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

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The following unaudited pro forma condensed consolidated statement of operations presents the results of operations for the six months ended June 30, 2000, as though the consummation of the Plan and Fresh Start Reporting had been completed on January 1, 2000, and assumes that there were no other changes in the operations of the Company. The pro forma results are not necessarily indicative of the financial results that might have occurred had the consummation of the Plan and Fresh Start Reporting actually taken place on January 1, 2000, or of future results of operations (in thousands):

The Company's senior subordinated notes are guaranteed by all of the Company's direct and indirect subsidiaries (the "Guarantor Subsidiaries"). All of the Guarantor Subsidiaries are wholly owned direct or indirect subsidiaries of the Company and the guarantees of the Guarantor Subsidiaries are full, unconditional and joint and several. Trism, Inc., exclusive of its subsidiaries, has no independent assets or operations.

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" 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, results of operations and cash flows. 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.

In addition to matters referred to above, the Company is a party to certain additional lawsuits, none of which is believed to involve a significant risk of materially and adversely affecting the Company's financial condition, results of operations and cash flows.

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The Company identifies operating segments based on management responsibility and marketing strategies. The Company has two reportable segments: Heavy Haul and Secured Materials. Prior to August 2001, Logistics was reported as an operating segment but has since been sold as previously discussed. The Logistics segment is reported as discontinued operations in the statements of operations for all periods presented.

Prior to downsizing, as discussed in "Financial Results and Liquidity", this segment consisted of Trism Specialized Carriers, Inc. ("TSC"), specializing in the transportation of over-sized and over-dimensional loads throughout the United States, Canada, and Mexico. The largest markets for Heavy Haul were manufacturers of large machinery and equipment, suppliers and contractors to industrial and public construction, importers of industrial durable goods and the U.S. Government. In addition, the division maintains trailer interchange agreements with certain Mexican carriers. As a result of the continued decline in the profitability of the general freight services of the heavy haul segment, the Company announced the closure of TSC on August 22, 2001. TSC completed delivery of all shipments in transit to their destination points.

The Company will continue over-dimensional services of the Heavy Haul segment by transferring necessary TSC equipment to Tri-State Motor Transit ("TSMT"), which also operates in the Company's Secured Materials segment. Remaining TSC equipment will be returned to the equipment lenders or sold as previously discussed in "Financial Results and Liquidity." The Heavy Haul segment will continue to provide services to customers in the southeastern United States.

The Secured Materials segment consists of the following: TSMT and Trism Environmental Services ("TES"). The Secured Materials services are characterized by the toxic or explosive nature and special handling requirements of the cargo. The cargo typically consists of military munitions, commercial explosives, hazardous waste, and radioactive materials. The largest markets for Secured Materials are the United States government and various governmental agencies, waste generators, and environmental clean-up firms. TSMT is the largest transporter of the Department of Defense munitions in the continental United States. TSMT operates throughout the continental United States. TES provides service to customers in the hazardous waste and radioactive materials market and operates throughout the United States, but its primary market focus is east of the Mississippi. The operating companies within the Secured Materials segment have operating authority in the continental United States and certain provinces of Canada.

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Notes to Consolidated Financial Statements, Continued

A summary of segment information for the three months ended June 30, 2001 and 2000 is presented below (in thousands):

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Notes to Consolidated Financial Statements, Continued

A summary of segment information for the six months ended June 30, 2001 and 2000 is presented below (in thousands):

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain statements in this Form 10-Q include information that is forward-looking, such as the Company's anticipated liquidity and capital requirements, the projections of future revenues and the estimated results of possible sales of various assets and businesses. The matters referred to in forward-looking statements could be affected by the risks and uncertainties involved in the Company's 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.

The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and notes for the year ended December 31, 2000 and three and six months ended June 30, 2001.

To facilitate a meaningful comparison of the Company's quarterly operating performance in years 2001 and 2000, the following discussion of results of operations is presented on a traditional comparative basis for both periods. Accordingly, the results of operations for the six months ended June 30, 2000 represents the mathematical addition of the historical amounts for the predecessor company period January 1 through February 15, 2000, and the reorganized company period, February 16 through June 30, 2000. Consequently, the current year's information presented below does not comply with accounting requirements for companies upon emergence from bankruptcy which calls for separate reporting for the newly reorganized company and the predecessor company. Management believes that a combined discussion of predecessor and reorganized company periods is reasonable and appropriate because there were no material adjustments to the presented items (other than depreciation, amortization and interest expense) resulting from the Fresh Start Reporting.

The following tables summarize certain financial information on a percentage of revenue basis and selected operating data for the three and six months ended June 30, 2001 and 2000:

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Second Quarter 2001 as compared to Second Quarter 2000

Consolidated revenues decreased by $7.4 million due in large part to the $7.2 million decrease in Heavy Haul revenue. Heavy Haul revenue declined from $53.0 million to $45.8 million for the three months ended June 30, 2000 and 2001. The decline in revenue was caused by a decrease of 5.2 million miles despite an increase in revenue per loaded mile from $1.82 to $1.93.

Six months ended June 30, 2001 as compared to six months ended June 30, 2000

Consolidated revenues decreased by $14.0 million due in large part to the $13.3 million decrease in Heavy Haul revenue. Heavy Haul revenue declined from $101.0 million to $87.7 million for the six months ended June 30, 2000 and 2001. The decline in revenue was caused by a decrease of 9.7 million miles despite an increase in revenue per loaded mile from $1.82 to $1.89.

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Consolidated operating income decreased by $16.7 million including $13.3 million impairment loss on revenue equipment from $1.9 million to an operating loss of $14.8 million. The remaining $3.4 million is attributable to Heavy Haul. The decline in operating income is only 44 percent as much as the decline in revenue due to the reduction in variable costs related to the Heavy Haul fleet downsizing.

Six months ended June 30, 2001 as compared to six months ended June 30, 2000

Consolidated operating income decreased $19.1 million primarily due to $13.3 million impairment loss on revenue equipment and a $4.9 million decrease in Heavy Haul operating income. The impact is less on operating income than revenue due to the reduction in variable costs (wages, fuel, permits, etc.) related to the Heavy Haul fleet downsizing.

Operating expenses

While most expenses decreased with the downsizing effort, depreciation and insurance expenses increased, as well as, an impairment loss of $13.3 million recorded for the three months ended June 30, 2001. However, the increase in depreciation was more than offset by the reduction in equipment rents.

Salaries, wages, and fringes benefits, contractor equipment expenses, and broker carrier expenses all decreased as a direct result of fewer miles and the fleet downsizing.

Operating taxes and licenses decreased $0.3 million by purchasing 638,000 gallons less at the average tax rate of $0.429 per gallon. In addition, over-dimensional permits declined $0.5 million as a result of 5,000 fewer loads.

Claims and insurance expense increased as a result of claims liability of the $500,000 deductible insurance policy in place during 2001.

Depreciation expense increased as a result of purchasing 152 tractors at the end of 2000 and improvements made to existing equipment.

Revenue equipment rents decreased as several of the operating lease contracts have expired and payments on remaining operating leases have not been made.

Six months ended June 30, 2001 as compared to six months ended June 30, 2000

Operating expenses increased $5.1 million due to the impairment loss on revenue equipment and increases in fixed costs such as communications and insurance expense offset by savings in variable costs (wages, fuel, permits, etc.) due to the decrease in the number of tractors.

Operating Activities

Net cash provided by operating activities has increased by $1.3 million primarily due to non-cash activities during the first quarter 2000 related to the gain on extinguishment of debt, net of the loss on adjustment of assets to fair market value as part of the fresh start accounting, and a reduction in accounts receivable from collection efforts, and an increase due to the impairment loss of $13.3 million, offset by the increase in net loss for the year and the increase in restricted deposits as required for collaterization of the insurance policy on bodily injury and property damage.

Net cash provided by investing activities has increased $0.3 million due to increase in proceeds from sale of assets and a decrease in purchases of property, plant, and equipment.

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Net cash used in financing activities has increased $0.9 million due to reduced payments on equipment debt offset by reduced borrowing capacity. Failure to make equipment debt payments has forced the Company into default on its equipment debt.

The Company does not have any plans to replace or increase its tractor and trailer fleet in 2001. The Company has residual obligations of approximately $9.3 million, primarily relating to certain capital lease obligations, that will mature within twelve month period ended June 30, 2002. The Company will return equipment to the lessors at the end of the lease term.

In November 2000, the Company purchased a premium-based insurance policy against bodily injury and property damage with a $500,000 deductible per occurrence. As a result of this policy, insurance costs have increased 44.5% from $2.9 million for the second quarter 2000 to $4.2 million for the second quarter 2001. The Company has issued standby letters of credit in the amount of $9.3 million and collateralized an additional $4.4 million in the form of restricted cash deposits at June 30, 2001. Of the $9.3 million letters of credit, only $2.1 million are still outstanding as of September 30, 2001. During the three months ended September 30, 2001, letters of credit in the amount of $6.2 million have been drawn, and $1.0 million has been cancelled. On October 31, 2001, the Company has obtained insurance coverage for the Company's operations for a twelve month period beginning November 1, 2001 through October 31, 2002.

In connection with the exit from Chapter 11, the Company obtained the Revolver, a new, three-year $42.5 million revolving credit facility. The Revolver now provides for borrowings up to $40.0 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. If availability falls below $5 million, required covenants 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 and management, mergers and certain material asset sales, irrespective of the $5 million availability threshold.

On October 19, 2000, the Company was notified by CIT Business Credit that an event of default had occurred under the Revolver concerning a change in management restriction as a result of the resignation of the former Chief Executive Officer and Chief Financial Officer of the Company. On October 27, 2000, the Company was notified by CIT Business Credit that an event of default had occurred under the Revolver concerning a materially adverse effect evidenced by, (a) the Company's current and projected future negative earnings and cash flow, (b) the change in management discussed in notice of default on October 19, 2000, (c) the increase in fuel costs to the Company and (d) a proposed sixty percent increase in insurance premiums to the Company.

The Company is presently in default of certain covenants related to its Senior Subordinated Notes Due 2005 (the "New Notes") and has not made interest payments relating to such notes which were due March 15, 2001 and September 15, 2001. Under the terms of the New Notes, the thirty-day grace period with respect to such interest payments has passed and the note holders may call the New Notes. The Company did not make these interest payments by the end of the grace period, and this constituted an Event of Default under the terms of the indenture pursuant to which the New Notes were issued. The total arrearage as of October 31, 2001 is $4.5 million, including interest at 13% on the past due amount. In addition, beginning in October 2000 the Company has also been in default of certain covenants relating to its revolving credit facility (the "Revolver"). Since that time, the Company has negotiated several forbearance agreements with the lender for the Revolver, the terms of which have included payment of fees totaling $1.1 million, in exchange for such forbearance, as well as an increase in interest rates under the Revolver and a reduction in borrowing capacity. The most recent forbearance expires on November 30, 2001. The Company is presently negotiating with its lender for a continued extension of the forbearance agreements, however, such extension is not assured at this time. The Company is also in technical default on certain of its equipment debt and is several months behind in making certain of its equipment debt payments. As a result, in July 2001, one lender repossessed thirteen of the two-hundred-forty tractors which they have financed. Partial payments have been made to the lender and repossessions have been discontinued.

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Cash and availability under the Revolver was approximately $0.04 million and $0.6 million at September 30, 2001 and June 30, 2001, respectively; after reserving $2.8 million and $3.8 million as required by the forbearance agreement as of September 30, 2001 and June 30, 2001, respectively. Borrowings under the Revolver amounted to approximately $23.3 million and $28.5 million at September 30, 2001 and June 30, 2001, respectively. The September 30, 2001 Revolver balance includes $6.2 million letters of credit which have been drawn during the three months ended September 30, 2001. The Company has classified the long-term debt under the Revolver as current due to the existence of the technical default caused by a change in management.

Collection efforts have been increased to generate needed cash. The balance of past due receivables (outstanding more than 90 days) has decreased from $3.7 million at December 31, 2000 to $2.9 million at June 30, 2001.

Existing credit facilities are not expected to be sufficient to cover liquidity requirements for the next twelve months and the Company is facing the prospect of not having adequate funds to operate its business. Due to a number of uncertainties, many of which are outside the control of the Company, there can be no assurance that additional credit facilities can be arranged or that any long term restructuring can be successfully initiated or implemented, in which case the Company may be compelled to file for protection under Chapter 11 or to liquidate under Chapter 7 of the Bankruptcy Code. Moreover, it may be necessary for the Company to file under Chapter 11 to implement any consensually negotiated restructuring of its indebtedness or a sale of the Company as discussed above.

These matters raise substantial doubt about the Company's ability to continue as a going concern. The Company's continued existence is dependent on several factors, including the Company's ability to overcome the operational and liquidity issues discussed above. The Company's consolidated financial statements for the three and six months ended June 30, 2001 and for the year ended December 31, 2000 do not include any adjustments that might result from the outcome of this uncertainty.

See the accompanying notes to the unaudited consolidated financial statements for an additional discussion of the Company's liquidity and capital resources.

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.

During the six months ended June 30, 2001, fuel prices have averaged $1.40 per gallon as compared to $1.37 per gallon during the same period in 2000. The Company has adjusted its freight rates to partially recover these increased costs. The Company recovered $4.2 million through fuel surcharges to its customers during the six months ended June 30, 2001.

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, though no agreements were in place during 2001 or 2000.

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 be recognized as either assets or liabilities at fair value and establishes specific criteria for the use of hedge accounting. The Company adopted SFAS 133 on January 1, 2001. There was no material effect on consolidated results of operations, financial position, cash flows or stockholders' equity upon adoption of SFAS 133.

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On June 29, 2001, Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" was approved by the Financial Accounting Standards Board (FASB). SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. SFAS No. 141 was required to be implemented by July 1, 2001. There was no material effect on the consolidated financial position or results of operations upon adoption of SFAS No. 141.

On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company is required to implement SFAS No. 142 on January 1, 2002. Management expects no material effect on the consolidated financial position or results of operations upon adoption of SFAS No. 142 as there is no recorded goodwill or other intangible assets.

On August 1, 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was approved by the FASB. SFAS No. 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 142 is required to be adopted on January 1, 2002. Management has not determined the impact, if any, that this statement will have on our consolidated financial position or results of operations.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk" noted above.

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On April 27, 2001, the Board of Directors of Trism, Inc. adopted a Shareholders Rights Plan and declared a dividend of one right for each outstanding share of Trism's Common Stock, par value $.01 per share, to stockholders of record at the close of business on April 27, 2001 (the "Record Date"). A Shareholder Rights Plan is designed to assure that all of the Company's securityholders are offered a full and fair price in the event a potential acquirer seeks to gain control of the Company and to protect securityholders from attempts to acquire effective control through open market and/or private purchases of common stock without paying a fair control premium to either selling or remaining stockholders. Under certain circumstances if a person or group (other than those eligible to report beneficial ownership on Schedule G) acquires beneficial ownership of 30 percent or more of the Company's outstanding Common Stock, each right (other than those owned by such beneficial owner) will entitle the holder to purchase from Trism a number of shares of Common Stock having a market value at that time of two times the $1.50 exercise price of the right. The rights are not exercisable until the Distribution Date and will expire at the close of business on April 26, 2011, unless earlier redeemed by Trism. The complete description and terms of the rights are set forth in a Rights Agreement between Trism and Continental Stock Transfer & Trust Company, as Rights Agent.

The Company is presently in default of certain covenants related to its Senior Subordinated Notes Due 2005 (the "New Notes") and has not made its interest payments relating to such notes, which were due March 15, 2001 and September 15, 2001. Under the terms of the New Notes, the Company had a thirty-day grace period on these interest payments before the note holders could call the New Notes. The Company did not make the interest payment by the end of the grace period, and this constituted an Event of Default under the terms of the indenture pursuant to which the New Notes were issued. The total arrearage as of October 31, 2001 is $4.5 million, including interest at 13% on the past due amounts. In addition, beginning in October 2000 the Company has also been in default of certain covenants relating to its revolving credit facility (the "Revolver"). Since that time, the Company has negotiated several forbearance agreements with the lender for the Revolver, the terms of which have included payment of fees in exchange for such forbearance, as well as an increase in interest rates under the Revolver and a reduction in borrowing capacity. The most recent forbearance expires on November 30, 2001. The Company is presently negotiating with its lender for a continued extension of the forbearance agreement, however, such extension is not assured at this time.

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A.      Exhibits

The following exhibits are filed as part of this report.

B. Reports on Form 8-K

During the quarter covered by this report there was one report on Form 8-K filed as follows:

I.   Other Events - Filed on April 30, 2001, reporting on the adoption of the Shareholders Rights Plan.

Subsequent to the quarter covered by this report and prior to the filing of this Form 10-Q, no reports on Form 8-K were filed.

 

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

Date: November 1, 2001

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