<PAGE>                            

                              M.S. Carriers, Inc.
                              3171 Directors Row
                              Memphis, TN 38131

                              March 28, 1997

Securities and Exchange Commission
Washington, D.C.  20549

Gentlemen:

Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10-K.

Sincerely,

s/ M.J. Barrow

M.J. Barrow, Senior Vice President

<PAGE>


                                United States
                      Securities and Exchange Commission
                            Washington, D.C. 20549

                                  Form 10-K

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

For the fiscal year ended December 31, 1997

Commission file number 0-14781


                               M.S. Carriers, Inc.              
              (Exact name of registrant as specified in its charter)
                                    
         Tennessee                                     62-1014070
(State or other jurisdiction of                     (I.R.S. Employer  
incorporation or organization)                  Identification Number)    

   
3171 Directors Row, Memphis, TN                        38131
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:  (901) 332-2500

Securities registered pursuant to Section 12(b) of the Act:  None

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

     Common Stock, $.01 Par Value  Nasdaq National Market
   
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 periods that the registrant was 
required to filed such reports), and (2) has been subject to such filing 
requirements for the past 90 days.    Yes  ___X___     No _______

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

  The aggregate market value of the registrant's $.01 par value common stock 
held by non-affiliates of the registrant as of March 6, 1998 was $263,175,311 
(based on the closing sale price of $29.50 per share on that date, as reported 
by NASDAQ). 
  
  As of March 6, 1998, 12,251,101 shares of the registrant's common stock were 
outstanding. 
  
Documents Incorporated by Reference 

Materials from the Registrant's Proxy Statement relating to the 1998 Annual 
Meeting of Shareholders to be held on May 1, 1998 have been incorporated by 
reference into Part III, Items 11, 12 and 13. 
                                   1
<PAGE>                            

                                PART I

ITEM 1. BUSINESS

General
-------
  M.S. Carriers, Inc. (with its subsidiaries, the "Company" or "M.S. Carriers") 
is a transportation company primarily engaged in the hauling of truckload 
shipments of general commodities throughout the United States and the provinces 
of Quebec and Ontario in Canada.  M.S. Carriers is a Tennessee corporation 
headquartered in Memphis, Tennessee.  The Company's principal executive's 
offices are located at 3171 Directors Row, Memphis, Tennessee 38131, and its 
telephone number is (901) 332-2500. 

  M.S. Carriers has both common and contract authority to transport any type of 
freight (except certain types of explosives, household goods and commodities in 
bulk) from any point in the continental United States to any other point in any 
state over any route selected by the Company.  The Company has authority in 
Canada granted by the Quebec Transport Commission and the Ontario Highway 
Transport Board to haul general commodities from points in the United States to 
points in Quebec and Ontario and from points in Quebec and Ontario into the 
United States.  The Company also provides interline service to and from Mexico. 

  The Company's primary line-haul traffic flows are between the Middle South and
the Southwest, Midwest, Central States, Southeast and Northeast.  In addition, 
the Company operates regional networks which serve the West, Southeast, 
Southwest, Middle South, Central States and Northeast.  The average length of a 
trip (one-way) was approximately 633 miles in 1997 and 534 miles in 1996.  The 
principal types of freight transported are packages, retail goods, nonperishable
foodstuffs, paper and paper products, household appliances, furniture and 
packaged petroleum products. 

Business Strategy 
-----------------
  M.S. Carriers has targeted the service-sensitive segment of the 
transportation market rather than that segment which uses price as its primary 
consideration.  The Company has chosen to provide premium services and charge 
compensating rates rather than to compete solely on the basis of price.  The 
principal elements of the Company's premium service are on time deliveries, 
dependable late-model equipment, fully integrated computer systems to monitor 
shipment status and variations from schedules, on-board communications systems, 
multiple and appointment pickups and deliveries, assistance in loading and 
unloading, the availability of extra trailers which can be placed for the 
convenience of customers and sufficient equipment to respond promptly to 
customers' varying requirements. 

Operations 
----------
  The Company's operations are designed to maximize efficiency while maintaining
the emphasis placed on providing premium service to customers.  Through the use 
of the Company's information and satellite tracking systems, the location of all
shipments and equipment is continuously monitored to coordinate routes and 
increase equipment utilization.  The Company's usual hauling method requires the
unit carrying the shipment to proceed directly from origin to destination with 
no delay enroute occasioned by a change of drivers, relays or circuitous 
routing.  The Company's customer service department maintains constant customer 
                                   2
<PAGE>
contact regarding overall service requirements and specific freight movements 
and also attempts to produce backhauls for each unit. 

  Because the average trip has been approximately 633 miles, most of the 
Company's shipments are hauled by one driver rather than two.  The relatively 
short trips ordinarily run by the Company make this method of operation 
preferable to team operations.  Each of the Company's over-the-road tractors is 
equipped with a sleeper cab so that the driver can comply with the Department of
Transportation's hours of service guidelines. 

Marketing 
---------
  The Company's individualized service requires a strong commitment to 
marketing.  The Company's marketing efforts concentrate on attracting customers 
that ship multiple loads from numerous locations that complement the Company's 
existing traffic flows.  As shipping patterns of existing customers expand or 
change, the Company attempts to obtain additional customers to complement the 
new traffic flows.  Thus, the effort to attract new customers varies from time 
to time depending upon growth or changes in the shipping patterns of existing 
customers. 

  The Company's major revenue sources are the medium to long line-haul and the 
regional short-haul segments of the dry van truckload market.  In these markets,
the Company focuses on customers who value the broad geographic coverage, 
premium services and flexibility available from a larger carrier.  These 
customers generally prefer to have their freight handled by a few carriers with 
whom they can establish long-term relationships.  The Company also provides 
dedicated fleet services and logistics services.  These services supplement the 
Company's strengths in its traditional markets and position the Company to meet 
the anticipated needs of its customers. 

  The Company had revenues of $38.8 million in 1997 and $33.2 million in 1996 
from freight shipments having either a point of origin or a point of destination
in Mexico.  These shipments represented approximately 9.3% and 9.8%, 
respectively, of total revenues for 1997 and 1996. 

  The largest 25, 10 and 5 customers accounted for approximately 57%, 43% and 
33%, respectively, of the Company's revenues during 1997.  Most of these 
customers are large, publicly-held companies.  One customer, Sears, accounted 
for approximately 14% of the Company's revenues during 1997 and 17% in 1996.  No
other customer accounted for more than 10% of the Company's revenues during 1997
or 1996. 

Drivers and Employees 
---------------------
  The Company recognizes the importance of maintaining a professional driver 
work force.  The Company has established several programs to increase driver 
loyalty and to give drivers a stake in the Company.  The drivers are compensated
on the basis of miles driven and other services such as loading and unloading 
and number of deliveries.  Base pay for miles driven increases with a driver's 
length of employment with the Company. 

  The Company maintains a defined contribution plan under Section 401(k) of the 
Internal Revenue Code for drivers and all other employees.  The Company matches 
50% of the employee's contribution, but limited to a maximum of 3% of the 
employee's compensation.  The Company also grants to each driver and other 
employees, after the completion of six months of service, an option to purchase 
                                   3
<PAGE>
500 shares of the Company's Common Stock at the market price on the date of 
grant.  The option is exercisable five years from the date of grant provided the
driver or employee continues employment with the Company. 

  Drivers are selected in accordance with specific Company guidelines relating 
primarily to safety records, driving experience and personal evaluations.  Once 
selected, a driver is trained in all phases of Company policies and operations 
as well as safety techniques and fuel efficient operation of equipment.  In 
addition, all new drivers must pass a road test prior to assignment to a 
vehicle.  Recognizing the importance of driver contact while on the road for 
extended periods, the Company maintains an electronic mailbox system which 
allows the drivers to transmit and receive messages 24 hours a day, equips each 
of its tractors with a mobile two-way satellite communication system and 
maintains regular telephonic contact between dispatchers and drivers. 

  The Company also recognizes that owner-operators provide the Company with 
another source of drivers to support its operations.  Owner-operators are 
independent contractors who supply their own tractors and drivers, and are 
responsible for their operating expenses in return for a negotiated fee based 
upon number of miles driven and accessorial services provided.  While the 
Company's primary benefit from owner-operators is the acquisition of the 
services of a qualified driver, an additional benefit is the Company requires 
less capital for growth as owner-operators provide their own tractors.  The 
Company intends to continue its emphasis on recruiting and retaining 
owner-operators.
                                                               
  Since competition for qualified drivers is intense, the Company emphasizes the
importance of attracting and retaining qualified drivers.  The Company employs 
driver recruiters and owner-operator recruiters.  The driver compensation 
programs, together with the Company's late-model equipment, relatively short 
trips and get-home policies provide important incentives to attract and retain 
qualified drivers.  In addition, the Company operates a professional driving 
academy to train new drivers and employs  full-time recruiters in connection 
therewith.  Despite these incentives and programs, the Company 
experiences difficulty from time to time in attracting and retaining qualified 
drivers. 

  At December 31, 1997, the Company employed 3,112 persons, of whom 2,344 were 
drivers, 214 were mechanics and other equipment maintenance personnel, and 554 
were support personnel including management and administration.  The Company 
also leased 771 tractors with qualified drivers from owner-operators. 

  None of the Company's employees are represented by a collective bargaining 
unit, and management considers the Company's relationship with its employees to 
be excellent. 

Acquisitions 
------------
  The trucking industry has historically been a fragmented industry which 
management of the Company believes is starting to consolidate.  In 1997, the 
Company adopted a strategy of seeking to acquire small-to-medium trucking 
companies throughout the United States.  The Company believes any acquisition 
should be accretive to earnings within six months and should place the Company 
in new markets for customers and drivers or provide additional capacity for 
other new business opportunities. 

  In September 1997, the Company completed its first acquisition, Hi-Way 
Express.  This acquisition added 262 tractors to the Company's fleet.  In March 

                                   4
<PAGE>
1998, the Company concluded the purchase of certain assets relating to the U.S. 
operations of Challenger Motor Freight.  At closing, the Company added 195 
tractors and 481 trailers to its fleet. 

Competition 
-----------
  The entire transportation industry, including the trucking industry, is highly
competitive. The Company competes primarily with other truckload carriers.  
Competition for the freight transported by the Company is based, in the long-
term, primarily on service and efficiency and, to a lesser degree, on freight 
rates.  However, in recent years the Company has experienced an increased focus 
on freight rates in certain of the markets served by the Company.  Several other
truckload carriers have substantially greater financial resources, own more 
equipment or carry a larger volume of freight than the Company. 
              
Regulation 
----------
  The Company is a motor carrier regulated by the United States Department of 
Transportation.  Additionally, such matters as weight and dimensions of 
equipment are subject to federal, state and international regulations. The 
Company believes that it is in substantial compliance with all licensing and 
regulatory requirements in each jurisdiction in which it operates. 

Seasonality 
-----------
  In the trucking industry generally, results of operations tend to show a 
seasonal pattern as some customers reduce shipments during and after the winter 
holiday season and during the summer months due to temporary plant closings for 
vacations.  Revenues can also be affected by bad weather and holidays, since 
revenue is directly related to available working days.  Furthermore, operating 
expenses historically have been higher in the winter months due primarily to 
decreased fuel efficiency and increased maintenance costs of revenue equipment 
in cold weather. 

Fuel 
----
  Shortages of fuel or increases in fuel prices could have a materially adverse 
effect on the operations and profitability of the Company.  From time to time, 
the Company has implemented a fuel surcharge program in response to sudden 
increases in the cost of fuel.  However, there is no assurance that such fuel 
surcharges could be used to offset future increases in fuel prices.  During 
1997, fuel prices steadily declined, and have remained at levels close to 
historical norms. 

  The Company maintains fuel storage tanks at certain of its terminals.  Leakage
or damage to these tanks could subject the Company to environmental clean-up 
costs.  The Company believes it is in substantial compliance with all 
environmental laws and regulations. 
ITEM 2. PROPERTIES 

Office and Terminal Facilities 
------------------------------
  The Company's executive offices and principal terminal are located in Memphis,
Tennessee on 3-acre and 48-acre tracts of land, respectively, both of which are 
owned by the Company.  The executive offices have 57,000 square feet of office 

                                   5
<PAGE>
space.  The principal terminal consists of 52,000 square feet of office space 
and 41,000 square feet of maintenance facilities. 

  The Company owns office and maintenance facilities of 34,500 square feet in 
Columbus, Ohio, 16,500 square feet in Laredo, Texas, 16,500 square feet in 
Martinsburg, West Virginia and 45,500 square feet in Atlanta, Georgia.  
Additionally, the Company owns a 3,000 square foot office and terminal on a 4-
acre tract of land in Tupelo, Mississippi. 
                                      
  The Company leases several small offices and/or trailer parking yards 
throughout the country. 

Revenue Equipment 
-----------------
  The Company has a policy of purchasing standardized tractors and trailers 
manufactured to the Company's specifications.  At December 31, 1997, the Company
owned and operated 2,370 Company-owned tractors and leased 771 tractors owned by
owner-operators.  The Company owns 8,981 van trailers; all trailers are 102 
inches wide with a minimum of 109.5 inches of inside height.  Most of the 
tractors are manufactured by Freightliner and most of the trailers are 
manufactured by Lufkin or Great Dane. 

  Standardization enables the Company to simplify driver training, control the 
cost of spare parts inventory and enhance its preventive maintenance program.  
The Company adheres to a comprehensive maintenance program, based on the amount 
of use of the tractor, designed to minimize equipment down-time and enhance the 
resale value of all of its equipment.  The Company constantly monitors the fuel 
efficiency of its power equipment. 

  The following table shows the type and age of equipment operated by the 
Company at December 31, 1997: 
<TABLE>
<CAPTION>
     Model Year        Tractors          Trailers 
     --------------------------------------------
     <S>              <C>                   <C>  
     1998               602                 2,192
     1997               896                 2,147
     1996               515                 1,189
     1995               339                 1,101
     1994                 1                   998
     1993                 1                   855
     1992                11                   217
     1991                 0                    98
     1990                 3                   107
     1989                 0                    56
     1988                 1                     7
     1987                 1                    14
                      ---------------------------
                                                
                      2,370                 8,981    
                      ---------------------------
                      ---------------------------
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

  The Company is a party to routine litigation incidental to its business, 
primarily involving claims for personal injuries and property damage incurred in
the transportation of freight.  The Company believes adverse results in one or 
more of these cases would not have a material adverse effect on its financial 
position or its results of operations.  The Company self-insures for liability 
of $1,500,000 for the largest occurrence per policy year, $1,250,000 for the 
second largest occurrence per policy year, and $1,000,000 for each other 

                                   6
<PAGE>
occurrence involving bodily injury and property damage.  The Company maintains 
insurance which covers liability in excess of the self-insured amounts at 
coverage levels that management considers adequate. 

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

  No matters were submitted to a vote of security holders during the fourth 
quarter of 1997. 

                                   7
<PAGE>

                             PART II 

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK 
        AND RELATED STOCKHOLDER MATTERS 

Price Range of Common Stock 
---------------------------
  The Company's Common Stock is traded in the Nasdaq National Market ("Nasdaq") 
under the symbol "MSCA".  The following table sets forth, for the calendar 
periods indicated, the high and low sales prices for the Company's Common Stock 
as reported by Nasdaq for the periods indicated. 

<TABLE>
<CAPTION>
                          High      Low   
                         -----------------
          <S>            <C>       <C>
          1997          
          1st Quarter    17 3/4    15 3/4
          2nd Quarter    25 1/8    16 1/2
          3rd Quarter    26 3/4    21 7/8
          4th Quarter    27 15/16  20

          1996
          1st Quarter    20        15 1/4
          2nd Quarter    21 1/4    17 3/4
          3rd Quarter    22 1/8    19    
          4th Quarter    19 3/4    15 1/2 

</TABLE>
     
  On March 6, 1998, the last reported sales price of the Company's common stock 
was $29.50 per share.  At that date, the number of shareholders of record was 
216.  The Company estimates that there are approximately 3,000 beneficial owners
of the Company's outstanding shares of Common Stock. 

Dividend Policy 
---------------

  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. 

                                   8
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA 

  The following selected financial data should be read in conjunction with the 
financial statements and notes thereto appearing elsewhere herein. 

<TABLE>
<CAPTION>
                                               Year ended December 31
                                    1997       1996        1995        1994        1993                    
                       (In thousands, except per share amounts)
                                 --------------------------------------------------------
<S>                              <C>         <C>         <C>         <C>         <C>
Statement of income data:                         
 Operating revenues              $415,933    $340,236    $333,070    $292,883    $224,716 
 Operating expenses:                     
   Salaries, wages and benefits   133,517     127,237     126,176     111,493      84,820
   Operations and maintenance      71,381      66,224      66,961      64,498      60,880
   Taxes and licenses              10,708       8,973      10,024       8,746       6,901
   Insurance and claims            18,462      18,777      15,666      14,471       9,545
   Communications and utilities     5,711       5,209       6,081       4,698       4,135
   Depreciation and amortization   40,094      37,010      39,143      33,694      27,360
   Gains on disposals of revenue 
     equipment                      ( 490)     (2,397)
   Rent and purchased 
    transportation                 99,584      53,014      41,946      23,564       4,246
   Other                            2,077       2,362       2,435       2,058       1,792
                                 --------------------------------------------------------
  Total operating expenses        381,044     316,409     308,432     263,222     199,679
                                 --------------------------------------------------------
  Operating income                 34,889      23,827      24,638      29,661      25,037
  Interest expense                 (5,775)     (4,844)     (5,525)     (1,802)     (2,041)
  Interest income                                  92       1,449
  Other (expense) income              320         395         (25)        147         118 
                                 --------------------------------------------------------
 Income before income taxes and 
   cumulative effect of change  
   in accounting for income 
   taxes                           29,434      19,470      20,537      28,006      23,114
 Income taxes                      10,472       7,031       7,386      10,856       9,512
                                 --------------------------------------------------------
 Income before cumulative effect 
   of accounting change            18,962      12,439      13,151      17,150      13,602
 
 Cumulative effect as of 
   January 1, 1993 of change 
   in accounting for income 
   taxes                                                                              500                  
               
                                 --------------------------------------------------------
 Net income                       $18,962     $12,439     $13,151     $17,150     $14,102
                                 --------------------------------------------------------
                                 --------------------------------------------------------
                             
Diluted earnings per share:                       
  Income before cumulative 
    effect of accounting change     $1.54       $1.02       $1.01       $1.31       $1.13

  Cumulative effect of 
    accounting change                                                                0.04
                                 --------------------------------------------------------
Diluted earnings per share          $1.54       $1.02       $1.01       $1.31       $1.17
                                 --------------------------------------------------------
                                 --------------------------------------------------------
Basic earnings per share:
  Income before cumulative
    effect of accounting change     $1.57       $1.03       $1.02       $1.33       $1.15

  Cumulative effect of
    accounting change                                                               $0.04
                                 --------------------------------------------------------
Basic earnings per share            $1.57       $1.03       $1.02       $1.33       $1.15
                                 --------------------------------------------------------
                                 --------------------------------------------------------

</TABLE>
                                   9
<PAGE>
<TABLE>
<CAPTION>                               
 
                                                       December 31
                                    1997        1996        1995        1994        1993                   
                                  (In thousands)
                                 --------------------------------------------------------
<S>                              <C>         <C>         <C>         <C>         <C> 
Balance sheet data:  
 Total assets                    $362,246    $290,662    $279,934    $276,073    $198,960
 Long-term obligations             79,977      45,373      47,377      51,187      17,985 
 Stockholders' equity             177,391     154,211     152,524     147,924     131,939 

</TABLE>
<TABLE>
<CAPTION>
The following tables set forth data regarding the freight revenues, operations, revenue equipment and
employees of the Company.


                                    1997        1996        1995        1994        1993 
                                 --------------------------------------------------------

For the year ended December 31:        
<S>                              <C>         <C>         <C>         <C>         <C>    
 Operating ratio (1)               91.6%       93.0%       92.6%       89.9%       88.9%    
 Average number of truckloads      
  per week (2)                    9,385       9,277       8,265       6,971       5,759
 Average revenues per tractor 
  per week (2)                   $2,652      $2,575      $2,569      $2,613      $2,530
 Average miles per trip (2)         633         534         584         617         618 
 Average revenue per mile (2)     $1.19       $1.23       $1.25       $1.26       $1.19
                      
At December 31:                      
---------------
 Total tractors operated
  Company owned                   2,370       2,046       2,078       2,106       1,854
  Owner-Operator owned              771         419         253         207           0 
  Total tractors                  3,141       2,465       2,331       2,313       1,854
 Total trailers                   8,981       7,156       7,190       6,481       5,256 
 Number of employees              3,112       2,886       2,947       3,238       2,705
 
<FN> 
(1) Operating expenses as a percentage of operating revenues.

(2) Excludes revenues from logistics services which began 
    in September 1993.
</FN>
</TABLE>

                                   10
<PAGE>
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 
FINANCIAL CONDITION 
 
The following table sets forth the percentage relationship of revenue and 
expense items to operating revenues for the periods indicated. 
<TABLE> 
<CAPTION> 
                                        Percentage of Operating Revenues  
                                             Year ended December 31       
                                        1997          1996          1995  
                                        ----------------------------------
<S>                                     <C>           <C>           <C>
Operating revenues                      100.0%        100.0%        100.0%
Operating expenses:                                                       
     Salaries, wages and benefits        32.1          37.4          37.9 
     Operations and maintenance          17.2          19.5          20.1 
     Taxes and licenses                   2.6           2.6           3.0 
     Insurance and claims                 4.4           5.5           4.7 
     Communications and utilities         1.4           1.5           1.8 
     Depreciation and amortization        9.6          10.9          11.8 
     Gains on disposals of revenue                                        
      equipment                          (0.1)         (0.7)
     Rent and purchased transportation   23.9          15.6          12.6 
     Other                                0.5           0.7           0.7
                                        ----------------------------------
Total operating expenses                 91.6          93.0          92.6
                                        ----------------------------------
 
 
Operating income                          8.4           7.0           7.4 
Interest expense                          1.4           1.4           1.7
Interest income                                                      (0.5)
Other (income) expense                   (0.1)         (0.1)          0.1
                                        ----------------------------------
 
Income before income taxes                7.1           5.7           6.1
Income taxes                              2.5           2.0           2.2
                                        ----------------------------------
Net income                                4.6%          3.7%          3.9%
                                        ----------------------------------
                                        ----------------------------------
</TABLE> 
 
The sources of the Company's operating revenues were as follows: 
<TABLE>
<CAPTION> 
                                        Year ended December 31
                                   1997      1996        1995
                                        [Dollars in Thousands] 
                                   -------------------------------
<S>                                <C>       <C>          <C> 
Domestic Linehaul                  $206,368  $162,790     $166,655 
Interline Service - Mexico           38,849    33,183*      28,299 
Dedicated                            28,266    27,644       22,129
Regional                            107,366    93,794*      97,806
Logistics                            35,084    22,825       18,181
                                   -------------------------------
Total                              $415,933  $340,236     $333,070
                                   -------------------------------
                                   -------------------------------
<FN> 
* Interline Service - Mexico revenue was restated for 1996 to include 
international freight carried by regional trucks. Regional revenue for 1996 was 
reduced by the same amount. </FN> 
</TABLE>
                                   11
<PAGE>
1997 Compared to 1996 
---------------------
     Operating revenues grew 22.2% to $416 million in 1997 from $340 million in 
1996. The Company's increase in revenues was due primarily to increased demand 
from customers, expansion of the Company's fleet and increased logistics 
revenues. Total trucking revenues during 1997 increased 20.0% compared to 1996 
and logistics revenues during 1997 increased 53.7% compared to 1996. 

     The Company's fleet increased to 3,141 tractors at December 31, 1997 from 
2,465 at December 31, 1996, an increase of 676 tractors. In September 1997, the 
Company concluded the acquisition of certain assets of New Hi-Way Express, Inc.,
including 220 company-owned tractors and contracts with 42 owner-operators. 

     Revenues per mile were $1.19 in 1997 compared to $1.23 in 1996, due to a 
decrease in the average loaded rate per mile experienced by the Company in 1997.
The decrease resulted from a change in freight mix rather than a change in 
freight rates. Average length of haul increased to 633 miles in 1997 up from 534
miles in 1996. 

     The operating ratio (operating expenses as a percentage of operating 
revenues) for 1997 was 91.6% compared to 93.0% for 1996. 

     Salaries, wages and benefits decreased to 32.1% of revenues in 1997 
compared to 37.4% of revenues in 1996. This decrease was due primarily to the 
owner-operator tractors representing a larger percentage of the average number 
of total tractors in service during 1997 compared to 1996, which caused a shift 
in operating expenses as amounts paid to owner-operators are recorded as 
purchased transportation. The Company had 771 owner-operators at December 31, 
1997 compared to 419 at December 31, 1996. 

     Operations and maintenance expenses decreased to 17.2% of revenues in 1997 
from 19.5% of revenues in 1996. This decrease resulted from the expanded use of 
owner-operators and lower fuel costs. 

     Insurance and claims expense was 4.4% of revenues in 1997 compared to 5.5% 
of revenues in 1996. This decrease was due primarily to increased logistics 
revenues in 1997 and to unfavorable claims experience during the last quarter of
1996. 

     Depreciation and amortization decreased to 9.6% of revenues in 1997 
compared to 10.9% of revenues in 1996. This decrease resulted primarily from the
expanded use of owner-operators and increased logistics revenues. 

     The Company reported gains equal to .1% of revenues, or approximately 
$500,000, from the disposal of revenue equipment in 1997 compared to .7% of 
revenues, or approximately $2.4 million, in 1996. 

     Rent and purchased transportation increased to 23.9% of revenues in 1997 
from 15.6% of revenues in 1996. This increase was attributable primarily to the 
expanded use of owner-operators by the Company and increased expenses related to
logistics services. 
                                   12
<PAGE>
     Interest expense was $5,775,020 in 1997 compared to $4,844,062 in 1996. 
This increase in interest expense was due to an increase in average outstanding 
debt during 1997 as compared to 1996. 


     The effective income tax rate decreased to 35.6% in 1997 compared to 36.1% 
in 1996, as described in Note 7 to the Notes to Consolidated Financial 
Statements. 
 
1996 Compared to 1995 
---------------------
     Operating revenues increased to $340 million in 1996 from $333 million in 
1995. This 2.1% increase in revenues was due primarily to increased revenue from
logistics and dedicated fleet services. Total trucking revenues during 1996 
increased slightly compared to 1995. 

     The Company's fleet increased to 2,465 tractors at December 31, 1996 from 
2,310 at December 31, 1995, an increase of 155 tractors. Revenues per mile were 
$1.23 in 1996 compared to $1.25 in 1995, due to a decrease in the average loaded
rate per mile experienced by the Company in 1996. 

     Salaries, wages and benefits were 37.4% of revenues in 1996 compared to 
37.9% of revenues in 1995. The decrease was due to owner-operator tractors 
representing a larger percentage of the average number of total tractors in 
service during 1996 as compared to 1995. The Company had 419 owner-operators at 
December 31, 1996 compared to 253 at December 31, 1995. 

     Operations and maintenance expenses decreased to 19.5% of revenues in 1996 
from 20.1% of revenues in 1995, despite higher fuel costs. This decrease 
resulted from the larger percentage of owner-operator tractors used in 1996 and 
an updated fleet of tractors due to a reduction in the disposal cycle of 
tractors. 

     Taxes and licenses expense was 2.6% of revenues in 1996 compared to 3.0% in
1995. This decrease was due to various unexpected sales and operating tax 
refunds received from overpayments of taxes in prior years. 

     Insurance and claims expense was 5.5% of revenues in 1996 compared to 4.7% 
in 1995. This increase was attributable primarily to unfavorable claims 
experience during the last quarter of 1996. 

     Depreciation and amortization decreased to 10.9% of revenues in 1996 
compared to 11.8% of revenues in 1995. This decrease resulted primarily from a 
change in accounting estimate to increase the estimated salvage value of 
substantially all of the Company's trailers to more accurately reflect market 
conditions. See Note 3 of the Notes to Consolidated Financial Statements. 

     The Company reported gains equal to .7% of operating revenues, or 
approximately $2.4 million, from the disposal of revenue equipment in 1996. 
Prior to 1996, the Company traded in revenue equipment and reduced the basis of 
new additions. 

     Rent and purchased transportation increased to 15.6% of revenues in 1996 
compared to 12.6% of revenues in 1995. This increase was attributable primarily 
to the expanded use of owner-operators by the Company and increased expenses 
related to logistics services. 
                                   13
<PAGE>
     Interest expense was $4,844,062 in 1996 compared to $5,524,467 in 1995. 
This decrease in interest expense was due to the decrease in average outstanding
debt during 1996 as compared to 1995. 

     The effective income tax rate increased to 36.1% in 1996 compared to 36.0% 
in 1995, as described in Note 7 of the Notes to Consolidated Financial 
Statements. 
 
Liquidity and Capital Resources 
-------------------------------
     The Company's business continues to require significant investments in new 
revenue equipment and office and terminal facilities. These investments have 
been financed largely from cash provided by operating activities, secured and 
unsecured borrowing and unsecured credit facilities during the past three years.

     Net cash provided by operating activities was approximately $59.2 million 
in 1997, $53.7 million in 1996, and $55.4 million in 1995. At December 31, 1997,
the Company had total outstanding obligations of $95.7 million related to 
purchases of revenue equipment. 

     The Company expects to have expenditures, net of sales, of approximately 
$100 million for additional revenue equipment in 1998. The Company expects to 
fund these expenditures through cash provided by operating activities, secured 
borrowings, or existing credit facilities. Prevailing interest rates and the 
market for used revenue equipment may affect the timing of the Company's 
purchase of new and replacement revenue equipment. Historically, cash provided 
by operating activities, secured and unsecured borrowing and existing credit 
facilities have been sufficient to satisfy substantially all of the Company's 
working capital and capital expenditure requirements. The Company has bank lines
of credit providing for total borrowings of up to $70 million, with interest at 
the lower of the bank's prime rate or the 30-day LIBOR rate plus .45%. At 
December 31, 1997, there was $48.5 million outstanding under these lines of 
credit. Management expects to maintain these or similar credit facilities for an
indefinite period. 
 
Impact of Year 2000 
-------------------
     The Company has completed an assessment and will have to modify or replace 
portions of its software so that its computer systems will function properly 
with respect to dates in the Year 2000 and thereafter. The project is estimated 
to be completed no later than July 31, 1999, which is prior to any anticipated 
impact on its operating systems. Management estimates that the total Year 2000 
project costs will not have a material impact on the Company's results of 
operations, financial position or capital resources. 

     The Company believes that with modifications to its existing software, the 
Year 2000 Issue will not pose significant operational problems for its computer 
systems. The assessment of the impact of the Year 2000 Issue is based on 
management's best estimates, which were derived utilizing numerous assumptions 
of future events, including the continued availability of certain resources and 
other factors. However, there is no guarantee that these estimates will be 
achieved and actual results could differ materially from those anticipated. 
Specific factors that might cause material differences include, but are not 
limited to, the availability and costs of personnel trained in this area, the 
ability to locate and correct all relevant computer codes, the timely conversion
of systems of other companies which interface with the Company's systems, and 
similar uncertainties. 

                                   14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

  The Company's Consolidated Financial Statements and Financial Statement 
Schedules are included on pages 24 to 41. 


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 
        ON ACCOUNTING AND FINANCIAL DISCLOSURE 

  None. 
                                   15
<PAGE>
                            PART III 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 

  The names, ages and certain other information about the Company's directors, 
executive officers and other officers as of March 6, 1998 are set forth below: 

Name                     Age               Position                      
-------------------------------------------------------------------------
Michael S. Starnes       53                Chairman of the Board, 
                                           President, Chief       
                                           Executive Officer and  
                                           Director

James W. Welch           54                Senior Vice President -
                                           Marketing and Director

M. J. Barrow             53                Senior Vice President -
                                           Finance and Administration,
                                           Secretary - Treasurer and
                                           Director

Mike Reaves              53                Senior Vice President -
                                           Driver Services

Robert P. Hurt           63                Vice President - Maintenance
                                           Assistant Secretary

John M. Hudson           57                Vice President -       
                                           Human Resources

Kenneth B. Stonebrook    36                Vice President - Asset
                                           Utilization

Russell J. Begin         39                Vice President - Chairman's Office

Lisa Ayotte              33                Vice President - Safety and Risk
                                           Management

Dwight M. Bassett        38                Controller, Chief Accounting
                                           Officer, Assistant Secretary

Carl J. Mungenast        58                Director

Morris H. Fair           68                Director

Jack H. Morris, III      67                Director
                                   16
<PAGE>

  Michael S. Starnes has served as a director, Chief Executive Officer and 
President of the Company since 1978.  In 1986, Mr. Starnes was named 
Chairman of the Board.  Mr. Starnes is also a director of RFS Hotel 
Investors, Inc., a real estate investment trust.

  James W. Welch joined the Company in 1982 as a director and Vice President-
Sales.  In 1989, Mr. Welch was named Senior Vice President-Marketing of the 
Company and is an executive officer of the Company.

  M. J. Barrow joined the Company in 1982 as Controller and Treasurer.  
Shortly thereafter, he was elected as a director of the Company and named 
Vice President-Finance.  Mr. Barrow was named Secretary-Treasurer of the 
Company in 1986 and Senior Vice President-Finance of the Company in 1989.  
In 1996, he was named Senior Vice President - Finance and Administration.

  Mike Reaves joined the Company on June 20, 1994 and was named Vice 
President-Driver Services of the Company in 1995.  In 1996, he was named
Senior Vice President - Driver Services.  Prior to joining the Company, 
Mr. Reaves was employed by Yellow Corporation, the parent company of 
several less-than-truckload carriers, for more than five years in 
various sales management positions.

  Robert P. Hurt joined the Company in 1983 as a director and Vice President - 
Operations and Maintenance.  Mr. Hurt was named Vice President - Maintenance of 
the Company in 1984.

  John M. Hudson joined the Company in 1990 and was named Vice President-
Human Resources of the Company in 1991 and Vice President-Process and 
Individual Development of the Company in 1994.  In 1996, he resumed the 
position of Vice President - Human Resources.
     
  Kenneth B. Stonebrook joined the Company 1983 and was named Vice 
President-Human Resources of the Company in 1994.  He was named Vice
President and General Manager - Southeast Region in 1996 and became 
Vice President - Asset Utilization in 1997.

  Russell J. Begin joined the Company in 1992 as a Cost Accountant.  He was 
subsequently named Senior Financial Analyst, and later Divisional Sales Manager 
of the Southeast Region.  In 1996 he was named Director of Marketing, and in 
1997 assumed the position of Vice President - Chairman's Office. 

  Lisa Ayotte joined the Company in 1997 as Vice President - Safety and Risk 
Management.  Ms. Ayotte was previously employed by AmeriTruck Distribution 
Corporation as Director of Risk Management. 

  Dwight M. Bassett joined the Company in 1986 and was named Director of 
Accounting and Controller in 1992.  In 1996, Mr. Bassett was named Director and 
General Manager of the Company's Western Division and in 1997 he resumed his 
position as Director of Accounting and Controller.  In 1997, he was also named 
Assistant Secretary of the Company. 

  Carl J. Mungenast joined the Company as Executive Vice President 
and Chief Operating Officer in April 1994.  Mr. Mungenast was elected as a 
director of the Company in May 1994.  In June 1996, for health reasons,
Mr. Mungenast's duties were curtailed and he was named Advisor to the 
Chairman.  In November 1997, Mr. Mungenast became a consultant to the Company.  
Mr. Mungenast was employed by Sears Roebuck and Company from 1958 until his 
retirement in December 1993.  At the time of his retirement, 

                                   17
<PAGE>
he was Senior Vice President for Sears Logistics Services in Itasca, 
Illinois and responsible for all distribution, transportation and home 
delivery services for Sears.

  Morris H. Fair has served as a director of the Company since 1986.  Mr. Fair 
was Senior Vice President of Union Planters Corporation, a bank holding 
company, from September 1988 to December 1992.  Mr. Fair has been associated 
with Raymond James & Associates, Inc. since April 1995. 

  Jack H. Morris, III has served as a director of the Company since 1986.  Mr. 
Morris has been Chief Executive Officer of Auto Glass of Memphis, Inc. for 
more than five years.

  The Amended and Restated Bylaws of the Company provide for a Board of 
Directors consisting of not less than three members, which number may be 
fixed from time to time by resolution of the Board of Directors.  The term of 
each director expires at the next annual meeting of shareholders following the 
election of the director.

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's 
officers and directors, and persons who own more than 10% of a registered class 
of the Company's equity securities, to file reports of ownership and changes in 
ownership with the Securities and Exchange Commission (the "SEC").  Officers, 
directors and greater than 10% stockholders are required by SEC regulation to 
furnish the Company with copies of all Section 16(a) forms they file.  Based 
solely upon a review of the copies of such forms furnished to the Company, the 
Company believes that its officers, directors and greater than 10% beneficial 
owners complied with all Section 16(a) filing requirements applicable to them 
during the Company's preceding fiscal year, except (i) Mr. Starnes filed a late 
Form 5 relating to the gift of 1,045 shares of Common Stock in December 1996, 
(ii) Mr. Reaves reported the purchase of 500 shares of Common Stock in May 1996 
late on a Form 5 and (iii) Robert P. Hurt reported the exercise of a stock 
option for 20,000 shares of Common Stock in October 1997 late on Form 5.

                                   18
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION 

  Information with respect to executive compensation is set forth under the 
captions "Executive Compensation," "Summary Compensation Table," "Option Grants 
in 1997," "Aggregated Option Exercises in 1997 and Year-End Value Table" and 
"Employment Contracts" in the Registrant's Proxy Statement dated March 23, 1998 
relating to its 1998 Annual Meeting of Shareholders (the "1998 Proxy Statement")
to be held on May 1, 1998, which is incorporated by reference into the Form 10-
K.  With the exception of the foregoing information and other information 
specifically incorporated by reference in this Form 10-K, the 1998 Proxy 
Statement is not being filed as a part hereof. 
     
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND    
           MANAGEMENT

 Information with respect to security ownership of certain beneficial owners and
management is included under the caption "Beneficial Ownership of Common Stock" 
in the 1998 Proxy Statement and is incorporated herein by reference. 


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 The Executive Compensation Committee of the Board of Directors is comprised of 
Michael S. Starnes, Morris H. Fair and Jack H. Morris, III, all of whom 
participated in deliberations concerning executive officer compensation.  Mr. 
Starnes also serves as President and Chief Executive Officer of the Company.  
The Committee establishes the compensation for Mr. Starnes and reviews 
compensation set by Mr. Starnes for other executive officers.  Mr. Starnes does 
not participate in the Committee's deliberations concerning his compensation. 

                                   19
<PAGE>
                         PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial Statement Schedules.

    (1) The following consolidated Financial Statements of the Company and
        its Subsidiaries are included herein on the page indicated.  

                                                                    Page No.
        Report of Independent Auditor                                   25
        Consolidated Balance Sheets                                  26-27
        Consolidated Statements of Income                               28
        Consolidated Statements of Stockholders' Equity                 29
        Consolidated Statements of Cash Flow                            30
        Notes of Consolidated Statements                             31-40
                                                                     
    (2) Financial Statement Schedules

        Schedule II - Valuation and Qualifying Accounts for the Company is 
        included herein on page 41.

    (3) Exhibits -- An Exhibit Index of the exhibits required by Item 601 of
        Regulation S-K is included herein on page 22-23.

(b)  Reports on Form 8-K.

  The Company did not file any report on Form 8-K during the last quarter 
of 1997.
                                   20
<PAGE>

                              SIGNATURES

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

                           M.S. Carriers, Inc.
                              (Registrant)
                                    
                      By:  s/ Michael S. Starnes            
                           ---------------------
                           Michael S. Starnes
                           Chairman of the Board, President
                           and Chief Executive Officer

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


s/ Michael S. Starnes   Chairman of the Board, President,   March 31, 1998
---------------------   Chief Executive Officer and         --------------   
Michael S. Starnes      Director                                Date     
                                                                 

s/ James W. Welch       Senior Vice President -             March 31, 1998
---------------------   Marketing and Director              --------------
James W. Welch                                                  Date

s/ M.J. Barrow          Senior Vice President -             March 31, 1998
---------------------   Finance and Administration,         --------------
M.J. Barrow             Secretary-Treasurer and Director        Date
                       

s/ Dwight M. Bassett    Controller, Chief Accounting        March 31, 1998
---------------------   Officer and Assistant Secretary     --------------
Dwight M. Bassett                                               Date


s/ Jack H. Morris, III  Director                            March 31, 1998
---------------------                                       --------------
Jack H. Morris, III                                              Date

                                           
---------------------                                                     
Carl J. Mungenast       Director                            --------------
                                                                 Date

                                                                          
---------------------                                       --------------
Morris H. Fair          Director                                 Date

                                   21
<PAGE>

                                 EXHIBIT INDEX     
                                  
                                   
Exhibit                                         Page Number or Incorporation
Number    Description                            By Reference               
----------------------------------------------------------------------------
3(i).1    Restated Charter of M.S. Carriers,    Incorporated by reference from
           Inc.                                  exhibits to the Registrant's
                                                 Registration Statement on
                                                 Form S-1 (Registration
                                                 Number 33-12070).

3(i).2    Articles of Amendment to Charter      Incorporated by reference from
           of M.S. Carriers, Inc.                exhibits to the Registrant's
                                                 Registration Statement on Form
                                                 S-3 (Registration Number
                                                 33-63280).

3(ii)     Amended and Restated By-Laws of M.S.  Incorporated by reference from
           Carriers, Inc.                        exhibits to the Registrant's
                                                 Registration Statement on 
                                                 Form S-3 (Registration Number
                                                 33-63280).

10.1      Incentive Stock Option Plan           Incorporated by reference from
                                                 exhibits to the Registrant's
                                                 Registration Statement on
                                                 Form S-1 (Registration Number
                                                 33-12070).

10.2     Amendment to Incentive Stock Option    Incorporated by reference from
           Plan                                  exhibits to the Registrant's
                                                 Registration Statement on 
                                                 Form S-1 (Registration Number 
                                                 33-12070).

10.3     1993 Stock Option Plan                 Incorporated by reference from
                                                 exhibits to the Registrant's
                                                 Registration Statement on 
                                                 Form S-3 (Registration Number
                                                 33-63280).

10.4     Non-Employee Directors Stock Option    Incorporated by reference 
           Plan                                  from Registrant's Proxy
                                                 Statement dated March 31,
                                                 1995.

10.5     Employment Agreements with James W.    Incorporated by reference
           Welch, M.J. Barrow and Robert P.      from exhibits to the
           Hurt                                  Registrant's Statement on
                                                 Form S-1 (Registration 
                                                 Number 33-12070).

10.6     Employment Agreement with Michael S.   Incorporated by reference
          Starnes                                from exhibits to the
                                                 Registrant's 2nd Quarter
                                                 1995 Form 10-Q.

                                   22
<PAGE>
10.6     M.S. Carriers, Inc. 1996 Stock         Incorporated by reference
           Option Plan                            from exhibits to the 
                                                  Registrant's Proxy 
                                                  Statement dated April 4,
                                                  1996

21       Subsidiaries of the Registrant         Page 42

27       Financial Data Schedule                NOT INCLUDED WITH PAPER FILING

                                   23
<PAGE>
                       Annual Report on Form 10-K

               Item 8, Item 14(a)(1) and (2), (c) and (d)

               Index of Financial Statements and Financial 
                           Statement Schedule

               Financial Statements and Supplementary Data



                            Certain Exhibits

                      Financial Statement Schedule

                      Year ended December 31, 1997


                            M.S. Carriers, Inc. 

                            Memphis, Tennessee

                                   24
<PAGE>
Report of Independent Auditors 
 
 
Board of Directors 
M.S. Carriers, Inc. 
 
We have audited the accompanying consolidated balance sheets of M.S. Carriers, 
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related 
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997.  Our audits also 
included the financial statement schedule listed in the Index at Item 14(a).  
These financial statements and schedule are the responsibility of the Company's 
management.  Our responsibility is to express an opinion on these financial 
statements and schedule based on our audits.
 
 
We conducted our audits in accordance with generally accepted auditing 
standards. Those standards 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. An audit also includes 
assessing the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion. 

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated financial position of M.S. Carriers, 
Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated 
results of their operations and their cash flows for each of the three years in 
the period ended December 31, 1997 in conformity with generally accepted 
accounting principles.  Also, in our opinion, the related financial statement 
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth 
therein.        


                              s/ Ernst & Young LLP
                              --------------------
 
Memphis, Tennessee 
January 27, 1998

                                   25
<PAGE>
<TABLE>
<CAPTION>
                             M.S. Carriers, Inc.

                         Consolidated Balance Sheets

                                                    December 31
                                                1997            1996    
                                            ----------------------------
<S>                                         <C>              <C>
Assets
Current assets: 
 Cash and cash equivalents                  $    351,919     $ 1,153,993 
 Accounts receivable: 
  Trade, net                                  44,551,316      33,018,388 
  Officers and employees                         660,370       1,506,247
                                            ----------------------------
                                              45,211,686      34,524,635
 
 Recoverable income taxes                      4,520,917       5,870,263 
 Deferred income taxes                         5,427,000       3,755,000 
 Prepaid expenses and other                    4,979,826       4,898,183 
                                            ----------------------------
Total current assets                          60,491,348      50,202,074
 
Property and equipment:
 Land and land improvements                    6,221,032       6,110,279 
 Buildings                                    30,128,055      30,128,055
 Revenue equipment                           326,709,385     260,026,924 
 Service equipment and other                  40,089,062      37,014,110 
 Construction in progress                        114,015         177,218 
                                            ----------------------------
                                             403,261,549     333,456,586
 Accumulated depreciation and amortization   106,090,776      96,240,862 
                                            ----------------------------
                                             297,170,773     237,215,724

Other assets                                   4,584,340       3,243,916
                                            ----------------------------
Total assets                                $362,246,461    $290,661,714
                                            ----------------------------
                                            ----------------------------
</TABLE>

                                   26
<PAGE>

<TABLE>
<CAPTION>
                            M.S. Carriers, Inc.

                    Consolidated Balance Sheets (continued)

                                                  December 31
                                                1997           1996    
                                            ----------------------------
<S>                                        <C>              <C>
Liabilities and Stockholders' equity
Current liabilities:
 Trade accounts payable                     $  5,448,110    $  7,288,149 
 Accrued compensation and
  related costs                                2,343,595       3,125,694 
 Other accrued expenses                        8,438,898       6,608,104
 Claims payable                               14,826,627      11,694,210
 Current maturities of long-term
  obligations                                 15,737,609      14,315,462
                                            ----------------------------
Total current liabilities                     46,794,839      43,031,619
 
Long-term obligations, less current
 maturities                                   79,977,266      45,373,288
 
Deferred income taxes                         58,083,519      48,045,423
 
Commitments and contingencies
Stockholders' equity: 
 Common stock, $.01 par value: 
  Authorized shares- 20,000,000 
  Issued and outstanding shares-12,210,601
  in 1997 and 12,009,633 in 1996                 122,106         120,096
 Additional paid-in capital                   64,175,260       9,959,590
 Retained earnings                           115,097,125      96,135,352
 Cumulative translation adjustments           (2,003,654)     (2,003,654)
                                            ----------------------------
Total stockholders' equity                   177,390,837     154,211,384 

Total liabilities and stockholders' equity  $362,246,461    $290,661,714  
                                            ----------------------------
                                            ----------------------------
 
See accompanying notes. 
</TABLE>

                                   27
<PAGE>

<TABLE>
<CAPTION>


                            M.S. Carriers, Inc.

                      Consolidated Statements of Income 


                                       Year ended December 31
                                       1997          1996            1995  
                                    ------------------------------------------
<S>                                 <C>           <C>             <C> 
Operating revenues                  $415,932,825  $340,235,583    $333,069,506
Operating expenses:
 Salaries, wages and benefits        133,517,321   127,236,924     126,176,172
 Operations and maintenance           71,380,518    66,224,264      66,961,380
 Taxes and licenses                   10,707,885     8,972,386      10,024,270
 Insurance and claims                 18,462,037    18,776,953      15,666,099
 Communications and utilities          5,710,433     5,208,967       6,080,563
 Depreciation and amortization        40,093,988    37,010,281      39,142,879
 Gains on disposals of revenue
  equipment                             (489,519)   (2,397,205)
 Rent and purchased
  transportation                      99,584,257    53,014,083      41,945,874
 Other                                 2,077,206     2,361,881       2,434,767
                                    ------------------------------------------
                                     381,044,126   316,408,534     308,432,004
                                    ------------------------------------------
Operating income                      34,888,699    23,827,049      24,637,502
 
Other expense (income): 
 Interest expense                      5,775,020     4,844,062       5,524,467
 Interest income                                       (91,926)     (1,448,577)
 Other                                  (319,977)     (395,488)         24,081
                                    ------------------------------------------
                                       5,455,043     4,356,648       4,099,971
                                    ------------------------------------------
Income before income taxes            29,433,656    19,470,401      20,537,531 
Income taxes                          10,471,883     7,031,357       7,386,439
                                    ------------------------------------------
Net income                           $18,961,773   $12,439,044     $13,151,092
                                    ------------------------------------------
                                    ------------------------------------------
 
Basic earnings per share             $      1.57   $      1.03    $       1.02 
                                    ------------------------------------------
                                    ------------------------------------------
Diluted earnings per share           $      1.54   $      1.02    $       1.01 
                                    ------------------------------------------
                                    ------------------------------------------
 
See accompanying notes.
</TABLE>

                                   28
<PAGE>
<TABLE>
<CAPTION>

                                        M.S. Carriers, Inc. and Subsidaries

                                  Consolidated Statements of Stockholders' Equity 
 
                                                                  Additional                        Cumulative
                                          Common Stock              Paid-in          Retained       Translation
                                      Shares       Amount           Capital          Earnings       Adjustments       Total     
                                    --------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>                <C>             <C>              <C>
Balance at January 1, 1995          12,878,300    $128,783      $64,137,909        $84,842,041     $ (1,185,000)    $147,923,733
 Net income                                                                         13,151,092                        13,151,092
 Repurchase of common stock           (413,900)     (4,139)      (2,061,222)        (5,691,214)                       (7,756,575)
 Translation adjustments                                                                               (794,231)        (794,231)
                                    --------------------------------------------------------------------------------------------
Balance at December 31, 1995        12,464,400     124,644       62,076,687         92,301,919       (1,979,231)     152,524,019
 Net income                                                                         12,439,044                        12,439,044
 Exercise of stock options             131,333       1,313          801,681                                              802,994
 Repurchase of common stock           (586,100)     (5,861)      (2,918,778)        (8,605,611)                      (11,530,250)
 Translation adjustments                                                                                (24,423)         (24,423)
                                    --------------------------------------------------------------------------------------------
Balance at December 31, 1996        12,009,633      120,096      59,959,590         96,135,352       (2,003,654)     154,211,384
 Net income                                                                         18,961,773                        18,961,773
 Issuance of common stock
  upon business acquisition            153,468        1,535       3,574,270                                            3,575,805
 Exercise of stock options              47,500          475         641,400                                              641,875
                                    --------------------------------------------------------------------------------------------
Balance at December 31, 1997        12,210,601     $122,106     $64,175,260       $115,097,125      $(2,003,654)    $177,390,837
                                    --------------------------------------------------------------------------------------------
                                    --------------------------------------------------------------------------------------------


See accompanying notes. 
</TABLE>

                                   29
<PAGE>
<TABLE>
<CAPTION>

                            M.S. Carriers, Inc.

                    Consolidated Statements of Cash Flows 
 
                                                 Year ended December 31
                                             1997          1996         1995    
                                          ---------------------------------------
<S>                                       <C>           <C>           <C>   
Operating activities
Net income                                $18,961,773   $12,439,044   $13,151,092
Adjustments to reconcile net income to
 net cash provided by operating
 activities: 
  Depreciation and amortization            40,093,988    37,010,281    39,142,879
  Gains on disposals of revenue equipment    (489,519)   (2,397,205)
  Other                                      (220,695)     (324,759)     (208,613)
  Deferred income taxes                     8,366,096    10,669,902     6,326,521
  Changes in operating assets and
   liabilities:
   Accounts receivable                    (10,687,051)   (5,699,198)    4,959,327
   Current and other assets                 1,533,687    (1,084,198)   (5,407,782)
   Trade accounts payable                  (1,840,039)    2,951,302    (2,004,678)
   Other current liabilities                3,485,198       154,542      (585,670)
                                          ---------------------------------------
Net cash provided by operating activities  59,203,438    53,719,711    55,373,076
 
Investing activities
Purchases of property and equipment       (96,025,327)  (57,929,668)  (76,590,161)
Proceeds from disposals of property
 and equipment                             34,064,457    19,958,710     2,490,800 
Business acquisition                         (672,739)                            
                                          ---------------------------------------
Net cash used in investing activities     (62,633,609)  (37,970,958)  (74,099,361)
 
Financing activities
Proceeds from long-term obligations                         139,515
Net change in line of credit obligations   23,403,189    12,213,000    12,856,000
Proceeds from issuance of common stock        641,875       802,994
Repurchase of common stock                              (11,530,250)   (7,756,575)
Principal payments on long-term
 obligations                              (21,416,967)  (16,706,478)  (16,693,412)
                                          ---------------------------------------
Net cash provided by (used in) financing
 activities                                 2,628,097   (15,081,219)  (11,593,987)
                                          ---------------------------------------
Increase (decrease) in cash and cash
 equivalents                                 (802,074)      667,534   (30,320,272)
Cash and cash equivalents at beginning
 of year                                    1,153,993       486,459    30,806,731  
                                          ---------------------------------------
Cash and cash equivalents at end of year  $   351,919   $ 1,153,993  $    486,459  
                                          ---------------------------------------
                                          ---------------------------------------
 
See accompanying notes.
</TABLE>

                                   30
<PAGE>

                                 M.S. Carriers, Inc.
 
                      Notes to Consolidated Financial Statements

                                 December 31, 1997
 
1. Nature of Business 

M.S. Carriers, Inc. is an irregular route, truckload carrier transporting a wide
range of commodities throughout the United States, and the provinces of Ontario 
and Quebec, Canada, with interline service to Mexico. The Company may transport 
any type of freight (except certain types of explosives, household goods and 
commodities in bulk) from any point in the continental United States to any 
other point in another state over any route selected by the Company. The 
Company's primary traffic flows are between the Middle South and the Southwest, 
Midwest, Central States, Southeast and Northeast. The principal types of freight
transported are packages, retail goods, non-perishable foodstuffs, paper and 
paper products, household appliances, furniture and packaged petroleum products.
 
Concentrations of credit risk with respect to trade accounts receivable are 
limited due to the large number of entities comprising the Company's customer 
base and their dispersion across many different industries. The Company performs
ongoing credit evaluations and generally does not require collateral. 
 
2. Significant Accounting Policies 

Organization and Principles of Consolidation 

The consolidated financial statements include the accounts of M.S. Carriers, 
Inc. and its wholly-owned subsidiaries, M.S. Carriers Warehousing and 
Distribution, Inc., M.S. Carriers Logistics Mexico, S.A. de C.V., M.S. 
International, Inc. and M.S. Global, Inc. Significant intercompany accounts and 
transactions have been eliminated in consolidation. The Company accounts for its
50% investment in Transportes EASO S.A. de C.V. (EASO), a Mexican trucking 
company, by the equity method. This investment is classified as other assets in 
the consolidated financial statements and is approximately $1,503,000 and 
$1,197,000 at December 31, 1997 and 1996, respectively. The Company recognized 
income of approximately $306,000 in 1997 from its investment in EASO. The 
operations of EASO were approximately break even in 1996 and 1995. 
 
Revenue Recognition 

Operating revenues are recognized on the date the freight is delivered. 
 
Cash Equivalents 

The Company considers all highly liquid investments with a maturity of three 
months or less when purchased to be cash equivalents.

                                   31
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 

2.  Significant Accounting Policies (continued) 
 
Property and Equipment 

Property and equipment are stated at cost. Depreciation, which includes 
amortization of assets held under capital leases, is computed on the straight-
line method over the estimated useful lives as follows: 
 
      
          Buildings                     15-30 Years
          Revenue equipment               3-6 Years
          Service equipment and other     3-5 Years
 
Tires and tubes purchased as part of revenue equipment are capitalized as a cost
of the equipment. Replacement tires and tubes are expensed when placed in 
service. 
 
Foreign Currency Translation 

Prior to January 1, 1997, the functional currency of the Company's foreign 
subsidiary and equity investee was the local currency, the Mexican peso. Balance
sheet accounts were translated at exchange rates in effect at the end of the 
year and income statement accounts were translated at average exchange rates for
the year. Translation gains and losses were included as a separate component of 
stockholders' equity. 
 
Effective January 1, 1997, Mexico was designated as a highly inflationary 
economy. As a result, the functional currency was changed from the local 
currency to the reporting currency. Translation gains and losses beginning 
January 1, 1997 are recorded in the statement of income rather than as a 
separate component of stockholders' equity. 
 
Income Taxes 

The Company accounts for income taxes using the liability method. 
 
Earnings Per Share 

In 1997, the Financial Accounting Standards Board (FASB) issued and the Company 
adopted Statement No. 128, Earnings per Share. Statement 128 replaced the 
calculation of primary and fully diluted earnings per share with basic and 
diluted earnings per share. Unlike primary earnings per share, basic earnings 
per share excludes any dilutive effects of options, warrants and convertible 
securities. Diluted earnings per share is very similar to the previously 
reported fully diluted earnings per share. All earnings per share amounts for 
all periods have been presented, and where appropriate, restated to conform to 
the Statement 128 requirements. 
 
Risks and Uncertainties 

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 the accompanying 
notes. Actual results could differ from those estimates. 

                                   32
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 

2.  Significant Accounting Policies (continued) 

Stock-Based Compensation 

The Company accounts for stock-based compensation awards under provisions of 
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to 
Employees. 
 
Accounting Pronouncements 

In 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income, 
which is effective for fiscal years beginning after December 15, 1997. Statement
130 establishes standards for the reporting and display of comprehensive income 
and its components. The Statement requires that all items that are included in 
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company is currently 
evaluating the reporting formats recommended under this statement. 
 
In 1997, the FASB issued Statement No. 131, Disclosures about Segments of an 
Enterprise and Related Information, which is effective for fiscal years 
beginning after December 15, 1997. Statement 131 changes the way public 
companies report segment information in annual financial statements and also 
requires those companies to report selected segment information in interim 
financial reports to shareholders. The Company is evaluating the provisions of 
this statement and, upon adoption, may establish different operating segments 
for reporting purposes. 
 
3. Change in Accounting Estimate 

Effective February 1, 1996, the Company changed the estimated salvage value of 
substantially all of its trailers to more accurately reflect market conditions. 
This change in accounting estimate decreased depreciation expense by 
approximately $3,500,000, resulting in an increase in net income of 
approximately $2,200,000 and an increase in both basic and diluted earnings per 
share of $.18 per share for the year ended December 31, 1996. 
 
4. Business Acquisition 
 
In September 1997, the Company acquired substantially all of the assets and 
assumed certain liabilities of a truckload carrier located in Arkansas. The 
Company acquired assets, which consisted primarily of revenue equipment, 
totaling approximately $19,575,000, and assumed liabilities, which consisted 
primarily of capitalized lease obligations, totaling approximately $15,943,000. 
In connection with this acquisition, the Company issued to the seller 153,468 
shares of the Company's common stock valued at $3,575,805, recorded 
approximately $443,000 in deferred payments and paid cash of $673,000. The 
acquisition resulted in goodwill of approximately $1,060,000, which is being 
amortized using the straight-line method over five years. This acquisition was 
accounted for by the Company using the purchase method of accounting. The 
results of operations of the acquired company are included in the accompanying 
consolidated statement of income from the acquisition date, and are immaterial 
to the Company's results of operations. 

                                   33
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 
<TABLE>
<CAPTION>
 
5. Long-Term Obligations 
 
Long-term obligations consist of the following: 
   
                                                    December 31
                                                 1997           1996   
                                             --------------------------
<S>                                          <C>            <C>
Equipment loans                              $ 4,638,127    $13,291,078 
Capitalized lease obligations                 42,604,559     21,328,672
Revolving lines of credit                     48,472,189     25,069,000
                                             --------------------------
                                              95,714,875     59,688,750
Less current maturities                      (15,737,609)   (14,315,462) 
                                             --------------------------
                                             $79,977,266    $45,373,288 
                                             --------------------------
                                             --------------------------
</TABLE>
 
The equipment loan is due in 1998 in monthly installments and bears interest at 
a rate of 8.12%. 
 
The Company has a line of credit available for borrowings of up to $60,000,000 
with interest at the lower of the bank's prime rate or the 30-day LIBOR rate 
plus .45% (6.41% at December 31, 1997). The balance outstanding under this line 
of credit was $38,472,189 and $25,069,000 at December 31, 1997 and 1996, 
respectively. There are no commitment fees or compensating balance requirements 
for the line of credit, which expires June 1, 1999. 
 
During 1994, the Company entered into sale leaseback transactions related to 
revenue equipment. These capital leases are secured by the related revenue 
equipment with a net book value at December 31, 1997 and 1996 of approximately 
$19,700,000 and $23,100,000, respectively, which is net of accumulated 
amortization of $9,900,000 and $6,900,000, respectively, and bear interest at 
8.12%. The remaining lease terms are from 1 to 2 years and contain renewal or 
fixed price purchase options and guarantees of residual value at the end of the 
lease terms. 
 
During 1997, the Company entered into an agreement with a bank to provide for 
borrowings of up to $10,000,000 under a separate line of credit. The line of 
credit bears interest at varying rates based upon the lower of the bank's prime 
rate or the 30-day LIBOR rate plus .45% (6.41% at December 31, 1997). The 
balance outstanding under this line of credit, which expires June 1, 1998, was 
$10,000,000 at December 31, 1997. This amount is classified as a long-term 
obligation in the accompanying consolidated balance sheet because the Company 
intends to refinance the line of credit on a long-term basis through a new 
credit facility or through the existing $60,000,000 line of credit. 
 
During December 1997, the Company entered into a sale leaseback transaction 
related to revenue equipment. These capital leases bear interest at varying 
rates based upon the 30-day LIBOR rate less .60% (5.37% at December 31, 1997) 
and are secured by the related revenue equipment with a net book value at 
December 31, 1997 of $18,300,000. Amortization of the revenue equipment will 
begin January 1, 1998, when the assets are placed in service. The lease terms 
are 3 years and contain guarantees of residual value at the end on the lease 
terms.  
 
In connection with the acquisition described in note 4, the Company assumed 
approximately $15,700,000 in capitalized lease obligations related to acquired 
revenue equipment with a fair value of approximately $19,175,000 at the time of 
acquisition. These capital leases are secured by the related revenue equipment 

                                   34
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 
5.  Long-Term Obligations (continued)

with a net book value at December 31, 1997 of $18,445,000, which is net of 
accumulated amortization of $730,000 and bear interest at rates ranging from 8% 
to 11%. 
 
Certain of the Company's debt agreements contain covenants including required 
ratios of notes payable to net worth and notes payable to cash flow. 
 
The future maturities of long-term debt and future minimum lease payments under 
capitalized lease obligations, by year and in the aggregate, consist of the 
following at December 31, 1997: 

<TABLE>
<CAPTION>
 
                                         Long-Term      Capitalized Lease  
                                            Debt           Obligations   
                                        ---------------------------------
     <S>                                <C>                 <C>
     1998                               $ 4,638,127         $13,426,030 
     1999                                48,472,189          17,448,964 
     2000                                                    15,392,802
     2001                                                     2,002,949     
                                        ---------------------------------
                                         53,110,316          48,270,745
     Amounts representing interest                            5,666,186     
                                        ---------------------------------
     Total long-term obligations        $53,110,316         $42,604,559     
                                        ---------------------------------
                                        ---------------------------------
</TABLE> 

The Company paid interest of approximately $5,775,000 in 1997, $4,769,000 in 
1996 and $5,524,000 in 1995. 
 
6. Claims Payable 
 
Under an agreement with its insurance underwriters, the Company self-insures for
liability of $1,500,000 for the initial occurrence per policy year, $1,250,000 
for the second occurrence per policy year, and $1,000,000 for each occurrence 
thereafter involving bodily injury and property damage. Excess liability is 
assumed by the insurance underwriters. Reserves for claims are provided in 
amounts which management considers adequate. 
 
The Company self-insures employee health claims up to $175,000 per employee per 
policy year and workers' compensation claims up to $300,000 per employee per 
policy year and has provided reserves which management considers adequate for 
the Company's estimated liability for covered claims. 
 
7. Income Taxes 
 
The liability method is used in accounting for income taxes. Under this method, 
deferred tax assets and liabilities are determined based on differences between 
financial reporting and tax bases of assets and liabilities and are measured 
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Income tax expense (benefit) consists of the 
following:

                                   35
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 
7. Income Taxes (continued) 

<TABLE>
<CAPTION>
                                       Year ended December 31

                               1997            1996           1995     
                         ---------------------------------------------
<S>                      <C>             <C>               <C>
  Current:
   Federal               $ 1,931,443     $ (3,085,513)     $ 1,115,242
   State                     174,344         (553,032)         (55,324) 
                         ---------------------------------------------
                           2,105,787       (3,638,545)       1,059,918
  Deferred:
   Federal                 7,173,148        9,148,595        5,273,783 
   State                   1,192,948        1,521,307        1,052,738  
                         ---------------------------------------------
                           8,366,096       10,669,902        6,326,521  
                         ---------------------------------------------
                         $10,471,883    $   7,031,357      $ 7,386,439  
                         ---------------------------------------------
                         ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
 
The effective tax rate varied from the statutory federal income tax rate of 35% 
as follows: 
 
                                   Year ended December 31
                             1997            1996             1995      
                         --------------------------------------------
<S>                      <C>              <C>              <C>
Taxes at statutory rate  $10,301,780      $6,814,640       $7,188,136 
State income taxes, net
 of federal tax benefits    919,231         696,066           734,215 
Other                      (749,128)       (479,349)         (535,912)  
                         --------------------------------------------
                        $10,471,883      $7,031,357        $7,386,439   
                         --------------------------------------------
                         --------------------------------------------
</TABLE>
 
Income tax payments (refunds) were approximately $351,000 in 1997, $(2,046,000) 
in 1996 and $6,593,000 in 1995. 
 
The Company has alternative minimum tax credit carryforwards of approximately 
$630,000 at December 31, 1997, which have no expiration date and which have been
utilized for financial statement purposes. 
 
Significant components of the Company's deferred tax liabilities and assets as 
of December 31 are as follows:
 <TABLE> 
<CAPTION>
 
                                      1997          1996      
                                   --------------------------
<S>                                <C>            <C>
   Deferred tax liabilities:
    Property and equipment         $59,234,157    $48,563,673 
    Other --net                      1,969,673      1,774,718  
                                   --------------------------
   Total deferred tax liabilities   61,203,830     50,338,391  
                                   --------------------------

   Deferred tax assets:
    Claims payable                   5,719,357      4,511,042 
   Other -- net                      2,827,954      1,536,926  
                                   --------------------------
   Total deferred tax assets         8,547,311      6,047,968  
                                   --------------------------
   Net deferred tax liabilities    $52,656,519    $44,290,423  
                                   --------------------------
                                   --------------------------
</TABLE>
 
8. Employee Benefit Plan 
 
The M.S. Carriers, Inc. Retirement Savings Plan (the Plan) is a defined 
contribution plan under Section 401(k) of the Internal Revenue Code (IRC) and 
provides for voluntary contributions by employees and matching contributions by 
the Company. All employees who are 19 years of age or older and have completed 
six months of service are eligible for the Plan. The Plan provides each 

                                   36
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 

8. Employee Benefit Plan (continued) 

participant with the option of contributing from 1% to 15% of the employee's 
annual compensation subject to IRC limitations. The Company matches the employee
contribution up to 50% of the participant's contribution, but limited to a 
maximum of 3% of the participant's compensation. The Company's contribution to 
the Plan, net of forfeitures, was approximately $1,098,000 for 1997, $1,178,000 
for 1996 and $1,078,000 for 1995. 
 
9. Earnings Per Share 
 
The following table sets forth the computation of basic and diluted earnings per
share: 
<TABLE>
<CAPTION>

 
                                  1997         1996               1995     
                              -------------------------------------------
<S>                           <C>           <C>               <C>
Numerator:
  Net income available to  
    common stockholders       $18,961,773   $12,439,044       $13,151,092  
                              -------------------------------------------
                              -------------------------------------------
Denominator: 
  Weighted-average
     shares for basic 
     earnings per share        12,074,140    12,123,472        12,843,326 
  Dilutive employee 
     stock options                261,064       121,401           185,236  
                              -------------------------------------------
  Adjusted weighted  
     average shares for
     diluted earnings
     per share                 12,335,204    12,244,873        13,028,562  
                              -------------------------------------------
                              -------------------------------------------
Basic earnings  
  per share                   $      1.57   $      1.03       $      1.02 
                              -------------------------------------------
                              -------------------------------------------
Diluted earnings 
  per share                   $      1.54   $      1.02       $      1.01  
                              -------------------------------------------
                              -------------------------------------------
 
</TABLE>
10. Stock Options 

The Company has elected to follow Accounting Principles Board Opinion No. 25, 
Accounting for Stock Issued to Employees (APB 25) and related Interpretations in
accounting for its employee stock options because the alternative fair value 
accounting provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation (Statement 123), requires use of option valuation models that were 
not developed for use in valuing employee stock options. Under APB 25, because 
the exercise price of the Company's employee stock options equals the market 
price of the underlying stock on the date of grant, no compensation expense is 
recognized. 
 
The Company's Stock Option Plans (the Option Plans) provide for the granting of 
either qualified or nonqualified stock options. Options are subject to terms and
conditions determined by the Compensation Committee of the Board of Directors. 
Options granted under the 1986 Incentive Stock Option Plan generally are 
exercisable in increments of one-third per year beginning two years from the 
date of grant and expire ten years from the date of grant. Options granted under
the 1993 and 1996 Stock Option Plans are exercisable five years from the date of
grant. Under the Option Plans, the Company may grant options to purchase up to a
total of 2,600,000 shares of common stock at the prevailing market price at the 
date of grant. 
 
Pro forma information regarding net income and earnings per share is required by
FASB Statement 123, and has been determined as if the Company had accounted 

                                   37
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 
10. Stock Options (continued) 

for its employee stock options under the fair value method of Statement 123. The
fair value for the Company's options was estimated at the date of grant using a 
Black-Scholes option pricing model with the following weighted-average 
assumptions for 1997, 1996 and 1995, respectively: risk-free interest rates of 
5.3% in 1997, 6.6% in 1996 and 6.5% in 1995, a volatility factor of the expected
market price of the Company's common stock of .27 in 1997 and .25 in 1996 and 
1995; a weighted-average expected life of the options of 7 years, and no 
dividend payments. 
 
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully 
transferable. In addition, option valuation models require the input of highly 
subjective assumptions including the expected stock price volatility. Because 
the Company's employee stock options have characteristics significantly 
different from those of traded options, and because changes in the subjective 
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single 
measure of the fair value of its employee stock options. 
 
For purposes of pro forma disclosures, the estimated fair value of the options 
is amortized to expense over the respective options' vesting period. The 
Company's pro forma information follows: 
<TABLE>
<CAPTION>
 
                                          Year ended December 31
                                       1997           1996           1995   
                                   ---------------------------------------
<S>                                <C>            <C>           <C>
Pro forma net income               $17,638,311    $11,676,648   $13,104,073 
Pro forma basic               
 earnings per share                $      1.46    $       .96   $      1.02 
Pro forma diluted
 earnings per share                $      1.43    $       .95   $      1.01 
</TABLE>
 
Because Statement 123 applies only to stock-based compensation awards for 1995 
and future years, the pro forma disclosures under Statement 123 are not likely 
to be indicative of future disclosures until the disclosures reflect all 
outstanding, nonvested awards.

                                   38
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 

10. Stock Options (continued)

A summary of the Company's stock option plan activity is as follows:
<TABLE>
<CAPTION>

                                  Number of          Weighted
                                 Shares Under        Average
                                    Option        Exercise Price
                                 -------------------------------
<S>                               <C>                <C>
Balance at January 1, 1995          627,000          $14.82 
 Options granted                     45,000           22.61
 Options canceled                   (18,000)          21.31      
                                 -------------------------------
Balance at December 31, 1995        654,000           15.18
 Options granted                  1,539,000           19.03
 Options exercised                 (131,333)           6.11
 Options canceled                  (365,667)          19.86      
                                 -------------------------------
Balance at December 31, 1996      1,696,000           18.37
 Options granted                    516,500           20.93
 Options exercised                  (47,500)          13.93
 Options canceled                  (429,000)          18.67      
                                 -------------------------------
Balance at December 31, 1997      1,736,000          $19.01      
                                 -------------------------------
                                 -------------------------------
</TABLE> 
Options exercisable were 200,833, 177,999 and 229,669 at December 31, 1997, 1996
and 1995, respectively. The weighted-average fair value of options granted 
during 1997, 1996 and 1995 was $8.86, $8.37 and $9.82, respectively. Exercise 
prices for options outstanding as of December 31, 1997 ranged from $7.19 to 
$26.94. 

The following table segregates option information between ranges of exercise 
prices as of December 31, 1997:  
<TABLE>
<CAPTION>
 
                                         Exercise Price 
                                    Less Than      Greater Than
                                       $10             $10           Total
                                    ----------------------------------------
<S>                                 <C>            <C>            <C>
Number of shares under option        132,000        1,604,000      1,736,000 
Weighted-average exercise price     $   7.19       $    19.92     $    19.01 
 Weighted-average years of
 remaining contractual life             3.0               7.9            7.5 
Exercisable options                 132,000            76,833        200,833
 Weighted-average exercise price
 of exercisable options             $   7.19       $    21.85     $    13.00 
</TABLE>
 
At December 31, 1997, the Company had reserved 685,167 shares of its common 
stock for issuance pursuant to stock option plans. 
 
11. Significant Customers 
 
The Company operates primarily in one business segment, that of a truckload 
carrier. One customer, Sears, accounted for 10% or more of revenues in 1997, 
1996, and 1995 with revenues of $59,577,000, $57,358,000 and $59,533,000, 
respectively. 
 
12. Commitments and Contingencies 
 
The Company is involved in certain legal actions and claims arising in the 
ordinary course of business. It is the opinion of management that such 
litigation and claims will be resolved without material effect on the Company's 
financial position or results of operations. 

                                   39
<PAGE>
                           M.S. Carriers, Inc.


             Notes to Consolidated Financial Statements (continued) 

13. Fair Value of Financial Instruments 

The carrying amounts of cash and cash equivalents, accounts receivable, and 
accounts payable approximate fair value. The book value of long-term 
obligations, including current portion, approxi-mates fair value based on the 
Company's current incremental borrowing rates for similar types of borrowing 
arrangements. 
 
14. Selected Quarterly Data (Unaudited) 
 
Summarized quarterly data for 1997 and 1996 follows: 
<TABLE>
<CAPTION>
 
                                        1997 
                      March 31      June 30      September 30   December 31 
                    -------------------------------------------------------
<S>                 <C>           <C>           <C>            <C>
Operating revenues  $92,699,990   $101,511,950  $107,465,935   $114,254,950
Operating expenses   86,806,599     92,422,387    97,140,083    104,675,057
                    -------------------------------------------------------
Operating income      5,893,391      9,089,563    10,325,852      9,579,893
Other expense         1,249,589      1,397,517     1,670,508      1,137,429
                    -------------------------------------------------------
Income before taxes   4,643,802      7,692,046     8,655,344      8,442,464
Income taxes          1,643,822      2,790,178     3,085,265      2,952,618 
                    -------------------------------------------------------
Net income          $ 2,999.980    $4,901,868    $ 5,570,079   $  5,489,846
                    -------------------------------------------------------
                    -------------------------------------------------------

Basic earnings per
 share              $       .25    $      .41    $       .46   $        .45
                    -------------------------------------------------------
                    -------------------------------------------------------
Diluted earnings per
 share              $       .25    $      .40    $       .45   $        .44
                    -------------------------------------------------------
                    -------------------------------------------------------

</TABLE>
<TABLE>
<CAPTION>

                                            1996 (A) 
                      March 31      June 30      September 30   December 31
                    -------------------------------------------------------
<S>                 <C>           <C>           <C>            <C>
Operating revenues  $79,690,228    $84,267,277    $85,822,977   $90,455,101
Operating expenses   75,811,677     76,610,270     78,134,832    85,851,755
                    -------------------------------------------------------
Operating income      3,878,551      7,657,007      7,688,145     4,603,346
Other expense         1,132,854      1,099,724      1,044,321     1,079,749
                    -------------------------------------------------------
Income before taxes   2,745,697      6,557,283      6,643,824     3,523,597
Income taxes          1,020,626      2,364,097      2,387,308     1,259,326
                    -------------------------------------------------------
Net income          $ 1,725,071    $ 4,193,186    $ 4,256,516   $ 2,264,271
                    -------------------------------------------------------
                    -------------------------------------------------------
Basic earnings per
 share              $       .15    $       .34    $       .35   $       .19
                    -------------------------------------------------------
                    -------------------------------------------------------
Diluted earnings per
 share              $       .15    $       .34    $       .34    $      .19
                    -------------------------------------------------------
                    -------------------------------------------------------
 
<FN>
(A) Includes the effect of a change in accounting estimate. See note 3.
</FN>
</TABLE> 

                                   40
<PAGE>
<TABLE>
<CAPTION>
                                                                                                       Schedule II

                                             Valuation and Qualifying Accounts

                                                   M.S. Carriers, Inc.

              Column A                    Column B             Column C                   Column D      Column E
-------------------------------------------------------------------------------------------------------------------
                                                              Additions    
                                                          Charged   Charged
                                          Balance at       to         to                                 Balance at
                                          Beginning      Costs and  Other                                   End
      Description                         Of Period      Expenses   Accounts  Deductions                 Of Period
-------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>                  <C>                        <C>
Year ended December 31, 1997
Deducted from asset accounts:
 Allowance for doubtful accounts
 receivable                               $514,610       $1,268,497           $285,456      (1)          $1,497,651

Year ended December 31, 1996
Deducted from asset accounts:
 Allowance for doubtful accounts
 receivable                               $508,919       $  400,000           $394,309      (1)          $  514,610

Year ended December 31, 1995
Deducted from asset accounts:
 Allowance for doubtful accounts
 receivable                               $492,400       $  202,176           $185,657      (1)          $  508,919






<FN>
(1)  Uncollectible accounts written off, net of recoveries.
</FN>
</TABLE>

                                   41
<PAGE>
                                     Exhibit 21


                         Subsidaries of M.S. Carriers, Inc.

                     
                                                       Jurisdiction of
          Subsidiary                                    Incorporation 
                                                       ---------------
M.S. Carriers Warehousing & Distribution, Inc.            Tennessee

M.S. Nationwide, Inc. (inactive)                          Tennessee

M.S. Carriers Logistics Mexico, S.A. de C.V.              Mexico

M.S. International, Inc.                                  Nevada

M.S. Global, Inc.                                         Nevada

                                   42
<PAGE>