</TABLE>

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


                                      F-3
<PAGE>   40
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                               1998             1999               2000
                                                            ---------         ---------         ---------
<S>                                                         <C>               <C>               <C>
OPERATING REVENUES:
    Transportation                                          $ 355,022         $ 521,746         $ 506,048
    Other                                                      42,716            65,061            64,737
                                                            ---------         ---------         ---------
      Total operating revenues                                397,738           586,807           570,785
                                                            ---------         ---------         ---------
OPERATING EXPENSES:
    Purchased transportation                                  225,633           321,219           322,596
    Compensation                                               54,678            92,378            80,296
    CLC integration-nonrecurring                                   --                --             6,740
    Restructuring charge                                           --                --             3,195
    Option expense                                             14,678                --                --
    Fuel, supplies and maintenance                             35,908            50,561            51,815
    Depreciation and amortization                              31,043            42,212            37,044
    Depreciation-nonrecurring                                      --            20,072                --
    Selling and administrative                                 10,865            19,885            18,133
    Insurance claims                                            7,185             6,803             8,320
    Taxes and licenses                                          3,437             4,752             4,986
    Communication and utilities                                 4,758            10,012             8,467
    (Gain) loss on sale of property and equipment                 987               (90)             (457)
                                                            ---------         ---------         ---------
      Total operating expenses                                389,172           567,804           541,135
                                                            ---------         ---------         ---------

Net operating income                                            8,566            19,003            29,650
Interest expense, net                                         (19,791)          (40,452)          (40,236)
Other income                                                      164               134                24
                                                            ---------         ---------         ---------

Loss before provision for income taxes                        (11,061)          (21,315)          (10,562)
Benefit (provision) for income taxes                            4,047             5,906           (31,225)
Minority interest                                                 (74)              (21)               --
                                                            ---------         ---------         ---------

Loss before extraordinary item                                 (7,088)          (15,430)          (41,787)
Extraordinary item, net of taxes of $1,643                     (3,077)               --                --
                                                            ---------         ---------         ---------

Net Loss                                                      (10,165)          (15,430)          (41,787)
Preferred stock dividends and accretions                         (581)           (1,444)           (1,745)
                                                            ---------         ---------         ---------

Net Loss attributable to common stockholders                $ (10,746)        $ (16,874)        $ (43,532)
                                                            =========         =========         =========
PER SHARE DATA:
    Basic:
      Net Loss before extraordinary item                    $   (2.41)        $   (8.37)        $  (21.59)
      Extraordinary item                                         (.97)               --                --
                                                            ---------         ---------         ---------
      Net Loss attributable to common stockholders          $   (3.38)        $   (8.37)        $  (21.59)
                                                            =========         =========         =========

    Diluted:
      Net income before extraordinary item                  $   (2.41)        $   (8.37)        $  (21.59)
      Extraordinary item                                         (.97)               --                --
                                                            ---------         ---------         ---------
      Net Loss attributable to common stockholders          $   (3.38)        $   (8.37)        $  (21.59)
                                                            =========         =========         =========

    Weighted average number of common shares - basic            3,178             2,015             2,016
    Weighted average number of common equivalent
        shares - diluted                                        3,178             2,015             2,016
</TABLE>


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


                                      F-4
<PAGE>   41
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND
COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                                                         TOTAL
                                                                                                             STOCK       STOCK-
                           COMPREHENSIVE                   ADDITIONAL               STOCK        OTHER       SUB-       HOLDERS'
                              INCOME     COMMON  TREASURY   PAID-IN    RETAINED   RECAPITAL- COMPREHENSIVE SCRIPTION     EQUITY
                               (LOSS)    STOCK    STOCK     CAPITAL    EARNINGS    IZATION       LOSS      RECEIVABLE   (DEFICIT)
                           ------------- ------- --------  ----------  --------   ---------- ------------- ----------   ---------
<S>                        <C>           <C>     <C>      <C>          <C>        <C>        <C>           <C>        <C>
Balance, December 31, 1997   $     --    $ 45    $  --    $  30,459    $ 49,241    $      --    $  (213)   $    --    $  79,532

Recapitalization of
    common stock                   --     (28)      --       62,333          --     (188,379)        --     (1,398)    (127,472)
Mandatorily
    Redeemable
    common stock                   --      --       --           --          --       (1,210)        --         --       (1,210)
Issuance of common
    stock                          --       3       --       12,015          --           --         --         --       12,018
Net loss                     $(10,165)     --       --           --     (10,165)          --         --         --      (10,165)
Preferred stock
    accretion                      --      --       --           --        (581)          --         --         --         (581)
Translation
    adjustment                   (442)     --       --           --          --           --       (442)        --         (442)
Net loss                     $(15,430)     --       --           --     (15,430)          --         --         --      (15,430)
                             --------    ----    -----    ---------    --------    ---------    -------    -------    ---------
Balance, December 31, 1998   $(10,607)     20       --      104,807      38,495     (189,589)      (655)    (1,398)     (48,320)
Issuance of common
    stock, net                     --               --          108          --           --         --         --          108
Stock subscription
    receipts                       --               --           --          --           --         --        136          136
Preferred stock
    accretion                      --               --           --      (1,444)          --         --         --       (1,444)
Minority stock
    dividend                       --               --           --        (301)          --         --         --         (301)
Translation
    Adjustment                    478               --           --          --           --        478         --          478
Net loss                     $(41,787)     --       --           --     (41,787)          --         --         --      (41,787)
                             --------    ----    -----    ---------    --------    ---------    -------    -------    ---------
Balance, December 31, 1999   $(14,952)     20       --      104,915      21,320     (189,589)      (177)    (1,262)     (64,773
Issuance of common
    stock, net                     --      --       --          741          --           --         --         --          741
Stock subscription                 --      --       --           --          --           --         --       (624)        (624)
Treasury stock                     --      --      (32)          --          --           --         --         --          (32)
Preferred stock
    Accretion                      --      --       --           --      (1,444)          --         --         --       (1,444)
Minority stock
    Dividend                       --      --       --           --        (301)          --         --         --         (301)
Pension plan minimum
    Liability                  (2,072)     --       --           --          --           --     (2,072)        --       (2,072)
Translation adjustment           (574)     --       --           --          --           --       (574)        --         (574)
                             --------    ----    -----    ---------    --------    ---------    -------    -------    ---------
Balance, December 31, 2000   $(44,433)   $ 20    $ (32)   $ 105,656    $(22,212)   $(189,589)   $(2,823)   $(1,886)   $(110,866)
                             ========    ====    =====    =========    ========    =========    =======    =======    =========
</TABLE>



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


                                      F-5
<PAGE>   42



QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                           1998              1999             2000
                                                                       ---------           --------           --------
<S>                                                                    <C>                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                           $ (10,165)          $(15,430)          $(41,787)
    Adjustments to reconcile to net cash and cash
        equivalents provided by operating activities:
      Deferred income taxes                                               (5,230)             2,439             30,523
      Depreciation and amortization                                       31,043             62,284             37,044
      Extraordinary item, net of taxes                                     3,077                 --                 --
      Equity in income from investments                                       (5)                22                 --
      (Gain) loss on sale of property and equipment                          987                (90)              (457)
      Minority interest                                                       74                 21                 --
      Changes in assets and liabilities:
        (Increase) decrease in accounts and other receivables              2,672            (12,165)            35,105
        (Increase) decrease in inventories                                   (43)               238                (23)
        (Increase) decrease in prepaid expenses                           (1,951)            (3,303)             3,662
        (Decrease) in prepaid tires                                         (123)            (2,928)             1,123
        (Increase) decrease in other assets                              (16,937)             5,593              1,978
        Increase (decrease) in accounts payable and accrued
             expenses                                                      6,251            (17,591)           (12,016)
        Increase (decrease) in affiliates and independent
             owner-operators payable                                      (1,092)              (148)              (629)
        Increase (decrease) in other liabilities                           7,290            (13,668)           (16,315)
        Change in current income taxes                                       748              3,895                (16)
                                                                       ---------           --------           --------
           Net cash and cash equivalents provided by
               operating activities                                       16,596              9,169             38,192
                                                                       ---------           --------           --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                 (29,765)           (25,727)           (23,079)
    Acquisition of businesses, net of cash received                     (264,016)                --                 --
    Proceeds from sale of subsidiary                                          --              9,251                 --
    Proceeds from sales of property and equipment                          4,506              7,601              4,358
                                                                       ---------           --------           --------
           Net cash and cash equivalents used in
               investing activities                                     (289,275)            (8,875)           (18,721)
                                                                       ---------           --------           --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of long-term debt and capital
         lease obligations                                               442,807              1,589                 --
    Principal payments on long-term debt and capital
        lease obligations                                                (57,177)            (8,764)           (17,218)
    Restricted cash released                                                  --              7,867                 --
    Stock transactions                                                    74,323                243                438
    Cash dividend                                                             --               (301)              (301)
    Recapitalization expenditures, net                                  (188,379)                --                 --
    Distribution to minority interest                                       (161)                --                 --
                                                                       ---------           --------           --------
           Net cash and cash equivalents provided by
               (used in) financing activities                            271,413                634            (17,081)
                                                                       ---------           --------           --------
Net (decrease) increase in cash and cash equivalents                      (1,266)               928              2,390
Effect of translation adjustment on cash                                     (26)                37               (804)
Cash and cash equivalents, beginning of year                               1,377                 85              1,050
                                                                       ---------           --------           --------
Cash and cash equivalents, end of year                                 $      85           $  1,050           $  2,636
                                                                       =========           ========           ========
</TABLE>



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


                                      F-6
<PAGE>   43



QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       1998              1999           2000
                                                                      ----              ----           ----
<S>                                                                 <C>              <C>                <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
      Interest                                                      $24,600          $ 38,450           $39,412
      Income taxes                                                  $ 2,056          $    992           $   637

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
    Preferred shares issued in connection with acquisition          $15,500          $ (5,000)               --
    Accretion of dividends on preferred stock                       $   581          $  1,444             1,444
    Future payouts related to purchase volume contract
      and non compete agreement related to an
      acquisition of a business                                     $    --          $  2,231                --
</TABLE>


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


                                      F-7
<PAGE>   44


QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

1.       BUSINESS ORGANIZATION

         NATURE OF OPERATIONS

         Quality Distribution, Inc. and subsidiaries (the "Company" or "QDI",
         formerly MTL, Inc.) is engaged primarily in truckload transportation of
         bulk liquids in North America. The Company conducts a significant
         portion of its business through a network of 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 equipment (including debt
         service), fuel and other operating costs. Independent 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 independent 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 independent owner-operators
         are generally paid 85 percent and 63 percent, respectively, of the
         revenues generated for each load hauled.

         RECAPITALIZATION

         On June 9, 1998, the Company completed a recapitalization with Sombrero
         Acquisition Corporation ("Sombrero"), an affiliate of Apollo
         Management, L.P. ("Apollo"), pursuant to which Sombrero merged with and
         into the Company. According to the terms of the merger agreement, the
         stockholders of the Company (other than certain management
         shareholders) received $40.00 per share in cash. The total transaction
         value was approximately $250 million, including payment for outstanding
         stock options and payment of approximately $51 million in debt. As a
         result of the recapitalization, Apollo (through three affiliated
         limited partnerships) controls approximately 85% of the common stock
         outstanding.

         The transaction was accounted for as a leveraged recapitalization.
         Recapitalization expenditures charged to equity were $189.6 million.
         $140.0 million of senior subordinated debt was used to finance the
         acquisition along with $60.0 million of senior secured bank debt.

         The following table is intended to show the sources and uses of funds
         for the recapitalization (dollars in table in millions):


<TABLE>
<S>                                                           <C>
SOURCES OF FUNDS:
    Revolving credit facility (sublimit)                      $    10.0
    Term loan facility                                             50.0
    Notes                                                         140.0
    Equity investment                                              68.0 (a)
                                                              ---------
      Total sources                                           $   268.0
                                                              =========
USES OF FUNDS:
    Payment of consideration in the merger                    $   195.0 (a)
    Repayment of long-term debt, net                               54.3 (b)
    Fees and expenses                                              18.7
                                                              ---------
      Total uses                                              $   268.0
                                                              =========
</TABLE>


(a)      Includes $5.7 million implied value of 142 shares of common stock at
         $40 per share retained by management.
(b)      Represents the repayment of $55.8 million of long term debt, net of
         available cash of $1.5 million.


                                      F-8
<PAGE>   45

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

         CHEMICAL LEAMAN CORPORATION ACQUISITION

         On August 28, 1998, the Company completed its agreement and plan of
         merger with Chemical Leaman Corporation ("CLC") and the shareholders of
         CLC in a transaction accounted for as a purchase.

         The following table is intended to show the sources and uses of funds
         for the acquisition of CLC and the related transactions (dollars in
         table in millions):


SOURCES OF FUNDS:
    Incremental term loans                                            $235.0
    Preferred equity                                                    19.9
    Common equity                                                       12.0
                                                                      ------
      Total sources                                                   $266.9
                                                                      ======
USES OF FUNDS:
    Payment of consideration in the transactions relating to the
        acquisition of CLC                                            $ 69.8
    Transaction bonuses/payments                                         1.9
    Management loans                                                     1.1
    MTL preferred stock to CLC shareholders                              5.0
    CLC preferred stock retained                                         4.4
    CLC debt refinancing (including Tender Offer)                      170.7
    Fees and expenses                                                   14.0
                                                                      ------
      Total uses                                                      $266.9
                                                                      ======


         Approximately $164 million of the purchase price has been allocated to
         goodwill.

         As of December 31, 1998, the Company included approximately $10.9
         million of accrued purchase price and approximately $5 million of
         outstanding redeemable preferred stock which were subject to
         finalization based upon the outcome of certain environmental and other
         indemnifications. On February 3, 1999, the Company entered into a
         settlement agreement with former shareholders of CLC regarding the
         remaining consideration owed in the CLC acquisition. The agreement
         called for a payment of $3 million of restricted cash to the former
         shareholders as a settlement of final payment of amounts owed under the
         merger agreement and a cancellation of the 50 preferred shares issued
         in connection with the acquisition.

         In connection with the acquisition, $4.4 million of CLC preferred stock
         remained outstanding, and certain employees of Leaman Logistics
         acquired 5% of the equity (valued at approximately $.4 million) of
         Leaman Logistics through a rollover of CLC common stock held by certain
         CLC shareholders. These amounts have been reflected in the accompanying
         financial statements as minority interest in subsidiaries. During 1999,
         the Company sold the assets of Leaman Logistics Inc. ("LLI") and Core
         Logistics Management Inc. ("CLM") for $9.3 million cash and the
         outstanding minority interest of LLI. In connection with the sale,
         goodwill in the amount of $8.1 million was allocated to LLI and CLM. No
         gain or loss was recorded in connection with this sale.

         In connection with the CLC acquisition, the Company formulated a
         preliminary plan of integration including termination and relocation of
         certain personnel of CLC. The preliminary plan was prepared from an
         assessment performed by function and includes all regional and national
         administration and operational departments. Management has
         substantially completed the integration by the end of 1999.

         Giving effect to the acquisition between the Company and CLC as if CLC
         had been acquired January 1, 1998; pro forma revenues for the year
         ended December 31, 1998 was $620.2 million. Pro forma net loss before
         extraordinary items for the year ended December 31, 1998 was ($14.2
         million). Pro forma basic and diluted loss per common share was ($6.01)
         for the year ended December 31, 1998.


                                      F-9
<PAGE>   46

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

2.       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 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, materials and
         supplies for servicing the Company's revenue equipment.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated 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. 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 4-10 years for other equipment. Maintenance and
         repairs are charged to operating expense when incurred. Major
         improvements which extend the lives of the assets are capitalized. 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 $5,423 and $10,074 at December 31, 1999
         and 2000, respectively.

         OTHER ASSETS

         Other assets consist primarily of an investment in a barge tank
         operation and deferred loan costs. The Company's investment in the
         partnership is accounted for using the equity method. The Company's
         investment, including loans made (net of loan repayments) to the
         partnership, was $412 as of December 31, 1999. During February of 2000,
         the Company sold its interest in the barge tank operation for $753 and
         recognized a gain of $341 during fiscal year 2000.

         Deferred loan costs of approximately $6,711 at December 31, 2000
         (approximately $8,258 at December 31, 1999) are being amortized over
         two to seven years, the estimated lives of the related long-term debt.

         RECLASSIFICATION

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

         IMPAIRMENT OF LONG-LIVED ASSETS

         At each balance sheet date, the Company evaluates the realizability of
         long-lived assets based upon expectations of non-discounted cash flows
         and operating income. Based on the most recent analysis, the Company
         believes no material impairment exists at December 31, 2000.

                                      F-10
<PAGE>   47

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     ACCRUED LOSS, DAMAGE AND ENVIRONMENTAL CLAIMS

     Effective September 1998, the Company maintains liability insurance for
     bodily injury and property damage in the amount of $100.0 million per
     incident, having no deductible. There is no aggregate limit on this
     coverage. The Company currently maintains first dollar workers'
     compensation insurance coverage. The Company is self-insured for damage or
     loss to the equipment it owns or leases, and for cargo losses.

     Prior to September 1998, the Company retained liability up to $75 per
     health claim and was self-insured for cargo claims. For automotive
     liability, the Company had deductibles ranging from $150 to $500 per
     occurrence. Prior to September 1994, the Company retained liability for
     workers' compensation of up to $250 per occurrence. Subsequent to this
     date, all workers' compensation claims are fully insured. The Company has
     accrued for the estimated cost of open claims based upon losses and claims
     reported and an estimate of 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 which can be estimated.
     Recoverable environmental costs consist principally of recoverable costs
     under various insurance policies related to environmental matters (see Note
     13).

     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 and, accordingly,
     the gains and losses from changes in derivative fair values are deferred.
     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 for foreign exchange contracts for trading purposes.

     The Company currently has approximately $316 million of variable interest
     debt. The Company has 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. At December 31, 2000 and
     1999, the Company had interest rate swaps with a notional amount of $65
     million and $100 million. The notional amounts do not represent a measure
     of exposure of the Company. The Company will pay the counter parties
     interest at a fixed rate ranging from 5.41% to 5.48%, and the
     counterparties will pay the Company interest at a variable rate equal to
     LIBOR. The LIBOR rate applicable to these agreements at December 31, 1999
     was 5.51% and at December 31, 2000 was 6.715%. These agreements mature and
     renew every three months and expire on September 2, 2001. A 10% fluctuation
     in interest rates would have a $2.5 million impact, net of interest rate
     swap agreements on future annual earnings.

     The Company has entered into short-term foreign currency agreements to
     exchange US dollars (US $6.0 million) for Canadian dollars (CN $8.9
     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 rates ranging from 1.47 to 1.48, and as such the
     market risk based upon a 10% fluctuation in the exchange rate is
     immaterial.

     On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
     Statement of Financial Accounting Standards No. 133, "Accounting for
     Derivative Instruments and Hedging Activities (FAS 133). FAS 133 is
     effective for all


                                      F-11
<PAGE>   48

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     fiscal quarters of all fiscal years beginning after June 15, 2000 (January
     1, 2001 for the Company). FAS 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 designated as
     part of a hedge transaction and, if it is, the type of hedge transaction.
     Management of the Company anticipates that, due to its limited use of
     derivative instruments, the adoption of FAS 133 will not have a significant
     effect on the Company's results of operations or its financial position.

     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 $63.0 million at December 31, 2000. The fair value of the
     Company's Series B floating interest rate subordinated term notes is
     approximately $24.0 million at December 31, 2000. The book value of the
     Company's remaining variable rate debt approximates fair market value at
     December 31, 2000. The fair value of derivative financial instruments at
     December 31, 1999 and 2000 results in an asset of $1,877 and $337,
     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, independent 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 reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     FOREIGN CURRENCY TRANSLATION

     The functional currency for Levy is Canadian dollars. 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

     The Company follows the income tax policy provided by Statement of
     Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
     statement provides for a liability approach under which deferred income
     taxes are provided for based upon enacted tax laws and rates applicable to
     the periods in which the taxes become payable. These differences result
     from items reported differently for financial reporting and income tax
     purposes, primarily depreciation and accruals.


                                      F-12
<PAGE>   49

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                       --------------------------------
                                                          1998       1999       2000
                                                          -----      -----      -----
<S>                                                       <C>        <C>        <C>

Basic weighted average number of common shares            3,178      2,015      2,016
Diluted effect of options outstanding                        --         --         --
                                                          -----      -----      -----
Diluted weighted average number of common and common
      equivalent shares                                   3,178      2,015      2,016
                                                          =====      =====      =====
</TABLE>

     In 2000, 1999 and 1998, options were anti dilutive.

3.   ACCOUNTS RECEIVABLE

     Accounts receivable consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                        1999               2000
                                                                     ---------          ---------
<S>                                                                  <C>                <C>

Trade accounts receivable                                            $ 111,191          $  95,093
Affiliate and independent owner-operator receivables                     6,454              4,912
Employee receivables                                                       105                327
Other                                                                    4,788              4,202
                                                                     ---------          ---------
                                                                       122,538            104,534
Less allowance for doubtful accounts                                    (6,438)            (9,779)
                                                                     ---------          ---------
                                                                     $ 116,100          $  94,755
                                                                     =========          =========
</TABLE>

     The activity in the allowance for doubtful accounts for each of the three
     years in the period ended December 31, 2000, is as follows:

<TABLE>
<CAPTION>
                                                 1998            1999            2000
                                               -------         -------         -------
<S>                                            <C>             <C>             <C>

Balance, beginning of period                   $ 1,980         $ 3,935         $ 6,438
Additions charged to operating expenses          2,047           2,623           4,295
Write-off of bad debts                             (92)           (120)           (954)
                                               -------         -------         -------
Balance, end of period                         $ 3,935         $ 6,438         $ 9,779
                                               =======         =======         =======
</TABLE>

     As of December 31, 2000 and 1999, approximately 85 percent of trade
     accounts receivable were due from companies in the chemical and bulk food
     products industries, respectively. No single customer accounted for over
     7.5 percent of the Company's operating revenues.

4.   OTHER RECEIVABLES

     Other receivables include the minimum lease payments due to the Company
     from third parties for tractors and trailers leased under capital leases.
     The leases expired during 2000.

     Additionally, other receivables include the current portion of notes due
     from QDI affiliates in the coming year in the amount of $518 at December
     31, 2000.


                                      F-13
<PAGE>   50

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

5.   FIXED ASSETS

     Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                   1999              2000
                                                ---------         ---------
<S>                                             <C>               <C>

Land and improvements                           $  10,168         $  10,673
Buildings and improvements                         12,997            15,704
Revenue equipment                                 267,781           274,009
Other equipment                                    26,706            26,603
Accumulated depreciation                         (128,895)         (151,473)
                                                ---------         ---------
Property and equipment, net                     $ 188,757         $ 175,516
                                                =========         =========
</TABLE>

     Depreciation expense was $29,565, $58,341 and $32,502 for the periods
     ending December 31, 1998, 1999 and 2000, respectively. During 1999, the
     Company had a one time charge of $11.3 million relating to the reduction in
     the useful life of acquired software, now fully written off, used in the
     trucking operation and a one time charge of approximately $9 million due to
     a change in the estimated useful life of certain revenue equipment.

     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>
                                   1999        2000
                                   -----       -----
<S>                                <C>         <C>

Tractors and trailers              $ 377       $ 347
Less accumulated amortization       (207)       (245)
                                   -----       -----
                                   $ 170       $ 102
                                   =====       =====
</TABLE>

6.   ACCRUED EXPENSES

     Accrued expenses include the following at December 31:

<TABLE>
<CAPTION>
                                                          1999           2000
                                                        -------        -------
<S>                                                     <C>            <C>

Outstanding checks                                      $16,672        $14,582
Loss and damage claims                                    7,240          3,640
Environmental liabilities                                15,000         13,365
Severance, relocation and integration                     3,394          1,517
Salary, wage and benefits                                 7,311          6,353
Restructure reserve                                          --          1,334
Accrued interest                                            634          1,484
Other                                                     8,598          8,379
                                                        -------        -------
                                                        $58,849        $50,654
                                                        =======        =======
</TABLE>

     In connection with the acquisition of CLC, $17.5 million of restructuring
     related costs were 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. The Company's plan calls for
     the payment of substantially all these costs within one year of the
     acquisition. At December 31, 2000 approximately $1.5 million of deferred
     severance payments remain.

                                      F-14
<PAGE>   51

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     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 $2.1 million and $1.1 million in the third and fourth quarters of
     2000, respectively. At December 31, 2000, approximately $1.8 million has
     been paid.

7.   LONG-TERM INDEBTEDNESS

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

<TABLE>
<CAPTION>
                                                                                       1999            2000
                                                                                     ---------       ---------
<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 $224 due quarterly with the balance due
in 2004                                                                                 88,090          87,206

Tranche B term loan, principal of $261 due quarterly with the balance due
in 2005                                                                                102,764         101,740

Tranche C term loan, principal of $224 due quarterly with the balance due
in 2006                                                                                 88,038          87,206

Revolving credit facility                                                               14,962             500

5% unsecured note payable to former employee, due in annual installments
of $70 through 2001                                                                        139              67

Capitalized equipment leases, interest rates ranging from 6.75% to 11.65%                  163             220

Less current maturities of long-term debt                                               (3,026)         (3,619)
                                                                                     ---------       ---------

Long-term debt, less current maturities                                              $ 431,130       $ 413,320
                                                                                     =========       =========
</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, excluding Bulknet.
     The guarantees are full, unconditional, joint and several obligations of
     the guarantors. The subordinated floating interest rate Series B Notes
     interest rate was 11.47% at December 31, 2000.

     At any time, or from time to time, on or prior to June 15, 2001, the
     Company may, at its option, use the net cash proceeds of one or more Equity
     Offerings to redeem up to 35% of the aggregate principal amount of the
     fixed rate notes originally issued at a redemption price equal to 110% of
     the principal amount thereof; plus accrued and unpaid interest thereon, if
     any, to the date of redemption provided certain conditions are met.

     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:

                                  YEAR                             PERCENTAGE
                           ---------------------                   ----------

                           2002                                      105.0%
                           2003                                      102.5%
                           2004 and thereafter                       100.0%


     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


                                      F-15
<PAGE>   52

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     forth below, plus, in each case, accrued and unpaid interest thereon, if
     any, to the date of redemption:


                         YEAR                             PERCENTAGE
                  ---------------------                   ----------

                  2001                                      102.0%
                  2002                                      101.0%
                  2003 and thereafter                       100.0%


     TRANCHE A, B AND C 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) 1.75% in excess of the Eurodollar
     rate for Eurodollar Loans, in each case, subject to adjustment based upon
     the achievement of certain financial ratios (8.5275% at December 31, 2000).

     Tranche B Term Loans bear interest at the option of the Company at (a)
     1.25% in excess of the Base Rate and (b) 2.25% in excess of the Eurodollar
     rate for Eurodollar Loans, in each case, subject to adjustment based upon
     the achievement of certain financial ratios (9.05375% at December 31,
     2000).

     Tranche C Term Loans bear interest at the option of the Company at (a)
     1.50% in excess of the Base Rate and (b) 2.50% in excess of the Eurodollar
     rate for Eurodollar Loans, in each case, subject to adjustment based upon
     the achievement of certain financial ratios (9.0275% at December 31, 2000).

     REVOLVING CREDIT FACILITY

     The Company has available 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.

     Permanent reductions to the revolving credit facility are required in an
     amount equal to,

     1.   100.0%, or 75.0%, if the Leverage Ratio (as defined) is less than
          4.0:1.0, of the net cash proceeds of all asset sales and dispositions
          by the Company and its subsidiaries, subject to certain exceptions,

     2.   100.0%, or 75.0%, if the Leverage Ratio is less than 4.0:1.0, of the
          net cash proceeds of issuances of certain debt obligations and certain
          preferred stock by the Company and its subsidiaries, subject to
          certain exceptions,

     3.   50.0%, or 0%, if the Leverage Ratio is less than 4.0:1.0, of the net
          proceeds from common equity and certain preferred stock issuances by
          the Company and its subsidiaries, subject to certain exceptions,
          including permitted acquisitions,

     4.   75.0%, or 50.0%, if the Leverage Ratio is less than 4.0:1.0, of annual
          Excess Cash Flow, and

     5.   100.0% of certain insurance proceeds, subject to certain exceptions.
          Such mandatory prepayments and permanent reductions will be allocated
          first, to the Term Loans and second, to 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


                                      F-16
<PAGE>   53

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     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 (8.25% at December 31, 2000).

     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 will pay a commitment fee equal to a percentage 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 will
     be 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 will
     be 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 will be required to be
     pledged.

     DEBT RETIREMENT AND EXTRAORDINARY ITEM

     Substantially all the outstanding indebtedness of the Company was
     extinguished and refinanced in connection with the leverage
     recapitalization and the acquisition of CLC. As a result of these early
     extinguishments, the Company incurred additional charges of approximately
     $3 million in 1998, net of tax, which is included as an extraordinary item
     in the accompanying statements of operations.

     In connection with the CLC Merger, on July 28, 1998, the Company commenced
     a Tender Offer for the $100 million principal amount of outstanding 10-3/8%
     Senior Notes due 2005 issued by CLC. The Tender Offer was subject to the
     consummation of the CLC Merger. The Company accepted 100% of the
     outstanding CLC Notes for payment and paid to the holders the tender offer
     consideration and a related consent payment. The Company paid approximately
     $117 million for the acquisition of the outstanding debt which was included
     as part of the purchase price of CLC (see Note 1).


                                      F-17
<PAGE>   54

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     Under the terms of the Company's debt agreements, 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
     agreements contain restrictions on 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,                     2000
               ------------------------                  ---------

                       2001                              $   3,619
                       2002                                  2,832
                       2003                                  2,832
                       2004                                 86,450
                       2005                                 91,063
                       Thereafter                          230,143
                                                         ---------
                                                         $ 416,939
                                                         =========

8.   INCOME TAXES

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

<TABLE>
<CAPTION>
                                              1998            1999            2000
                                            -------         -------         -------
<S>                                         <C>             <C>             <C>

Current taxes:
    Federal                                 $    17         $    --         $    --
    Foreign                                     261             219              40
    State                                       905             441             397
                                            -------         -------         -------
                                              1,183             660             437
                                            -------         -------         -------
Deferred taxes:
    Federal                                  (2,661)         (4,272)         22,480
    Foreign                                     402             570             348
    State                                    (2,971)         (2,864)          7,960
                                            -------         -------         -------
                                             (5,230)         (6,566)         30,788
                                            -------         -------         -------

Provision (benefit) for income taxes        $(4,047)        $(5,906)        $31,225
                                            =======         =======         =======
</TABLE>


                                      F-18
<PAGE>   55

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                                                                   1999             2000
                                                                                 --------         --------
<S>                                                                              <C>              <C>

Deferred tax assets:
    Environmental reserve, net                                                   $ 18,248         $ 17,946
    Capital leases treated as operating leases for tax purposes as lessee             142               --
    Tax credit carryforwards                                                        2,957            2,957
    Self-insurance reserves                                                         4,745            2,443
    Allowance for doubtful accounts                                                 2,383            3,004
    Investment basis difference                                                       217               --
    Accrued vacation pay                                                              909            1,083
    Pension                                                                         4,575            1,854
    Net operating loss carryforwards                                               22,362           27,309
    Restructuring accruals                                                          1,190            1,209
    Other accruals                                                                  2,033            3,176
    State taxes, net                                                                7,960            7,884
    Other                                                                           1,457               --
                                                                                 --------         --------
                                                                                   69,178           68,865
    Less valuation allowance                                                       (1,398)         (33,755)
                                                                                 --------         --------
                                                                                   67,780           35,110
                                                                                 --------         --------
Deferred tax liabilities:
    Property and equipment basis difference                                       (31,002)         (31,107)
    Capital leases treated as operating leases for tax purposes as lessor          (2,052)          (1,776)
    Deferred Environmental                                                         (2,976)          (2,087)
    Other                                                                          (2,409)          (1,322)
                                                                                 --------         --------
                                                                                  (38,439)         (36,292)
                                                                                 --------         --------

Net deferred tax asset (liability)                                                 29,341           (1,182)
Less current portion                                                              (15,214)              --
                                                                                 --------         --------

Long-term net deferred tax asset (liability)                                     $ 14,127         $ (1,182)
                                                                                 ========         ========
</TABLE>

     The Company has provided a valuation allowance against deferred tax assets,
     in accordance with SFAS109, due to cumulative tax losses in recent years.

     The Company's effective tax rates differ from the federal statutory rate of
     34 percent. The reasons for those differences are as follows for the years
     ended December 31:

<TABLE>
<CAPTION>
                                                     1998            1999           2000
                                                   -------         -------        --------
<S>                                                <C>             <C>            <C>

Tax expense (benefit) at the statutory rate        $(3,761)        $(7,247)        $(3,591)
State income taxes, net of federal benefit          (1,364)           (720)            397
Amortization of goodwill                               386           1,859           1,294
Foreign taxes                                          663             790             388
Valuation allowance                                     --              --          32,573
Other                                                   29            (588)            164
                                                   -------         -------        --------

Provision (benefit) for income taxes               $(4,047)        $(5,906)       $ 31,225
                                                   =======         =======        ========
</TABLE>

     At December 31, 2000, the Company has approximately $80 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 2020 while the alternative minimum tax credits may
     be carried forward indefinitely. Approximately $28.7 million of net
     operating loss carryforwards and $1.9 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 carryforwards which expire
     over the next 2 to 20 years.


                                      F-19
<PAGE>   56

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

9.   EMPLOYEE BENEFIT PLANS

     As a result of the acquisition of Chemical Leaman, the Company maintains
     two noncontributory defined benefit plans that cover full-time CLC salaried
     employees and certain other CLC employees under a collective bargaining
     agreement. Retirement benefits for employees covered by the salaried plan
     are based on years of service and compensation levels. During 1999, the
     Company froze the benefits associated with the CLC salaried plan. 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.

     The components of net periodic pension cost are as follows:

                                                   DECEMBER 31,
                                              ----------------------
COMPONENTS OF NET PERIODIC PENSION COST         1999           2000
                                              -------        -------

Service cost                                  $   852        $   252
Interest cost                                   2,692          2,641
Expected Return on plan assets                 (2,363)        (2,721)
                                              -------        -------
Net periodic pension cost                     $ 1,181        $   172
                                              =======        =======


     The actuarial assumptions used in accounting for the plans are as follows:

                                                            DECEMBER 31,
                                                       -----------------------
                                                       1999               2000
                                                       -----             -----

Discount rates                                         7.75%             7.50%
Expected long-term rates of return on plan assets      8.00%             8.00%
Rate of assumed compensation increase                  5.00%             5.00%


     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,
                                                          -------------------------
                                                            1999             2000
                                                          --------         --------
<S>                                                       <C>              <C>

CHANGE IN BENEFIT OBLIGATION
    Benefit obligation at beginning of year               $ 40,746         $ 35,225
    Acquisition                                                 --               --
    Service cost                                               852              252
    Interest cost                                            2,692            2,641
    Amendments                                              (3,967)              --
    Actuarial (gain)/loss                                   (2,772)           2,348
    Benefits and expenses paid                              (2,326)          (3,209)
                                                          --------         --------
    Benefit obligation at end of year                     $ 35,225         $ 37,257
                                                          ========         ========
CHANGE IN PLAN ASSETS
    Fair value of plan assets at beginning of year        $ 30,435         $ 33,039
    Acquisition                                                 --               --
    Actual return on plan assets                             3,460             (646)
    Contributions                                            1,470            2,390
    Benefits and expenses paid                              (2,326)          (3,209)
                                                          --------         --------
    Fair value of plan assets at end of year              $ 33,039         $ 31,574
                                                          ========         ========
</TABLE>


                                      F-20
<PAGE>   57

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>                                                       <C>               <C>

UNFUNDED STATUS                                           $ (2,186)         $(5,683)
    Unrecognized net actuarial (gain) loss                  (3,729)           1,985
    Adjustment to recognize minimum liability                   --           (2,072)
                                                          --------         --------
    Accrued pension expense (included in other
       non-current liability)                             $ (5,915)        $ (5,770)
                                                          ========         ========
</TABLE>

     The Company charged to operations payments to multiemployer pension plans
     required by collective bargaining agreements approximately $1,800 and
     $2,000 for the years ended December 31, 1999 and 2000, 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 multiemployer plans is not readily available.

     PROFIT SHARING PLANS

     The Company provided a profit sharing plan for substantially all employees.
     Contributions were made at the discretion of the Board of Directors. The
     Company made contributions of $350, $0 and $0 for 1998, 1999 and 2000
     respectively.

10.  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.

     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 two series of
     preferred stock, 8% Redeemable Preferred Stock and 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
     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.

     8% MANDATORILY REDEEMABLE PREFERRED STOCK

     In connection with the CLC acquisition on August 28, 1998, the Company
     issued 50 shares of "8% Redeemable Preferred Stock" with a liquidation
     preference of $100. These shares are convertible by the Company into
     debentures with comparable dividend and maturity dates and are mandatorily
     redeemable in 2007. See Note 1 related to the subsequent liquidation of
     these shares.


                                      F-21
<PAGE>   58

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

11.  COMMON STOCK

     The Company has 15,000 shares $.01 par value of common stock authorized,
     and had 2,000, 2,014, and 2,022 shares outstanding at December 31, 1998,
     1999 and 2000, 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% (8.80%
     at December 31, 2000). The loans are secured by a pledge of approximately
     47 shares of the Company's common stock and options to purchase 47 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 $1,262 and $1,886 at December 31,
     1999 and 2000, respectively.

12.  INCENTIVE STOCK OPTION PLANS

     OLD STOCK OPTION PLAN

     In 1992, an incentive stock option plan (the Old Plan) was adopted which
     allowed for 100 options to be granted to eligible employees. During 1994,
     the Company's Board of Directors elected to adopt a new incentive stock
     option plan (the Plan). The Plan absorbed the options granted under the Old
     Plan, and an additional 200 options were approved for granting at an
     exercise price not to be less than the market price of the common stock at
     the date of grant. During 1996, an additional 400 shares were approved for
     granting under the Plan. Options are granted at the discretion of the Board
     of Directors and are exercisable for shares of unissued common stock or
     treasury stock. Options vest 20 percent each year, other than 11 options
     granted in 1994 and 100 options granted in 1996, which vested immediately.
     Substantially all employees, officers and directors are eligible for
     participation in the Plan.

     As part of the recapitalization in 1998, the Company paid $14,678 to
     employees for the cancellation of all outstanding options.


                                      F-22
<PAGE>   59

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     Combined stock option activity for the Old Plan for the years ended
     December 31, 1998, through December 31, 2000, 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, 1997           537          6.25-18.25       15.42          300        2002-2006
1998 option activity:
    Exercised                                       (3)              15.00       15.42           (3)       2002-2006
    Canceled                                        (2)        15.00-18.25       15.42
    Recapitalization                              (532)         6.05-18.25       15.42         (297)       2002-2006
                                                ------                                       ------

Old options outstanding at December 31, 1998        --                                           --
</TABLE>

     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. For SFAS 123 purposes, the
     fair value of each option grant has been estimated as of the grant date
     using the Black-Scholes option pricing model with the following weighted
     average assumptions: risk free interest rate of 6.18% for options with an
     expected life of four years and 6.39% for options with an expected life of
     six years, expected option life of four or six years, expected dividend
     rate of 0%, and expected volatility of 30.05%. No options were granted
     during 1998.

     NEW STOCK OPTION PLAN

     Subsequent to the recapitalization, the Company adopted a new employee
     stock option 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.

     The stock of the Company is no longer traded publicly. The pro forma fair
     value of options granted during 1998, 1999 and 2000 are based upon a model
     using a risk free rate of 4.64% for 1998, 6.1% for 1999, and 5.76% for
     2000; for options with an expected life of 10 years. The pro forma fair
     value of stock options granted in 1998 is $3,089, 1999 is $477, and 2000 is
     $1,049. At December 31, 2000, a total of 14 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>
                                                               1998             1999             2000
                                                            ----------       ----------        ---------
<S>                                                         <C>             <C>                <C>

Net income (loss) attributable to common stockholders;
    As reported                                             $  (10,746)      $  (16,874)        (43,532)
    Pro forma                                                  (10,928)         (17,267)        (43,918)
Earnings (loss) per common share:
    As reported                                             $    (3.38)      $    (8.37)         (21.59)
    Pro forma                                                    (3.44)      $    (8.57)         (21.78)
</TABLE>


                                      F-23
<PAGE>   60

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     Stock option activity for the years ended December 31, 1998, 1999 and 2000
     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, 1997                 --               --             --           --                --
1998 option activity:
     Granted                                            210           $40.00         $40.00           --              2008
                                                                                                 -------
                                                    -------
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
                                                    --------                                     -------
</TABLE>

13.  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, 2000 are as follows:

                                                  OPERATING
     YEAR ENDING DECEMBER 31,                       LEASES
     ------------------------                     ---------

            2001                                  $ 3,663
            2002                                    2,096
            2003                                    1,248
            2004                                    1,080
            2005                                    1,123


     Rent expense under operating leases was $2,798, $5,051 and $6,447 for the
     years ended December 31, 1998, 1999 and 2000, respectively.

     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. Management estimated the fair value of this
     equipment to be $1,100 and $233 at December 31, 1999 and 2000,
     respectively, which was based upon an average dealer-estimated repurchase
     price.

     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. Management estimated the fair value of this equipment to be
     $1,585 and $1,212 at December 31, 1999 and


                                      F-24
<PAGE>   61

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     2000, respectively, which was based upon an average dealer-estimated
     repurchase price.

     Reserves have been recognized by the Company for its estimated exposure
     under the above guarantees. It is possible that the estimates used in
     determining these reserves and the fair value may change. However, it is
     the opinion of management that the ultimate difference in the estimates
     will not have a material effect on the Company's financial position or
     results of operations.

     In 2000, we entered into a purchase agreement with Mack Trucks, Inc. of
     Allentown, PA to purchase 100 new tractors. As of December 31, 2000 the
     Company is committed to purchase undelivered Mack Tractors totaling $4.7
     million.

     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 contain 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's wholly-owned subsidiary, Quality Carriers, Inc., 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 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," or has
     otherwise been alleged to have some level of responsibility, under CERCLA
     or


                                      F-25
<PAGE>   62

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     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. See "Risk Factors -- Transporting Hazardous Substances Could
     Create Environmental Liabilities" for a discussion of certain risks of the
     Company associated with transporting hazardous substances.

     CLC 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.), 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.

     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 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.


                                      F-26
<PAGE>   63

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

     Other Environmental Matters. CLC has been named as PRP under CERCLA and
     similar state laws at approximately 40 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.

14.  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 received an initial fee of $2.0
     million on June 9, 1998 and thereafter 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 1999 and 2000.

     An executive of the Company owns a minority interest in a firm that
     provides services to the Company. Total amounts charged to the Company by
     the firm during 2000 were $344 ($268 during 1999).

15.  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, 1998, 1999 and
     2000, is as follows:

<TABLE>
<CAPTION>
                                                                             1998
                                               -------------------------------------------------------------------
                                                  U.S.           INTERNATIONAL      ELIMINATIONS      CONSOLIDATED
                                               -----------       -------------      ------------      ------------
<S>                                            <C>               <C>                <C>               <C>

Operating revenues                             $   373,562        $   25,221        $    (1,045)      $   397,738
Net operating income                                 6,171             2,395                 --             8,566
Identifiable assets                                569,482            28,182            (14,418)          583,246
Depreciation and amortization                       27,478             3,565                 --            31,043
Capital expenditures                                21,630             8,135                 --            29,765

<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>


                                      F-27
<PAGE>   64

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<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>

16.      SUBSEQUENT EVENTS

On February 26, 2001, we entered into new swap agreements on $30 million and
$100 million of our 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 rate 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, we entered into a new swap agreement on $30 million of our
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.
These agreements mature and renew every three months and mature on September 22,
2002.

Effective November 8, 2000, Elton E. Babbitt agreed to sell his QDI common
shares to the Company. These shares will be repurchased in increments over the
24 month period starting December 15, 2000.

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

17.      GUARANTOR SUBSIDIARIES

The 10% Series B Senior Subordinated Notes issued in June 1998 and due 2006 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). 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:

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

The parent company and combined guarantor subsidiaries.

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

                                      F-28
<PAGE>   65

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

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                                            --              --              --              --              --
   Accounts receivable, net                                   --             518              --              --             518
   Current maturities and other
       receivables                                            --          85,329           9,426              --          94,755
   Inventories                                                --           1,528             258              --           1,786
   Prepaid expenses                                           --           7,249             142              --           7,391
   Prepaid tires                                              --           7,660             496              --           8,156
   Income tax recoverable                                     --             350              --              --             350
   Deferred income taxes                                      --             (20)             20              --              --
   Other                                                      --             650              --              --             650
                                                      ----------      ----------      ----------      ----------      ----------
     Total current assets                                     --         105,733          10,509              --         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      $  420,189      $   32,884      $ (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              --              --
   Independent contractors 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

Bank facility, 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
                                                      ----------      ----------      ----------      ----------      ----------

Redeemable common stock                                    1,210              --              --              --           1,210
                                                      ----------      ----------      ----------      ----------      ----------
Mandatorily 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         142,963          15,082        (158,045)        105,676
   Retained earnings (deficit)                           (22,212)         62,608           1,320         (63,928)        (22,212)
   Treasury stock                                            (32)             --              --              --             (32)
   Stock recapitalization                               (189,589)             --             (55)             55        (189,589)
   Other shareholder's equity                             (2,823)             --            (820)            820          (2,823)
   Notes receivable                                       (1,886)             --              --              --          (1,886)
                                                      ----------      ----------      ----------      ----------      ----------
     Total shareholders' equity (deficit)               (110,866)        205,571          15,527        (221,098)       (110,866)
                                                      ----------      ----------      ----------      ----------      ----------
                                                      $  321,098      $  420,189      $   32,884      $ (321,098)     $  453,073
                                                      ==========      ==========      ==========      ==========      ==========
</TABLE>

                                      F-29
<PAGE>   66

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

CONSOLIDATING BALANCE SHEET, DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                      GUARANTOR     NON-GUARANTOR
                                                        PARENT       SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS     CONSOLIDATED
                                                      ----------     ------------   --------------  -------------    ------------
<S>                                                   <C>            <C>            <C>             <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                          $       --      $      165      $      885                      $    1,050
   Restricted cash                                                            --
   Accounts receivable, net                                              108,027           8,073                         116,100

   Current maturities and other
     receivables                                                           2,159              --                           2,159
   Inventories                                                             1,547             216                           1,763
   Prepaid expenses                                                       10,696             357                          11,053
   Prepaid tires                                                           8,754             525                           9,279
   Income tax recoverable                                                    354              --                             354
   Deferred income taxes                                                  15,214              --                          15,214
   Other                                                                     689              --                             689
                                                      ----------      ----------      ----------      ----------      ----------
     Total current assets                                     --         147,605          10,056              --         157,661
Property and equipment, net                                              165,781          22,976                         188,757
Goodwill, net                                                            157,363           1,051                         158,414
Insurance proceeds and other
     environmental receivables                                            11,403              --                          11,403
Deferred income taxes                                                     14,127              --                          14,127
Investment in subsidiaries                               271,424              --              --        (271,424)             --
Other assets                                             100,000          11,642             237        (100,000)         11,879
                                                      ----------      ----------      ----------      ----------      ----------
                                                      $  371,424      $  507,921      $   34,320      $ (371,424)     $  542,241
                                                      ==========      ==========      ==========      ==========      ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Current maturities of
       indebtedness                                   $    2,888      $      138      $       --      $       --           3,026
   Accounts payable                                           --          14,912           3,360              --          18,272
   Affiliates and independent                                 --
       owner-operators payable                                --           8,092              99              --           8,191
   Accrued expenses                                           --          57,954             895              --          58,849
   Income taxes payable                                       --             334             520              --             854
                                                      ----------      ----------      ----------      ----------      ----------
     Total current liabilities                             2,888          81,430           4,874              --          89,192

Long-term debt, less current
     maturities                                          420,022         100,008          11,100        (100,000)        431,130
Environmental liabilities                                     --          49,346              --              --          49,346
Other long-term liabilities                                   --          19,265              --              --          19,265
Deferred income tax                                           --          (2,334)          2,334              --              --
                                                      ----------      ----------      ----------      ----------      ----------
     Total liabilities                                   422,910         247,715          18,308        (100,000)        588,933
                                                      ----------      ----------      ----------      ----------      ----------

Mandatorily redeemable common stock                        1,210              --              --              --           1,210
                                                      ----------      ----------      ----------      ----------      ----------
Mandatorily redeemable preferred stock                    12,077              --              --              --          12,077
                                                      ----------      ----------      ----------      ----------      ----------
Minority interest in subsidiaries                             --           4,794              --              --           4,794
                                                      ----------      ----------      ----------      ----------      ----------
Shareholders' equity:
   Common stock and additional
       paid-in capital                                   104,935         200,202          15,081        (215,283)        104,935
   Retained earnings (deficit)                            21,320          55,210           1,174         (56,384)         21,320
   Stock recapitalization                               (189,589)             --             (55)             55        (189,589)
   Cumulative currency translation                            --
       adjustment                                           (177)             --            (188)            188            (177)
   Note receivable                                        (1,262)             --              --              --          (1,262)
                                                      ----------      ----------      ----------      ----------      ----------
     Total shareholders' equity (deficit)                (64,773)        255,412          16,012        (271,424)        (64,773)
                                                      ----------      ----------      ----------      ----------      ----------
                                                      $  371,424      $  507,921      $   34,320      $ (371,424)     $  542,241
                                                      ==========      ==========      ==========      ==========      ==========
</TABLE>

                                      F-30
<PAGE>   67

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

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                                 17,160               --               --          (17,160)              --
                                               ---------        ---------        ---------        ---------        ---------

Income (loss) before taxes                       (22,774)          28,840              532          (17,160)         (10,562)

Income taxes                                     (19,013)         (11,824)            (388)              --          (31,225)
Minority interest                                     --               --               --               --               --
                                               ---------        ---------        ---------        ---------        ---------

Net income (loss)                              $ (41,787)       $  17,016        $     144        $ (17,160)       $ (41,787)
                                               =========        =========        =========        =========        =========
</TABLE>

                                      F-31
<PAGE>   68

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

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>

                                      F-32
<PAGE>   69

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998

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

Operating revenues:
   Transportation                              $      --        $ 331,377        $  23,991        $    (346)       $ 355,022
   Other                                              --           42,185            1,230             (699)          42,716
                                               ---------        ---------        ---------        ---------        ---------

     Total revenues                                   --          373,562           25,221           (1,045)         397,738

Operating expenses:
   Purchased transportation                           --          223,858            2,820           (1,045)         225,633
   Option expense                                     --           14,678               --               --           14,678
   Depreciation and amortization                      --           27,478            3,565               --           31,043
   Other operating expenses                           --          101,377           16,441               --          117,818
                                               ---------        ---------        ---------        ---------        ---------

Operating income                                      --            6,171            2,395               --            8,566

Interest expense, net                            (14,290)          (4,774)            (727)              --          (19,791)
Other expense                                         --              164               --               --              164
Equity in earnings of subsidiaries                (1,145)              --               --            1,145               --
                                               ---------        ---------        ---------        ---------        ---------

Income (loss) before taxes                       (15,435)           1,561            1,668            1,145          (11,061)

Income taxes                                       5,344             (641)            (656)              --            4,047
Minority interest                                     --              (74)              --               --              (74)
                                               ---------        ---------        ---------        ---------        ---------

Net income (loss) before
    extraordinary item                           (10,091)             846            1,012            1,145           (7,088)

Extraordinary item                                    --           (3,008)             (69)              --           (3,077)
                                               ---------        ---------        ---------        ---------        ---------

Net income (loss)                              $ (10,091)       $  (2,162)       $     943        $   1,145        $ (10,165)
                                               =========        =========        =========        =========        =========
</TABLE>

                                      F-33
<PAGE>   70

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

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              144        $ (17,160)       $ (41,787)
   Adjustments for non-cash
       Charges                                    41,787           21,293            4,030               --           67,110
   Changes in assets and
       liabilities                                    --          (12,592)           8,301           17,160           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                                        --          (15,859)          (2,862)              --          (18,721)
                                               ---------        ---------        ---------        ---------        ---------
Financing activities:
   Proceeds from issuance of
       long-term debt                               (314)              --              314               --               --
   Payment of 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                                  --            3,109             (719)              --            2,390
Effect of exchange rate changes
     on cash                                          --             (804)              --               --             (804)
Cash, beginning of period                             --              165              885               --            1,050
                                               ---------        ---------        ---------        ---------        ---------

Cash, end of period                            $      --        $   2,470        $     166               --        $   2,636
                                               =========        =========        =========        =========        =========
</TABLE>

                                      F-34
<PAGE>   71

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 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               --           10,050
                                               ---------        ---------        ---------        ---------        ---------

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

                                      F-35
<PAGE>   72

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

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 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>

                                      F-36
<PAGE>   73

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN 000'S, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998

<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)                           $ (10,091)       $  (2,162)       $     943        $   1,145        $ (10,165)
   Adjustments for non-cash
     charges                                      10,091           16,208            3,647               --           29,946
   Changes in assets and
     liabilities                                      --           (2,250)             210           (1,145)          (3,185)
                                               ---------        ---------        ---------        ---------        ---------
Net cash provided by
     Operating activities                             --           11,796            4,800               --           16,596
                                               ---------        ---------        ---------        ---------        ---------
Investing activities:
   Acquisition of subsidiary                    (264,016)              --               --               --         (264,016)
   Capital expenditures                               --          (21,631)          (8,134)              --          (29,765)
   Proceeds from asset
     dispositions                                     --            4,026              480               --            4,506
   Other                                              --               --               --               --               --
                                               ---------        ---------        ---------        ---------        ---------
Net cash used for investing
     activities                                 (264,016)         (17,605)          (7,654)              --         (289,275)
                                               ---------        ---------        ---------        ---------        ---------
Financing activities:
   Proceeds from issuance of
     long-term debt
     and capital leases                          433,000               --            9,807               --          442,807
   Payment of obligations                             --          (45,279)         (11,898)              --          (57,177)
   Recapitalization
     expenditures                               (188,324)              --              (55)              --         (188,379)
   Issuance of common stock - net                 74,323               --               --               --           74,323
   Other                                              --             (161)              --               --             (161)
   Net change in intercompany
     balances                                    (54,983)          49,825            5,158               --               --
                                               ---------        ---------        ---------        ---------        ---------
Net cash provided by financing
     activities                                  264,016            4,385            3,012               --          271,413
                                               ---------        ---------        ---------        ---------        ---------

Net increase in cash                                  --           (1,424)             158               --           (1,266)
Effect of exchange rate changes
     on cash                                          --               --              (26)              --              (26)
Cash, beginning of period                             --              703              674               --            1,377
                                               ---------        ---------        ---------        ---------        ---------

Cash, end of period                            $      --        $    (721)       $     806        $      --        $      85
                                               =========        =========        =========        =========        =========
</TABLE>

                                      F-37
<PAGE>   74

<TABLE>
<CAPTION>

Exhibit No.       Description
-----------       -----------

<S>      <C>

2.1      Agreement and Plan of Merger, dated as of February 10, 1998, by and
         among QDI and Sombrero Acquisition Corp.*

2.2      Agreement and plan of Merger, dated as of June 9, 1998, b6 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      Bylaws of QDI.*

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

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

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

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

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

4.6      Exchange Indenture re: 13.75% Senior Exchangeable Preferred Stock.*

4.7      Indenture, dated as of June 16, 1997 between CLC and First Union Bank,
         as Trustee.*

4.8      First Supplemental Indenture, dated as of August 12, 1998, between CLC
         and First Union National Bank to the indenture dated as of June 16,
         1997.

4.9      Form of 10% Senior Subordinated notes due 2006 (filed as part of
         Exhibit 4.2).*

4.10     Form of Floating Interest Rate Subordinated Term Securities due 2006
         (filed as part of Exhibit 4.2).*

4.11     Registration Rights Agreement, dated as of June 9, 1998, by and among
         QDI, the Guarantors and BT Alex. Brown Incorporated, Credit Suisse
         First Boston Corporation and Salomon Brothers Inc.*
</TABLE>
<PAGE>   75

<TABLE>
<S>      <C>
10.1     QDI 1998 Employee Stock Option Plan.*

10.2     Employment Agreement, dated as of February 10, 1998, by and between
         Charles J. O'Brien and Montgomery Tank Lines, Inc.*

10.3     Supplemental Letter dated as of February 10, 1998 to Employment
         Agreement between Charles O'Brien and Montgomery Tank Lines, Inc.*

10.4     Employment Agreement, dated as of February 10, 1998, by and between
         Richard J. Brandewie and Montgomery Tank Lines, Inc.*

10.5     Employment Agreement, dated as of February 10, 1998, by and between
         Marvin Sexton and Montgomery Tank Lines, Inc.*

10.6     Consulting Agreement between Montgomery Tank Lines, Inc. and Elton E.
         Babbit, dated February 10, 1998.*

10.7     Shareholders' Agreement by and between Elton E. Babbit, Charles J.
         O'Brien, Jr., Richard J. Brandewie, Marvin E. Sexton and Apollo, dated
         February 10, 1998.*

10.8     Non-Competition Agreement with Elton E. Babbit, dated as of February
         10, 1998.*

10.9     Non-Competition Agreement with Gordon Babbit, dated as of February 10,
         1998.*

10.10    Management Agreement between Apollo and QDI dated as of February 10,
         1998.*

10.11    Marvin Sexton Limited Recourse Secured Promissory Note, dated as of
         June 9, 1998.*


*        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.
</TABLE>

(d)      Reports on Form 8-K        None.

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


March 27, 2001


<PAGE>   76
Date:    March 22, 2001


         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 27, 2001    /s/ Thomas L. Finkbiner            President, and Chief Executive
                  -----------------------------      Officer
                  Thomas L. Finkbiner                (Principal Executive Officer)




March 27, 2001    /s/ Dennis R. Farnsworth           Senior Vice President and
                  -----------------------------      Chief Financial Officer
                  Dennis R. Farnsworth               (Principal Financial and
                                                     Accounting Officer)



March 27, 2001    /s/ Charlie J. O'Brien             Chairman of the Board
                  -----------------------------
                  Charlie J. O'Brien



March 27, 2001    /s/ Richard J. Brandewie           Director
                  -----------------------------
                  Richard J. Brandewie



March 27, 2001    /s/ Joshua Harris                  Director
                  -----------------------------
                  Joshua Harris



March 27, 2001    /s/ Michael D. Weiner              Director
                  -----------------------------
                  Michael D. Weiner



March 27, 2001    /s/ Robert A. Katz                 Director
                  -----------------------------
                  Robert A. Katz



March 27, 2001    /s/ Marc J. Rowan                  Director
                  -----------------------------
                  Marc J. Rowan
</TABLE>




<PAGE>   77

<TABLE>
<S>               <C>                                <C>

March 27, 2001    /s/ John H. Kissick                Director
                  -----------------------------
                 John H. Kissick



March 27, 2001    /s/ Philip J. Ringo                Director
                  -----------------------------
                  Philip J. Ringo



March 27, 2001    /s/ Marc Becker                    Director
                  -----------------------------
                  Marc Becker



March 27, 2001    /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 2000 fiscal year.