EAGLE USA AIRFREIGHT INC, S-3, 1999-07-29

EAGLE USA AIRFREIGHT INC
S-3, 1999-07-29
ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1999.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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EAGLE USA AIRFREIGHT, INC.
(Exact name of registrant as specified in its charter)

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TEXAS 76-0094895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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15350 VICKERY DRIVE
HOUSTON, TEXAS 77032
(281) 618-3100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JAMES R. CRANE
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
EAGLE USA AIRFREIGHT, INC.
15350 VICKERY DRIVE
HOUSTON, TEXAS 77032
(281) 618-3100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:

<TABLE>
<S> <C>
GENE J. OSHMAN STEVEN K. COCHRAN
BAKER & BOTTS, L.L.P. THOMPSON & KNIGHT, L.L.P.
3000 ONE SHELL PLAZA 1700 PACIFIC AVENUE, SUITE 3300
HOUSTON, TEXAS 77002-4995 DALLAS, TEXAS 75201-1700
(713) 229-1234 (214) 969-1700
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

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<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE(1) PRICE(2)(3) FEE
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<S> <C> <C> <C> <C>
Common stock, par value $.001 per share..... -- -- $50,715,000 $14,099
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</TABLE>

(1) In accordance with Rule 457(o) under the Securities Act, the number of
shares being registered and the proposed maximum offering price per share
are not included in this table.
(2) Includes shares of common stock that may be purchased from the selling
shareholder by the underwriters pursuant to their over-allotment option.
(3) Estimated in accordance with Rule 457(c) under the Securities Act solely for
the purpose of calculating the registration fee based upon the average of
the high and low sales prices reported on the Nasdaq National Market on July
28, 1999.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

SUBJECT TO COMPLETION JULY 29, 1999
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PROSPECTUS

, 1999

[EAGLE USA AIRFREIGHT LOGO]

1,200,000 SHARES OF COMMON STOCK

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THE COMPANY:

- - We are a leading provider of air freight forwarding and other transportation
services.

- - Eagle USA Airfreight, Inc.
15350 Vickery
Houston, Texas 77032
(281) 618-3100

- - NASDAQ SYMBOL: EUSA

THE OFFERING:

- - An existing shareholder is offering 1,200,000 shares of common stock.

- - The underwriters have an option to purchase an additional 180,000 shares from
the selling shareholder to cover over-allotments.

- - There is an existing trading market for these shares. The reported last sale
price on July 28, 1999 was $36 1/8 per share.

- - We will not receive any of the proceeds from the shares sold in this offering
or incur any out-of-pocket expenses associated with the offering.

- - Closing: , 1999.

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<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
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Public offering price: $ $
Underwriting fees:
Proceeds to selling shareholder:
</TABLE>

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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE

WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
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[MAP SHOWING OUR TERMINAL LOCATIONS]

TABLE OF CONTENTS

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PAGE
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Prospectus Summary.................... 1
Risk Factors.......................... 5
Forward-Looking Statements............ 8
Use of Proceeds....................... 8
Price Range of Common Stock........... 9
Dividend Policy....................... 9
Capitalization........................ 10
Selected Consolidated Financial and
Operating Data...................... 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
</TABLE>

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PAGE
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Business.............................. 22
Management............................ 35
Principal and Selling Shareholders.... 36
Description of Capital Stock.......... 37
Underwriting.......................... 41
Legal Matters......................... 43
Experts............................... 43
Where You Can Find More Information... 43
Incorporation of Documents
by Reference........................ 43
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
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PROSPECTUS SUMMARY

This summary is qualified by more detailed information appearing in other
sections of this prospectus. The other information is important, so please read
this entire prospectus carefully. Unless otherwise indicated, the information in
this prospectus assumes that the over-allotment option will not be exercised and
does not give effect to the three-for-two stock split we declared on July 26,
1999. The stock split will be distributed on August 30, 1999, to holders of
record on August 23, 1999.

THE COMPANY

We are a leading provider of air freight forwarding and other
transportation services. We have become one of the largest air freight
forwarders in the United States as measured by domestic forwarding revenues
largely as a result of our ability to work closely with our customers to provide
customized freight shipping services on a price-competitive basis. We focus on
expedited deliveries. During the third quarter of fiscal 1999, over 60% of our
freight forwarding shipments were delivered on a next day or second day basis.
Our revenues grew at a compound annual rate of 49.6% to $417.1 million in fiscal
1998 from $83.3 million in fiscal 1994 and our operating income increased at a
compound annual rate of 53.0% to $32.2 million in fiscal 1998 from $5.9 million
in fiscal 1994. During the first nine months of fiscal 1999, our revenues were
$428.4 million and our operating income was $31.6 million, compared to revenues
of $295.2 million and operating revenue of $23.9 million during the first nine
months of fiscal 1998.

Historically, we have grown almost exclusively through the internal
expansion of our air freight forwarding customer base and terminal network. Over
the last several years, we have expanded our terminal network from 27 domestic
terminals in September 1994 to 64 domestic and 14 foreign terminals in July
1999. As we have grown, we have significantly expanded our services beyond air
freight forwarding to include:

- local pick-up and delivery,
- truck brokerage,
- customs brokerage,
- air charter services,
- ocean freight services,
- computerized tracking of shipments via the Internet,
- computer-based shipping systems,
- electronic data interchange,
- custom shipping reports,
- warehousing, and
- cargo assembly and protective packing and crating.

As a result of our terminal network growth and increased services, we have
expanded the scope of our potential customers and enhanced our ability to
compete for high-revenue national accounts. Because of our increasing shipment
volumes, we have been able to command priority access to freight capacity from
air carriers at peak times and at discount rates. The increasingly complex
demands of freight transportation and the need for cost-effective distribution
networks have placed a premium on the services of air freight forwarders,
including our company, that can offer reliable service over a broad network at
competitive prices.

Our customers are engaged in a variety of industries. Although we impose no
size or weight restrictions on shipments, we focus on shipments of over 50
pounds. Our average shipment weight during fiscal 1998 was 623 pounds. As a
result of our focus on larger shipments, we do not directly compete for most of
our business with overnight courier or small parcel companies like Federal
Express Corporation, United Parcel Service of America, Inc. and Airborne Freight
Corporation. Those companies typically use their own captive airplane fleets. On
occasion, these fleets are a source of cargo space for our forwarding
operations.

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Our freight forwarding operations involve:

- obtaining shipment orders from customers,
- determining the best means to transport the shipments to their
destination, and
- arranging and monitoring all aspects of the shipments.

Typically, a commercial air carrier provides the transportation. We do not
own or operate aircraft, and consequently, we place no restrictions on delivery
schedules or shipment size or weight. We currently service specific high-volume
transportation lanes utilizing eight cargo airplanes under short term leases. On
occasion, we charter cargo aircraft for use in other transportation lanes as
needed. We draw on our transportation expertise to provide forwarding services
that are tailored to meet the goals of the customer. We arrange for, and in many
cases provide, pick-up and delivery service between the carrier and the location
of the shipper or recipient. We have local pick-up and delivery operations at 64
of our 78 terminal locations as well as at three locations without air freight
forwarding operations. If delivery schedules permit, we typically use
lower-cost, overland truck transportation services, including those obtained
through our truck brokerage operations.

We believe that our advanced information systems are important to our
operations and have contributed to our growth. Our integrated information
systems -- Worldport -- includes logistics information, management information
and accounting systems. Worldport permits on-line entry and retrieval of
shipment, pricing, scheduling and tracking data and is the database for our
management information and accounting systems. Our information systems provide
accurate, up-to-date information on the status of shipments, both internally and
to customers, and allow our management to monitor our operations and financial
results. Our customers can obtain shipment information through the Eagle Track
option on our Web site or through a software program named Eagle Advisor. Eagle
Advisor allows customers to access shipment information that is automatically
transmitted to their personal computers via the Internet. Our local pick-up and
delivery operations use barcode and signature scanners that allow for enhanced
tracking of shipments. Delivery receipts with signatures are stored on a
centralized imaging system, and the images are available to all North American
locations via our Intranet and to customers via Eagle Advisor. In addition, we
offer to some of our customers Eagle-Ship, a dedicated personal computer,
printer and barcode scanner, that allows the customer's shipping dock personnel
to automate their shipping process with multiple shippers.

Our business strategy includes the following principal elements:

- continuing the growth of our core domestic freight forwarding business by
providing high-quality, customized services, expanding our terminal
network and capitalizing on economies of scale,

- expanding our international freight forwarding business,

- expanding our local pick-up and delivery and centralized truck brokerage
operations to retain additional profits on shipments and enhance our
ability to monitor and control shipments,

- providing attractive incentive-based compensation to attract, retain and
highly incentivize our employees, and

- using our advanced information systems, including Internet applications,
to provide our customers with accurate and up-to-date shipment
information.

By the end of fiscal 2000, we currently plan to open new terminals in
approximately 10 additional locations and to initiate local pick-up and delivery
operations in approximately 10 additional locations. We also plan to expand our
overseas presence through a variety of means that may include new terminal
openings, exclusive or nonexclusive agency agreements, direct equity positions
within selected overseas agencies and strategic acquisitions.

2
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THE OFFERING

Common stock offered by the
selling shareholder............ 1,200,000 shares

Common stock outstanding as of
June 30, 1999.................. 19,030,774

Use of proceeds.................. We will not receive any of the proceeds
from the sale of these shares. All of our
out-of-pocket offering expenses will be
paid by the selling shareholder.

Nasdaq National Market symbol.... EUSA

The number of outstanding shares of our common stock shown above excludes
an aggregate of 4,319,287 shares reserved for issuance under our stock plans as
of June 30, 1999. 2,945,208 of these shares were issuable upon exercise of stock
options outstanding as of June 30, 1999 at a weighted average exercise price of
$23.61, including vested options for 601,708 shares. Under the treasury stock
method of computation and at a $36.125 per share price for shares repurchased,
the issued options would represent approximately 622,648 common stock
equivalents.

3
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

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<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues...................................... $ 83,276 $126,214 $185,445 $291,767 $417,083 $295,239 $428,424
Cost of transportation........................ 49,764 72,366 103,312 163,616 233,257 164,525 243,455
-------- -------- -------- -------- -------- -------- --------
Gross profit.................................. 33,512 53,848 82,133 128,151 183,826 130,714 184,969
Personnel costs............................... 19,165 27,939 41,619 67,813 97,584 69,071 93,955
Other selling, general and
administrative expenses..................... 8,461 13,704 22,665 34,639 54,022 37,758 59,411
-------- -------- -------- -------- -------- -------- --------
Operating expenses............................ 27,626 41,643 64,284 102,452 151,606 106,829 153,366
-------- -------- -------- -------- -------- -------- --------
Operating income.............................. 5,886 12,205 17,849 25,699 32,220 23,885 31,603
Nonoperating income........................... 76 319 934 1,693 1,776 1,259 1,934
-------- -------- -------- -------- -------- -------- --------
Income before income taxes.................... 5,962 12,524 18,783 27,392 33,996 25,144 33,537
Provision for income taxes.................... 2,408 5,017 7,302 10,594 12,964 9,620 12,961
-------- -------- -------- -------- -------- -------- --------
Net income(1)................................. $ 3,554 $ 7,507 $ 11,481 $ 16,798 $ 21,032 $ 15,524 $ 20,576
======== ======== ======== ======== ======== ======== ========
Basic earnings per share(2)..................... -- $ 0.55 $ 0.69 $ 0.94 $ 1.12 $ 0.83 $ 1.09
Diluted earnings per share(2)................... -- 0.51 0.66 0.90 1.09 0.80 1.07
OPERATING DATA:
Gross margin.................................. 40.2% 42.7% 44.3% 43.9% 44.1% 44.3% 43.2%
Operating margin.............................. 7.0% 9.7% 9.6% 8.8% 7.7% 8.1% 7.4%
Same terminal revenue growth(3)............... 44.0% 29.1% 29.3% 48.7% 25.0% 30.0% 36.2%
Air freight terminals at period end........... 27 37 47 60 71 66 78
Local delivery locations at period end........ 0 11 28 44 64 58 67
Freight forwarding shipments.................. 291,956 382,583 524,685 832,704 1,048,795 747,811 1,006,094
Average weight (lbs) per freight forwarding
shipment.................................... 520 608 576 521 623 597 675
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF JUNE 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................... $ 3,510 $ 6,852 $ 41,487 $ 60,638 $ 85,869 $ 82,847 $102,516
Total assets.................................. 16,612 24,468 71,729 106,871 156,336 140,303 187,682
Long-term indebtedness, less current
portion..................................... 11 8,474 0 0 0 0 0
Shareholders' equity.......................... 5,031 1,699 50,442 80,504 119,046 113,118 140,213
</TABLE>

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

(1) Net income includes pro forma charges of $1,916 for fiscal 1994, $3,682 for
fiscal 1995 and $945 for fiscal 1996. These pro forma charges represent the
estimated federal income taxes that would have been reported had we been a C
Corporation before December 4, 1995.

(2) Historical net income per share is not provided for fiscal 1994 as such
inclusion is considered to be irrelevant.

(3) Percentage increase in revenues for terminals open as of the beginning of
the prior fiscal period.

4
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RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. If any of the following risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected. In that case, the trading price of the common stock could
decline, and you may lose all or part of your investment.

WE MAY NOT BE SUCCESSFUL IN CONTINUING OUR GROWTH EITHER INTERNALLY OR THROUGH
ACQUISITION

We have experienced significant growth, primarily through increases in
sales at existing terminals and opening new terminals. We also completed one
acquisition in 1997 and two in 1998. We anticipate that our growth strategy in
the future will primarily focus on internal growth in our domestic and
international freight forwarding, local pick-up and delivery and truck brokerage
business, and could also include additional acquisitions. Our ability to
continue our growth will depend on a number of factors, including:

- existing and emerging competition,
- our ability to open new terminals,
- our ability to maintain profit margins in the face of competitive
pressures,
- the continued recruitment, training and retention of operating and
management employees,
- the strength of demand for our services,
- the availability of capital to support our growth, and
- the ability to identify, negotiate and fund acquisitions when
appropriate.

Acquisitions involve risks, including those relating to:

- the integration of acquired business,
- the retention of prior levels of business,
- the retention of employees,
- the diversion of management attention,
- the amortization of acquired intangible assets, and
- unexpected liabilities.

We cannot assure you that we will be successful in implementing any of our
business strategy or plans for future growth.

OUR BUSINESS COULD BE ADVERSELY IMPACTED BY NEGATIVE CONDITIONS IN THE
INDUSTRIES OF OUR PRINCIPAL CUSTOMERS, IN PARTICULAR THE PERSONAL COMPUTER,
ELECTRONICS, TELECOMMUNICATIONS AND RELATED INDUSTRIES

Demand for our services could be adversely impacted by negative conditions
in the industries of our customers. A substantial number of our principal
customers are in the personal computer, electronics, telecommunications and
related industries. These customers collectively accounted for a substantial
percentage of our revenues in fiscal 1998 and in the first nine months of fiscal
1999. Adverse conditions in the industries of our customers could cause us to
lose a significant customer or experience a decrease in the shipment volume of
our customers. Either of these events could negatively impact our financial
results. We expect that demand for our services, and consequently our results of
operations, will continue to be sensitive to domestic and, as we continue to
expand internationally, global economic conditions and other factors beyond our
control.

OUR ABILITY TO SERVE OUR CUSTOMERS DEPENDS ON THE AVAILABILITY OF CARGO SPACE
FROM THIRD PARTIES

Our ability to serve our customers depends on the availability of air cargo
space, including space on passenger and cargo airlines that service the
transportation lanes we use. Shortages of cargo space are most likely to develop
around holidays and in especially heavy transportation lanes. In addition,
available cargo space could be reduced as a result of decreases in the number of
passenger airlines serving particular transportation lanes at particular times.
This could occur as a result of economic conditions, transportation
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strikes, regulatory changes and other factors beyond our control. Although we do
not believe that the lack of cargo space has had a significant impact on our
ability to book cargo space to date, future operating results could be adversely
affected by significant shortages of suitable cargo space and associated
increases in rates charged by passenger airlines for cargo space.

WE MAY LOSE BUSINESS TO COMPETITORS, PARTICULARLY THOSE WITH GREATER FINANCIAL
RESOURCES OR ESTABLISHED INTERNATIONAL NETWORKS

Competition within the freight industry is intense. We compete with fully
integrated carriers, including BAX Global, Inc. and Emery Air Freight
Corporation, that have substantially greater financial resources than us. As we
expand our international operations, we expect to encounter increased
competition from those forwarders that have a predominantly international focus
and have established international networks that are much more extensive than
ours, including Air Express International Corporation, Expeditors International
of Washington, Inc., Fritz Companies Inc. and Circle International Group, Inc.
We also encounter competition from other forwarders with nationwide networks,
regional and local forwarders, passenger and cargo air carriers, trucking
companies, cargo sales agents and brokers, and carriers and associations of
shippers organized for the purpose of consolidating their members' shipments to
obtain lower freight rates from carriers. Our inability to compete successfully
in our industry could cause us to lose customers or lower the volume of our
shipments.

WE ARE SUBJECT TO CLAIMS ARISING FROM OUR PICK-UP AND DELIVERY OPERATIONS

At June 30, 1999, we utilized the services of approximately 1,548 drivers
in connection with our local pick-up and delivery operations. From time to time,
these drivers are involved in accidents. Although most of these drivers are
independent contractors, we could be held liable for their actions. We currently
carry, or require our independent owner/operators to carry, liability insurance
of $1.0 million for each accident. However, claims against us may exceed the
amount of coverage. A material increase in the frequency or severity of
accidents, liability claims or workers' compensation claims, or unfavorable
resolutions of claims, could materially affect us. In addition, significant
increases in insurance costs as a result of these claims could reduce our
profitability.

EVENTS IMPACTING THE VOLUME OF INTERNATIONAL TRADE COULD ADVERSELY AFFECT OUR
INTERNATIONAL OPERATIONS

Our international operations are directly related to and dependent on the
volume of international trade, particularly trade between the United States and
foreign nations. This trade is influenced by many factors, including:

- economic and political conditions in the United States and abroad,
- major work stoppages,
- exchange controls, the Euro conversion and currency fluctuations,
- wars and other armed conflicts, and
- United States and foreign laws relating to tariffs, trade restrictions,
foreign investment and taxation.

Trade-related events beyond our control, like a failure of various nations
to reach or adopt international trade agreements or an increase in bilateral or
multilateral trade restrictions, could have a material adverse effect on our
international operations.

OUR SUCCESS DEPENDS ON THE EFFORTS OF OUR FOUNDER AND OUR OTHER KEY MANAGERS AND
PERSONNEL

Our founder, James R. Crane, serves as President, Chief Executive Officer
and Chairman of the Board. We believe that our future success will be highly
dependent upon the continuing efforts of Mr. Crane and our other executive
officers, key employees and regional managers, as well as our ability to attract
and retain other skilled managers and personnel. The loss of the services of any
of our key personnel could have a material adverse effect on us.

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WE MAY BE VULNERABLE TO YEAR 2000 FAILURES THAT COULD LEAD TO AN UNINSURED
BUSINESS INTERRUPTION

A Year 2000 failure of our internal systems or the systems of our
customers, suppliers or other third parties could result in a business
interruption that adversely affects our business, financial condition or
operations. We are not insured for this type of loss. For a more detailed
description of the Year 2000 issues facing us, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000 Issues."

WE ARE CONTROLLED BY OUR PRINCIPAL SHAREHOLDER, AND THIS COULD DELAY OR PREVENT
A CHANGE OF CONTROL OF OUR COMPANY

After this offering, James R. Crane will own approximately 36.8% of the
outstanding shares of our common stock, or 35.8% if the underwriters'
over-allotment option is exercised in full. As a result, Mr. Crane individually
will be in a position to control our company through his ability to
significantly influence the outcome of elections of our directors and other
matters submitted to a vote of shareholders. Mr. Crane's ownership of our common
stock may have the effect of delaying or preventing a change of control of our
company.

WE COULD INCUR ADDITIONAL EXPENSES OR TAXES IF THE INDEPENDENT OWNER/OPERATORS
WE USE IN CONNECTION WITH OUR LOCAL PICK-UP AND DELIVERY OPERATIONS ARE FOUND TO
BE "EMPLOYEES" RATHER THAN "INDEPENDENT CONTRACTORS"

The Internal Revenue Service, state authorities and other third parties
have at times successfully asserted that independent owner/operators in the
transportation industry, including those of the type we use in connection with
our local pick-up and delivery operations, are "employees" rather than
"independent contractors." Although we believe that the independent
owner/operators we use are not employees, the IRS, state authorities or others
could challenge this position, and federal and state tax or other applicable
laws, or interpretations of applicable laws, could change. If they do, we could
incur additional employee benefit-related expenses and could be liable for
additional taxes, penalties and interest for prior periods and additional taxes
for future periods.

OUR FAILURE TO COMPLY WITH GOVERNMENTAL PERMIT AND LICENSING REQUIREMENTS COULD
RESULT IN SUBSTANTIAL FINES OR REVOCATION OF OUR OPERATING AUTHORITIES

Our operations are subject to various state, local, federal and foreign
regulations that in many instances require permits and licenses. Our failure to
maintain required permits or licenses, or to comply with applicable regulations,
could result in substantial fines or revocation of our operating authorities.

PROVISIONS OF OUR CHARTER AND BYLAWS AND OF TEXAS LAW MAY DELAY OR PREVENT
TRANSACTIONS THAT WOULD BENEFIT SHAREHOLDERS

Our articles of incorporation and bylaws and Texas law contain provisions
that may have the effect of delaying, deferring or preventing a change of
control of our company. These provisions, among other things:

- authorize our board of directors to set the terms of preferred stock,
- restrict the ability of shareholders to take action by written consent,
and
- restrict our ability to engage in transactions with 20% shareholders.

Because of these provisions, persons considering unsolicited tender offers
or other unilateral takeover proposals may be more likely to negotiate with our
board of directors rather than pursue non-negotiated takeover attempts. As a
result, these provisions may make it more difficult for our shareholders to
benefit from transactions that are opposed by an incumbent board of directors.

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FORWARD LOOKING STATEMENTS

This prospectus includes or incorporates by reference forward looking
statements, including those relating to:

- availability of cargo space,
- our overseas presence and plans for international air freight forwarding
services and agreements for international cargo,
- expansion and results of our terminal network,
- plans for local delivery services and truck brokerage,
- improvements in our information systems and logistic systems and services
and the impact of the Year 2000 problem,
- marketing results,
- effects of litigation and governmental regulation or action,
- margins, costs of transportation and other operating expenses,
- any seasonality of our business,
- dividend plans,
- retention of employees or management,
- continued growth, acquisitions and implementation growth and business
strategy,
- expected sources of liquidity to support working capital and capital
expenditure requirements,
- tax benefits of any stock option exercises, and
- any other statements regarding future growth, future cash needs, future
terminals, future operations, business plans and future financial
results, and any other statements which are not historical facts.

When used in this prospectus, the words "anticipate," "believe,"
"estimate," "expect," "may," "plans," "project" and similar expressions are
intended to be among the statements that identify forward-looking statements.
These statements involve risks and uncertainties, including those factors
detailed in "Risk Factors" and elsewhere in this prospectus and in our other
filings with the Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the shares by the
selling shareholder. The selling shareholder will receive all proceeds from the
sale of the shares offered in this prospectus. See "Principal and Selling
Shareholders."

8
<PAGE> 12

PRICE RANGE OF COMMON STOCK

For the fiscal quarters indicated, the following table summarizes the high
and low last reported closing sales prices of our common stock for each
quarterly period indicated:

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
---------------
HIGH LOW
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1997:
First Quarter............................................. $27 3/4 $25 1/4
Second Quarter............................................ 33 1/2 25 1/4
Third Quarter............................................. 31 3/8 18
Fourth Quarter............................................ 36 1/8 24 1/8
FISCAL YEAR ENDED SEPTEMBER 30, 1998:
First Quarter............................................. $35 3/4 $25 1/2
Second Quarter............................................ 30 1/2 27 1/2
Third Quarter............................................. 36 25 1/4
Fourth Quarter............................................ 36 5/8 12
FISCAL YEAR ENDING SEPTEMBER 30, 1999:
First Quarter............................................. $24 7/8 $24 1/2
Second Quarter............................................ 32 1/2 32 1/2
Third Quarter............................................. 48 3/4 42 7/8
Fourth Quarter (through July 28, 1999).................... 43 7/16 36 1/8
</TABLE>

On July 28, 1999, the reported last sale price of our common stock was
$36 1/8 per share. As of June 30, 1999, we had approximately 111 stockholders of
record, including brokerage firms and other nominees.

DIVIDEND POLICY

We intend to retain all available earnings generated by our operations for
the development and growth of our business. Since our initial public offering,
we have not paid cash dividends. We do not anticipate paying any cash dividends
on our common stock in the foreseeable future. Subject to Texas law, our board
of directors will have broad discretion to make any future determination as to
dividend policy. Any determination will depend on a number of factors, including

- future earnings,
- capital requirements,
- financial condition,
- business factors, and
- any other factors our board of directors deems relevant.

9
<PAGE> 13

CAPITALIZATION

The following table shows our cash and short-term investments and total
capitalization as of June 30, 1999. The table excludes 4,319,287 shares of
common stock reserved for issuance under our stock incentive plans as of June
30, 1999. 2,945,208 of these shares were issuable upon exercise of stock options
outstanding at June 30, 1999, including vested options for 601,708 shares.

<TABLE>
<CAPTION>
AS OF
JUNE 30, 1999
--------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
Cash and short-term investments............................. $ 59,413
========
Total debt (including current maturities)................... $ --
Shareholders' equity:
Preferred stock, par value $0.001 per share; 10,000,000
shares authorized; no shares issued and outstanding.... --
Common stock, par value $0.001 per share; 100,000,000
shares authorized, 19,030,774 shares issued and
outstanding net of 558,558 treasury shares............. 19
Additional paid in capital................................ 80,115
Retained earnings......................................... 69,707
Accumulated other comprehensive loss...................... (426)
Treasury stock at cost.................................... (9,202)
--------
Total shareholders' equity........................ 140,213
--------
Total capitalization........................................ $140,213
========
</TABLE>

10
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following selected consolidated statement of income and balance sheet
data has been derived from our audited financial statements for the five fiscal
years ended September 30, 1998 and our unaudited financial statements for the
nine months ended June 30, 1999 and 1998. You should read this information in
conjunction with the consolidated financial statements and related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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

(2) Historical net income per share is not provided for fiscal 1994 as such
inclusion is considered to be irrelevant.

(3) Percentage increase in revenues for terminals open as of the beginning of
the prior fiscal period.

11
<PAGE> 15

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

You should read the following management's discussion and analysis of
financial condition and results of operations in conjunction with our
consolidated financial statements and related notes appearing elsewhere in this
prospectus.

OVERVIEW

During the past two fiscal years, our revenues increased at a compound
annual rate of 50.1% to $417.1 million in fiscal 1998 from $185.4 million in
fiscal 1996. Our revenues increased by 45.1% to $428.4 million in the first nine
months of fiscal 1999 from $295.2 million in the first nine months of fiscal
1998. Our operating income increased at a compound annual rate of 34.7% to $32.2
million in fiscal 1998 from $17.8 million in fiscal 1996 and increased by 32.3%
to $31.6 million in the first nine months of fiscal 1999 from $23.9 million in
the first nine months of fiscal 1998. Historically, we have grown primarily
through internal means, including developing our terminal network, expanding our
service offerings and sales force and increasing our customer base. We have also
made acquisitions on a limited basis. Since October 1, 1996, we have added 31
terminals, increasing the total number of terminals we operate to 78 as of June
30, 1999. As of June 30, 1999, 13 of these terminals had been open less than 12
months.

We plan to continue to expand our terminal network. We currently plan to
open terminals in approximately 10 additional cities by the end of fiscal 2000.
These plans, however, are subject to change based on a variety of factors. We
may also complement our internal expansion with selective acquisitions.

The opening of a new terminal generally has an initial short-term negative
impact on our profitability due to the operating losses of the new terminal.
However, the opening of a new terminal generally does not require significant
capital expenditures. Additionally, personnel costs are contained at the time of
the opening of a new terminal because commissions are generally not paid until
salesmen achieve minimum sales levels and until managers achieve terminal
profitability. Although future new terminals may be opened in cities smaller
than those in which our more mature terminals are located, we believe the
results of new terminals should benefit from a ready base of business provided
by our existing customers. Historically, our operating results have been subject
to a limited degree to seasonal trends when measured on a quarterly basis. The
second quarter has traditionally been the weakest, and the fourth quarter has
traditionally been the strongest.

We intend to continue to expand our international freight forwarding
business. International shipments typically generate higher gross revenues per
shipment than domestic shipments. We anticipate that the costs of transportation
as a percentage of revenues will be higher for international freight than for
domestic freight. However, we do not expect our operating expenses to increase
in proportion to these revenues. In April 1998, we expanded our international
operations through the acquisition of the operations of Eagle Transfer, Inc. and
of S. Boardman (Air Services Limited). Additionally, we commenced operations in
Hong Kong during September 1998 and in Argentina, Brazil and Peru during July
1999.

We also intend to continue the growth of our local pick-up and delivery
operations. By providing local pick-up and delivery services for our freight
forwarding shipments, we have been able to increase our gross margin for these
shipments because we capture margins that were previously paid to third parties.
However, our local pick-up and delivery services provided to other,
non-forwarding, customers generate a lower gross margin than our domestic
forwarding operations due to their higher transportation costs as a percentage
of revenues.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 is effective for transactions
entered into after January 1, 2000. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at 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 the type of hedge transaction. The

12
<PAGE> 16

ineffective portion of all hedges will be recognized in earnings. We are in the
process of determining the impact that the adoption of SFAS 133 will have on our
results of operations and financial position.

In October 1998, we adopted SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information." Under SFAS 130, companies are required to report in their
financial statements, in addition to net income, comprehensive income including,
as applicable

- foreign currency items,
- minimum pension liability adjustments, and
- unrealized gains and losses on selected investments in debt and equity
securities.

Our only component of other comprehensive income is foreign currency
translation adjustments. Our cumulative translation adjustments are now
characterized as accumulated other comprehensive income or loss.

SFAS 131 requires that companies report separately, in their financial
statements, financial and descriptive information about operating segments, if
applicable. Adoption of SFAS 130 and SFAS 131 did not have a material impact on
our consolidated financial statements and related disclosures. During the nine
and three months ended June 30, 1999, our geographic segments outside of the
United States did not represent, in the aggregate, more than 10% of the
revenues, net income or assets of the combined amounts for all geographic
segments.

RESULTS OF OPERATIONS

The following table presents selected statement of income data as a
percentage of revenues for the periods indicated.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, JUNE 30,
------------------------- -----------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
Revenues....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of transportation......................... 55.7 56.1 55.9 55.7 56.8
----- ----- ----- ----- -----
Gross profit................................... 44.3 43.9 44.1 44.3 43.2
Personnel costs................................ 22.5 23.2 23.4 23.4 21.9
Other selling, general and administrative
expenses..................................... 12.2 11.9 13.0 12.8 13.9
----- ----- ----- ----- -----
Operating expenses............................. 34.7 35.1 36.4 36.2 35.8
----- ----- ----- ----- -----
Operating income............................... 9.6% 8.8% 7.7% 8.1% 7.4%
===== ===== ===== ===== =====
Net income..................................... 6.2% 5.8% 5.0% 5.3% 4.8%
</TABLE>

NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED JUNE 30, 1998

Revenues increased 45.1% to $428.4 million in the first nine months of
fiscal 1999 from $295.2 million in the same period of fiscal 1998 primarily due
to increases in the number of shipments and the total weight of cargo shipped.
These increases resulted from an increase in the number of terminals open during
such period, an increase in penetration in existing airfreight and pickup and
delivery markets, the addition of significant national account customers and the
effect of two acquisitions.

For those freight forwarding terminals opened prior to the beginning of
fiscal 1998 (60 terminals), revenues increased 36.2% to $359.8 million for the
nine months ended June 30, 1999 from $264.2 million for the nine months ended
June 30, 1998.

Revenues for the nine months ended June 30, 1999 were comprised of $391.3
million of forwarding revenues and $37.1 million of local pick-up and delivery
revenues, as compared to $272.3 million of forwarding revenues and $23.0 million
of local pick-up and delivery revenues for the nine months ended June 30, 1998.

13
<PAGE> 17

Our total local pick-up and delivery revenues for the first nine months of
fiscal 1999 were $112.7 million. This amount includes $75.6 million of
intercompany sales that were eliminated upon consolidation and $37.1 million in
services to third-party (non-forwarding) customers.

Cost of transportation increased during the first nine months of fiscal
1999 as a percentage of revenues to 56.8% from 55.7% in the comparable period in
fiscal 1998. The increase was primarily attributable to increased international
freight shipping volumes, which carry a higher cost of transportation per
shipment than domestic freight. Cost of transportation increased in absolute
terms by 48.0% to $243.4 million for the nine months ended June 30, 1999 from
$164.5 million in the same period in fiscal 1998 as a result of increases in air
freight shipped. Gross margin decreased to 43.2% in the first nine months of
fiscal 1999 from 44.3% in the same period in fiscal 1998. The primary reasons
for the margin decline were increased international freight shipping volumes,
which carry a higher cost of transportation per shipment than domestic freight.
Gross profit increased 41.5% to $185.0 million in first nine months of fiscal
1999 from $130.7 million in the same period in fiscal 1998.

Operating expenses decreased as a percentage of revenues to 35.8% in the
first nine months of fiscal 1999 from 36.2% for the same period in fiscal 1998.
The $46.5 million increased costs in absolute terms were attributable primarily
to continued growth in the level of operations from additional terminals and
expansion of local delivery operations. Personnel costs decreased as a
percentage of revenues to 21.9% in the first nine months of fiscal 1999 from
23.4% in the same period in fiscal 1998 due primarily to controlled headcount
growth, and increased in absolute terms by 36.0% to $94.0 million. This increase
was due to increased staffing needs associated with the opening of new terminals
and local delivery locations, the effect of acquisitions, expanded operations at
existing terminals and increased commissions resulting from higher revenues and
expanded corporate infrastructure. Such personnel costs include all compensation
expenses, including those relating to sales commissions and salaries and to
headquarters employees and executive officers. We have added personnel to build
corporate infrastructure, to keep pace with its recent significant growth, to
deepen the staff at our terminals and to prepare for expected growth during
fiscal 1999. Other selling, general and administrative expenses increased as a
percentage of revenues to 13.9% in the first nine months of fiscal 1999 from
12.8% for the same period of fiscal 1998, and increased in absolute terms by
57.3% to $59.4 million in the fiscal 1999 period from $37.8 million in the
fiscal 1998 period. In the first nine months of fiscal 1999, selling expenses as
a percentage of revenues decreased by 0.2% and other general and administrative
expenses as a percentage of revenues increased by 1.3% compared to the same
period of fiscal 1998. The absolute increases in selling, general and
administrative expenses were due to overall increases in the level of our
activities in the fiscal 1999 period, increased expenses attributable to our
acquisitions, our new headquarters facility and increased professional and
technical fees.

Operating income increased 32.3% to $31.6 million in the first nine months
of fiscal 1999 from $23.9 million in the comparable period in fiscal 1998.
Operating margin for the nine months ended June 30, 1999 was 7.4%, down from
8.1% for the nine months ended June 30, 1998 primarily due to the increased cost
of transportation and the increases in other general and administrative expenses
described above. Interest and other income increased to $1.9 million from $1.3
million as a result of increased levels of investments due to increased cash
balances from results of operations.

Income before provision for income taxes increased 33.4% to $33.5 million
in the first nine months of fiscal 1999 from $25.1 million in the comparable
period of fiscal 1998. Provision for income taxes increased 34.7% to $13.0
million for the nine months ended June 30, 1999 from $9.6 million for the nine
months ended June 30, 1998. Net income increased 32.5% to $20.5 million in the
first nine months of fiscal 1999 from net income of $15.5 million in the same
period in fiscal 1998. Diluted earnings per share increased 33.8% to $1.07 per
share for the nine months ended June 30, 1999 from $0.80 in the same period in
fiscal 1998.

FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1997

Revenues increased 43.0% to $417.1 million in fiscal 1998 from $291.8
million in fiscal 1997 primarily due to increases in the number of shipments and
total weight of cargo shipped. These increases resulted

14
<PAGE> 18

from an increase in the number of terminals open during that period, an increase
in penetration in existing markets, the effect of three acquisitions and the
addition of significant national account customers.

For those terminals open as of the beginning of fiscal 1997, revenues
increased approximately 25.0% to $335.3 million in fiscal 1998 from $268.2
million in fiscal 1997. Revenues for fiscal 1998 were comprised of $384.0
million of forwarding revenues, $32.8 million of local pick-up and delivery
revenues and $338,000 of other freight forwarding revenues.

Total local pick-up and delivery revenues for fiscal 1998 were $112.0
million. This amount includes $79.2 million of intercompany sales that were
eliminated upon consolidation and $32.8 million in services to third-party
(non-forwarding) customers.

Cost of transportation decreased as a percentage of revenues to 55.9% in
fiscal 1998 from 56.1% in fiscal 1997. The decrease was primarily attributable
to the continued expansion of the local pick-up and delivery operations,
enabling us to capture margins previously paid to third parties. Cost of
transportation increased in absolute terms by 42.6% to $233.3 million in fiscal
1998 from $163.6 million in fiscal 1997 as a result of increases in air freight
shipped. Gross margin increased to 44.1% in fiscal 1998 from 43.9% in fiscal
1997. Gross profit increased 43.4% to $183.8 million in fiscal 1998 from $128.2
million in fiscal 1997. Operating expenses increased as a percentage of revenues
to 36.4% in fiscal 1998 from 35.1% in fiscal 1997. Operating expenses increased
in absolute terms by 48.0% to $151.6 million in fiscal 1998 from $102.5 million
in fiscal 1997. Personnel costs increased slightly as a percentage of revenues
to 23.4% in fiscal 1998 from 23.2% in fiscal 1997 and increased in absolute
terms by 43.9% to $97.6 million. These increases were due to increased staffing
needs associated with the opening of 11 new terminals, the opening of new local
delivery operations, the effect of acquisitions, expanded operations at existing
terminals, increased commissions resulting from higher revenues and expanded
corporate infrastructure. These personnel costs include all compensation
expenses, including those relating to sales commissions and salaries and to
headquarters employees and executive officers. We have added personnel to build
corporate infrastructure and keep pace with our recent significant growth. These
additions also allowed us to deepen the staff of our domestic, international and
local delivery operating units and prepare for any additional growth.

Other selling, general and administrative expenses increased as a
percentage of revenues to 13.0% in fiscal 1998 from 11.9% in fiscal 1997 and
increased in absolute terms by 56.0% to $54.0 million in fiscal 1998 from $34.6
million in fiscal 1997. In fiscal 1998, selling expenses decreased as a
percentage of revenues by 0.3% and other general and administrative expenses
increased as a percentage of revenues by 1.4% compared to fiscal 1997. The
absolute increases in selling, general and administrative expenses were due to
overall increases in the level of our activities in fiscal year 1998, increased
expenses attributable to our acquisitions, our new headquarters facilities and
increased professional fees.

Operating income increased 25.4% to $32.2 million in fiscal 1998 from $25.7
million in fiscal 1997 for the reasons indicated above. The operating margin for
fiscal 1998 was 7.7% of revenues, down from 8.8% of revenues in fiscal 1997
primarily due to the higher operating expenses as a percentage of revenues
described above. Non-operating income increased to approximately $1.8 million in
fiscal 1998 from approximately $1.7 million in fiscal 1997 due to increased
amounts of short-term investments as a result of the cash proceeds from our
initial and secondary public offerings. The 1997 amount included $375,000 from
reimbursements related to a public offering.

Income before income taxes increased 24.1% to $34.0 million in fiscal 1998
from $27.4 million in fiscal 1997. Provision for income taxes for fiscal 1998
was $13.0 million compared to provision for income taxes of $10.6 million for
fiscal 1997. Net income increased 25.2% to $21.0 million in fiscal 1998 from
$16.8 million in fiscal 1997. Diluted earnings per share increased 21.1% to
$1.09 per share in fiscal 1998 from $0.90 per share in fiscal 1997.

FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1996

Revenues increased 57.3% to $291.8 million in fiscal 1997 from $185.4
million in fiscal 1996 primarily due to increases in the number of shipments and
total weight of cargo shipped. These increases resulted

15
<PAGE> 19

from an increase in the number of terminals open during that period, an increase
in penetration in existing markets and the addition of significant national
account customers.

The number of shipments increased 58.7% during fiscal 1997, in part
attributable to an increased number of smaller shipments during the UPS strike.
The total weight of cargo shipped increased 43.5% over fiscal 1996. For those
terminals open as of the beginning of fiscal 1996, revenues increased
approximately 48.7% to $253.4 million in fiscal 1997 from $170.5 million in
fiscal 1996. Revenues for fiscal 1997 were comprised of $273.7 million of
forwarding revenues, $17.1 million of local pick-up and delivery revenues, and
$1.0 million of other freight forwarding revenues.

Total local pick-up and delivery revenues for our Eagle Freight Services
subsidiary for fiscal 1997 were $65.0 million. This amount includes $47.9
million of intercompany sales that were eliminated upon consolidation and $17.1
million in services to third-party (non-forwarding) customers.

Cost of transportation increased as a percentage of revenues to 56.1% in
fiscal 1997 from 55.7% in fiscal 1996. The increase was the result of the
following factors:

- For the period October 1996 to May 1997, several of our transportation
providers implemented a fuel surcharge which was not in effect during
fiscal 1996.
- Increased revenues from international freight, which generally have lower
gross margins than domestic shipments, to $20.9 million in fiscal 1997
from $9.8 million in fiscal 1996, also contributed to the higher cost of
transportation as a percentage of revenues.
- The reinstatement on March 7, 1997 of the Federal Air Cargo
Transportation Excise Tax, which had previously expired January 1, 1997,
negatively impacted cost of transportation as a percentage of revenues
for the year. In fiscal 1996, this tax expired January 1, 1996 and was
not reinstated until August 27, 1996.

These factors were additionally offset by the continued expansion of our
local pick-up and delivery operations, which enabled us to capture margins
previously paid to third parties.

Cost of transportation increased in absolute terms by 58.4% to $163.6 million in
fiscal 1997 from $103.3 million in fiscal 1996 as a result of increases in air
freight shipped. Gross margins decreased to 43.9% in fiscal 1997 from 44.3% in
fiscal 1996. Gross profit increased 56.0% to $128.2 million in fiscal 1997 from
$82.1 million in fiscal 1996.

Operating expenses increased as a percentage of revenues to 35.1% in fiscal
1997 from 34.7% in fiscal 1996. Operating expenses increased in absolute terms
by 59.4% to $102.5 million in fiscal 1997 from $64.3 million in fiscal 1996.
Personnel costs increased as a percentage of revenues to 23.2% in fiscal 1997
from 22.5% in fiscal 1996 and increased in absolute terms by 62.9% to $67.8
million. These increases were due to increased staffing needs associated with
the opening of 13 new terminals and to a lesser extent with respect to the UPS
strike, expanded operations at existing terminals and increased revenues, which
resulted in an increase in commissions and expanded corporate infrastructure.
These personnel costs include all compensation expenses, including those
relating to sales commissions and salaries to headquarters employees and
executive officers.

Other selling, general and administrative expenses decreased as a
percentage of revenues to 11.9% in fiscal 1997 from 12.2% in fiscal 1996, and
increased in absolute terms by 52.8% to $34.6 million in fiscal 1997 from $22.7
million in fiscal 1996. In fiscal 1997, selling expenses decreased as a
percentage of revenues by 0.2% and other general and administrative expenses
decreased as a percentage of revenues by 0.1% compared to fiscal 1996. The
absolute increases in selling, general and administrative expenses were due to
overall increases in the level of our activities in fiscal 1997.

Operating income increased 44.0% to $25.7 million in fiscal 1997 from $17.8
million in fiscal 1996 for the reasons indicated above. Non-operating income
increased to approximately $1.7 million in fiscal 1997 from approximately
$934,000 in fiscal 1996 due to increased amounts of short-term investments.
These amounts resulted from the cash proceeds from our initial and secondary
public offerings and a one-time

16
<PAGE> 20

payment of $375,000 in reimbursement of internal costs related to the February
1997 secondary public offering. See "-- Liquidity and Capital Resources."

Income before income taxes increased 45.8% to $27.4 million in fiscal 1997
from $18.8 million in fiscal 1996. Provision for income taxes for fiscal 1997
was $10.6 million compared to provision for income taxes of $6.4 million for
fiscal 1996. A portion of the increase in provision for income taxes was from
the termination of Eagle's S Corporation status shortly before the initial
public offering on December 6, 1995. Net income increased 35.2% to $16.8 million
in fiscal 1997 from net income of $12.4 million in fiscal 1996 and increased
46.3% from pro forma net income of $11.5 million in fiscal 1996. Diluted
earnings per share increased 36.4% to $0.90 in fiscal 1997 from $0.66 pro forma
diluted earnings per share in fiscal 1996.

Our fiscal 1997 results were affected by the UPS strike occurring during a
two-week period in the fourth quarter of fiscal 1997 as we shipped freight that
would have ordinarily been shipped by UPS. We estimate that the UPS strike
resulted in approximately $6.0 million in incremental revenue which generated
approximately 5% after tax profit on that revenue. The strike had a slightly
positive impact on gross profit margin as the increased traffic from the strike
carried higher yields on a per-pound basis. The strike, however, resulted in
higher operating expenses, primarily personnel costs, which offset these higher
yields. We do not expect to retain any of the business we gained through the UPS
strike, as we generally occupy a separate niche within the freight
transportation marketplace.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and short-term investments increased to $59.4 million at June 30,
1999 compared to $49.7 million at September 30, 1998. At June 30, 1999, we had
working capital of $102.5 million and a current ratio of 3.16 compared to
working capital of $85.9 million and a current ratio of 3.30 at September 30,
1998. Our working capital has increased primarily as a result of the profitable
growth associated with the expansion of our operations and the resultant
increase in accounts receivable and payable. Capital expenditures were
approximately $8.7 million for the first nine months of fiscal 1999 and were
approximately $11.9 million for fiscal 1998. We believe that cash flow from
operations and the remaining proceeds from our public stock offerings will be
adequate to support our normal working capital and capital expenditures
requirements for at least the next 12 months.

Other than our public stock offerings, our cash generated from operations
has been our primary source of liquidity, although we have from time to time
made limited use of bank borrowing and lease or purchase arrangements. We do not
anticipate paying any cash dividends on our common stock in the foreseeable
future.

During fiscal 1999, we repurchased 563,200 shares of our common stock
pursuant to board authorization, which has since expired. Subsequently, 4,642 of
the shares repurchased were resold pursuant to our employee stock purchase plan.
The total cost of the share repurchases as of June 30, 1999 was approximately
$9.2 million.

Our subsidiaries in the United Kingdom, Hong Kong and Mexico maintain bank
lines of credit for purposes of securing customs bonds and bank letters of
credit for purposes of guaranteeing some transportation expenses. These credit
lines and letters of credit are supported by standby letters of credit issued by
a United States bank or guarantees issued by us to the foreign banks. At June
30, 1999, we were contingently liable for approximately $2.5 million under
outstanding letters of credit and guarantees related to these obligations.

On January 10, 1997, we entered into a five-year operating lease agreement
with two unrelated parties for financing the construction of our Houston
terminal, warehouse and headquarters facility. The cost of the Houston facility
was approximately $8.5 million. Under the terms of the lease agreement, average
monthly lease payments are approximately $59,000, which includes monthly
interest costs based upon LIBOR rate plus 145 basis points, beginning on July 1,
1998 through October 2, 2002. A balloon payment equal to the outstanding lease
balance, which was initially equal to the cost of the facility, is due on
October 2, 2002. As of June 30, 1999, the lease balance was approximately $8.3
million.

On April 3, 1998, we entered into a five-year $20 million master operating
lease agreement with two unrelated parties for financing the construction of
terminal and warehouse facilities throughout the United

17
<PAGE> 21

States that we designate. Under the terms of the master operating lease
agreement, average monthly lease payments, including monthly interest costs
based upon LIBOR rate plus 145 basis points, begin upon the completion of the
construction of each financed facility. The monthly lease obligations continue
for a term of 52 months. A balloon payment equal to the outstanding lease
balances, which were initially equal to the cost of the facility, is due at the
end of each lease term. Construction began during fiscal 1999 on five terminal
facilities. As of June 30, 1999, the aggregate lease balance was approximately
$9.1 under the master operating lease agreement.

We have an option, exercisable at any time during the lease term, and under
particular circumstances may be obligated, to acquire the Houston terminal and
each of our other financed facilities for an amount equal to the outstanding
lease balance. If we do not exercise the purchase option, and do not otherwise
meet our obligations, we are subject to a deficiency payment computed as the
amount equal to the outstanding lease balance minus the then-current fair market
value of each financed facility within limits. We expect that the amount of any
deficiency payment, if made, would be expensed.

During fiscal 1998 and 1999, we entered into commitments of approximately
$6.0 million for the construction of additional terminal and warehouse
facilities located in the United States. Payment for the construction of the
facilities is being made from cash balances. As of June 30, 1999, we had paid
approximately $3.5 million of the commitments. Construction of the facilities is
estimated to be completed during fiscal 1999 and fiscal 2000.

As of June 30, 1999, we had outstanding non-qualified stock options to
purchase an aggregate of 2,945,208 shares of common stock at exercise prices
ranging from $1.25 to $37.28, which equaled the fair market value of the
underlying common stock on the dates of grant. At the time a non-qualified stock
option is exercised, we will generally be entitled to a deduction for federal
and state income tax purposes equal to the difference between the fair market
value of the common stock on the date of exercise and the option price. As a
result of exercises of non-qualified stock options to purchase an aggregate of
464,827 shares during the first nine months of fiscal 1999, 623,852 shares
during fiscal 1998 and 452,489 shares during fiscal 1997, we are entitled to
federal income tax deductions of approximately $10.3 million for the first nine
months of fiscal 1999, $12.9 million for fiscal 1998 and $10.2 million for
fiscal 1997. We realized tax benefits of approximately $4.0 million in the first
nine months of fiscal 1999, $4.7 million in fiscal 1998 and $4.1 million in
fiscal 1997. Accordingly, we recorded an increase to additional paid-in capital
and a reduction to current taxes payable pursuant to the provisions of SFAS No.
109, "Accounting for Income Taxes." Any exercises of non-qualified stock options
in the future at exercise prices below the then fair market value of the common
stock may also result in tax deductions equal to the difference between those
amounts. There is uncertainty as to whether or not the exercises will occur, the
amount of any deductions or our ability to fully utilize any tax deductions.

On February 18, 1997, we completed an underwritten secondary public
offering of 1,779,922 shares of our common stock at a price to the public of
$28.25 per share. We sold 232,164 of these shares, and the net proceeds we
received after deducting underwriting discounts and commissions were $6.2
million. These proceeds will be used for general corporate purposes. We did not
receive any of the proceeds from the sale of 1,547,758 of these shares sold by
Daniel S. Swannie, a former executive officer and director of Eagle. Under an
agreement between Eagle and Mr. Swannie, Mr. Swannie reimbursed us for all of
our out-of-pocket expenses incurred in connection with the offering and made a
payment to us of $375,000 for our estimated internal costs relating to the
offering. This agreement also restricts Mr. Swannie's ability to compete against
us for a three-year term and places some other limitations on his ability to act
against our interests.

On January 30, 1998, we completed an underwritten secondary public offering
of 2,012,500 shares of our common stock at a price to the public of $27.75 per
share. We sold 262,500 of these shares, and the net proceeds we received after
deducting underwriting discounts and commissions and offering expenses

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<PAGE> 22

were approximately $6.6 million. These proceeds will be used for general
corporate purposes. We did not receive any of the proceeds from the sale of
1,750,000 of these shares sold by James R. Crane, our Chairman of the Board of
Directors, President and Chief Executive Officer.

ACQUISITIONS AND PRIOR S CORPORATION STATUS

On September 19, 1997, we acquired the operating assets and assumed some
liabilities of Michael Burton Enterprises, Inc., a transportation and
value-added logistics service provider in Columbus, Ohio. We issued 33,362
shares of common stock, valued at $1.0 million, and paid approximately $5.6
million in cash. The acquisition agreement also provides for three contingent
payments of up to $1.8 million if specified annual sales goals are achieved over
the next three years. The acquisition was accounted for as a purchase.
Accordingly, the purchase price was allocated on the basis of the estimated fair
market value of the net assets acquired. The results of operations for the
acquired business was included in the consolidated statement of income from the
acquisition date forward. The first contingent payment of $1.5 million was paid
in October 1998.

On April 3, 1998, we acquired substantially all of the operating assets and
assumed some liabilities of Eagle Transfer, Inc., a privately-held international
freight forwarder/consolidator based in Miami, Florida. Despite the similarity
in names, we and Eagle Transfer had no prior affiliation. On April 14, 1998, we
acquired all of the outstanding stock of S. Boardman (Air Services) Limited, a
privately held full services forwarder based in London, England. The aggregate
purchase price for the two 1998 acquisitions was approximately $5.4 million,
including $4.3 million in cash plus 27,999 shares of common stock, valued at
$750,000. The agreements also specify maximum contingent earnout payments in the
aggregate of $2.0 million in cash plus $2.3 million in common stock, if
specified performance benchmarks are met over each of the next three years. The
acquisitions were accounted for as purchases. Accordingly, in each case the
purchase price was allocated based upon the estimated fair market value of the
net assets acquired with the excess being recorded as goodwill. The results of
operations for the acquired operations were included in the consolidated
statements of income from the acquisition date forward. The first contingent
payment of $500,000 was paid in April 1999.

Effective October 1, 1992, we elected to be treated as an S Corporation
under Subchapter S of the Internal Revenue Code and comparable provisions of
state tax laws. From October 1, 1992 until the termination of our S Corporation
status, we paid no federal income tax. For financial reporting purposes, for
periods before our December 1995 initial public offering, we recorded a
provision for state income taxes for all states in which we operated. We also
have recorded for fiscal 1996 the federal income tax liability for each of our
subsidiaries that paid federal income taxes.

Shortly before our initial public offering in December 1995, our status as
an S Corporation was terminated. Since that time, we have been liable for
federal income taxes and state income taxes in some states. Before the closing
of the initial public offering, we declared distributions payable both in cash
and in the form of special distribution notes in an amount equal to all of our
undistributed S Corporation earnings up through the closing. The final payment
of these notes was made in fiscal 1997. We have no plans to pay any dividends or
distributions in the foreseeable future.

On October 1, 1994, we purchased a 50% interest in Eagle Freight Services,
Inc. and C&D Freight Services of California, Inc. from a third party. During
fiscal 1995, we purchased a 50% interest in Freight Services Management, Inc.
from our Chairman of the Board and initiated operation of Eagle USA
Transportation Services, Inc. and Eagle USA Import Brokers, Inc. The remaining
interests in each of these entities were purchased from our Chairman of the
Board immediately before the closing of the initial public offering in December
1995. Because we controlled each of these entities, results for fiscal 1996 and
1995 reflect the operations of all of these entities as if we owned 100% of
these entities as of the beginning of the period presented.

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<PAGE> 23

YEAR 2000 ISSUES

Historically, some computer programs used only the last two digits of a
year to refer to a date, causing them to not properly recognize a year that does
not begin with "19." This could result in major failures or miscalculations and
is generally referred to as the "Year 2000" or "Y2K" problem.

We rely principally on three internal systems to support our freight
forwarding, pick up and delivery, logistics management, accounting and
management reporting worldwide. Our assessment of these systems is as follows:

- The primary domestic forwarding, logistics management, accounting and
management system has been independently tested and we expect to receive
a Year 2000 compliance certificate in August 1999. The cost of this
testing was not significant and only minor remediation was requested.

- The primary international forwarding system has been developed in-house,
and remains under development. This system is being developed using
current technology and a platform that has been certified as Y2K
compliant.

- We plan to upgrade our pick up and delivery system by September 1999 for
a minimal cost.

We have not identified any internal non-information technology systems that
use embedded technology on which we rely and that we believe is likely to have a
Y2K problem. Except as noted above, we have completed our review and remediation
of our internal systems for potential Year 2000 problems we have identified.
However, we plan to continue to monitor these systems through the end of 1999.

We are also reliant on systems capabilities of business partners, trading
partners, customers, suppliers, governmental agencies and internet and
telecommunications providers in many countries throughout the world. Like every
other business enterprise, we are also at risk from Year 2000 failures in public
and private infrastructure services, including electricity, water, gas,
transportation and communications. Other than telecommunications services and
electronic data interchange, we do not directly rely on the systems capabilities
of third parties for our principal operations. Because of our extensive use of
technology, we are dependent on data and voice communications to receive,
process, track and bill customer orders. We have completed tests of electronics
data interchange with several of our trading partners and plan additional tests
through the end of 1999. We have also received representations as to Year 2000
compliance from a majority of our major suppliers and plan to continue to
monitor the status of our suppliers' compliance efforts through the end of 1999.
We are also vulnerable to noncompliance of third party systems if they result in
business interruption of a customer. We plan to address readiness issues with
some of our major customers during calendar 1999.

Because of the number of external risks involved, we believe there is
likely to be some disruption in our business as a result of noncompliance by
third parties. Of all the external risks, we believe that the most reasonably
likely worst case scenario would be a business disruption resulting from an
extended communications failure and/or an extended failure of the nations air
traffic system. In addition, the global transportation industry and regulatory
authorities, including the United States Department of Transportation and
related agencies, could be affected in a way that negatively affects our
operations. Our transportation providers might be unable to provide those
services because of these Year 2000 failures or Year 2000 problems of their own.
If a Year 2000 failure causes insufficient air lift to be available to us, our
air freight forwarding operations would be curtailed and we might also be unable
to provide sufficient alternative services such as ground, rail or ocean cargo
capacity to meet expected levels of operations. Furthermore, should our
customers experience business interruption in the year 2000, our results of
operation could be materially adversely affected. We would also likely
experience a deterioration in collections if our customers experience Year 2000
failures. Based on our information regarding the readiness of suppliers,
including air carriers and communication carriers, and customers, we expect that
any Year 2000 disruption would be of short duration. However, we are unable to
determine the potential business interruption costs that might be incurred as a
result of Y2K disruptions.

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<PAGE> 24

We are currently exploring contingency plans in the event of possible
business interruptions. We intend to address emergency instructions, including
security, power outages and telecommunications failures, and alternative means
of transporting freight for each of our terminals in late 1999. We expect that
our contingency planning will continue to the end of 1999 and the beginning of
2000.

To date, we have incurred less than $100,000 of expense and do not
currently plan to expend any material amount of funds for Y2K remediation.
Despite our assessment to date, we cannot assure you as to the ultimate effect
that the Y2K issues will have on us.

Our assessment of our Year 2000 issues involves many assumptions. Our
assumptions might prove to be inaccurate, and actual results could differ
significantly from the assumptions. In addition, third party representations or
certifications as to Year 2000 compliance might prove to be inaccurate and Year
2000 compliance tests may not have been subjected to a sufficient sample of
conditions. We could be adversely affected by business disruptions of a greater
magnitude than anticipated or from a failure of our contingency plans to
adequately address problems.

SEASONALITY

Historically, our operating results have been subject to a limited degree
to seasonal trends when measured on a quarterly basis. The second fiscal
quarter, ending March 31, has traditionally been the weakest, and the fourth
fiscal quarter, ending September 31, has traditionally been the strongest. This
pattern is the result of, or is influenced by, numerous factors including
climate, national holidays, consumer demand, economic conditions and a myriad of
other similar and subtle forces.

In addition, this historical quarterly trend has been influenced by the
growth and diversification of our terminal network. We cannot accurately
forecast many of these factors, nor can we estimate accurately the relative
influence of any particular factor. As a result, we cannot assure you that
historical patterns, if any, will continue in future periods.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 1999, we did not have any outstanding short-term or
long-term debt instruments. Accordingly, we do not have market risk related to
interest rates. However, our lease payments on some financed facilities are tied
to market interest rates. At June 30, 1999, a 10% rise in the base rate for
these financing arrangements would not have a material impact on operating
income for fiscal 1999.

Our earnings are affected by fluctuations in the value of the U.S. dollar
as it relates to the earnings of our United Kingdom, Canada, Mexico and Hong
Kong operations, as a result of transactions in foreign markets. At June 30,
1999, the result of a uniform 10% strengthening in the value of the dollar
relative to the currencies in which these operations are denominated would not
have a material impact on operating income for fiscal 1999.

We have not purchased any futures contracts, nor have we purchased or held
any derivative financial instruments for trading purposes during the nine months
ended June 30, 1999.

In the second quarter of fiscal 1999, we entered into contracts for the
purpose of hedging the cost of a portion of anticipated jet fuel purchases
during the following twelve months. These contracts are nominally insignificant.
At June 30, 1999, a 10% change in the price of jet fuel would not have a
material impact on operating income for fiscal 1999.

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BUSINESS

- local pick-up and delivery,
- truck brokerage,
- customs brokerage,
- air charter services,
- ocean freight services,
- computer-based shipping systems,
- electronic data interchange,
- custom shipping reports,
- computerized tracking of shipments via the Internet,
- warehousing, and
- cargo assembly and protective packing and crating.

INDUSTRY OVERVIEW

As business requirements for efficient and cost-effective distribution
services have increased, so has the importance and complexity of effectively
managing freight transportation. Businesses increasingly strive to minimize
inventory levels, perform manufacturing and assembly operations in different
locations and distribute their products to numerous destinations. As a result,
companies frequently desire expedited or time-definite shipment services.
Time-definite shipments are required to be delivered at a specific, typically
less expedited time, which may result in lower rates than expedited shipments.

Companies requiring some form of expedited or time-definite handling
generally have two principal alternatives to transport freight: they may use an
air freight forwarder or they may ship via a fully integrated carrier.

An air freight forwarder:

- procures shipments from customers,
- makes arrangements for transportation of the cargo on a carrier, and
- may arrange both for pick-up from the shipper to the carrier and for
delivery of the shipment from the carrier to the recipient.

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<PAGE> 26

Air freight forwarders often tailor the routing of each shipment to meet
the price and service requirements of the customer. Fully integrated carriers
provide pick-up and delivery service, primarily through their own captive fleets
of trucks and aircraft. Because air freight forwarders select from various
transportation options in routing customer shipments, they are often able to
serve their customers less expensively and with greater flexibility than
integrated carriers. In addition to the high fixed expenses associated with
owning, operating and maintaining fleets of aircraft, trucks and related
equipment, integrated carriers often have significant restrictions on delivery
schedules and shipment weight, size and type. Air freight forwarders, however,
generally handle shipments of any size and can offer customized shipping
options, thus offering an effective alternative for shippers of freight.

Most air freight forwarders, including our company, focus on the shipment
of heavy cargo and do not directly compete for the majority of their business
with integrated shippers of primarily small parcels, including Federal Express
Corporation, United Parcel Service of America, Inc., Airborne Freight
Corporation, DHL Worldwide Express, Inc. and The United States Postal Service.
On occasion, these shippers also serve as a source of cargo space to forwarders.
However, several integrated carriers, like Emery Air Freight Corporation and BAX
Global, Inc., focus on shipments of heavy cargo in competition with forwarders.
Additionally, most air freight forwarders do not generally compete with the
major commercial airlines, which to some extent depend on forwarders to procure
shipments and supply freight to fill cargo space on their scheduled flights.

The domestic air freight forwarding industry is highly fragmented. Many
companies in the industry are able to meet only a portion of their customers'
required transportation service needs. Some national domestic air freight
forwarders rely on networks of terminals operated by franchisees or agents. We
believe that the development and operation of company-owned terminals and staff
under the supervision of our management have enabled us to maintain a greater
degree of control over our finances, operations and service quality than
franchise-based networks.

We believe that the most important competitive factors in our industry are
quality of service, including reliability, responsiveness, expertise and
convenience, scope of operations, information technology and price.

BUSINESS STRATEGY

Our business strategy includes the following principal elements:

CONTINUED RAPID EXPANSION OF CORE DOMESTIC FREIGHT FORWARDING BUSINESS

We plan to expand our domestic freight forwarding business by continuing
to:

- provide high-quality customized freight forwarding and related
transportation services,
- expand our network of terminals, and
- capitalize on economies of scale.

We may complement our internal expansion with selective acquisitions. We
believe that this expansion will make us more attractive to national shippers
and to local shippers in the new markets. This expansion should also give us
additional control and enable us to capture more profit on shipments to the new
cities, where the third-party agents previously used are replaced by company
personnel at the new terminals. As we expand our terminal network and grow our
customer and shipment base, we will continue to seek increasing advantages from
economies of scale, like cargo space buying power with airlines and
sophisticated information systems.

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DEVELOPMENT OF INTERNATIONAL FREIGHT FORWARDING

We intend to continue to expand our international freight forwarding
services and expect that these operations will be the focus of an increasing
portion of management time and company resources. We plan to expand our overseas
presence through a variety of means that may include

- new terminal openings,
- exclusive or nonexclusive agency agreements,
- direct equity positions within selected overseas agencies, and
- strategic acquisitions.

We have designed and implemented an exclusive international information
management system that utilizes Internet-based technology to facilitate our
global operations and communications network. We expect lower gross margins on
international business than domestic business. However, we expect to achieve
operating margins for our international business that are consistent with those
for our domestic business by focusing on high-revenue shipments for existing
customers in conjunction with leveraging the business through our existing
domestic terminal network and overhead structure.

EXPANSION OF LOCAL PICK-UP AND DELIVERY AND TRUCK BROKERAGE

We have local pick-up and delivery services at 64 of our 78 terminal
locations, as well as at three locations without air freight forwarding
operations. We plan to initiate local pick-up and delivery services in
approximately 10 additional locations by the end of fiscal 2000. We intend to
continue the expansion of our local pick-up and delivery service and to increase
that business beyond that generated by air freight customers. In addition, we
have initiated a centralized truck brokerage service to more efficiently utilize
truck transportation as an effective alternative to air shipment for less urgent
forwarding business.

By providing the local pick-up and delivery services to our air freight
customers, we have been able to increase our gross margins on their shipments
because our own costs to provide these services are less than the third-party
charges we previously paid.

ATTRACTIVE INCENTIVE-BASED COMPENSATION

As a service organization, we recognize the importance of hiring and
retaining the highest quality employees available. Consequently, we pay our
entire sales force and most of our operations personnel what we believe is
significantly more than the industry average and offer a broad-based
compensation plan, including participation in our stock purchase plan, to these
employees. We also include stock options in the compensation packages for our
key management personnel. We believe this compensation plan and philosophy give
us a competitive advantage and have helped us to attract, retain and incentivize
top quality personnel while providing for proper checks and balances between our
growth and profitability goals. Our management from the terminal manager level
and above has an average of over 15 years of transportation experience.

ENHANCEMENT OF ADVANCED INFORMATION SYSTEMS

We believe the ability to provide accurate up-to-date information on the
status of shipments, both internally and to customers, will become increasingly
important. Consequently, we have invested and plan to continue to invest,
substantial management and financial resources in the development and upgrading
of our information systems. Based upon our analysis of systems generally
available to air freight forwarders, we believe that our systems are superior to
those of other domestic freight forwarders and provide us with a competitive
advantage. The expansion of our local pick-up and delivery service is expected
to further improve our logistics system by ultimately enabling shipment
information to be monitored from pick-up through delivery.

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OUR SERVICES

DOMESTIC AIR FREIGHT FORWARDING SERVICES

Our freight forwarding operations involve:

- obtaining shipment orders from customers,
- determining the best means to transport the shipment to its destination,
and
- arranging and monitoring all aspects of the shipment.

Typically, transportation for our domestic shipments is provided by a
commercial air carrier. We prepare all required shipping documents and deliver
shipments to the transporting carrier. For much of our customer traffic, we make
arrangements for three separate transportation segments:

- pick-up from the shipper to our terminal in the origin city,
- shipment by air or overland carrier, and
- delivery from our terminal in the destination city to the recipient.

Local transportation services are performed either by independent cartage
companies or, increasingly, by our local pick-up and delivery operations. If
delivery schedules permit, we will typically use lower-cost, overland truck
transportation services, including those obtained through our truck brokerage
operations. In some cases, the shipments are consolidated at our four ground
transportation hubs. As part of our routine services, we also provide handling,
packing and containerizing services, arrange for insurance and the tracking of
shipments and provide physical breakbulk. Breakbulk involves receiving and
breaking down consolidated air freight lots and arranging for distribution of
the individual shipments.

We neither own nor operate any aircraft and, consequently, place no
restrictions on delivery schedules or shipment size. We arrange for
transportation of our customers' shipments via commercial airlines and, to a
lesser extent, air cargo carriers. All of our air shipments can be accommodated
by either narrow-body or wide-body aircraft. We select the carrier for a
shipment on the basis of route, departure time, available cargo capacity and
cost.

We have begun regularly-scheduled dedicated charters of eight cargo
airplanes under short-term leases to service specific transportation lanes. On
occasion, we charter cargo aircraft for use in other transportation lanes, as
needed. The number of these dedicated charters varies from time to time
depending upon seasonality, freight volumes and other factors.

Due to the high volume of freight we control, we are able to obtain
discounted rates from airlines and are often able to reserve space at times when
available space is limited. As a result, we can provide shipment options not
directly available to our customers. Occasionally, we are able to consolidate
shipments to further reduce our costs of transportation. Our rate schedule
generally offers increasing discounts for shipment options with later scheduled
delivery times. Our per pound rates are also based on shipment weight and
generally decrease as the weight of the shipment increases.

We offer our customers five major delivery schedule options:

- next flight -- immediate pick-up and placement of the shipment on the
next available flight,
- next-day AM priority -- shipments that take precedence for delivery by
the morning of the following day,
- next-day PM -- shipments delivered by the afternoon of the following day,
- second day -- shipments delivered by the afternoon of the second
following day, and
- economy -- shipments typically delivered by the afternoon of the third to
fifth day after shipment.

Relatively less time-sensitive shipments, or shipments for which expedited
delivery is not economical, are often shipped second day or economy. These
options enhance our opportunity to achieve savings by the use of truck
transportation, the consolidation of shipments and the increased air cargo
options afforded by the additional time for shipment.

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We provide forwarding services that are tailored to meet the needs of the
customer and, in addition to regularly scheduled service, offer customized
schedules to do so. In addition, our services are customized to address each
client's individual shipping requirements, generally without restrictions on
shipment weight, size or type. Once the customer's requirements for an
individual shipment have been established, we proactively manage the execution
of the shipment to ensure the satisfaction of these requirements.

During fiscal 1998, average shipment weight was approximately 623 pounds.
Although we impose no size or weight restrictions on shipments, we focus on
shipments of over 50 pounds. During fiscal 1998, no customer accounted for more
than 10% of our revenues. Our principal forwarding customers during fiscal 1998
included shippers of:

- computers and other electronic and high-technology equipment,

- printed and publishing materials,

- automotive and aerospace components,

- trade show exhibit materials,

- telecommunications equipment,

- machinery and machine parts, and

- apparel and entertainment.

When acting as a forwarder, we are legally responsible to our customer for
the safe delivery of the customer's cargo to its ultimate destination, subject
to a contractual limitation on liability to the lesser of $0.50 per pound or $50
for domestic flights and the greater of $50 or $20 per kilogram ($9.07 per
pound) for international flights. However, because an air freight forwarder's
relationship to an airline is that of a shipper to a carrier, the airline
generally has the same responsibility to us as we have to our customers.
Additionally, shippers may purchase insurance on shipments. We may have sole
carrier liability for a shipment before or after delivery to the carrier, and in
some other cases. Our claims expenses have generally been limited, totaling
$1,706,000 for fiscal 1998, $652,000 for fiscal 1997 and $468,000 for fiscal
1996.

INTERNATIONAL FREIGHT FORWARDING SERVICES

We have continued to expand our international forwarding operations by
entering into agreements with independent cargo agents at strategic worldwide
locations. These agents provide breakbulk, pick-up and delivery and customs
brokerage services for cargo generated by our North American based locations, as
well as arranging for overseas sales of cargo bound for North America. We are
also expanding our international services offerings by providing ocean freight
consolidation services and in some locations, customs brokerage services. We
completed two acquisitions in fiscal 1998 that expanded our European and South
American capabilities. Additionally, we commenced operations in Hong Kong during
September 1998 and in Argentina, Brazil and Peru during July 1999.

We are also emphasizing the marketing of our international services
throughout our North American network, particularly at some of our largest
locations, including:

- Atlanta
- Chicago
- Dallas
- Houston
- Los Angeles
- Miami
- New York
- San Francisco

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To support our international operations, one of our subsidiaries is
certified by the Federal Maritime Commission as a Non-Vessel Owning Common
Carrier, or NVOCC, to facilitate the handling of ocean shipments. Additionally,
one of our subsidiaries received a customs brokerage license from the U.S.
Department of the Treasury during fiscal 1998. Our custom brokerage and ocean
forwarding capabilities were enhanced by our acquisition of a Miami-based
operation in fiscal 1998.

We generated $46.4 million in international revenues in fiscal 1998, or an
increase of $25.5 million over fiscal 1997. We intend to utilize our
relationship with the major U.S.-based air carriers to secure competitive rate
and space agreements for our international cargo. In addition, we continue to
emphasize the use of both our truck brokerage and local delivery operations to
facilitate the pick-up, delivery and line-haul for the domestic portion of
international freight shipments. We are also developing an international
information management system which utilizes Internet-based technology to
facilitate our operations and communications network.

LOCAL DELIVERY SERVICES

Through a subsidiary, we provide same-day local pick-up and delivery
services, both for shipments for which we are acting as an air freight forwarder
as well as for third-party customers requiring pick-up and delivery within the
same metropolitan area. We believe that these services are an important
complement to our air freight forwarding services by allowing for quality
control over the critical pick-up and delivery segments of the transportation
process as well as allowing for prompt, updated information on the status of a
customer's shipment at each step in the shipment process. We focus on providing
local pick-up and delivery services to those accounts with a relatively high
volume of business, which we believe provides a greater potential for
profitability than a broader base of small, infrequent customers.

During the last several years, we upgraded the information systems used by
our local pick-up and delivery operations. These improvements included bar code
and signature scanners that allow for enhanced tracking of shipments and access
by shippers of receipt signatures for proof of delivery information. We are
currently in the process of designing a new, enhanced system of dispatching for
our local pick-up and delivery operation.

Our local pick-up and delivery operations commenced service in Houston in
1989 and in recent years have rapidly expanded its operations. As of July 1999,
local delivery services were offered in 64 of the 78 cities in which our
terminals were located, with three of these locations being established during
fiscal 1999. These cities are generally the sites of our busiest forwarding
operations. We currently intend to initiate local pick-up and delivery services
in approximately 10 additional locations by the end of fiscal 2000, although
these plans may change based on several factors.

We currently offer local pick-up and delivery service at three locations
without airfreight forwarding operations. On-demand pick-up and delivery
services are available 24 hours a day, seven days a week. In most locations,
delivery drivers are independent contractors who operate their own vehicles. Our
Houston operation includes a number of company-owned or leased trailers, trucks
and other ground equipment primarily to service specific customer accounts.

Our local pick-up and delivery revenues of $112.0 million during fiscal
1998 and $65.0 million during fiscal 1997. Approximately $79.2 million of these
revenues in fiscal 1998 and $47.9 million of these revenues in fiscal 1997 were
attributable to our air freight forwarding operations and eliminated upon
consolidation. The remaining local pick-up and delivery revenues in those fiscal
years were attributable to local delivery services for third-party,
non-forwarding, customers. Approximately 85% of the total cost of providing for
local pick-up and delivery of our freight forwarding shipments in fiscal 1998
and approximately 83% of that cost in fiscal 1997 was attributable to our own
local pick-up and delivery services.

TRUCK BROKERAGE

Our truck brokerage operations provide logistical support to our forwarding
operations and, to a lesser extent, provide truckload service to selected
customers. Our truck brokerage services locate and secure

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capacity when overland transportation is the most efficient means of meeting
customer delivery requirements, especially in cases of air freight customers
choosing the economy delivery option. We use our internal truck brokerage
operations to meet delivery requirements without having to rely on third-party
truck brokerage services. Additionally, by centralizing our truck brokerage, we
have been able to achieve greater efficiencies and utilize purchasing power over
transportation providers. Our truck brokerage operations do not own any trucks,
but instead utilize carriers or independent owner-operators of trucks and
trailers on an as-needed basis. We utilize our relationships with a number of
independent trucking companies to obtain truck and trailer space. If space is
not available through these companies, we utilize electronic bulletin boards to
communicate with independent truckers as to our needs.

Our average length of haul was approximately 1,627 miles during fiscal 1998
and 1,061 miles during fiscal 1997. As with local pick-up and delivery services,
we view our truck brokerage services primarily as a means of maintaining quality
control and enhancing customer service of our core air freight forwarding
business, as well as a means of capturing a portion of profits that would
otherwise be earned by third parties. We may expand our truck brokerage
operations selectively beyond providing support to our air freight operations,
to providing truck brokerage services to customers that do not utilize our air
freight services.

LOGISTICS SERVICES

Many customers are increasingly demanding more than the simple movement of
freight from their transportation suppliers. To meet these needs, suppliers,
including Eagle, seek to customize their services, by, among other things,
providing information on

- the status of materials, components and finished goods through the
logistics pipeline, and
- performance reports on and proof of delivery for each shipment.

We utilize our logistics expertise to maximize the efficiency and
performance of our forwarding and other transportation services to our
customers. In addition, we provide transportation consulting services and make
available our expertise and resources to assist customers in balancing their
transportation needs against budgetary constraints by developing logistics plans
for them. We staff and manage the shipping department of some of our customers
that outsource their transportation function and may seek to provide outsourcing
services to other customers in the future. We also provide other ancillary
services, including:

- electronic data interchange,
- custom shipping reports,
- computerized tracking of shipments,
- customs brokerage,
- air charters,
- warehousing,
- cargo assembly, and
- protective packing and crating.

We have recently begun to expand our services to include warehousing and
distribution management.

We have established Eagle Exhibitor Services, an internal group that
focuses on the special needs of exhibitors in the trade show industry. In
addition to air freight forwarding and charter services, this group provides
special exhibit handling, by-appointment delivery, caravan services and
short-term warehousing.

INFORMATION SYSTEMS

A primary component of our business strategy is the continued development
of advanced information systems. We have invested substantial management and
financial resources in the development of our information systems in an effort
to provide accurate and timely information to our management and customers. We
believe the ability to provide accurate up-to-date information on the status of
shipments will become increasingly important, both internally, to ensure on-time
delivery and efficient operations, and to customers, through whatever medium
they request.
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<PAGE> 32

We have developed and continue to upgrade our information systems. Our
integrated information systems -- Worldport -- include logistics information,
management information and accounting systems. A central computer located at our
headquarters in Houston, Texas is accessible from computer terminals located at
all of our North American facilities and from computer terminals located at the
facilities of many of our customers through the use of a toll-free dial-in
program.

The Worldport system provides a comprehensive source of information for
managing the logistics of our sourcing and distribution activities.
Specifically, the Worldport system permits us to track the flow of a particular
shipment from pick-up order through the transportation process to the point of
delivery. Through the system, we can also access daily financial information for
our entire company, a particular terminal, a particular division, customer or
service or a given shipment. The Worldport system:

- permits on-line entry and retrieval of shipment, pricing, scheduling, and
tracking data,
- integrates with our management information and accounting systems,
- allows for importing of dispatch information, proof of delivery
information, status updates, electronic invoicing, funds exchange between
customers and file exchange, and
- provides our sales force with margin information on customers and
shipments, thereby enhancing our ability to bid aggressively for future
forwarding business and avoid committing to unprofitable shipments.

Worldport can provide our management and customers with reports customized
to meet their information requirements.

Our customers and management can obtain shipment information through our
extranet client/server application software program named Eagle Advisor.
Customers can download this software to their personal computers from our
Internet home page. Through Eagle Advisor, customers can access our password
protected Website. Worldport transmits data every 30 minutes to this Website.
The customer's shipment data is then automatically transmitted to their personal
computer via the Internet. Eagle Advisor allows customers and management to
track and trace shipments, obtain proof of delivery information and generate
customized shipment reports. Our corporate Intranet "Eaglesnest" contains
internal training portals to key airline internet sites, sales and marketing
information and other tools for our offices. In addition to Eagle Advisor, the
"Eagle TRAK" option on our Internet home page allows customers to obtain
shipment tracing information via the Internet. We believe that our systems:

- have been instrumental in the productivity of our personnel and the
quality of our operations and service,
- have resulted in substantial reductions in paperwork, and
- expedited the entry, processing, retrieval and dissemination of critical
information, both internally and to customers.

We have recently completed the development of an air export module of
"Talon," our international operating system. Talon provides enhanced features
for international operations including document production, electronic customs
filing of shipper export declarations via the United States Customs Automated
Export System, agent settlements, and real-time tracking and tracing. The system
is integrated to a multi-country and multi-currency accounting system. We have
implemented our integrated operational and accounting systems in our first
foreign site. The air export module is in production in our North American
international gateway terminals. We are in the process of developing an ocean
export, NVOCC operation and air import module to complement the air export
module.

The expansion of our local pick-up and delivery service has further
improved our logistics system by enabling shipment data to be input remotely
from pick-up through delivery. We have implemented the use of remote hand-held
bar code and signature scanners for use by our pick-up and delivery operations.
We have implemented the use of hand-held bar code dock scanners in our
airfreight operations. Worldport is integrated with both of these scanners to
automatically apply the proof of delivery or shipment status information to the
system. This information is then made available to all on-line locations as well
as customers' dial-in facilities, allowing for enhanced tracking of shipments
and viewing by shippers of receipt
29
<PAGE> 33

signatures. Delivery receipts are electronically imaged and centrally stored to
increase both internal and customer efficiencies.

Our systems also include Eagle-Ship, which allows our customers to automate
their shipping processes and consolidate their shipping systems. Eagle-Ship was
developed by, and through January 2001 is licensed to us from, Neopost/ASAM
International, which is restricted from making the system available to most
other major air freight forwarders during that time. For customers using
Eagle-Ship, we provide a dedicated personal computer, printer and bar code
scanner that allow the customer's shipping dock personnel to process and weigh
boxes, record the shipment, produce customized box labels and print an Eagle
house airway bill or bill of lading. Eagle-Ship also provides customers with
weight analysis, tariff reporting, assistance in consolidation of like orders
and price comparison among shipping options.

Eagle-Ship enables our customers to process shipments for many carriers
with one personal computer and to compare the cost and service options of
various carriers, consolidate Eagle-Ship label printing and generate reports
that profile the customer's shipping activity. Eagle-Ship is designed to run
shipping systems for UPS, Federal Express and other small parcel carriers and
can be customized to run the systems of up to 99 air and truck carriers. We
believe that Eagle-Ship gives us a competitive advantage among a growing number
of customers that are resistant to the proliferation of dedicated shipper
systems because of the cost, complexity and dock space required to maintain a
separate personal computer for each carrier. We also believe that the use of
Eagle-Ship should lead to increased use of our services by helping to ensure
that customers will allocate dock space to Eagle-Ship rather than multiple
systems from other carriers. Although Eagle-Ship does provide customers with
assistance in selecting competitors for our shipping services, we believe that
much of that information, like that relating to Federal Express Corporation, is
used in the delivery of documents and small packages, which constitute a small
portion of our cargoes, and that, overall, Eagle-Ship will demonstrate to
customers the advantages of our services in comparison to our more direct
competitors. We had installed 126 Eagle-Ship personal computers for 85 of our
customers as of July 1999. We believe that Eagle-Ship enhances our ability to
market to national accounts.

For information regarding our Year 2000 compliance program, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Issues."

MARKETING

We market our services through an organization consisting of approximately
209 full-time salespersons supported by the sales efforts of our senior
management, six regional managers, seven regional operations managers, terminal
managers and national services center.

We plan to emphasize the marketing of international services through our
existing sales force and through the expected addition of sales personnel at our
international terminals.

Managers at each terminal are responsible for customer service and
coordinate the reporting of customers' requirements and expectations with the
regional managers and sales staff. In addition, the regional managers are
responsible for the financial performance of the stations in their region. Our
employees are available 24 hours a day to respond to customer inquiries.

We have increased our emphasis on obtaining high-revenue national accounts
with multiple shipping locations. These accounts typically impose numerous
requirements on those competing for their freight business, including electronic
data interchange and proof of delivery capabilities, the ability to generate
customized shipping reports and a nationwide network of terminals. These
requirements often limit the competition for these accounts to integrated
carriers and a very small number of forwarders. We believe that our recent
growth and development has enabled us to more effectively compete for and obtain
these accounts.

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<PAGE> 34

TERMINALS

We conduct our air freight forwarding operations through 78 terminals
located at or near airports throughout the United States and in Canada, Mexico,
Latin America, Europe and Asia. Terminals are managed by a station manager who
is assisted by an operations manager. Our corporate office occupies
approximately 135,279 square feet of space in a facility located in Houston,
Texas. Our 78 terminal locations typically are located at or near major
metropolitan airports, and each occupies approximately 1,000 to 160,000 square
feet of leased space and typically consists of offices, warehouse space, bays
for loading and unloading, and facilities for packing. In addition, we have
locations that are limited to sales and administrative activities. Currently,
other than our Newark terminal, all of these properties are leased, although we
may purchase or construct facilities if we believe we can do so on a more
attractive financial basis. Generally, each terminal location lease is for a
term of three to five years and generally expires between fiscal 1999 and fiscal
2006. From time to time, we may expand or relocate terminals to accommodate
growth.

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<PAGE> 35

Our terminals as of July 1999 were:

<TABLE>
<S> <C>
LOCATION AND YEAR FREIGHT LOCATION AND YEAR FREIGHT
FORWARDING SERVICES BEGAN FORWARDING SERVICES BEGAN
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>

UNITED STATES
Houston, Texas*-1984
Dallas, Texas*-1988
St. Louis, Missouri*-1989
Atlanta, Georgia*-1989
Los Angeles, California*-1991
San Francisco, California*-1991
Chicago, Illinois*-1992
Newark, New Jersey*-1992
Boston, Massachusetts*-1993
Charlotte, North Carolina*-1993
Denver, Colorado*-1993
San Antonio, Texas*-1993
El Paso, Texas*-1993
Orlando, Florida*-1993
San Diego, California*-1993
Seattle, Washington*-1993
Kansas City, Missouri*-1994
Oklahoma City, Oklahoma*-1994
Raleigh-Durham, North Carolina*-1994
Austin, Texas*-1994
Greenville, South Carolina*-1994
Cincinnati, Ohio*-1994
Minneapolis, Minnesota*-1994
Memphis, Tennessee*-1994
Detroit, Michigan*-1994
Portland, Oregon*-1994
Baltimore, Maryland/Washington, D.C.*-1994
Phoenix, Arizona*-1994
Cleveland, Ohio*-1994
Philadelphia, Pennsylvania*-1994
McAllen, Texas*-1995
Albuquerque, New Mexico*-1995
Las Vegas, Nevada*-1995
Indianapolis, Indiana*-1995
Sacramento, California*-1995
San Juan, Puerto Rico*-1995
Pittsburgh, Pennsylvania*-1995
Milwaukee, Wisconsin*-1995
New Orleans, Louisiana*-1996
Miami, Florida*-1996
Hartford, Connecticut*-1996
Salt Lake City, Utah*-1996
Honolulu, Hawaii-1996
Columbus, Ohio*-1996
Tulsa, Oklahoma*-1996
Omaha, Nebraska*-1996
Tucson, Arizona*-1996
Laredo, Texas*-1996
Anchorage, Alaska-1996
Richmond, Virginia*-1996
South Bend, Indiana*-1997
Harrisburg, Pennsylvania*-1997
Reno, Nevada*-1997
Nashville, Tennessee*-1997
Little Rock, Arkansas*-1997
Toledo, Ohio**-1998
Longview, Texas**-1998
Wichita, Kansas*-1998
Tampa, Florida*-1998
Norfolk, Virginia*-1998
Jackson, Mississippi*-1998
Beaumont, Texas**-1998
Birmingham, Alabama*-1998
Louisville, Kentucky*-1998
Jacksonville, Florida*-1999
Washington, D.C.*-1999
Rochester, New York*-1999

CANADA
Toronto, Ontario*-1996
Montreal, Quebec*-1998
Vancouver, British Columbia-1999

MEXICO
Monterrey, Mexico-1997
Guadalajara, Mexico-1997
Mexico City, Mexico-1997

LATIN AMERICA
Buenos Aires, Argentina-1999
Sao Paulo, Brazil-1999
Lima, Peru-1999

EUROPE
London-Heathrow, England-1998
Birmingham, England-1998
Manchester, England-1998
London-Gatwick, England-1998

ASIA
Kowloon, Hong Kong-1998

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

* Includes local pick-up and delivery operations.

** Local pick-up and delivery operations only.

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<PAGE> 36

EMPLOYEES

We have approximately 2,386 full-time employees at June 30, 1999, including
approximately 209 sales personnel. None of our employees are currently covered
by a collective bargaining agreement. We have experienced no work stoppages and
consider our relations with our employees to be good.

We also have contracts with approximately 1,218 independent owner/operators
of local delivery services as of June 30, 1999. The independent owner/operators
own, operate and maintain the vehicles they use in their work for us and may
employ qualified drivers of their choice. Company-owned or leased vehicles are
driven by 330 of our employees as of June 30, 1999.

We pay our entire sales force and most of our operations personnel what we
believe is significantly more than the industry average. We also offer a
broad-based compensation plan to these employees. Sales personnel are paid a
gross commission on shipments sold. Operations personnel and management are paid
bonuses based on the profitability of their terminals, as well as our overall
profitability. To ensure quality control and the profitability of accounts,
terminal managers retain the final approval on all accounts.

REGULATION

Our air freight forwarding business is subject to regulation, as an
indirect air cargo carrier, under the Federal Aviation Act by the Department of
Transportation, although air freight forwarders are exempted from most of the
Act's requirements by the Economic Aviation Regulations. Our foreign air freight
forwarding operations are subject to similar regulation by the regulatory
authorities of the respective foreign jurisdictions. The air freight forwarding
industry is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the costs of providing, services to customers.

Our delivery operations are subject to various state and local regulations
and, in many instances, require permits and licenses from state authorities. In
addition, some of our delivery operations are regulated by the Surface
Transportation Board. These state and federal authorities have broad power,
including the power to approve specified mergers, consolidations and
acquisitions, and regulate the delivery of some types of shipments and
operations within particular geographic areas.

The Surface Transportation Board has the power to regulate motor carrier
operations, approve some rates, charges and accounting systems, and require
periodic financial reporting. Interstate motor carrier operations are also
subject to safety requirements prescribed by the Federal Department of
Transportation. In some potential locations for our delivery operations, state
and local permits and licenses may be difficult to obtain.

Our truck brokerage operations subject us to regulation as a property
broker by the Surface Transportation Board, and we have obtained a property
broker license and surety bond. Our domestic customs brokerage operations are
subject to the licensing requirements of the United States Department of the
Treasury and are regulated by the United States Customs Service. We have
received our customs brokerage license from the United States Customs Service
and are currently applying for additional related approvals. Our foreign customs
brokerage agents are licensed in and subject to the regulations of their
respective countries.

The Federal Maritime Commission regulates our ocean forwarding operations.
The Federal Maritime Commission licenses ocean freight forwarders. Indirect
ocean carriers (Non-Vessel Operating Common Carriers) are subject to Federal
Maritime Commission regulation, under the Commission's tariff filing and surety
bond requirements, and under the Shipping Act of 1984, particularly those terms
proscribing rebating practices. Some portions of our warehouse operations
require:

- registration under the Gambling Act of 1962 and a license or registration
by the U.S. Department of Justice,
- authorizations and bonds by the U.S. Treasury Department,
- a license by the Bureau of Alcohol, Tobacco & Firearms of the U.S.
Treasury Department, and
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<PAGE> 37

- approvals by the United States Customs Service.

In the United States, we are subject to federal, state and local provisions
relating to the discharge of materials into the environment or otherwise for the
protection of the environment. Similar laws apply in many foreign jurisdictions
in which we may operate in the future. Although current operations have not been
significantly affected by compliance with these environmental laws, governments
are becoming increasingly sensitive to environmental issues, and we cannot
predict what impact future environmental regulations may have on our business.
We do not anticipate making any material capital expenditures for environmental
control purposes during the remainder of the current or succeeding fiscal years.

We do not believe that costs of regulatory compliance have had a material
adverse impact on our operations to date. However, our failure to comply with
the applicable regulations or to maintain required permits or licenses could
result in substantial fines or revocation of our operating permits or
authorities. We cannot assure you as to the degree or cost of future regulations
on our business.

LEGAL PROCEEDINGS

In December 1997, the U.S. Equal Employment Opportunity Commission, or the
EEOC, issued a Commissioner's Charge against us and some of our subsidiaries
under Sections 706 and 707 of Title VII of the Civil Rights Act of 1964, as
amended. We continue to vigorously defend against the allegations contained in
the Commissioner's Charge. In the Commissioner's Charge, the EEOC charged us and
some of our subsidiaries with violations of Section 703 of Title VII, as
amended, the Age Discrimination in Employment Act of 1967, and the Equal Pay Act
of 1963, resulting from engaging in unlawful discriminatory hiring, recruiting
and promotion practices and maintaining a hostile work environment, based on one
or more of race, national origin, age and gender, failures to investigate,
failures to maintain proper records and failures to file accurate reports.

The Commissioner's Charge states that the persons aggrieved include all
Blacks, Hispanics, Asians and females who are, have been or might be affected by
the alleged unlawful practices. We cannot currently predict with any great
degree of certainty the length of time it will take to resolve this matter, the
likely outcome of this matter or the effect of any such outcome. An adverse
determination of the matters in the Commissioner's Charge would likely result in
a civil action by the EEOC that could seek back pay, other compensatory damages
and punitive damages for the allegedly aggrieved persons.

From time to time we are a party to various legal proceedings arising in
the ordinary course of business. Except as described above, we are not currently
a party to any material litigation and are not aware of any litigation
threatened against us which we believe would have a material adverse effect on
our business.

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<PAGE> 38

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table shows selected information concerning our directors and
executive officers as of the date of this prospectus:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Chairman of the Board of Directors, President
James R. Crane................ 45 and
Chief Executive Officer
Ronald E. Talley.............. 47 Chief Operating Officer
Douglas A. Seckel............. 48 Chief Financial Officer and Treasurer;
Director
John C. McVaney............... 41 Executive Vice President
Frank J. Hevrdejs............. 54 Director
Neil E. Kelley................ 40 Director
Norwood W.
Knight-Richardson........... 52 Director
Rebecca A. McDonald........... 47 Director
William P. O'Connell.......... 60 Director
</TABLE>

The backgrounds of each of our directors and executive officers are as
follows:

James R. Crane, age 45, has served as President and Director since he
founded Eagle in March 1984. Before the organization of Eagle, Mr. Crane had
been employed by other air freight forwarders. Mr. Crane has a total of 17 years
experience in the transportation industry. Mr. Crane is also outside director
for HCC Insurance Holdings, Inc.

Ronald E. Talley, age 47, was appointed Chief Operating Officer of Eagle in
December 1997. He joined us in 1990 as a station manager, and later served as a
regional manager. In 1996, he served as a Senior Vice President of Eagle Freight
Services, Eagle Transportation and Eagle Charter, and most recently, he has
served as Senior Vice President of Air and Truck Operations. Before joining
Eagle, Mr. Talley served as a station manager at Holmes Freight Lines from 1982
to 1990. From 1979 to 1982, Mr. Talley held a variety of management positions
with Trans Con Freight Lines. From 1969 to 1979, Mr. Talley served in several
management positions at Roadway Express.

Douglas A. Seckel, age 48, has served as Chief Financial Officer of Eagle
since April 1989, has served as Treasurer of Eagle since May 1991 and has served
as a director of Eagle since May 1995. From 1984 through 1989, he served as
finance director for the City of Bellaire, Texas. Mr. Seckel and Mr. Crane are
first cousins.

John C. McVaney, age 41, was appointed Executive Vice President of Eagle in
January 1998. He joined us in 1995 as a station manager and served most recently
as Regional Vice President for our southeast region. From 1992 to 1995, he
served as Regional Manager of the northeast United States and Canada for
Nationsway Transport Service, Inc. From 1989 to 1992, Mr. McVaney served as
National Account Manager for St. Johnsbury Trucking Company, Inc. During 1989,
he was the President and sole owner of B&C of New Orleans, Inc., a trucking
company. From 1987 to 1988, Mr. McVaney served as President of the Lindsay
Division of Bulldog Trucking, Inc. and Regional Manager of Standard Trucking
Company.

Frank J. Hevrdejs, age 54, has served as a director since December 1995.
Mr. Hevrdejs is a co-founder and a principal of The Sterling Group, Inc., a
private financial organization engaged in the acquisition and ownership of
operating businesses since 1982. He has served as President of The Sterling
Group from 1982 to 1989 and from 1994 to the present. Since 1989, he has served
as Chairman of First Sterling Ventures Corp. Mr. Hevrdejs also serves as a
director for Mail-Well, Inc., Sterling Chemical, Inc., Chase Bank of Texas,
N.A., Fibreglass Holdings Inc. and Enduro Systems Inc.

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<PAGE> 39

Neil E. Kelley, age 40, has served as a director since September 1995. Mr.
Kelley is the Chairman and Chief Executive Officer of Avista Energy, Inc., a
national energy trading and marketing company. Previously, Mr. Kelley was the
Vice Chairman and a senior partner of the Vitol Group of Companies, an
international oil supply, trading and refining company, where he has served as
an Executive Director from 1990 to 1998. Mr. Kelley is also an outside director
of Quantum Energy Technologies, an energy technology development company based
in Cambridge, Massachusetts.

Norwood W. Knight-Richardson, age 51, has served as a director since May
1998. Dr. Knight-Richardson has served as the Medical Director of and a
practicing physician for CareMark Behavioral Health Services, a private
behavioral health services company, since August 1998. He has served as the
President and Chief Medical Officer of Continuum Healthcare Services, Inc. from
December 1997 to August 1998 and the Practicing Physician and Director of
University Behavioral Health Services from 1996 to December 1997. Dr.
Knight-Richardson was the Founder, President and Chief Executive Officer of the
Richardson Clinics from 1992 to 1996. Before that time, Dr. Knight-Richardson
held several positions including that of Vice President in the International
Division of Bank of America. Dr. Knight-Richardson has also held faculty
positions at several medical schools and is currently clinical associate
professor at Baylor College of Medicine in Houston, Texas as well as Division
Chief of Corporate Psychiatry and Adjunct Professor of Oregon Health Services
University.

Rebecca A. McDonald, age 47, was elected a director in 1999. Ms. McDonald
has been Executive Managing Director of Enron International since February 1999.
She was President and CEO of Amoco Energy Development Company from 1994 to 1999.
Before joining Amoco, Ms. McDonald was President of Tenneco Energy Services from
1991 to 1993 and was Vice President for Strategic Planning for Tenneco Gas
Company from 1991 to 1991. She is a member of the advisory boards of the Natural
Gas Association of Houston and the New York Mercantile Exchange Natural Gas
Futures. Ms. McDonald is a director of the Natural Gas Council and a founding
member of the Mercosur Council. She also serves as an outside director for both
Granite Construction Company and Morton International.

William P. O'Connell, age 60, has served as a director since May 1995. Mr.
O'Connell has served as the President and Chief Executive Officer of AIM, Inc.,
a materials handling systems and equipment company, since 1988. He served as
President and Chief Executive Officer of Westweld Supply, Inc. from 1990 to
1995. Mr. O'Connell also serves as a director of AIM, Inc. and the Parnell
Group, Inc.

Officers are elected annually by the board of directors and serve at the
discretion of the board. Our board of directors is currently composed of seven
directors, two of whom are our employees. All of the current directors serve
until the next annual shareholders' meeting or until their successors have been
duly elected and qualified.

PRINCIPAL AND SELLING SHAREHOLDERS

The following table shows information concerning:

- the only persons we know, based on statements filed by these persons with
the Securities and Exchange Commission, to own beneficially in excess of
5% of our common stock as of December 31, 1999, and
- the shares of common stock beneficially owned, as of June 30, 1999, by
each of our directors and executive officers and by all directors and
executive officers as a group.

Except as indicated, each individual has sole voting power and sole investment
power over all shares listed opposite his name, subject to community property
laws where applicable. The business address of each director and executive
officer is c/o Eagle USA Airfreight, Inc., 15350 Vickery Drive, Houston, Texas
77032.

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<PAGE> 40

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
--------------------- NUMBER OF ---------------------
NUMBER OF SHARES BEING NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
<S> <C> <C> <C> <C> <C>
Directors and Executive Officers:
James R. Crane............................... 8,263,478 43.0% 1,200,000 7,063,478 36.8%
Douglas A. Seckel............................ 110,976 * -- 110,976 *
Frank J. Hevrdejs(1)......................... 61,500 * -- 61,500 *
Neil E. Kelley............................... 40,000 * -- 40,000 *
Norwood W. Knight-Richardson................. 20,400 * -- 20,400 *
Rebecca A. McDonald.......................... -- * -- -- *
William P. O'Connell......................... 15,000 * -- 15,000 *
Ronald E. Talley............................. 50,497 * -- 50,497 *
John C. McVaney.............................. 35,600 * -- 35,600 *
Directors and Executive Officers as a Group (8
persons)..................................... 8,597,451 44.7% -- 7,397,451 38.5%
Other Five Percent Owners
T. Rowe Price Associates, Inc.(2)............ 1,199,700 7.5% -- 1,199,700 7.5%
</TABLE>

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

* Less than 1%.

(1) Includes 1,500 shares owned by Mr. Hevrdejs' wife as to which he disclaims
beneficial ownership.

(2) Based on a Schedule 13G made with the Securities and Exchange Commission on
February 5, 1999, reflecting ownership of common stock. The address of T.
Rowe Price Associates, Inc. is 100 East Pratt Street, Baltimore, Maryland
21202.

The table includes shares of common stock that can be acquired through the
exercise of options within 60 days as follows: Mr. Hevrdejs -- 30,000 shares,
Mr. Kelley -- 30,000 shares, Dr. Knight-Richardson -- 20,000 shares, Mr.
Talley -- 44,497 shares, Mr. Seckel -- 10,000 shares, Mr. O'Connell -- 15,000
shares and Mr. McVaney -- 35,600 shares. The percent of the class owned by each
person has been computed assuming the exercise of all options deemed to be
beneficially owned by that person, and assuming that no options held by any
other person have been exercised.

SELLING SHAREHOLDER

In connection with this offering, Eagle and Mr. Crane have entered into an
agreement under which Mr. Crane has agreed to reimburse us for all of our
out-of-pocket expenses incurred in connection with this offering. Mr. Crane is a
party to the Shareholders' Agreement described under "Description of Capital
Stock -- Registration Rights of Holders," and this offering constitutes a
registration under the registration rights granted by that agreement.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock currently consists of 100 million shares of
common stock, par value $.001 per share, and 10 million shares of preferred
stock, par value $.001 per share, issuable in series. As of June 30, 1999, our
issued and outstanding capital stock consisted of 19,030,774 shares of common
stock. We have approximately 111 shareholders of record, including brokerage
firms and other nominees, of common stock as of June 30, 1999. No shares of
preferred stock are currently outstanding. As of June 30, 1999, 1,324,079 shares
of common stock were reserved for issuance under our incentive plan and 50,000
shares of common stock were reserved for issuance under our non-employee
director plan.

On July 26, 1999, we declared a three-for-two split of our common stock.
The stock split will be effected in the form of a stock dividend and will
entitle each shareholder of record on August 23, 1999 to receive one additional
share for every two shares of our common stock held on the record date.
Fractional shares will be paid in cash. The stock split will be distributed on
August 30, 1999. After giving effect to

37
<PAGE> 41

this stock split, we would have had 28,546,161 shares of common stock
outstanding as of June 30, 1999. The number of shares reserved for issuance
under our stock incentive plans will be proportionally adjusted as a result of
the stock split.

The following description is a summary of provisions of our articles of
incorporation and bylaws. Please see the articles of incorporation and bylaws,
which are included as exhibits to the registration statement of which this
prospectus is a part. Eagle was organized in March 1984 and is a Texas
corporation.

COMMON STOCK

Holders of common stock are entitled to one vote per share with respect to
all matters required by law to be submitted to our shareholders. Holders of
common stock have no preemptive rights to purchase or subscribe for our
securities, and the common stock is not convertible or subject to redemption by
Eagle.

The holders of common stock are entitled to dividends that may be declared
by our board of directors from time to time out of funds legally available for
dividends. Shareholders' rights to dividends are subject to the dividend and
liquidation rights of any preferred stock that may be issued and to any dividend
restrictions that may be contained in debt agreements. In the event of our
liquidation, holders of common stock will share pro rata in any assets that
remain after payment of our debts and satisfaction of any liquidation preference
on any outstanding preferred stock.

American Securities Transfer & Trust, Inc. is the registrar and transfer
agent for the common stock.

PREFERRED STOCK

Our board of directors, without further action by the shareholders, is
authorized to issue up to 10 million shares of preferred stock in one or more
series and to fix and determine as to any series all the relative rights and
preferences of shares in that series, including:

- preferences, limitations or relative rights with respect to redemption
rights,
- conversion rights,
- voting rights,
- dividend rights, and
- preferences on liquidation.

We have no present intention to issue any preferred stock, but may determine to
do so in the future.

The issuance of shares of preferred stock, or the issuance of rights to
purchase the shares, could adversely affect the voting power of the common
stock, discourage an unsolicited acquisition proposal or make it more difficult
for a third party to gain control of our company.

For instance, the issuance of a series of preferred stock might impede a
business combination by including class voting rights that would enable the
holder to block the transaction, or facilitate a business combination by
including voting rights that would provide a required percentage vote of the
shareholders. In addition, under particular circumstances, the issuance of
preferred stock could adversely affect the voting power of the holders of the
common stock. Although the board of directors is required to make any
determination to issue the stock based on its judgment as to the best interests
of the shareholders, the board of directors could act in a manner that would
discourage an acquisition attempt or other transaction that some, or a majority,
of the shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then market price
of the stock. The board of directors does not at present intend to seek
shareholder approval before any issuance of currently authorized stock, unless
otherwise required by law.

38
<PAGE> 42

SPECIAL MEETINGS

Special meetings of our shareholders may be called by the chief executive
officer, the board of directors or by shareholders holding not less than 50% of
our outstanding voting stock.

VOTING

Holders of common stock are entitled to cast one vote per share on matters
submitted to a vote of shareholders and do not have cumulative voting rights.
Each director will be elected annually. Any director may be removed, with or
without cause, at any meeting of shareholders called expressly for that purpose,
by a vote of the holders of a majority of the outstanding shares. Because the
common stock does not have cumulative voting rights, the holders of more than
50% of the shares may, if they choose to do so, elect all of the directors, and
the holders of the remaining shares will not be able to elect any directors.

Subject to any additional voting rights that may be granted to holders of
future classes or series of stock, our articles of incorporation require the
affirmative vote of holders of a majority of the outstanding shares entitled to
vote to approve any of the following for which a vote is required by the Texas
Business Corporation Act:

- merger, consolidation or share exchange,
- sale of all or substantially all of our assets,
- dissolution, or
- amendment to our articles of incorporation.

Approval of other matters not described above that are submitted to the
shareholders generally requires the affirmative vote of the holders of a
majority of the shares of common stock represented at the meeting. The holders
of a majority of the shares entitled to vote will constitute a quorum at
meetings of shareholders.

Our bylaws provide that shareholders who wish to nominate directors or to
bring business before a shareholders' meeting must notify us and provide
specified pertinent information at least 80 days before the meeting date (or
within ten days after public announcement under the bylaws of the meeting date,
if the meeting date has not been publicly announced at least 90 days in
advance).

BUSINESS COMBINATION LAW

Part Thirteen of the Texas Business Corporation Act applies to our company.
The Business Combination Law generally prevents an "affiliated shareholder" or
its affiliates or associates from entering into or engaging in a "business
combination" with an "issuing public corporation" during the three-year period
immediately following the affiliated shareholder's acquisition of shares unless
specific conditions are satisfied. The three-year restriction does not apply if
either:

- before the date such person became an affiliated shareholder, the board
of directors of the issuing public corporation approves the business
combination or the acquisition of shares made by the affiliated
shareholder on such date; or

- not less than six months after the date such person became an affiliated
shareholder, the business combination is approved by the affirmative vote
of holders of at least two-thirds of the issuing public corporation's
outstanding voting shares not beneficially owned by the affiliated
shareholder or its affiliates or associates.

An affiliated shareholder is defined generally as a person that is or was within
the preceding three-year period the beneficial owner of 20% or more of a
corporation's outstanding voting shares.

39
<PAGE> 43

The business combinations subject to the restriction generally include:

- mergers or share exchanges;
- dispositions of assets having an aggregate value equal to 10% or more of
the market value of the assets or of the outstanding common stock or
representing 10% or more of the earning power or net income of the
corporation;
- certain stock issuances or transactions by the corporation that would
increase the affiliated shareholder's proportionate interest in the
corporation;
- certain liquidations or dissolutions; and
- the receipt of tax, guarantee, loan or other financial benefits by an
affiliated shareholder other than proportionately as a shareholder of the
corporation.

The Business Combination Law does not apply to a business combination with
an affiliated shareholder that was the beneficial owner of 20% or more of the
outstanding voting shares of the issuing public corporation on December 31,
1996, and continuously until the announcement date of the business combination.
As a result, the restrictions of the Business Combination Law would not apply to
Mr. Crane who has been the beneficial owner of more than 20% of our outstanding
common stock continuously since prior to December 31, 1996.

In discharging the duties of director under the Business Combination Law or
otherwise, a director, in considering the best interests of our company, may
consider the long-term as well as the short-term interests of our company and
shareholders, including the possibility that those interests may be best served
by our continued independence.

LIMITATION OF DIRECTOR LIABILITY AND INDEMNIFICATION ARRANGEMENTS

Our articles of incorporation contain a provision that limits the liability
of our directors as permitted by the Texas Miscellaneous Corporation Laws Act.
The provision eliminates the personal liability of directors to us and our
shareholders for monetary damages for breach of directors' fiduciary duty of
care. The provision does not change the liability of a director for

- breach of the duty of loyalty to Eagle or to shareholders,
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
- an act or omission for which the liability of a director is expressly
provided for by an applicable statute, or
- any transaction from which a director received an improper personal
benefit.

Under the articles of incorporation, the liability of directors will be further
limited or eliminated without action by shareholders if Texas law is amended to
further limit or eliminate the personal liability of directors.

Our bylaws provide for the indemnification of our officers and directors,
and the advancement to them of expenses in connection with proceedings and
claims, to the fullest extent permitted by the Texas Business Corporation Act.
We have also entered into indemnification agreements with each of our directors
and some of our officers. These agreements contractually provide for
indemnification and expense advancement and include related provisions meant to
facilitate the indemnitees' receipt of these benefits.

We purchase directors' and officers' liability insurance policies for our
directors and officers. In addition, the bylaws and these agreements with
directors and officers provide for indemnification for amounts (1) in respect of
the deductibles for any insurance policies, (2) that exceed the liability limits
of any insurance policies, and (3) in respect of these types of insurance
policies that are available, were available or that become available to us or
which are generally available to comparable companies but that our officers or
directors determine is inadvisable for us to purchase, given the cost involved.

40
<PAGE> 44

This type of indemnification relating to director and officer insurance may
be made even though directors and officers would not otherwise be entitled to
indemnification under other provisions of the bylaws or individual agreements.

REGISTRATION RIGHTS OF HOLDERS

Eagle and James R. Crane are parties to a shareholders' agreement dated as
of October 1, 1994 that provides Mr. Crane with registration rights with respect
to common stock he held on the date of the agreement or purchased from Eagle
after that date. Mr. Crane may require us to effect six registrations of his
securities and may require us to include his shares in other registrations we
make. Although we are required under the agreement to pay for the offering costs
for these registrations, Mr. Crane has agreed to pay the cost of this offering.
The registration for this offering constitutes the second registration by Mr.
Crane under the shareholders' agreement. Registration of Mr. Crane's shares
under the Securities Act results in those shares becoming freely tradable
without restriction under the Securities Act in the hands of purchasers, except
for shares purchased by our affiliates.

UNDERWRITING

Subject to the terms and conditions contained in an Underwriting Agreement
dated , 1999, Donaldson, Lufkin & Jenrette Securities Corporation (the
"underwriter") has agreed to purchase from the selling shareholder the shares
offered hereby.

The underwriting agreement provides that the obligations of the underwriter
to purchase and accept delivery of the shares of common stock offered hereby are
subject to approval by their counsel of certain legal matters and to certain
other conditions. The underwriter is obligated to purchase and accept delivery
of all the shares of common stock offered hereby (other than those shares
covered by the over-allotment option described below) if any are purchased.

The underwriter initially proposes to offer the shares of common stock in
part directly to the public at the public offering price set forth on the cover
page of this prospectus and in part to certain dealers (including the
underwriter) at such price less a concession not in excess of $ per share.
The underwriter may allow, and such dealers may re-allow, to certain other
dealers a concession not in excess of $ per share. After the initial
offering of the common stock, the public offering price and other selling terms
may be changed by the underwriter without notice.

The following table shows the underwriting fees the selling shareholder
will pay to the underwriter in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriter's option to
purchase additional shares of our common stock from the selling shareholder.

<TABLE>
<CAPTION>
TO BE PAID
BY THE SELLING SHAREHOLDER
---------------------------
NO EXERCISE FULL EXERCISE
<S> <C> <C>
Per Share................................................... $ $
Total....................................................... $ $
</TABLE>

Offering expenses, estimated to be $ , will be paid by the selling
shareholder.

The selling shareholder will grant to the underwriter an option,
exercisable for 30 days from the date of this prospectus, to purchase up to an
additional 180,000 shares of our common stock at the public offering price less
the underwriting fees. The underwriter may exercise its option solely to cover
over-allotments, if any, made in connection with this offering. To the extent
that the underwriter exercises its option, the underwriter will become
obligated, subject to conditions, to purchase the additional shares.

We have agreed to indemnify the underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriter may be required to make in respect
to those liabilities.

41
<PAGE> 45

Each of Eagle and the selling shareholder will agree, subject to particular
exceptions, not to

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock

for a period of 90 days in the case of Eagle and for a period of one calendar
year after the date of this prospectus in the case of the selling shareholder,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation, other than

- shares of common stock offered by this prospectus,

- shares of common stock we issue upon the exercise of an option or warrant
or the conversion of a security outstanding on the date of this
prospectus,

- shares of common stock issued or stock options we granted under an
employee stock option plan, stock purchase plan or any other of our
benefit plans in existence as of the date of this prospectus,

- shares of common stock which we may issue in connection with some of our
acquisitions, and

- shares of common stock transferred among family members and to trusts for
estate planning purposes.

In addition, during these 90-day and one year periods, Eagle has also
agreed not to file any registration statement with respect to, and the selling
shareholder has agreed not to make any demand for, or exercise any right with
respect to, the registration of any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation.

The underwriter has advised us that it does not intend to confirm sales of
shares of common stock offered by this prospectus to accounts over which it
exercises discretionary authority.

Our shares of common stock are listed on The Nasdaq National Market under
the symbol "EUSA."

The shares of common stock offered hereby may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of that jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and observe any restrictions
relating to the offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any shares of common stock offered hereby in any jurisdiction in which such
an offer or a solicitation is unlawful.

The underwriter and dealers may engage in passive market making
transactions in the common stock in accordance with Rule 103 of Regulation M
promulgated by the Securities and Exchange Commission. In general, a passive
market maker may not bid for or purchase shares of common stock at a price that
exceeds the highest independent bid. In addition, the net daily purchases made
by any passive market maker generally may not exceed 30% of its average daily
trading volume in the common stock during a specified two month prior period, or
200 shares, whichever is greater. A passive market maker must identify passive
market making bids as such on the Nasdaq electronic inter-dealer reporting
system. Passive market making may stabilize or maintain the market price of the
common stock above independent market levels. Underwriters and dealers are not
required to engage in passive market making and may end passive market making
activities at any time.

In connection with this offering, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price of Eagle's
common stock. Specifically, the underwriters may over-allot the
42
<PAGE> 46

offering, creating a syndicate short position. The underwriters may bid for and
purchase shares of common stock in the open market to cover such syndicate short
position or to stabilize the price of the common stock. In addition, the
underwriter may reclaim selling concessions from syndicate members and selected
dealers if the underwriters repurchase previously distributed common stock in
syndicate covering transactions, in stabilizing transactions or otherwise. These
activities may stabilize or maintain the market price of the common stock above
independent market levels. The underwriter is not required to engage in these
activities, and may end any of them at any time.

DLJ has, in the past, provided certain investment banking and underwriting
services to us for which it received customary compensation.

LEGAL MATTERS

Baker & Botts, L.L.P., Houston, Texas has passed upon certain legal matters
in connection with the shares of common stock offered by the selling shareholder
by this prospectus. Thompson & Knight, L.L.P., Dallas, Texas, will pass upon
certain matters relating to this offering for the underwriters.

EXPERTS

Our consolidated financial statements as of September 30, 1997 and 1998,
and for each of the three years in the period ended September 30, 1998 included
in this prospectus and incorporated in this prospectus by reference to our
Annual Report on Form 10-K for the fiscal year ended September 30, 1998 have
been so included and incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange
Act of 1934 and accordingly file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy the
reports, statements or other information we file at the SEC's public reference
rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World Trade
Center, New York, New York 10048 and 500 West Madison 14th Floor, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Our SEC filings are also available on the SEC's
website at http:\\www.sec.gov. Because we are listed on the Nasdaq National
Market, you may also inspect those reports, proxy statements and other
information concerning Eagle at the offices of the Nasdaq Stock Market, Inc.,
8513 Key West Avenue, Rockville, Maryland 20850.

We have filed a registration statement on Form S-3 with the SEC to register
the shares of common stock offered by this prospectus. This prospectus is part
of the registration statement.

As allowed by SEC rules, this prospectus does not contain all of the
information you can find in the registration statement or the exhibits to the
registration statement.

INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows us to "incorporate by reference" information in this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. This
information incorporated by reference is deemed a part of this prospectus,
except to the extent the information is superseded by information in this
prospectus.

The following documents we previously filed with the SEC are incorporated
by reference (Commission File No. 0-27288)

- Annual Report on Form 10-K for the fiscal year ended September 30, 1998,

43
<PAGE> 47

- Quarterly Reports on Form 10-Q for the quarters ended December 31, 1998
and March 31, 1999, and
- The description of our common stock contained in our Registration
Statement on Form 8-A dated November 27, 1995.

We will provide a copy of any of the documents incorporated by reference in
this prospectus upon written request. Please direct requests to Douglas A.
Seckel, Chief Financial Officer, Secretary and Treasurer, at our principal
executive offices located at 15350 Vickery Drive, Houston, Texas 77032.

44
<PAGE> 48

EAGLE USA AIRFREIGHT, INC.

INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet as of September 30, 1998 and
1997...................................................... F-3
Consolidated Statement of Income for the Three Years Ended
September 30, 1998........................................ F-4
Consolidated Statement of Cash Flows for the Three Years
Ended September 30, 1998.................................. F-5
Consolidated Statement of Shareholders' Equity for the Three
Years Ended September 30, 1998............................ F-6
Notes to Consolidated Financial Statements.................. F-7
Condensed Consolidated Balance Sheet as of June 30, 1999 and
1998...................................................... F-18
Condensed Consolidated Statement of Income and Comprehensive
Income for the Nine Months Ended June 30, 1999 and 1998... F-19
Condensed Consolidated Statement of Income and Comprehensive
Income for the Three Months Ended June 30, 1999 and
1998...................................................... F-20
Condensed Consolidated Statement of Cash Flows for the Nine
Months Ended June 30, 1999 and 1998....................... F-21
Condensed Consolidated Statement of Shareholders' Equity.... F-22
Notes to Consolidated Financial Statements.................. F-23
</TABLE>

F-1
<PAGE> 49

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Eagle USA Airfreight, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of Eagle USA
Airfreight, Inc. and its subsidiaries at September 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1998, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards 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.

PricewaterhouseCoopers LLP
Houston, Texas
November 20, 1998

F-2
<PAGE> 50

EAGLE USA AIRFREIGHT, INC.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------
1998 1997
(IN THOUSANDS, EXCEPT PAR VALUES)
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 37,191 $ 25,107
Short-term investments.................................... 12,487 2,679
Accounts receivable -- trade, net of allowance for
doubtful accounts of $675 and $566, respectively....... 69,576 54,662
Prepaid expenses and other................................ 3,905 4,557
-------- --------
Total current assets.............................. 123,159 87,005
Property and equipment, net................................. 21,963 14,090
Other assets................................................ 11,214 5,776
-------- --------
$156,336 $106,871
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable -- trade................................. $ 4,542 $ 7,757
Accrued transportation costs.............................. 14,014 6,062
Accrued compensation and employee benefits................ 14,061 10,454
Other accrued liabilities................................. 4,673 2,094
-------- --------
Total current liabilities......................... 37,290 26,367
-------- --------
Shareholders' equity:
Preferred stock, $0.001 par value, 10,000 shares
authorized
Common stock, $0.001 par value, 100,000 shares authorized,
19,125 and 18,210 shares issued and outstanding........ 19 18
Additional paid-in capital................................ 70,256 52,387
Retained earnings......................................... 49,131 28,099
Cumulative currency translation adjustments............... (360)
-------- --------
119,046 80,504
-------- --------
Commitments and contingencies (Note 11)
-------- --------
$156,336 $106,871
======== ========
</TABLE>

The accompanying notes are an integral part of this statement.

F-3
<PAGE> 51

EAGLE USA AIRFREIGHT, INC.

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------
1998 1997 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues.................................................... $417,083 $291,767 $185,445
Cost of transportation...................................... 233,257 163,616 103,312
-------- -------- --------
183,826 128,151 82,133
-------- -------- --------
Operating expenses:
Personnel costs............................................. 97,584 67,813 41,619
Other selling, general and administrative expenses.......... 54,022 34,639 22,665
-------- -------- --------
151,606 102,452 64,284
-------- -------- --------
Operating income............................................ 32,220 25,699 17,849
Interest and other income................................... 1,776 1,693 1,079
Interest expense............................................ (145)
-------- -------- --------
Income before provision for income taxes.................... 33,996 27,392 18,783
Provision for income taxes.................................. 12,964 10,594 6,357
-------- -------- --------
Net income.................................................. $ 21,032 $ 16,798 $ 12,426
======== ======== ========
Basic earnings per share.................................... $ 1.12 $ 0.94
======== ========
Diluted earnings per share.................................. $ 1.09 $ 0.90
======== ========
Pro forma information:
Net -- income as reported................................. $ 12,426
Pro forma charge in lieu of income taxes (Note 4)......... 945
--------
Pro forma net income........................................ $ 11,481
========
Pro forma net income per share (Note 1)..................... $ 0.66
========
</TABLE>

The accompanying notes are an integral part of this statement.
F-4
<PAGE> 52

EAGLE USA AIRFREIGHT, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers............................ $ 402,773 $ 266,037 $ 172,461
Cash paid to carriers, suppliers and employees.......... (372,077) (259,760) (158,483)
Interest received....................................... 1,699 1,580 968
Interest paid........................................... (145)
Income taxes paid....................................... (7,851) (6,936) (3,954)
--------- --------- ---------
Net cash provided by operating activities....... 24,544 921 10,847
--------- --------- ---------
Cash flows from investing activities:
Purchase of investments................................. (20,304) (11,350) (27,714)
Maturity of investments................................. 10,496 12,080 26,232
Acquisitions of business, net of cash................... (3,619) (5,574)
Acquisition of property and equipment................... (11,863) (6,524) (7,189)
Disposition of property and equipment................... 763 319 72
Increase in other assets................................ (300)
Advances to shareholders and employees.................. (67)
Repayments from affiliates.............................. 737
--------- --------- ---------
Net cash used by investing activities........... (24,527) (11,049) (8,229)
--------- --------- ---------
Cash flows from financing activities:
Payments on indebtedness................................ (2,178)
Proceeds from indebtedness.............................. 1,800
Issuance of common stock, net of related costs.......... 5,806 6,162 34,559
Offering fee paid by selling shareholder................ 375
Proceeds from exercise of stock options................. 6,621 2,637 628
Payments on shareholder distribution notes.............. (635) (8,209)
Distributions to shareholders........................... (2,701)
--------- --------- ---------
Net cash provided by financing activities....... 12,427 8,539 23,899
--------- --------- ---------
Effect of foreign currency translation on cash............ (360)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents...... 12,084 (1,589) 26,517
Cash and cash equivalents, beginning of year.............. 25,107 26,696 179
--------- --------- ---------
Cash and cash equivalents, end of year.................... $ 37,191 $ 25,107 $ 26,696
========= ========= =========
</TABLE>

The accompanying notes are an integral part of this statement.
F-5
<PAGE> 53

EAGLE USA AIRFREIGHT, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
--------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995..... 6,000 $ 6 $ 108 $ 1,585 $ 1,699
Issuance of common stock to
majority shareholder for
acquisition of
subsidiaries................. 223
Issuance of common stock, net of
related costs................ 2,300 2 34,557 34,559
Distributions to shareholders... (2,701) (2,701)
Conversion from S Corporation to
C Corporation................ 457 457
Exercise of stock options....... 296 628 628
Tax benefit from exercise of
stock options................ 3,374 3,374
Two-for-one stock split
(issuance of 8,673 shares of
common stock)................ 8,673 9 (9)
Net income...................... 12,426 12,426
------ --- ------- ------- --------
Balance at September 30, 1996..... 17,492 17 39,124 11,301 50,442
Issuance of common stock, net of
related costs................ 232 6,162 6,162
Issuance of common stock for
acquisition.................. 33 1,000 1,000
Payment on shareholder
distribution notes........... (635) (635)
Exercise of stock options....... 453 1 2,636 2,637
Tax benefit from exercise of
stock options................ 4,100 4,100
Net income...................... 16,798 16,798
------ --- ------- ------- --------
Balance at September 30, 1997..... 18,210 18 52,387 28,099 80,504
Issuance of common stock, net of
related costs................ 263 6,621 6,621
Issuance of common stock for
acquisition.................. 28 750 750
Exercise of stock options....... 624 1 5,805 5,806
Tax-benefit from exercise of
stock options................ 4,693 4,693
Foreign currency translation
adjustments.................. $(360) (360)
Net income...................... 21,032 21,032
------ --- ------- ------- ----- --------
Balance at September 30, 1998..... 19,125 $19 $70,256 $49,131 $(360) $119,046
====== === ======= ======= ===== ========
</TABLE>

The accompanying notes are an integral part of this statement.
F-6
<PAGE> 54

EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

Eagle USA Airfreight, Inc. (the Company) is a worldwide logistics company.
The Company maintains operating facilities throughout the United States, Mexico,
Canada, Hong Kong and the United Kingdom, as well as a worldwide network of
exclusive and nonexclusive agents. The Company operates in one principal
industry segment.

All dollar amounts in the notes are presented in thousands except for share
data.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of consolidation

The consolidated financial statements include the accounts of Eagle USA
Airfreight, Inc. and its subsidiaries. All significant intercompany transactions
have been eliminated.

Revenue and expense recognition

Revenues and expenses related to the transportation of freight are
recognized at the time the freight departs the terminal of origin. All other
revenues are recognized when the service is provided.

Cash equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less to be
cash equivalents. Cash equivalents are carried at cost, which approximates
market value.

Short-term investments

At September 30, 1998 and 1997, the Company had short-term investments in
commercial paper, U.S. Treasury Bills and Tax Exempt Municipal Bonds with a
carrying value of $12,487 and $2,679, respectively. Securities with a carrying
value of $10,457 at September 30, 1998 mature in less than one year. Such
investments are "available for sale", since the Company has the intent to
utilize the funds as needed. The investments are stated at amortized cost, which
approximated market. Accordingly, no unrealized holding gains or losses have
been recorded by the Company as of September 30, 1998. The Company's short-term
investments in U.S. Treasury Bills at September 30, 1997 matured during fiscal
1998 with no gain or loss recognized.

Concentration of credit risk

The Company's customers include retailing, wholesaling, manufacturing, and
electronics companies as well as international agents throughout the world.
Management believes that concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
Company's customer base and their dispersion across many different industries
and geographic regions. The Company performs ongoing credit evaluations of its
customers to minimize credit risk.

Doing business in foreign locations subjects the Company to various risks
and considerations typical to foreign enterprises, including, but not limited
to, economic and political conditions in the United States and abroad, currency
exchange rates, tax laws, and other laws and trade restrictions.

Foreign currency exchange

Foreign currency amounts attributable to foreign operations have been
translated into U.S. dollars using year-end exchange rates for assets and
liabilities, historical rates for equity, and average annual rates

F-7
<PAGE> 55
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for revenues and expenses. Unrealized gains and losses arising from fluctuations
in currency exchange rates are recorded as equity adjustments. Foreign currency
transaction gains and losses realized during 1998 and 1997 were insignificant.

Property and equipment

Property and equipment is stated at cost. Property and equipment is
depreciated using the straight line method over its estimated useful life.
Expenditures for maintenance and repairs are expensed as incurred. Major
improvements are capitalized. Costs of internally-developed software are
capitalized in accordance with Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use."

Goodwill

Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is being amortized on a straight-line basis over the
estimated useful lives of the businesses acquired.

Income taxes

The provision for income taxes is computed based upon the pretax income
included in the consolidated statement of income. The asset and liability
approach is used to recognize deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Prior to December 4, 1995,
the Company had elected to be treated as an S Corporation for federal income tax
purposes. Accordingly, all income tax liability was the responsibility of the
shareholders.

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Earnings per share and pro forma net income per share

The Company has adopted Statement of Financial Accounting Standard No. 128
(SFAS 128) "Earnings per Share". Adoption of SFAS 128 has resulted in the
retroactive restatement of earnings per share for the years ended prior to
September 30, 1998. Basic earnings per share excludes dilution and is computed
by dividing income available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per share
includes potential dilution that could occur if securities to issue common stock
were exercised.

As a result of the Company's change from an S Corporation to a C
Corporation in December 1995, presentation of pro forma net income per share is
necessary for the year ended September 30, 1996. For purposes of the pro forma
net income per share computation, the two-for-one stock split and the shares
issued to the Company's Chairman of the Board in connection with the acquisition
of his interests in the Company's subsidiaries have been treated as if they had
been effective and outstanding as of the beginning of fiscal 1996.

F-8
<PAGE> 56
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The computation of basic and diluted earnings per share were determined as
follows:

<TABLE>
<CAPTION>
EARNINGS
PER SHARE
--------------- PRO FORMA
YEAR ENDED NET INCOME
SEPTEMBER 30, PER SHARE
--------------- ----------
1998 1997 1996
<S> <C> <C> <C>
Shares used in basic calculation:
Weighted average shares outstanding.................... 18,734 17,792 16,234
------ ------ ------
Total basic shares............................. 18,734 17,792 16,234
Additional shares for diluted computation:
Common stock equivalents............................... 640 890 939
Effect of shares issued to the Company's Chairman of
the Board........................................... 82
Number of shares sold by the Company that would have
been necessary to fund pre-IPO S Corporation
distributions....................................... 266
------ ------ ------
Total diluted shares........................... 19,374 18,682 17,521
====== ====== ======
</TABLE>

Historical earnings per share is not provided for the fiscal year ended
September 30, 1996 as such inclusion is not considered to be meaningful.

New accounting pronouncements

In February 1997, the Financial Accounting Standards Board issued SFAS 129
"Disclosure of Information About Capital Structure" for all periods ending after
December 15, 1997. SFAS 129 contains no changes in the disclosure requirements
of the Company because it was previously subject to such requirements pursuant
to other Statements and Opinions.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". The adoption of both statements is
required for the Company's fiscal year ending September 30, 1999. Under SFAS No.
130, companies are required to report in the financial statements, in addition
to net income, comprehensive income including, as applicable, foreign currency
items, minimum pension liability adjustments and unrealized gains and losses on
certain investments in debt and equity securities. SFAS 131 requires that
companies report separately, in the financial statements, financial and
descriptive information about operating segments, if applicable. The Company
does not expect the adoption of SFAS No. 130 or SFAS 131 to have a material
impact on its consolidated financial statements and related disclosures.

F-9
<PAGE> 57
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- PROPERTY AND EQUIPMENT:

Property and equipment consist of the following at September 30:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1998 1997
<S> <C> <C> <C>
Office and warehouse equipment and software.......... 5 years $17,139 $10,934
Vehicles............................................. 5 years 4,979 3,960
Furniture and fixtures............................... 7 years 3,356 1,031
Land................................................. 731 731
Leasehold improvements............................... lease terms 3,972 2,007
------- -------
30,177 18,663
Less -- accumulated depreciation and amortization.... (8,214) (4,573)
------- -------
$21,963 $14,090
======= =======
</TABLE>

NOTE 3 -- BUSINESS ACQUISITIONS:

On September 19, 1997, the Company acquired the operating assets of Michael
Burton Enterprises, Inc., a transportation and value-added logistics service
provider in Columbus, Ohio. The Company issued 33 shares of common stock, valued
at $1,000, and paid approximately $5,574 in cash. The acquisition agreement also
provides for three contingent payments of up to $1,750 each if certain annual
sales goals are achieved over the next three years. The acquisition was
accounted for as a purchase. Accordingly, the purchase price was allocated on
the basis of the estimated fair market value of the net assets acquired,
resulting in initial goodwill of approximately $4,750. The results of operations
for the acquired business were included in the consolidated statement of income
from the acquisition date forward. The first contingent payment was paid in
October 1998.

On April 3, 1998, the Company acquired substantially all of the operating
assets of Eagle Transfer, Inc. (Eagle Companies), a privately-held international
freight forwarder/consolidator based in Miami, Florida. On April 14, 1998, the
Company acquired all of the outstanding stock of S. Boardman (Air Services)
Limited and Subsidiaries (S. Boardman), a privately-held full services forwarder
based in London, England. The aggregate purchase price for the two 1998
acquisitions was approximately $5,447, including $4,300 in cash plus 28 shares
of Common Stock, valued at $750. The agreements also specify maximum contingent
earnout payments in the aggregate of $1,950 in cash plus $2,250 in common stock,
if certain performance benchmarks are met over each of the next three years.
Despite the similarity in names, the Company and Eagle Companies have had no
prior affiliation. The acquisitions were accounted for as purchases;
accordingly, in each case the purchase price was allocated based on the
estimated fair market value of the net assets acquired with the excess being
recorded as goodwill. The results of operations for the acquired operations were
included in the consolidated statements of income from the acquisition date
forward. Pro forma disclosures for the acquisitions described above have not
been included as the effects are not material to the consolidated results of
operations.

Pro forma disclosures for the acquisitions described above have not been
included as the effects are not material to the consolidated results of
operations.

F-10
<PAGE> 58
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- INCOME TAXES:

The Company's income tax provision was comprised of the following for the
years ended September 30:

<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current:
State.................................................. $ 1,670 $ 1,525 $1,152
Federal................................................ 10,239 8,686 5,129
Foreign................................................ 19
------- ------- ------
11,928 10,211 6,281
------- ------- ------
Deferred:
State.................................................. 165 67 11
Federal................................................ 936 316 65
Foreign................................................ (65)
------- ------- ------
1,036 383 76
------- ------- ------
Total.......................................... $12,964 $10,594 $6,357
======= ======= ======
</TABLE>

A reconciliation of the federal statutory tax rate and the Company's
provision for income taxes is as follows for the years ended September 30:

<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Income taxes at the applicable federal statutory
rates................................................. $11,637 $ 9,371 $ 6,386
Tax exempt income....................................... (205) (158) (130)
Nondeductible items..................................... 339 330 245
State income taxes, net of federal benefit.............. 1,193 1,051 1,163
S Corporation taxation benefit.......................... (1,307)
------- ------- -------
Provision for income taxes.............................. $12,964 $10,594 $ 6,357
======= ======= =======
</TABLE>

As a result of the exercises for the years ended September 30, 1998 and
1997 of nonqualified stock options to purchase an aggregate of 624 and 452
shares of common stock, the Company is entitled to a federal income tax
deduction of approximately $12,887 and $10,200. The Company realized a tax
benefit of approximately $4,693 and $4,100; accordingly, the Company recorded an
increase to additional paid-in capital and a reduction in current taxes payable
pursuant to the provisions of Statement of Financial Accounting Standards No.
109 (SFAS 109), "Accounting for Income Taxes". Any exercises of nonqualified
stock options in the future at exercise prices below the then fair market value
of the common stock may also result in tax deductions equal to the difference
between such amounts, although there can be no assurance as to whether or not
such exercises will occur, the amount of any deductions or the Company's ability
to fully utilize such tax deductions.

F-11
<PAGE> 59
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax assets and liabilities as of September 30, 1998 and 1997 were
comprised of the following:

<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Assets:
Bad debt expense.......................................... $ 260 $ 221
Amortization.............................................. 50
Accruals and other........................................ 618 625
Net operating loss carryforwards.......................... 65
------- -----
943 896
------- -----
Liabilities:
Depreciation.............................................. (992) (822)
Software development costs................................ (866)
Amortization.............................................. (47)
------- -----
(1,905) (822)
------- -----
$ (962) $ 74
======= =====
</TABLE>

NOTE 5 -- SHAREHOLDERS' EQUITY:

On December 6, 1995, the Company completed an underwritten public offering
of 2,000 shares of common stock at a price to the public of $16.50 per share. In
connection with the offering, the underwriters fully exercised an over-allotment
option of 300 shares. Proceeds to the Company after deducting underwriting
discounts, commissions and offering costs were approximately $34,559. Such
proceeds have and may continue to be used for general corporate purposes,
including acquisitions and working capital.

On July 8, 1996, the Board authorized a two-for-one stock split, effected
in the form of a stock dividend, payable August 1, 1996 to shareholders of
record on July 24, 1996. All references in the financial statements to earnings
per share and share information have been retroactively restated to reflect the
split. The stock split resulted in the issuance of approximately 8,673 new
shares of common stock and a reclassification of $9 from retained earnings to
common stock representing the par value of the shares issued.

In February 18, 1997, the Company completed an underwritten secondary
public offering of 1,548 shares of its common stock at a price to the public of
$28.25 per share. The Company did not receive any of the proceeds from the sale
of shares by Daniel Swannie, a former executive officer and director of the
Company. Pursuant to an agreement between the Company and Mr. Swannie entered
into in connection with the offering, Mr. Swannie reimbursed the Company for all
of its out-of-pocket expenses incurred in connection with the offering and made
a payment to the Company of $375 for the Company's estimated internal costs
relating to the offering. The agreement also restricts Mr. Swannie's ability to
compete against the Company for a three-year term and places certain other
limitations on his ability to act against the interests of the Company. In
connection with the offering, the Company sold 232 shares of common stock to the
underwriters pursuant to an over-allotment option at a price of $28.25 per
share. The net proceeds received by the Company after deducting underwriting
discounts and commissions were $6,162 and will be used for general corporate
purposes.

On January 30, 1998, the Company completed an underwritten secondary public
offering of 2,013 shares of its Common Stock at a price to the public of $27.75
per share. The Company did not receive any of the proceeds from the sale of
1,750 of these shares sold by James R. Crane, the Company's Chairman of the
Board of Directors, President and Chief Executive Officer. The Company sold 263
of the

F-12
<PAGE> 60
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

offered shares and the net proceeds received by the Company after deducting
underwriting discounts and commissions and offering expenses were $6,600 and
will be used for general corporate purposes.

In September and October 1998, the Company's Board of Directors authorized
the repurchase of up to one million shares of the Company's common stock in the
open market. As of November 20, 1998, the Company had purchased 433 shares of
common stock. Such shares are held in treasury.

NOTE 6 -- BENEFIT PLANS AND STOCK PLANS:

SAVINGS PLAN

In October 1998, the Company initiated a Stock Purchase Plan, which
provides for up to 200 shares of the Company's Common Stock to be reserved for
issuance upon exercise of purchase rights granted to certain employees who elect
to participate through regular payroll deductions. Purchase rights are granted
to eligible employees who elect to participate each January 1 through July 1 for
a six-month offering period. The purchase rights are exercisable in the
following January or July at a price equal to the lesser of (1) 85% of the fair
market value of the Company's Common Stock on the first date of such period or
(2) 85% of the fair market value of the Common Stock on the last day of such
period.

The Company has a 401(k) savings plan pursuant to which the Company
provides discretionary matching of employees' tax-deferred savings, up to a
maximum of 5% of eligible compensation. During fiscal 1998, 1997, and 1996, the
Company recorded charges of $1,916, $1,373 and $960, respectively, related to
its discretionary contributions to this plan.

STOCK OPTION PLANS

The Company has two stock option plans (the 1994 Plan and Director Plan)
whereby certain officers, directors and employees may be granted options,
appreciation rights or awards related to the Company's common stock. The Board
has authorized 6,100 shares to be available for grant pursuant to the 1994 Plan
and 200 shares pursuant to the Director Plan.

Under the 1994 Plan, each option is to be granted at an exercise price
equal to the fair market value of the common stock on the date of grant. The
options generally vest ratably over a five-year or seven-year period from the
date of issuance (or 100% upon death). The Company has no obligation to
repurchase the options granted. Vested options terminate seven years from the
date of grant.

Additional awards may be granted under the 1994 Plan in the form of cash,
stock or stock appreciation rights. The stock appreciation right awards may
consist of the right to receive payment in cash or common stock. Any award may
be subject to certain conditions, including continuous service with the Company
or achievement of certain business objectives. There have been no awards of this
kind under the 1994 Plan.

Under the Director Plan each option vests within one year from the date of
issuance and terminates ten years from the date of issuance.

F-13
<PAGE> 61
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of September 30, 1998, options to purchase 3,129 shares of common stock
of the Company under both plans were outstanding as follows:

<TABLE>
<CAPTION>
EXERCISE PRICE
OPTIONS PER SHARE
<S> <C> <C>
Outstanding at September 30, 1995........................... 845 $ 2.50 - 8.00
Granted prior to stock split................................ 535 16.50 - 37.50
Effect of stock split (Note 9).............................. 1,237 1.25 - 18.75
Granted..................................................... 22 19.25 - 20.25
Forfeited................................................... (149) 1.25
Exercised................................................... (297) 1.25 - 8.25
-----
Outstanding at September 30, 1996........................... 2,193 1.25 - 20.25
Granted..................................................... 437 19.25 - 35.13
Forfeited................................................... (68) 1.25 - 25.75
Exercised................................................... (452) 1.25 - 19.25
-----
Outstanding at September 30, 1997........................... 2,110 $ 1.25 - 35.13
Granted..................................................... 1,842 $24.63 - 34.63
Forfeited................................................... (199) 1.25 - 32.88
Exercised................................................... (624) 1.25 - 26.31
-----
Outstanding at September 30, 1998........................... 3,129
=====
Options vested at end of year............................... 550
=====
</TABLE>

The two-for-one stock split resulted at the date thereof in the issuance of
an additional option for each one outstanding and a 50% reduction in the
exercise price for all outstanding options (Note 5).

The following table summarizes information about stock options outstanding
at September 30, 1998:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------------- ------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICES NUMBER LIFE PRICE NUMBER PRICE
<S> <C> <C> <C> <C> <C>
$ 1.25 - $ 1.25................ 595 3.0 $ 1.25 325 $ 1.25
$ 4.00 - $14.00................ 315 4.8 11.58 102 10.48
$17.13 - $30.63................ 2,014 6.2 27.56 121 22.68
$31.25 - $35.13................ 205 6.9 33.36 2 34.52
----- --- ------ --- ------
$ 1.25 - $35.13................ 3,129 5.5 $21.33 550 $ 7.77
===== === ====== === ======
</TABLE>

The Company applies APB25 and related interpretations in accounting for its
stock option plans. No compensation cost has been recognized for these plans.
The weighted average fair values of options granted during 1998, 1997 and 1996
were $16.66, $12.50 and $6.62, respectively. Had compensation cost for the
Company's option plans been determined based upon the fair value at the grant
dates for awards under these plans consistent with the method set forth under
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation", the Company's net income for the years ended
September 30, 1998 and 1997 would have been reduced by $3,101 and $2,490,
respectively. Pro forma net income for the year ended September 30, 1996 would
have been reduced by $636.

Diluted earnings per share for fiscal 1998 and 1997 would have been reduced
by $0.16 and $0.13, respectively, and pro forma net income per share for fiscal
1996 would have been reduced by $0.04.

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes options-repricing model with the following
weighted-average assumptions used for grants in 1998, 1997 and

F-14
<PAGE> 62
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1996: expected volatility of 60%, 44% and 70%, risk-free interest rates of 5.4%,
6.3% and 6.1%, zero dividend yield and an expected life of five years in 1998
and six years in 1997 and 1996.

NOTE 7 -- RELATED PARTY TRANSACTIONS:

From time to time, the Company utilizes an aircraft owned by an entity that
is controlled by the principal shareholder and is charged $1.4 per hour for
actual usage. Total travel expense during fiscal years ended September 30, 1998,
1997 and 1996 related to the aircraft was $424, $125 and $72.

NOTE 8 -- FINANCING ARRANGEMENTS:

The Company has a number of operating lease agreements, principally for
computer equipment, office space and freight operation facilities. These leases
are noncancelable and expire on various dates through 2007. Following is a
summary of future minimum rental payments required under the operating leases
that have initial or remaining noncancelable lease terms in excess of one year:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
<S> <C>
1999..................................................... $ 7,807
2000..................................................... 6,988
2001..................................................... 5,102
2002..................................................... 2,623
Thereafter............................................... 1,040
-------
$23,560
=======
</TABLE>

Rent expense under all noncancelable operating leases during 1998, 1997 and
1996 was $7,022, $4,773 and $3,062, respectively.

In January 1997, the Company entered into a five-year operating lease
agreement with two unrelated parties for financing the construction of its
recently completed Houston terminal, warehouse and headquarters facility (the
Houston facility). The cost of the Houston facility was approximately $8.5
million. Under the terms of the lease agreement, average monthly lease payments
are approximately $59 (including monthly interest costs based upon LIBOR rate
plus 145 basis points) beginning July 1, 1998 through October 2, 2002 with a
balloon payment equal to the outstanding lease balance (initially equal to the
cost of the facility) due on October 2, 2002. The Company has an option,
exercisable at any time during the lease term to acquire the facility for an
amount equal to the outstanding lease balance. In the event the Company does not
exercise the purchase option, it is subject to a deficiency payment computed as
the amount equal to the outstanding lease balance minus the then current fair
market value of the Houston facility. As of September 30, 1998, the lease
balance was approximately $8,500.

On April 3, 1998, the Company entered into a five-year $20 million master
operating lease agreement with two unrelated parties for financing the
construction of terminal and warehouse facilities throughout the United States
designated by the Company (each, a Financed Facility). Under the terms of the
master operating lease agreement, average monthly lease payments (including
monthly interest costs based upon LIBOR rate plus 145 basis points) began upon
the completion of the construction of each Financed Facility and will continue
for a term of 52 months with a balloon payment equal to the outstanding lease
balances (initially equal to the cost of the facility) due at the end of each
lease term, and the Company has an option, exercisable at any time during the
lease term, and under certain circumstances may be obligated, to acquire each
Financed Facility for an amount equal to the outstanding lease balance. In the
event the Company does not exercise the purchase option, and does not otherwise
meet its obligations, it is subject to a deficiency payment computed as the
amount equal to the outstanding lease balance minus the

F-15
<PAGE> 63
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

then fair market value of each Financed Facility within certain limits. The
Company expects to begin construction of each Financed Facility prior to
December 1999. As of September 30, 1998, the aggregate lease balance was
approximately $750 under the master operating leases.

The Company's subsidiaries in the United Kingdom and Mexico maintain bank
lines of credit for purposes of securing customs bonds and bank letters of
credit for purposes of guaranteeing certain transportation expenses. These
credit lines and letters of credit are supported by standby letters of credit
issued by a United States bank or guarantees issued by the Company to the
foreign banks. At September 30, 1998 the Company was contingently liable for
approximately $3 million under outstanding letters of credit and guarantees
related to these obligations.

NOTE 9 -- STATEMENT OF CASH FLOWS:

Following is a reconciliation of net income to net cash provided by
operating activities for the years ended September 30:

<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Reconciliation of net income to net cash provided by
operating activities: --
Net income......................................... $ 21,032 $ 16,798 $ 12,426
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for bad debts............................ 2,036 1,447 743
Depreciation and amortization...................... 4,271 2,092 1,124
Deferred income tax expense (benefit).............. 1,036 383 76
Other income....................................... 694
Change in assets and liabilities, net of
acquisitions:
Trade accounts receivable....................... (10,347) (24,486) (13,727)
Prepaid expenses and other assets............... 1,194 (1,086) (272)
Accounts payable and other accrued
liabilities................................... 5,322 5,079 10,477
-------- -------- --------
Net cash provided by operating
activities............................... $ 24,544 $ 921 $ 10,847
======== ======== ========
</TABLE>

Supplemental information on noncash investing and financing activities:

The exercise of employee stock options resulted in a reduction of the
Company's tax liability and an increase in its additional paid-in capital
of $4,693 and $4,100 in fiscal 1998 and 1997.

A 2-for-1 stock split was paid on August 1, 1996 and resulted in a
charge of $9 to common stock and retained earnings.

A contingent payment of $1,500 was accrued at September 30, 1998
resulting in an increase in goodwill and accrued liabilities.

Goodwill was recorded in 1998 as a result of the issuance of 28 shares
of common stock, valued at $750, in connection with an acquisition.

F-16
<PAGE> 64
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

The following is a summary of the Company's unaudited quarterly financial
information for the years ended September 30, 1998 and 1997.

<TABLE>
<CAPTION>
QUARTER ENDED,
---------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1998 1998 1998
<S> <C> <C> <C> <C>
Revenues............................... $97,645 $90,544 $107,050 $121,844
Operating income....................... 9,349 6,064 8,472 8,335
Income before provision for income
taxes................................ 9,654 6,532 8,958 8,852
Net income............................. 5,890 3,989 5,645 5,508
Diluted earnings per share............. 0.31 0.21 0.29 0.28
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED,
---------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997 1997
<S> <C> <C> <C> <C>
Revenues................................ $67,586 $61,489 $71,301 $91,391
Operating income........................ 7,198 4,025 6,352 8,124
Income before provision for income
taxes................................. 7,471 4,726 6,726 8,469
Net income.............................. 4,514 2,948 4,104 5,232
Diluted earnings per share.............. 0.24 0.16 0.22 0.28
</TABLE>

NOTE 11 -- COMMITMENTS AND CONTINGENCIES:

From time to time, the Company is a party to various legal claims and
proceedings arising in the ordinary course of business.

In December 1997, the U.S. Equal Employment Opportunity Commission ("EEOC")
issued a Commissioner's Charge against the Company and certain of its
subsidiaries (the "Commissioner's Charge") pursuant to Sections 706 and 707 of
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"). The Company
continues to vigorously defend against allegations contained in the
Commissioner's Charge. In the Commissioner's Charge, the EEOC charged the
Company and certain of its subsidiaries with violations of Section 703 of Title
VII, as amended, the Age Discrimination in Employment Act of 1967, and the Equal
Pay Act of 1963, resulting from (i) engaging in unlawful discriminatory hiring,
recruiting, and promotion practices and maintaining a hostile work environment,
based on one or more of race, national origin, age, and gender, (ii) failures to
investigate, (iii) failures to maintain proper records and (iv) failures to file
accurate reports. The Commissioner's Charge states that the persons aggrieved
include all Blacks, Hispanics, Asians and females who are, have been or might be
affected by the alleged unlawful practices. The Company cannot currently predict
with any great degree of certainty, the length of time it will take to resolve
this matter, the likely outcome of this matter or the effect of any such
outcome. An adverse determination of the matters in the Commissioner's Charge
would likely result in a civil action by the EEOC that could seek back pay,
other compensatory damages, and punitive damages for the allegedly aggrieved
persons.

F-17
<PAGE> 65

EAGLE USA AIRFREIGHT, INC.

CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUES)

<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1999 1998
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 47,403 $ 37,191
Short-term investments.................................... 12,010 12,487
Accounts receivable -- trade, net......................... 84,724 69,576
Prepaid expenses and other................................ 5,848 3,905
-------- --------
Total current assets.............................. 149,985 123,159
Property and equipment, net................................. 26,543 21,963
Other assets................................................ 11,154 11,214
-------- --------
$187,682 $156,336
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable -- trade................................. $ 10,187 $ 4,542
Accrued transportation costs.............................. 15,801 14,014
Accrued compensation and employee benefits................ 14,063 14,061
Other current liabilities................................. 7,418 4,673
-------- --------
Total current liabilities......................... 47,469 37,290
-------- --------
Long-term indebtedness......................................
-------- --------
Shareholders' equity:
Preferred Stock, $0.001 par value, 10,000 shares
authorized
Common Stock, $0.001 par value, 100,000 shares authorized,
19,031 and 19,125 shares issued and outstanding........ 19 19
Additional paid-in capital................................ 80,115 70,256
Retained earnings......................................... 69,707 49,131
Accumulated other comprehensive loss...................... (426) (360)
Treasury stock at cost.................................... (9,202)
-------- --------
140,213 119,046
-------- --------
$187,682 $156,336
======== ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-18
<PAGE> 66

EAGLE USA AIRFREIGHT, INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------
1999 1998
<S> <C> <C>
Revenues.................................................... $428,424 $295,239
Cost of transportation...................................... 243,455 164,525
-------- --------
184,969 130,714
-------- --------
Operating expenses:
Personnel costs........................................... 93,955 69,071
Other selling, general and administrative expenses........ 59,411 37,758
-------- --------
153,366 106,829
-------- --------
Operating income............................................ 31,603 23,885
-------- --------
Interest and other income................................... 1,934 1,259
Interest expense............................................
-------- --------
Nonoperating income......................................... 1,934 1,259
-------- --------
Income before provision for income taxes.................... 33,537 25,144
Provision for income taxes.................................. 12,961 9,620
-------- --------
Net income.................................................. 20,576 15,524
Other comprehensive income:
Foreign currency translation................................ (40)
-------- --------
Comprehensive income........................................ $ 20,536 $ 15,524
======== ========
Basic weighted average common shares outstanding............ 18,812 18,617
======== ========
Diluted weighted average common and common equivalent shares
outstanding............................................... 19,283 19,322
======== ========
Basic earnings per share (Note 2)........................... $ 1.09 $ 0.83
======== ========
Diluted earnings per share (Note 2)......................... $ 1.07 $ 0.80
======== ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-19
<PAGE> 67

EAGLE USA AIRFREIGHT, INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------
1999 1998
<S> <C> <C>
Revenues.................................................... $149,826 $107,050
Cost of transportation...................................... 86,133 60,343
-------- --------
63,693 46,707
-------- --------
Operating expenses:
Personnel costs........................................... 32,012 24,135
Other selling, general and administrative expenses........ 20,609 14,100
-------- --------
52,621 38,235
-------- --------
Operating income............................................ 11,072 8,472
-------- --------
Interest and other income................................... 751 486
Interest expense............................................
-------- --------
Nonoperating income......................................... 751 486
-------- --------
Income before provision for income taxes.................... 11,823 8,958
Provision for income taxes.................................. 4,528 3,313
-------- --------
Net income.................................................. 7,295 5,645
Other comprehensive income:
Foreign currency translation................................ (233)
-------- --------
Comprehensive income........................................ $ 7,062 $ 5,645
======== ========
Basic weighted average common shares outstanding............ 18,934 19,008
======== ========
Diluted weighted average common and common equivalent shares
outstanding............................................... 19,723 19,674
======== ========
Basic earnings per share (Note 2)........................... $ 0.39 $ 0.30
======== ========
Diluted earnings per share (Note 2)......................... $ 0.37 $ 0.29
======== ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-20
<PAGE> 68

EAGLE USA AIRFREIGHT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------
1999 1998
<S> <C> <C>
Cash flows from operating activities........................ $ 23,873 $ 19,191
-------- --------
Cash flows from investing activities:
Purchase of investments................................... (12,627) (13,897)
Maturity of investments................................... 13,104 2,500
Acquisition of property and equipment, net................ (8,687) (8,081)
Payment of contingent consideration for acquisition....... (2,000)
Other..................................................... (63) (2,988)
-------- --------
Net cash used by investing activities............. (10,273) (22,466)
-------- --------
Cash flows from financing activities:
Issuance of common stock, net of related costs............ 6,623
Proceeds from exercise of stock options................... 5,896 5,425
Purchase of treasury stock................................ (9,218)
-------- --------
Net cash provided (used) by financing
activities....................................... (3,322) 12,048
-------- --------
Effect of foreign currency translation on cash.............. (66)
-------- --------
Net increase in cash and cash equivalents................... 10,212 8,773
Cash and cash equivalents, beginning of period.............. 37,191 25,107
-------- --------
Cash and cash equivalents, end of period.................... $ 47,403 $ 33,880
======== ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-21
<PAGE> 69

EAGLE USA AIRFREIGHT, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
--------------- PAID-IN RETAINED COMPREHENSIVE TREASURY
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998....... 19,125 $19 $70,256 $49,131 $(360) $119,046
Exercise of stock options........... 465 5,896 5,896
Issuance of shares under stock
purchase plan..................... 4 (16) $ 64 48
Purchase of treasury stock.......... (563) (9,266) (9,266)
Tax benefit from exercise of stock
options........................... 3,979 3,979
Net income.......................... 20,576 20,576
Foreign currency translation
adjustments....................... (66) (66)
------ --- ------- ------- ----- ------- --------
Balance at June 30, 1999............ 19,031 $19 $80,115 $69,707 $(426) $(9,202) $140,213
====== === ======= ======= ===== ======= ========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-22
<PAGE> 70

EAGLE USA AIRFREIGHT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

The accompanying unaudited condensed consolidated financial statements have
been prepared by Eagle USA Airfreight, Inc. (the Company) in accordance with the
rules and regulations of the Securities and Exchange Commission (the SEC) for
interim financial statements and accordingly do not include all information and
footnotes required under generally accepted accounting principles for complete
financial statements. The financial statements have been prepared in conformity
with the accounting principles and practices disclosed in, and should be read in
conjunction with, the annual financial statements of the Company included in the
Company's Annual Report on Form 10-K (File No. 0-27288). In the opinion of
management, these interim financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position at June 30, 1999 and the
results of its operations for the nine and three months ended June 30, 1999 and
1998. Results of operations for the nine and three months ended June 30, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 1999.

NOTE 1 -- ORGANIZATION, OPERATIONS, AND SIGNIFICANT ACCOUNTING POLICIES:

Eagle USA Airfreight, Inc. (the Company) is a worldwide logistics company.
The Company maintains operating facilities throughout the United States, Mexico,
Canada, Hong Kong, the United Kingdom, Argentina, Brazil, and Peru as well as a
worldwide network of exclusive and nonexclusive agents. The Company operates in
one principal industry segment.

On July 26, 1999, the Board of Directors declared a three-for-two-stock
split, effected in the form of a stock dividend, payable to shareholders of
record on August 23, 1999. As of June 30, 1999, the Company has 19,030,774
common shares outstanding (net of 558,558 treasury shares). After the split, the
number of shares outstanding will increase to approximately 28,546,161.

In September and October 1998, the Company's Board of Directors authorized
the repurchase of up to one million shares of the Company's common stock in the
open market. As of June 30, 1999, the Company had repurchased 563,200 shares of
common stock (4,642 shares of which were subsequently resold pursuant to the
Company's employee stock purchase plan). Such shares are held in treasury. The
board authorization for share repurchases expired following these repurchases.

NOTE 2 -- EARNINGS PER SHARE:

The Company has adopted Statement of Financial Accounting Standard No. 128
(SFAS 128), "Earnings Per Share". Adoption of SFAS 128 has resulted in the
retroactive restatement of earnings per share. Basic earnings per share excludes
dilution and is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period. Diluted
earnings per share includes potential dilution that could occur if securities to
issue common stock were exercised.

F-23
<PAGE> 71
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The computation of basic and diluted earnings per share are as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
------------------
1999 1998
<S> <C> <C>
Net income.................................................. $20,576 $15,524
======= =======
Shares used in basic calculation:
Weighted average shares outstanding....................... 18,812 18,617
------- -------
Total basic shares................................ 18,812 18,617
Additional shares for diluted computation:
Effect of stock options................................... 471 705
------- -------
Total diluted shares.............................. 19,283 19,322
======= =======
Basic earnings per share.................................... $ 1.09 $ 0.83
======= =======
Diluted earnings per share.................................. $ 1.07 $ 0.80
======= =======
</TABLE>

For the nine months ended June 30, 1999, the effect of stock options was
calculated assuming exercise of options for 2,945,208 shares of common stock at
prices ranging from $1.25 to $37.28 per share and assumed repurchase of shares
at the average market price per share of $28.18 computed as of the beginning of
the period using the treasury stock method. For the nine months ended June 30,
1998, the effect of stock options was calculated assuming exercise of options
for 3,019,153 shares of common stock at prices ranging from $1.25 to $35.13 per
share and assumed repurchase of shares at the average market price per share of
$30.28 computed as of the beginning of the period using the treasury stock
method. For the nine months ended June 30, 1999 and 1998, 1,731,075 and 175,000
options, respectively, were excluded from the diluted earnings per share
calculation because their effect was antidilutive.

<TABLE>
<CAPTION>
THREE ENDED JUNE 30,
--------------------
1999 1998
<S> <C> <C>
Net income.................................................. $ 7,295 $ 5,645
======= =======
Shares used in basic calculation:
Weighted average shares outstanding....................... 18,934 19,008
------- -------
Total basic shares................................ 18,934 19,008
Additional shares for diluted computation:
Effect of stock options................................... 789 666
------- -------
Total diluted shares.............................. 19,723 19,674
======= =======
Basic earnings per share.................................... $ 0.39 $ 0.30
======= =======
Diluted earnings per share.................................. $ 0.37 $ 0.29
======= =======
</TABLE>

For the three months ended June 30, 1999, the effect of stock options was
calculated assuming exercise of options for 2,945,208 shares of common stock at
prices ranging from $1.25 to $37.28 per share and assumed repurchase of shares
at the average market price per share of $40.87 computed as of the beginning of
the period using the treasury stock method. For the three months ended June 30,
1998, the effect of stock options was calculated assuming exercise of options
for 3,019,153 shares of common stock at prices ranging from $1.25 to $35.13 per
share and assume repurchase of shares at the average market price per share of
$31.74 computed as of the beginning of the period using the treasury stock
method. For the three months ended June 30, 1999 and 1998, 0 and 152,500
options, respectively, were excluded from the diluted earnings per share
calculation because their effect was antidilutive.

F-24
<PAGE> 72
EAGLE USA AIRFREIGHT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTE 3 -- NEW ACCOUNTING PRONOUNCEMENTS:

On October 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", and SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information". Under SFAS 130, companies are required to
report in the financial statements, in addition to net income, comprehensive
income including, as applicable, foreign currency items, minimum pension
liability adjustments and unrealized gains and losses on certain investments in
debt and equity securities. The Company's only component of other comprehensive
income is foreign currency translation adjustments. The Company's cumulative
translation adjustments are now characterized as accumulated other comprehensive
income or loss.

SFAS 131 requires that companies report separately, in the financial
statements, financial and descriptive information about operating segments, if
applicable. During the nine and three months ended June 30, 1999, the Company's
geographic segments which are not domiciled in the United States did not
represent, in the aggregate, more than 10% of the revenues, net income, or
assets of the combined amounts for all geographic segments.

F-25
<PAGE> 73

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

, 1999

[EAGLE USA AIRFREIGHT LOGO]

1,200,000 SHARES OF COMMON STOCK

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

PROSPECTUS

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

DONALDSON, LUFKIN & JENRETTE

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

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THAT WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR OUR AFFAIRS HAVE NOT
CHANGED SINCE THE DATE HEREOF.

- --------------------------------------------------------------------------------
<PAGE> 74

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses we incurred in
connection with the issuance and distribution of the securities being registered
under this registration statement. The estimates do not include underwriting
discounts and commissions, all of which will be paid by the Selling Shareholder.
Except for the SEC registration fee and the NASD filing fee, all expenses are
estimated.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $14,099
NASD Filing Fee............................................. 5,572
Printing and Engraving Expense.............................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Transfer Agent and Registrar Fees and Expenses.............. *
Blue Sky Fees and Expenses (including legal fees)........... *
Miscellaneous............................................... *
-------
Total............................................. *
</TABLE>

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

* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article 2.02-1 of the Texas Business Corporation Act provides that a
corporation may indemnify any director or officer who was, is or is threatened
to be made a named defendant or respondent in a proceeding because he is or was
a director or officer, provided that the director or officer

- conducted himself in good faith,
- reasonably believed in the case of conduct in his official capacity, that
his conduct was in the corporation's best interests or, in all other
cases, that his conduct was at least not opposed to the corporation's
best interests and
- in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful.

Subject to certain exceptions, a director or officer may not be indemnified if
the person is found liable to the corporation or if the person is found liable
on the basis that he improperly received a personal benefit. Under Texas law,
reasonable expenses incurred by a director or officer may be paid or reimbursed
by the corporation in advance of a final disposition of the proceeding after the
corporation receives a written affirmation by the director or officer of his
good faith belief that he has met the standard of conduct necessary for
indemnification and a written undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined that the director or
officer is not entitled to indemnification by the corporation. Texas law
requires a corporation to indemnify an officer or director against reasonable
expenses incurred in connection with the proceeding in which he is named
defendant or respondent because he is or was a director or officer if he is
wholly successful in defense of the proceeding.

Texas law also permits a corporation to purchase and maintain insurance or
another arrangement on behalf of any person who is or was a director or officer
against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, whether or not the
corporation would have the power to indemnify him against that liability under
Article 2.02-1.

Our bylaws provide for the indemnification of our officers and directors,
and the advancement to them of expenses in connection with proceedings and
claims, to the fullest extent permitted by the Texas Business Corporation Act.
We have also entered into indemnification agreements with each of our directors
and some of our officers that contractually provide for indemnification and
expense advancement

II-1
<PAGE> 75

and include related provisions meant to facilitate the indemnitees' receipt of
these benefits. These provisions cover, among other things:

- specification of the method of determining entitlement to indemnification
and the selection of independent counsel that will in some cases make
such determination,
- specification of the time periods by which payments or determinations
must be made and actions must be taken and
- the establishment of presumptions in favor of an indemnitee.

The benefits of some of these provisions are available to an indemnitee only if
there has been a change in control. In addition, we may purchase directors' and
officers' liability insurance policies for our directors and officers in the
future. Our Bylaws and these agreements with directors and officers provide for
indemnification for amounts

- in respect of the deductibles for these insurance policies,
- that exceed the liability limits of these insurance policies and
- that are available, were available or which become available to us but
which our officers or directors determine is inadvisable for us to
purchase, given our cost involved.

This indemnification may be made even though directors and officers would
not otherwise be entitled to indemnification under other provisions of the
bylaws or such agreements.

The above discussion of Article 2.02-1 of the Texas Business Corporation
Act and of our bylaws is not intended to be exhaustive and is respectively
qualified in its entirety by the statute and the bylaws.

Reference is made to the form of the Underwriting Agreement, filed as
Exhibit 1.1 hereto, which contains provisions for indemnification of the selling
shareholder and us, our directors, officers and any controlling persons by the
Underwriters against some liabilities for information furnished by the
Underwriters.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
<C> <S>
+1.1 -- Form of Underwriting Agreement.
*4.1 -- Second Amended and Restated Articles of Incorporation of
the Company, as amended (filed as Exhibit 3(i) to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998, and incorporated herein by
reference).
*4.2 -- Amended and Restated Bylaws of the Company, as amended
(filed as Exhibit 3.2 to the Company's Registration
Statement on Form S-1, Registration No. 33-97606, and
incorporated herein by reference).
+5.1 -- Opinion of Baker & Botts, L.L.P.
23.1 -- Consent of PricewaterhouseCoopers LLP.
+23.2 -- Consent of Baker & Botts, L.L.P. (included in Exhibit
5.1)
24.1 -- Powers of Attorney (included on the signature page).
27.1 -- Financial Data Schedule.
+99.1 -- Agreement between the Company and Mr. James R. Crane
dated as of July 28, 1999.
</TABLE>

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

* Incorporated by reference as indicated.

+ To be filed by amendment.

II-2
<PAGE> 76

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

- For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of any employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
- For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
- For the purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and this Offering of such securities at that
time shall be deemed to be the initial bona fide Offering thereof.

II-3
<PAGE> 77

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 29th day of July,
1999.

EAGLE USA AIRFREIGHT, INC.

By: /s/ JAMES R. CRANE

----------------------------------
James R. Crane
President, Chief Executive Officer
and
Chairman of the Board

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James R. Crane and Douglas A. Seckel, and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement and any registration statement for
the same offering filed pursuant to Rule 462 under the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and other documents
in connection therewith, within the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents and each of them full power and
authority, to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, to all intents and purposes and as fully
as they might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or their substitutes may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on July 29, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ JAMES R. CRANE President, Chief Executive Officer and Chairman of
- ---------------------------------------------- the Board (Principal Executive Officer)
James R. Crane

/s/ DOUGLAS A. SECKEL Chief Financial Officer, Treasurer and Director
- ---------------------------------------------- (Principal Financial and Accounting Officer)
Douglas A. Seckel

/s/ FRANK J. HEVRDEJS Director
- ----------------------------------------------
Frank J. Hevrdejs

/s/ NEIL E. KELLEY Director
- ----------------------------------------------
Neil E. Kelley

/s/ NORWOOD KNIGHT-RICHARDSON Director
- ----------------------------------------------
Norwood Knight-Richardson

/s/ REBECCA A. MCDONALD Director
- ----------------------------------------------
Rebecca A. McDonald

/s/ WILLIAM P. O'CONNELL Director
- ----------------------------------------------
William P. O'Connell
</TABLE>

II-4
<PAGE> 78

EXHIBIT INDEX

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

* Incorporated by reference as indicated.

+ To be filed by amendment.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use and the incorporation by reference in this
Registration Statement on Form S-3 of our report dated November 20, 1998
appearing on page F-2 of Eagle USA Airfreight, Inc.'s Annual Report on Form 10-K
for the year ended September 30, 1998. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.

PRICEWATERHOUSECOOPERS LLP
July 29, 1999
Houston, Texas

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF EAGLE USA AIRFREIGHT, INC. FOR
THE NINE MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 47,403
<SECURITIES> 12,010
<RECEIVABLES> 86,149
<ALLOWANCES> 1,425
<INVENTORY> 0
<CURRENT-ASSETS> 149,985
<PP&E> 38,577
<DEPRECIATION> 12,034
<TOTAL-ASSETS> 187,682
<CURRENT-LIABILITIES> 47,469
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 140,194
<TOTAL-LIABILITY-AND-EQUITY> 187,682
<SALES> 428,424
<TOTAL-REVENUES> 428,424
<CGS> 0
<TOTAL-COSTS> 243,455
<OTHER-EXPENSES> 153,366
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33,537
<INCOME-TAX> 12,961
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,576
<EPS-BASIC> 1.09
<EPS-DILUTED> 1.07

</TABLE>