UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[ X ]     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required)

For the fiscal year ended December 31, 1999

or

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required)

For the transition period from                      to                           

Commission file number 0-23210

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

                              [ X ] Yes      [   ] No

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

Indicate by check mark whether the registrant has filed all documents and reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to distribution of securities under a plan confirmed by a court.

[ X ] Yes           [   ] No

As a result of the recent reorganization, no reliable quotation market exists for the Company's common stock of which 1,435,508 were held by non-affiliates.

As of March 15, 2000, after giving effect to the recent reorganization, 2,000,000 shares of TRISM, Inc.'s common stock, par value $.01 per share, were outstanding.

Page 1 of 55 Pages

Exhibit Index located on page 51.

TRISM, Inc. (the "Company"), a Delaware corporation, entered the transportation business in January 1990 with the acquisition of Tri-State Motor Transit Co. The Company's operations include a group of carriers primarily specializing in the transportation of heavy machinery and equipment and over-dimensional commodities, building materials, steel and metal products (Heavy Haul), hazardous waste, explosives, military munitions and radioactive materials (Secured Materials), and a contract logistics provider (Logistics). The Company conducts these operations principally through its subsidiaries, Trism Specialized Carriers, Inc. ("TSC"), Tri-State Motor Transit Co. ("TSMT"), Diablo Systems, Inc. ("Diablo"), C.I. Whitten Transfer ("CIW"), and Trism Logistics, Inc. ("TLI").

The Company had approximately $86.2 million of Senior Subordinated Notes (the "Notes") outstanding as of December 31, 1998 which were to mature December 15, 2000. The Company failed to make a scheduled interest payment on the Notes due on June 15, 1999. The grace period for the payment expired on July 15, 1999. The payment default constituted an Event of Default under the terms of the indenture pursuant to which the Notes were issued. This Event of Default caused other technical defaults under other secured borrowing arrangements, including the Company's revolving credit facility.

On July 15, 1999, the Company reached an agreement in principle with the steering committee representing major holders of the Notes. On September 10, 1999, the Company executed a restructuring agreement with the steering committee.

The agreement provided for the Notes to be converted into (i) new notes in the aggregate principal amount of $30 million, due February 15, 2005, with interest at the rate of 12% per annum (the first semi-annual interest payment on which will be due in March 15, 2000), and (ii) 95% of the new common equity of the Company to be issued post-recapitalization, prior to dilution respecting a management stock incentive program. The agreement also provided that the Company's old common equity would be converted into 5% of the new common equity issued post-recapitalization, prior to dilution.

On September 16, 1999, the Company filed (the "Filing") for protection under Chapter 11 of the United States Bankruptcy Code (the "Code") in the District of Delaware. The Company operated as a Debtor-in-Possession ("DIP") under the Code. Subsequent to the Filing, the Company obtained a $42.4 million senior collateralized DIP credit facility to meet its ongoing working capital needs and replace its pre-petition revolving credit facility. The DIP facility provided for borrowings up to $35 million on a revolving credit facility, with availability depending upon a borrowing base formula based on accounts receivable. Additionally, the DIP facility provided additional borrowing capacity of $2.4 million to refinance an existing term loan collateralized by five hundred and forty-one trailers and an incremental $5 million of borrowings, if drawn, to be collateralized by identified real property and other unencumbered trailers. The borrowings bore interest at rates ranging from prime rate plus .25% to .50% or from LIBOR rates plus 2.25% to 2.50%. The DIP facility was repaid in full on February 15, 2000, the effective date of the Plan of Reorganization (the "Plan"). On October 25, 1999 the Court signed an order approving the second amended disclosure statement for a joint plan of reorganization. On December 9, 1999, the Plan was confirmed by the United States Bankruptcy Court, District of Delaware (the "Court").

On February 15, 2000, the consummation of the Plan was completed, and the Company exited from Chapter 11. The Company converted the Notes and old common stock as outlined under the terms of the restructuring agreement.

In connection with the exit from Chapter 11, the Company executed a new, three-year $42.5 million revolving credit facility ("Revolver"). The Revolver provides for borrowings up to $42.5 million based on a borrowing base formula determined by eligible accounts receivable, certain unencumbered trailers, and the Company's real property in Kennesaw, Georgia. The Revolver also provides for the issuance of letters of credit up to $17 million. The Revolver bears interest at the prime rate plus .25% or LIBOR plus 2.25%. No financial covenants exist unless availability, as defined, initially falls below $5 million for ten consecutive business days. Required covenants if availability falls below $5 million include a minimum net worth threshold, minimum fixed charge coverage ratio and a maximum leverage ratio. The Revolver also limits debt incurrence,

capital expenditures, changes in control, mergers and certain material asset sales, irrespective of the $5 million availability threshold.

As a result of the Company's reorganization, total outstanding indebtedness was significantly reduced resulting in annual interest savings of $5.6 million. Additionally, the Company reduced certain costs in excess of $6.5 million including a reduction in non-driving personnel, closure of certain operating facilities, and elimination of under-utilized tractors and trailers. The Company has also implemented new programs to enhance revenues and revenue quality, and improve asset utilization (driver and equipment). These factors, coupled with expanded availability under the Revolver and reduced outstanding indebtedness, will improve the Company's cash flows.

TSC, the Company's largest segment, specializes in the transportation of over-sized and over-dimensional loads throughout the United States, Canada, and Mexico. The largest markets for Heavy Haul are manufacturers of large machinery and equipment, suppliers and contractors to industrial and public construction, importers of industrial durable goods and the U.S. Government. Also, the Company entered the Super Heavy Haul market in 1997 through its strategic alliance with Econofreight Group Limited, a U.K. subsidiary of Brambles Corporation, which generated approximately $6.3 million in operating revenues in 1999. The Super Heavy Haul market allows for the transportation of freight in excess of 80 tons up to 10,000 tons. The Heavy Haul segment data includes the operating results of a discontinued segment in generic flatbed, which included related revenues of $15 million for the year ended December 31, 1997.

The following table includes Heavy Haul's contribution of revenue, exclusive of intersegment elimination adjustments, for the three years ended December 31:

TSMT, Diablo and CIW service customers in the munitions and explosives market and are collectively the largest transporters of Department of Defense munitions in the continental United States. TSMT and CIW operate throughout the continental United States whereas Diablo's market focus is primarily in the western regions of the United States.

Trism Environmental Services ("TES"), a division of TSMT, provides service to customers in the hazardous waste and radioactive materials market. TES operates throughout the United States, but its primary market focus is east of the Mississippi.

The operating companies within the Secured Materials group have operating authority in the entire continental United States and certain provinces of Canada. In addition, the group maintains trailer interchange agreements with certain Mexican carriers.

The following table includes Secured Material's contribution of revenue, exclusive of intersegment elimination adjustments, for the three years ended December 31:

Trism Logistics, Inc. ("TLI") is a logistics firm specializing in the management of freight by truck (particularly in those specialized markets in which the Company operates). TLI's client base includes engineering and construction companies, suppliers to the European Community, Fortune 500 companies and major utility companies. In September 1998, TLI began providing logistics services to the rail industry through its intermodal division.

The following table includes TLI's contribution of revenue, exclusive of intersegment elimination adjustments, for the three years ended December 31:

The Company has sought to enter niche-trucking markets in which it can become the preeminent carrier. These markets generate higher revenues per mile than general freight carriage. There are substantial service and productivity advantages to having a large specialized equipment fleet including high route density and a large, diverse customer base.

The Company's coordinated nationwide operations, and careful compliance by the Company's drivers and field personnel, along with a synchronized network load plan are key elements in its strategy. In order to minimize down time and to reduce empty miles, the Company coordinates its nationwide operations by utilizing systems designed to match driver and equipment availability to customer and geographic demand. As part of this process, the Company has equipped substantially all of its tractors with satellite communications equipment that enables the Company's drivers and dispatchers to communicate with each other at any time regardless of where a tractor is in the continental United States. This system enables the Company to provide its customers with current information on the location and status of cargo while in transit.

The Company generally has the capability of handling all of an individual shipper's freight in the Company's niche markets. The Company's operating capabilities include a variety of specialized equipment, regulatory permits and compliance expertise, satellite communications and technology, specialized terminals including segregated munitions storage areas, and driver selectivity and training. The Company operates 32 types of trailers in order to meet the specialized needs of shippers. Because of the number and variety of trailers in the Company's fleet, the Company is able to accommodate large nationwide shippers' needs on a timely basis. The breadth of these equipment options is an integral part of the Company's position with its major customers.

The Company's operations are subject to seasonal trends common to the trucking industry. Results of operations for the quarters ending in December and March are significantly lower than the quarters ending in June and September due to reduced shipments and higher operating costs as a percentage of revenues in the winter months.

The Company's largest customer is the U.S. Government (principally the Department of Defense) which accounted for approximately 15 percent of consolidated revenues in 1999. The remainder of the Company's customer base is diversified in terms of customer concentration, industry and geography, none of which accounted for more than 5 percent of the Company's consolidated revenues.

At December 31, 1999, the Company had 2,258 employees of whom 1,641 were drivers, compared to 2,504 employees at December 31, 1998 of whom 1,766 were drivers. Like other trucking operations, the Company experiences a high turnover rate (approximately 99.3% for 1999) of its Company-employed drivers and contract operators. The inability to attract and retain qualified driving employees could negatively impact the operations of the Company.

The primary risk areas in the Company's businesses are liability for bodily injury and property damage, workers' compensation, and cargo loss and damage. In November 1999, the Company began a first dollar premium-based insurance program against liability for bodily injury and property damage and is not subject to deductibles. Prior to November 1999, the Company maintained liability insurance for bodily injury and property damage, with a deductible for bodily injury and property damage of $500,000 per occurrence plus the satisfaction of an additional $750,000 deductible per year for claims which exceed $500,000. The Company is a qualified workers' compensation self-insurer in the State of Missouri where most of its drivers are domiciled, with losses in excess of $500,000 insured by an excess workers' compensation policy. In all other states statutory workers' compensation insurance is maintained with a deductible of $500,000 loss limit per occurrence to the Company. The Company has issued standby letters of credit in the amount of $12.1 million and collateralized an additional $0.8 million in the form of restricted deposits at December 31, 1999, to collateralize its self-insured and previous liability for bodily injury and property damage deductible insurance programs.

The Company also self-insures as to damage or loss to the property and equipment it owns or leases, subject to insurance coverage maintained in the event of a catastrophic loss in excess of $50,000 for property and $100,000 for equipment. Certain shipments transported by the Company are very valuable. The Company currently maintains cargo loss and damage insurance with a current deductible of $100,000 per occurrence. In addition to following Department of Transportation ("DOT") regulations requiring random drug testing and post-accident drug testing, the Company rigorously enforces its accident and incident reporting and follow-up standards.

The Company employs safety specialists and maintains safety programs designed to meet its specific needs. In addition, the Company employs specialists to perform compliance checks and to conduct safety tests throughout the Company's operations. The Company conducts a number of safety programs designed to promote compliance with rules and regulations and to reduce accidents and cargo claims. These programs include an ongoing Substance Abuse Prevention Program, driver safety meetings, distribution of safety bulletins to drivers, and participation in national safety associations.

The Company's fuel requirements are met by commercial fuel stops. The Company has entered into agreements with national truckstop chains that provide for discounts on fuel. The Company may, from time to time, enter into the forward purchases of fuel for delivery through its truckstop network for up to 40 percent of its monthly usage. The Company believes that a portion of any increase in fuel costs or fuel taxes generally would be recoverable from its customers in the form of higher rates. However, a sharp, unexpected rise in fuel prices could negatively impact profitability due to a time lag in implementing and collecting these costs and the inability to fully recover these costs from customers.

During the first quarter of 2000, fuel prices have increased from $1.20 per gallon in the fourth quarter of 1999 to $1.40 per gallon. The Company has adjusted its freight rates to partially recover these increased costs. However, the Company has recovered approximately 65% of the increased costs and is seeking additional freight rate increases to supplement specific fuel surcharges.

The trucking industry is highly competitive. The Company competes with other truckload carriers, private carriage fleets and, to a lesser extent, railroads. Although the increased competition resulting from deregulation has created downward pressure on rates, the Company has mitigated this decline by setting rates on the basis of its quality of service and its ability to provide specialized services.

The trucking industry has been substantially deregulated since the Motor Carrier Act of 1980. Although the Company is still subject to the regulatory powers of the DOT (which has assumed the trucking regulation responsibilities from the Interstate Commerce Commission), as are all interstate common carriers by motor vehicle, many of the previous regulatory barriers for entry into the trucking business have been eased. Further, as a result of deregulation, operating authorities for handling commodities in individual states are more easily obtained by new and existing carriers, and certain restrictions on transportation have been eased.

The DOT sets safety and equipment standards, as well as hours of service regulations for drivers. Federal, state and local governments regulate the transportation of hazardous waste and hazardous materials. Generally, certain procedures must be followed, pre-notifications given, and permits obtained when transporting these materials.

The Company's operations as well as those of its competitors are subject to extensive federal, state and local environmental regulations. In order to comply with such regulations and to be consistent with the Company's corporate environmental policy, normal operating procedures include practices to protect the environment. Amounts expended relating to such practices are part of the normal day-to-day costs of the Company's business operations.

The Company owns executive and administrative offices in Kennesaw, Georgia and Joplin, Missouri, which are the Company's principal operational headquarters. These facilities provide sufficient space for the Company to coordinate its nationwide operations.

As of December 31, 1999, the Company operated 44 total facilities including 12 owned facilities and 32 leased facilities, compared to a total of 59 facilities at December 31, 1998. These facilities are strategically located in 23 states throughout the United States, and include operating terminals, maintenance facilities, equipment drop and exchange yards, and customer storage facilities. From these facilities, the Company caters to service-sensitive customers transporting cargo in truckload quantities to single destinations throughout the continental United States and Canada. The Company arranges for shipments into Mexico primarily through agreements it maintains with Mexican trucking companies.

The Company utilizes a wide range of specialized equipment designed to meet its customers' varied transportation requirements which distinguishes the Company from many other large truckload carriers. To meet its customers' specialized needs, the Company's trailer fleet consists of 32 types of trailers, including closed vans, flat beds, drop frames, double drops, extendibles, low-boy and dromedary trailers.

The Company's policy is to replace tractors on a four to five year cycle. At December 31, 1999, the average age of the Company's tractor fleet was 3.1 years. The Company's policy is to replace trailers on a seven to fifteen year cycle. At December 31, 1999, the average age of the Company's trailer fleet was 8.5 years.

TRISM operated the following tractors and trailers at December 31:

(1) Operated by Company-employed drivers.

The information required by this item is included in Item 7 and Note 9 of the Notes to the Company's Consolidated Financial Statements.

During the fourth quarter of 1999, no matters were submitted to a vote of security holders.

The Company's old common stock is believed to be owned by more than 500 beneficial stockholders as of December 31, 1999. See Note 12 of the Notes to the Company's Consolidated Financial Statements for discussion regarding the Company's reorganization and issuance of new common stock.

The Company's old common stock was traded on the National Association of Securities Dealers Automated Quotation National Market System (NASDAQ) until July 21, 1999, and was traded on the OTC Bulletin Board for the remainder of 1999. The following table sets forth the high and low closing sales prices for the Company's old common stock for 1999 and 1998.

The Company has never paid a cash dividend on its common stock. It is the current intention of the Company's Board of Directors to continue to retain earnings to finance the growth of the Company's business rather than to pay dividends. Future payment of cash dividends will depend upon the financial condition, results of operations and capital commitments of the Company as well as other factors deemed relevant by the Board of Directors. Furthermore, the old and new Senior Subordinated Notes and the old and new Revolver have covenants that restrict the payment of dividends. See Note 5 and Note 12 of the Notes to the Company's Consolidated Financial Statements.

1. Quotations on NASDAQ
2. Quotations on OTC Bulletin Board

The following table sets forth selected consolidated financial data for the periods indicated and should be read in conjunction with the consolidated financial statements and related notes. The selected financial data for each of the five years for the period ended December 31, 1999 was derived from the Company's audited consolidated financial statements.

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(a)  Includes restructuring charges of $0.8 million for the years ended December 31, 1999 and 1998, and $3.2 million for the year ended December 31, 1997.

(b)  The Company recorded an extraordinary gain related to the early extinguishment of debt for the year ended December 31, 1998.

(c)  The Company recorded a cumulative effect of accounting change related to tires in service for the year ended December 31, 1999.

(d)  Operating ratio represents operating expenses as a percentage of revenues.

(e)  Freight revenues exclude brokerage and other revenues.

(f)  Load factor represents loaded miles as a percentage of total book miles.

(g)  Based on weighted average number of tractors during the period.

(h)  Calculated as the average distance from origin to the destination of the shipments.

(i)  Includes part-time employees.

(j)  Administrative employees include all non-driver employees except mechanics.

(k)  Includes the monthly average of owned, leased and independent contractor units.

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The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain statements in Items 1, 3, 6, 7 and 8 of this Form 10-K include information that is forward looking, such as the Company's opportunities to grow revenues and increase operational efficiency, its anticipated liquidity and capital requirements, and the results of legal proceedings. The matters referred to in forward-looking statements could be affected by the risks and uncertainties involved in the Company's business.

These risks and uncertainties include, but are not limited to, the effect of economic and market conditions, the expenses associated with and the availability of drivers and fuel, as well as certain other risks described above in this Item and in Item 1 in "Business". Subsequent written and oral forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Form 10-K. The following discussion and analysis should be read in conjunction with the Selected Consolidated Financial Data and the Company's consolidated financial statements and related notes.

The following tables set forth certain financial information and operating data for the three years ended December 31:

Pertinent financial and operating data is summarized in Selected Financial Data and Operating Statistics on page 10 of this document.

Operating revenue was approximately $274.6 million in 1999 compared to $291.6 million in 1998. Operating loss for 1999 was approximately $1.2 million compared to an operating income of $6.3 million in 1998. The net loss for 1999 was $18.4 million ($3.24 per share) compared to a net loss of $7.4 million ($1.30 per share) in 1998. The results for 1999 include a cumulative effect of accounting change of $0.3 million, restructuring and severance charges of $0.8 million, $4.2 million reorganization expenses relating to the write-off of deferred loan costs and financial restructuring costs and the full reserve for additional tax benefits associated with the net operating loss carry-forwards in the amount of $6.3 million. The results for 1998 include a gain on the extinguishment of debt of $1.6 million, restructuring and severance charges of $0.8 million and a charge to fully reserve for future net operating loss carryforwards benefits of $3.4 million.

The Company's performance in 1999 was negatively impacted by a reduction in shipping volumes at Heavy Haul in those customers in the agriculture, aerospace, construction and machinery industries. The freight market at Secured also remained competitive with reductions in U.S. Government munitions shipments. These factors, along with increased competition for available qualified drivers and owner-operators, reduced total revenues. Additionally, the financial results were primarily affected by increased costs associated with attracting and retaining qualified drivers and lower asset productivity. The Company embarked upon a reorganization and recapitalization initiated in early 1999. Below is a summary of these events, which culminated in the Company's exit from Chapter 11 on February 15, 2000.

• The Company had approximately $86.2 million of Notes outstanding as of December 31, 1998, which were to mature December 15, 2000. The Company failed to make a scheduled interest payment on the Notes due on June 15, 1999 or during the thirty-day grace period ended July 15, 1999.
• On July 15, 1999, the Company reached an agreement in principle with the steering committee representing major holders of the Notes. This agreement in principle was formally documented in a restructuring agreement executed on September 10, 1999.
• The terms of the restructuring agreement provided for the Notes to be converted into (i) new notes in the aggregate principal amount of $30 million, due February 15, 2005, with interest at the rate of 12% per annum (the first semi-annual interest payment on which will be due March 15, 2000), and (ii) 95% of the new common equity of the Company issued post-recapitalization, prior to dilution for a management stock incentive program. The agreement also provided that the Company's old common equity would be converted into 5% of the new common equity issued post-recapitalization, prior to dilution.
• On September 16, 1999, the Company filed for protection under Chapter 11 of the Code in the District of Delaware. The pre-arranged Filing allowed the Company to continue to operate as a Debtor-in-Possession. In connection with the Filing, the Company obtained a $42.4 million senior collateralized Debtor-in-Possession credit facility to meet its on-going working capital needs during the course of the Filing.
• On October 25, 1999, the Court signed an order approving the second amended disclosure statement for the Plan.
• On December 9, 1999, the Plan was confirmed by the Court.
• In December 1999, operating cost reductions were substantially completed to include a reduction in non-driving personnel, closure of certain operating facilities, and elimination of under-utilized tractors and trailers. These reductions will reduce costs in excess of $6.5 million annually.
• On February 15, 2000, the Plan was consummated. The Company exited Chapter 11, converted the Notes and recapitalized the Company in accordance with the provisions of the restructuring agreement. In connection with the exit from Chapter 11, the Company executed a new, three-year $42.5 million revolving credit facility. The Revolver provides for borrowings up to $42.5 million based on a borrowing base formula, determined by eligible accounts receivable, certain unencumbered trailers, and the Company's real property in Kennesaw, Georgia. The Revolver also provides for the issuance of letters of credit up to $17 million. The Revolver bears interest at the

prime rate plus .25% or LIBOR plus 2.25%. No financial covenants exist unless availability, as defined, initially falls below $5 million. Required covenants if availability falls below $5 million include a minimum net worth threshold, minimum fixed charge coverage ratio and a maximum leverage ratio. The Revolver also limits debt incurrence, capital expenditures, changes in control, mergers and certain material asset sales, irrespective of the $5 million availability threshold.

Operating revenue for 1999 decreased $16.9 million, or 5.8%, from 1998 to 1999 and decreased $18.2, or 5.9%, from 1997 to 1998. Revenue per total mile amounted to $1.50, $1.47 and $1.47 in 1999, 1998 and 1997, respectively. Total miles driven amounted to approximately 161.3 million miles in 1999, 181.7 million miles in 1998, and 189.7 million miles in 1997. The Heavy Haul results include a discontinued market in generic flatbed which amounted to additional revenues of $15 million for the year ended December 31, 1997. Operating revenues between periods includes the following (in thousands):

Operating revenues declined by $18.2 million from 1997 to 1998. Heavy Haul's operating revenues were negatively impacted as a result of the Company's exit from the generic flatbed market resulting in a decrease of approximately $15 million from 1997; however, this was partially offset from Heavy Haul's increased revenue from ongoing operations of approximately $9.7 million. Additionally, operating revenues declined at Secured Materials due to increased competitive market conditions in the military munitions market, a reduced number of available military munitions shipments, and fragmentation within the hazardous waste markets from a national market to a regional market. Consolidated revenues were also negatively impacted by a lower than expected ratio of active to total tractors caused by a more competitive driver market. Finally, TLI revenues declined by $4.5 million due to a loss of contracts. The Company entered the Super Heavy Haul market in early 1997 through its strategic alliance with Econofreight Group Limited, a U.K. subsidiary of Brambles Corporation. Revenues for 1998 associated with Super Heavy Haul were $4.2 million.

Operating income between the periods includes the following (in thousands):

Operating income decreased $7.5 million in 1999 as compared to 1998 and decreased $0.6 million in 1998 as compared to 1997. The operating expense ratio was 100.5%, 97.8%, and 97.8% in 1999, 1998, and 1997, respectively.

The decline in the consolidated operating performance in 1999 from 1998 resulted from a decline in freight revenues of $25.1 million due to those factors noted above, an 11% decline in total miles driven, an overall 4.7% decline in revenue per tractor per day productivity, an increase in fuel costs of $2.6 million, an increase in driver recruiting, retention and wage costs of approximately $1.9 million, and an increase in insurance costs of $1.9 million. These changes were partially offset by a $4.0 million reduction in tractor ownership costs and a $2.4 million reduction in fixed operating costs.

Heavy Haul's operating income decreased by $8.7 million from 1998 to 1999 as a result of those factors noted above. Total miles driven decreased by 9% from 1998 and overall revenue per tractor per day productivity declined by 3.8%. Additionally, variable operating costs increased in the areas of fuel, driver recruiting, retention and wages, and insurance. All of these factors were partially offset by a reduction in tractor ownership costs, fixed operating costs and overhead.

TLI operating income remained relatively flat in 1999 despite an increase in revenues. TLI's revenues increased due to new business growth and the full year effect of the intermodal services divisions. Operating income was negatively impacted primarily as a result of start-up costs of the intermodal services division and new business contracts.

The decline in operating performance in 1998 was primarily a result of a more competitive and changing market at Secured Materials, increased costs of attracting and retaining qualified drivers, lower asset productivity and a lower percentage of loaded miles to total miles. These factors were partially offset in 1998 by elimination of a segment in the generic flatbed market and related operating losses and a reduction in fuel, insurance and fixed freight operating costs.

Heavy Haul's operating income decreased by approximately $1.0 million from 1997 to 1998 primarily resulting from low tractor productivity caused by tractors without drivers. Additionally, the percentage of loaded miles to total miles also declined from 1997 to 1998. Furthermore, operating income in 1997 includes an operating loss of approximately $2.5 million relating to the discontinued segment in the generic flatbed market.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations,

Secured Materials operating income declined approximately $5.3 million from 1997 to 1998. The decline in profitability resulted from lower revenues in the military munitions and hazardous waste markets, reduced freight rates due to competitive pressures and lower tractor productivity.

Logistics operating income remained relatively flat in 1998, despite a reduction in revenues from 1997.

The Company reduced its fleet size from 2,042 in 1997 to 1,956 in 1998 to combat effects of a more competitive driver labor market. Accordingly, the Company recorded a provision for loss on sale of non-productive revenue equipment of $0.45 million in the third quarter of 1998. The Company has also increased its independent contractors from 177 in 1997 to 244 in 1998 to reduce the risk in the driver market.

Total operating expenses decreased $9.5 million from 1998 to 1999. Total operating expenses decreased $17.6 million from 1997 to 1998. Operating expenses as a percentage of revenue were 100.5%, 97.8% and 97.8% in 1999, 1998, and 1997, respectively. The following expense categories increased or decreased significantly as a percentage of revenue between the periods indicated below:

• Salaries, wages and fringe benefits decreased 2.5% from 1998 to 1999. The decline resulted primarily from reductions in non-driving personnel and reduced workers' compensation costs. Additionally, the Company increased its use of independent contractors as a percentage of overall freight operations.
• Operating supplies and expenses decreased 0.1% from 1998 to 1999 despite an increase in fuel costs of $2.6 million as a result of an increase in fuel cost per gallon from $0.99 in 1998 to $1.08 in 1999. Cost reductions in the area of maintenance partially offset the rise in fuel prices.
• Contractor equipment expenses increased by 1.9% from 1998 to 1999 attributable to an overall increase in the number of independent contractors, which increased from 244 in 1998 to 270 in 1999.
• Broker carrier expense increased from 1998 to 1999 as a result of an increase in logistics and brokerage revenues from $23.7 million in 1998 to $31.9 million in 1999. Broker carrier expense increased to 85% of related revenues in 1999 from 82.6% in 1998 due primarily to the start-up costs of the intermodal services division and new logistics contracts.
• Operating taxes and licenses decreased 0.8% from 1998 to 1999 due to a decline in the Company owned tractor fleet and an increase in the number of independent contractors.
• Depreciation and amortization expenses increased by 0.8% from 1998 to 1999. The increase in depreciation resulted primarily from an increase in owned tractors to 1,126 in 1999 from 925 in 1998.
• General supplies and expenses increased by 0.4% from 1998 to 1999 as a result of additional costs associated with the Company's efforts to recruit, train, and retain qualified drivers and independent contractors.
• Revenue equipment rents declined by 0.6% from 1998 to 1999 primarily as a result of a reduction in the number of tractors under operating lease from 787 in 1998 to 380 in 1999.
• Claims and insurance costs increased by 0.7% from 1998 to 1999 as a result of a higher frequency of accidents relating to cargo claims.

• Interest expense, net declined by $2.1 million from 1998 to 1999. In accordance with AICPA Statement of Position 90-7, the Company ceased accruing interest for the Notes on the Filing Date of September 16, 1999.
• Reorganization costs incurred in 1999 result from the elimination of debt issuance costs under the Notes and pre-petition revolving credit facility due to the replacement of these items. Financial restructuring costs represent costs incurred beginning in the second quarter of 1999, including investment banker fees, attorney and accountant fees, Court fees, and printing and other administrative fees associated with the administration of the Filing.
• In the fourth quarter of 1999, the Company elected to change its method of accounting for tires-in-service. The net cumulative effect on prior years of the change in accounting method reduced earnings by $274,000. The change was recorded as of an effective date of January 1, 1999, the beginning of the fiscal year.

• Salaries, wages and fringe benefits increased 1.6% from 1997 to 1998. The increase resulted from driver compensation increases implemented in 1998 to increase the Company's competitive position to attract and retain qualified drivers.
• Operating supplies and expenses decreased $5.8 million or 1.0%, primarily as result of lower fuel prices that averaged $.99 a gallon in 1998 as compared to $1.14 in 1997, resulting in cost savings of approximately $3.8 million in 1998. These savings were partially offset by increased tractor maintenance expenditures of approximately $1.2 million due to an increase in the age of the tractor fleet.
• Contractor equipment expenses increased by 2.1% from 1997 to 1998, attributable to an overall increase in the number of independent contractors, which increased from 177 in 1997 to 244 in 1998.
• Brokerage carrier expense decreased to approximately 82.6% of brokerage revenue in 1998 as compared to 84% of brokerage revenue in 1997. Brokerage revenues declined by $7.6 million from 1997 to 1998.
• Restructuring and non-recurring charges of approximately $0.8 million were recorded in 1998 as compared to $3.2 million in 1997.
• Interest expense and other expenses were essentially flat between the periods.
• Income tax expense for 1998 was $1.5 million due to establishing a valuation allowance relating to tax benefits associated with net operating loss carryforwards. In 1997 an income tax benefit was recorded of $2.5 million.

Net cash provided by operating activities was $13.8 million in 1999 compared to $16.6 million in 1998. The decrease is primarily due to lower income from operations, and reduced gross collection amounts on accounts receivable due to lower sales. These changes were offset by an increase on accrued interest on the Notes and an increase in accounts payable related to the Bankruptcy.

Net cash provided by investing activities was $1.2 million in 1999 compared to $7.7 million in 1998. The decrease in investing activities results from a decline in proceeds from the sale of assets of $6.0 million from 1998. The Company significantly reduced its replacement capital expenditures as a result of the reorganization.

Net cash used in financing activities was $15.7 million in 1999 compared to $25.7 million in 1998. The decrease in cash from financing activities in 1999 resulted from lower repayment of long-term debt due to a reduction in replacement capital expenditures requiring the extension of related obligations and a decrease in Notes retirement.

The Company's performance in 1999 was negatively impacted by a reduction in shipping volumes at Heavy Haul in those customers in the agriculture, aerospace, construction and machinery industries. The freight market at Secured also remained competitive with reductions in U.S. Government munitions shipments. These factors, along with increased competition for available qualified drivers and owner-operators, reduced total revenues. Additionally, the financial results were primarily affected by increased costs associated with attracting and retaining qualified drivers and lower asset productivity. The Company embarked upon a reorganization and recapitalization initiated in early 1999. Below is a summary of these events, which culminated in the Company's exit from Chapter 11 on February 15, 2000.

• The Company had approximately $86.2 million of Notes outstanding as of December 31, 1998, which were to mature December 15, 2000. The Company failed to make a scheduled interest payment on the Notes due on June 15, 1999 or during the thirty-day grace period ended July 15, 1999.
• On July 15, 1999, the Company reached an agreement in principle with the steering committee representing major holders of the Notes. This agreement in principle was formally documented in a restructuring agreement executed on September 10, 1999.
• The terms of the restructuring agreement provided for the Notes to be converted into (i) new notes in the aggregate principal amount of $30 million, due February 15, 2005, with interest at the rate of 12% per annum (the first semi-annual interest payment on which will be due March 15, 2000), and (ii) 95% of the new common equity of the Company issued post-recapitalization, prior to dilution for a management stock incentive program. The agreement also provided that the Company's old common equity would be converted into 5% of the new common equity issued post-recapitalization, prior to dilution.
• On September 16, 1999, the Company filed for protection under Chapter 11 of the Code in the District of Delaware. The pre-arranged Filing allowed the Company to continue to operate as a Debtor-in-Possession. In connection with the Filing, the Company obtained a $42.4 million senior collateralized Debtor-in-Possession credit facility to meet its on-going working capital needs during the course of the Filing.
• On October 25, 1999, the Court signed an order approving the second amended disclosure statement for the Plan.
• On December 9, 1999, the Plan was confirmed by the Court.

• In December 1999, operating cost reductions were substantially completed to include a reduction in non-driving personnel, closure of certain operating facilities, and elimination of under-utilized tractors and trailers. These reductions will reduce costs in excess of $6.5 million annually.
• On February 15, 2000, the Plan was consummated. The Company exited Chapter 11, converted the Notes and recapitalized the Company in accordance with the provisions of the restructuring agreement. In connection with the exit from Chapter 11, the Company executed a new, three-year $42.5 million revolving credit facility. The Revolver provides for borrowings up to $42.5 million based on a borrowing base formula, determined by eligible accounts receivable, certain unencumbered trailers, and the Company's real property in Kennesaw, Georgia. The Revolver also provides for the issuance of letters of credit up to $17 million. The Revolver bears interest at the prime rate plus .25% or LIBOR plus 2.25%. No financial covenants exist unless availability, as defined, initially falls below $5 million. Required covenants if availability falls below $5 million include a minimum net worth threshold, minimum fixed charge coverage ratio and a maximum leverage ratio. The Revolver also limits debt incurrence, capital expenditures, changes in control, mergers and certain material asset sales, irrespective of the $5 million availability threshold.

The Company believes these factors will improve liquidity, improve the Company's abilities to meet its capital requirements, and increase cash flows.

The Company estimates 2000 net capital expenditures of approximately $27 million primarily related to the replacement of tractors and trailers. The Company estimates net proceeds from the sale of the replaced equipment to amount to approximately $3.0 million and believes it will be able to finance its needs during 2000. However, if losses continue, the Company's ability to attract capital could be limited, causing the Company to reduce its capital expenditures. In addition, residual obligations of approximately $2.8 million, primarily relating to certain capital lease obligations, will mature in 2000, and the Company will have the option to extend the maturity of the residual, purchase the revenue equipment for the residual amount, sell the equipment and repay the residual, or return the equipment to the lessor at the end of the lease term.

Operating revenues derived from U.S. Governmental Agencies were approximately $40.7 million, $43.9 million and $49.7 million for the years ended December 31, 1999, 1998, and 1997, respectively, which represents 15 percent, 15 percent and 16 percent of total operating revenues for 1999, 1998, and 1997, respectively. There was no other single customer that exceeded 5 percent of operating revenues during this same period.

Under the Comprehensive Environmental Responses, Compensation and Liability Act ("CERCLA") and similar state laws, a transporter of hazardous substances may be liable for the costs of responding to the release or threatened release of hazardous substances from disposal sites if such transporter selected the site for disposal. Because it is the Company's practice not to select the sites where hazardous substances and wastes will be disposed, the Company does not believe it will be subject to material liability under CERCLA and similar laws. Although the Company has been identified as a "potentially responsible party" (PRP) at four sites, solely because of its activities as a transporter of hazardous substances, the Company does not believe it will be subject to material liabilities at such sites.

The Company is a party to certain legal proceedings incidental to its business, primarily involving claims for personal injury or property damage arising from the transportation of freight. The Company does not believe that these legal proceedings, or any other claims or threatened claims of which it is aware, are likely to materially and adversely affect

the Company's financial condition. With regard to personal injury, property damage, workers' compensation claims, and cargo claims, the Company is and has been covered by insurance. Such matters may include claims for punitive damages, which in some jurisdictions, may not be covered by insurance.

Inflation can be expected to have an impact on the Company's earnings; however, the effect of inflation has been minimal over the past three years. An extended period of inflation or increase in fuel costs would adversely affect the Company's results of operations without a corresponding freight rate increase from customers.

Market Risk

The Company is exposed to market risk from changes in interest rates and fuel prices. The Company manages its exposure to these market risks through its regular operating and financing activities and may utilize fuel forward purchase commitments.

The fair value of the Company's cash and short-term investment portfolio at December 31, 1999 approximated carrying value due to its short-term duration. Market risk was estimated as the potential decrease in fair value resulting from a hypothetical 10% increase in interest rates for the issues contained in the investment portfolio and was not materially different from the year-end carrying value.

The Company has no material future earnings or cash flow expenses from changes in interest rates related to the senior subordinated notes or the Company's equipment obligations, as these long-term debt obligations have fixed rates. The fair value of the Company's long-term debt, including current maturities, was estimated to be $104 million at December 31, 1999, and was below the carrying value by $56 million. A hypothetical 10% increase in the interest rates on the Company's revolving credit facility long-term debt for a duration of one year would not have a material impact in 2000.

The Company may use forward purchase commitments to reduce the exposure to fluctuations in fuel prices by entering into short-term fuel price agreements for the actual delivery of fuel. These forward purchase commitments have the effect of locking in for specified periods the price the Company will receive for the fuel volumes to which the forward purchase commitment relates. As a result, while these forward purchase commitments are structured to reduce the Company's exposure to increases in the price of fuel, they also limit the benefit the Company might otherwise have received from any price decreases associated with the fuel volumes. At December 31, 1999, the Company did not have any outstanding forward purchase commitments.

During the first quarter of 2000, fuel prices have increased from $1.20 per gallon in the fourth quarter of 1999 to $1.40 per gallon. The Company has adjusted its freight rates to partially recover these increased costs. However, the Company has recovered approximately 65% of the increased costs and is seeking additional freight rate increases to supplement specific fuel surcharges.

The Company evaluated its internal date-sensitive systems and equipment for Year 2000 compliance. The assessment and testing phase of the Year 2000 project is complete and included both information technology equipment and non-information technology equipment. Based on its assessment and testing, the Company determined that it's critical software, hardware and information technology equipment was in compliance with Year 2000 requirements. However, at December 31, 1999, the Company was 100% complete in the modification or replacement of the non-information technology equipment requiring remediation. The Company's operations incurred no disruption of their ability to transport product, process financial transactions or engage in normal business activities. Likewise, the Company experienced no significant problems with its non-information technology systems. As of December 31, 1999, all costs had been incurred and totaled less than $0.1 million.

The Company experienced no significant problems with key suppliers and customers as a result of the Year 2000 issue. Where needed, the Company established contingency plans based on actual testing results and assessment of outside risks; however, it was not necessary to implement any contingency plan.

The above statement in its entirety is designated a Year 2000 readiness disclosure under the Year 2000 Information and Readiness Disclosure Act.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivatives and hedging. It requires that all derivatives are recognized as either assets or liabilities at fair value and establishes specific criteria for the use of hedge accounting. The Company's required adoption date is January 1, 2001. SFAS 133 is not to be applied retroactively to financial statements of prior periods. The Company expects no material adverse effect on consolidated results of operations, financial position, cash flows or stockholders' equity upon adoption of SFAS 133.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk" on page 20.

The accompanying notes are an integral part of the consolidated financial statements.