SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

(Mark One)
[  X  ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.
         For the Fiscal Year Ended December 31, 1996
                                       OR
[      ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.
         For the transition period from                     to

Commission file number 000-20793

                           SMITHWAY MOTOR XPRESS CORP.
             (Exact name of registrant as specified in its charter)

        Nevada                                            42-1433844
(State or Other Jurisdiction                (I.R.S. Employer Identification No.)
of Incorporation or Organization)

             Rural Route #5
            Fort Dodge, Iowa                                  50501
(Address of Principal Executive Offices)                    (Zip Code)

Registrant's telephone number, including area code:  515/576-7418

Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:
                                            $0.01 Par Value Class A Common Stock
                                            ------------------------------------

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO

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

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant was  $20,452,209 as of March 1, 1997,  (based upon the $9 3/8 per
share  closing  price on that  date as  reported  by  Nasdaq).  In  making  this
calculation the registrant has assumed,  without admitting for any purpose, that
all  executive  officers,  directors,  and holders of more than 5% of a class of
outstanding common stock, and no other persons, are affiliates.

As of March 1, 1997, the registrant had 3,999,293 shares of Class A Common Stock
and 1,000,000 shares of Class B Common Stock outstanding.

DOCUMENTS  INCORPORATED BY REFERENCE:  The information set forth under Part III,
Items 10, 11, 12, and 13 of this Report is  incorporated  by reference  from the
registrant's   definitive  proxy  statement  for  the  1997  annual  meeting  of
stockholders that will be filed no later than April 30, 1997.


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<PAGE>



                              Cross Reference Index

The following  cross  reference index indicates the document and location of the
information contained herein and incorporated by reference into the Form 10-K.


                                                           Document and Location
                                     Part I
Item 1   Business                                                  Page 3 herein
Item 2   Properties                                                Page 8 herein
Item 3   Legal Proceedings                                         Page 9 herein
Item 4   Submission of Matters to a Vote of Security
            Holders                                                Page 9 herein
                                     Part II
Item 5   Market for the Registrant's Common Equity and
            Related Stockholder Matters                            Page 9 herein
Item 6   Selected Financial Data                                  Page 10 herein
Item 7   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                   Page 11 herein
Item 8   Financial Statements and Supplementary Data              Page 17 herein
Item 9   Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                   Page 17 herein
                                    Part III
Item 10  Directors and Executive Officers of the
            Registrant                                 Page 2 of Proxy Statement
Item 11  Executive Compensation                        Page 4 of Proxy Statement
Item 12  Security Ownership of Certain Beneficial
            Owners and Management                      Page 5 of Proxy Statement
Item 13  Certain Relationships and Related
            Transactions                               Page 7 of Proxy Statement
                                     Part IV
Item 14  Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K                           Pages 18 and 42 herein
            Form 8-K

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

         This report  contains  "forward-looking  statements" in paragraphs that
are marked with an asterisk.  These  statements are subject to certain risks and
uncertainties  that could cause actual results to differ  materially  from those
anticipated.  See "Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations  -  Cautionary  Statement  Regarding  Forward-Looking
Statements" for additional  information and factors to be considered  concerning
forward-looking statements.


                                        2

<PAGE>



                                     PART I


ITEM 1.  BUSINESS

The Company

         Smithway  Motor  Xpress  Corp.  ("Smithway"  or  the  "Company")  is  a
truckload  carrier  that  provides  nationwide   transportation  of  diversified
freight, concentrating primarily on the flatbed segment of the truckload market.
The Company uses its "Smithway Network" of 24 computer-connected  field offices,
commission  agencies,   and  Company-owned   terminals  to  offer  comprehensive
truckload  transportation services to shippers located predominantly between the
Rocky  Mountains in the West and the  Appalachian  Mountains in the East, and in
eight Canadian provinces.

         Smithway  operated  essentially  as a local  cartage  company until the
early  1970's,  when it  acquired  the  assets and  operating  rights of another
carrier and began  expanding its flatbed  operation.  From that time through the
early 1980's,  the Company  specialized in transporting  building  materials and
managed  growth by  balancing  its fleet  with  approximately  equal  numbers of
Company-owned  and  independent  contractor  tractors.  William G. Smith  became
President of Smithway in 1984, when the Company's revenue was $26.4 million. Mr.
Smith led the Company's  effort to diversify its customer and freight base, form
the Smithway  Network of  locations,  and grow to the size that enabled it to be
named  as  a  core  carrier  by  major  shippers.  After  achieving  revenue  of
approximately  $50 million in 1991,  management  focused upon  profitability and
implemented systems to support sustained growth and premium service.

          After establishing an efficient growth platform,  management commenced
the  Company's  acquisition  strategy in 1995 to take  advantage of economies of
scale,  customer  relationships,  and other  opportunities  offered by  industry
consolidation.  Smithway  acquired the  operations of three  trucking  companies
between June 1995 and October 1996.  The Company added a fourth  acquisition  in
February 1997. In each transaction,  Smithway purchased specific assets for fair
market value and paid the selling  company's owner a small percentage of revenue
for a  noncompetition  arrangement.  The Company  acquired  the  business of Van
Tassel,  Inc., a primarily  flatbed carrier based in Pittsburg,  Kansas, in June
1995,  and  Smith  Trucking  Company,  a  primarily  dry van  carrier  based  in
McPherson,  Kansas,  in  January  1996.  Both of  these  acquisitions  permitted
Smithway  to expand and  solidify  existing  customer  relationships  as well as
access new customers.  The Smith  Trucking  location also expanded the Company's
driver recruiting  region. In October 1996, the Company acquired the business of
Marquardt  Transportation,  Inc., a primarily  flatbed carrier based in Yankton,
South  Dakota,  and with a small  facility in  Stockton,  California.  Marquardt
further  diversified  Smithway's  freight  base by  increasing  its  presence in
hauling  large,  manufactured  items  and heavy  machinery.  In  February  1997,
Smithway acquired Fort Dodge,  Iowa-based Pirie Motor Freight,  Inc. Pirie was a
small flatbed  carrier,  and its operations  were  consolidated  into Smithway's
headquarters.

         The Company's  current Chairman,  President,  and CEO, William G. Smith
and  his  father,  Harold  C.  Smith,  acquired  Acme  Transfer,  Inc.,  an Iowa
corporation,  in 1958. In 1972,  they changed its name to Smithway Motor Xpress,
Inc.  ("Smithway-Iowa").  Smithway Motor Xpress Corp. was incorporated in Nevada
in January 1995 to serve as a holding company and conduct the Company's  initial
public  offering,  which  occurred in June 1996.  References to the "Company" or
"Smithway" herein refer to the consolidated  operations of Smithway Motor Xpress
Corp.,  a  Nevada   corporation   ("Smithway-Nevada"),   and  its  wholly  owned
subsidiary,   Smithway-Iowa.   Former   subsidiaries   Smithway   Transportation
Brokerage,  Inc., an Iowa corporation,  and Wilmar Truck Leasing,  Inc., an Iowa
corporation, were merged into Smithway-Iowa in 1996.

Strategy

         Smithway's  objective is to accelerate the expansion of its operations.
Management  believes that the flatbed and dry van truckload markets offer growth
opportunities  because of several  identifiable  trends. Many major shippers are
reducing  the number of  carriers  they use in favor of  service-based,  ongoing
relationships with

                                        3

<PAGE>



a limited group of core carriers.  These  partnerships and the increasing use of
equipment and drivers dedicated to a single shipper's needs ("dedicated fleets")
are designed to ensure higher quality,  more consistent service for shippers and
greater  equipment  utilization and more predictable  revenue for core carriers.
Other  shippers  that  own   tractor-trailer   fleets  are   outsourcing   their
transportation  requirements to truckload  carriers to lower operating  expenses
and conserve capital for core corporate purposes.  This outsourcing has resulted
in some shippers  eliminating  their own trucks in favor of truckload  carriers,
which,  according to a study commissioned by the American Trucking  Associations
Foundation,  can  provide  similar  service  at  approximately  25%  less  cost.
Deregulation and economies of scale also promote  consolidation.  Many truckload
carriers  have grown rapidly  since  deregulation  in 1980 and have achieved the
size to negotiate  lifetime  equipment  warranties and obtain  equipment,  fuel,
insurance,  financing,  and other items for  significantly  less than smaller or
more leveraged  competitors.  Management  believes that these trends favor large
carriers with modern fleets,  excellent  service,  in-transit  communication and
load tracking, good drivers, a strong safety record,  adequate insurance,  and a
strong capital base.

         The Smithway growth strategy contains six key elements:

         o Market Leadership. Smithway strives for market prominence by offering
a combination of premium service,  equipment availability,  and broad geographic
coverage in a highly fragmented flatbed market segment  characterized  primarily
by  smaller,  less  diversified,  and less  technologically  advanced  carriers.
Management believes the Company's service standards, as well as core carrier and
dedicated  fleet  relationships  with major  shippers,  support higher rates and
prevent diversion of freight by price-competitive carriers.  Management believes
the flatbed  market is less  developed  than the dry van  segment,  and that the
Company's size, service standards,  and financial strength have positioned it to
take advantage of predicted market consolidation.(*)

         o Diversified  Freight.  Smithway targets a diversified mix of freight.
Management  believes  that   diversification  can  reduce  exposure  to  certain
customers'  or  industries'  business  cycles.  In addition,  certain  shipments
outside  the  construction  materials  most  typically  transported  by  flatbed
carriers can increase  profitability.  Smithway's diversified operations include
revenue generated by dry van, transportation logistics,  brokerage,  specialized
railroad  service,  and dedicated route  operations,  together with transporting
non-construction freight such as tires, machinery, and irrigation systems.

         o  Acquisitions.  Smithway  intends to  continue  acquisitions  of both
flatbed and dry van carriers,  focusing  primarily on the flatbed  sector of the
industry.  Management  believes that industry  trends will further the Company's
acquisition  strategy because smaller carriers will find it difficult to compete
with larger,  better capitalized carriers such as Smithway.  Management believes
that  acquisitions  can  promote the  Company's  growth by  providing  access to
drivers,  customer relationships,  and diversified freight.  Management believes
that consolidation in the truckload industry will accelerate in future years.(*)

         o Return on Equity.  Smithway  emphasizes  return on equity by limiting
capital  investment and attempting to increase the utilization of its equipment.
The Company limits capital  expenditures  through the use of equipment  owned by
independent  contractors and facilities provided by commission sales agents. The
Company's  participation in the flatbed market also reduces capital requirements
because  flatbed  operations  generally  require a lower  ratio of  trailers  to
tractors than is required for van traffic.

         o Productivity Incentives.  Smithway seeks to create an entrepreneurial
environment  for its  personnel by  compensating  all  independent  contractors,
commission  sales  agents,  and most flatbed  drivers  solely on a percentage of
revenue basis, and all Company sales personnel  partially through  percentage of
revenue  bonuses.  The majority of employees also participate in profits through
the  Company's  contributions  to its 401(k)  profit-sharing  plan the  ("401(k)
Plan") or  ownership  of  Smithway  Class A Common  Stock  formerly  held by the
Company's Employee Stock Ownership Plan ("ESOP"). Effective January 1, 1997, the
ESOP was merged into the
--------
         (*)      May contain "forward-looking" statements.

                                        4

<PAGE>



401(k)  Plan,  and the  Smithway  stock was placed in an  employer  stock  fund.
Management  believes that these  incentives  invest its workforce  with a direct
personal interest in each load.

         o  Operating  Efficiencies.   Smithway  enhances  operating  efficiency
through freight-selection software,  satellite-based  communication,  late-model
revenue  equipment,  and the Smithway  Network.  The Spectrum freight  selection
software  permits  dispatchers  to select freight based upon  profitability  and
compatibility with preferred routes. The Qualcomm  satellite-based  tracking and
communication   system   permits   instantaneous   location  of  equipment   and
communication  with drivers.  Smithway operates a late-model tractor fleet (with
an average age of 21.4 months at December 31,  1996) to enhance fuel  efficiency
and driver recruitment while reducing maintenance downtime.

Operations

         Smithway  integrates  its sales and dispatch  functions  throughout its
computer-connected  "Smithway  Network."  The Smithway  Network  consists of the
Company's  headquarters in Fort Dodge,  Iowa, and 23 field offices,  independent
agencies, and terminals strategically located near major shippers to provide the
consistent,  local  contact  with  shipper  personnel  expected  by  many of the
Company's flatbed customers. The headquarters and 16 terminals and field offices
are  managed  by  Smithway  employees,  while  the 7  agencies  are  managed  by
independent  commission agents. The customer sales representatives and agents at
each location have front-line responsibility for booking freight and dispatching
all  trucks  in  their  regions.   Fleet  managers  at  the  Fort  Dodge,  Iowa,
headquarters  coordinate  all load  movements via computer link to optimize load
selection  and promote  proper fleet  balance  among  regions.  Personnel at the
Company's  headquarters also handle all sales and dispatch functions for the van
division and for flatbed traffic that does not originate within a specific sales
region.

         Agents are important to the Company's  operations  because they are the
primary  contact for shippers  within their region and have regular contact with
drivers and independent contractors.  The Company's agents are paid a commission
on revenue they generate.  Although agent contracts  typically are cancelable on
14 days' notice,  Smithway's  agents  average  nearly ten years' tenure with the
Company. In addition to sales and customer service benefits, management believes
agents offer the advantage of  minimizing  capital  investment  and fixed costs,
because agents are responsible for all of their own expenses.

Customers and Marketing

         Smithway's sales force includes six national sales  representatives and
personnel  at 17  terminals  and  field  offices  and 7  independent  commission
agencies.  National sales  representatives  focus on national  customers and van
freight,  while sales  personnel at  terminals,  field  offices and agencies are
responsible for regional customer contact.  The Company's sales force emphasizes
rapid response time to customer  requests for  equipment,  undamaged and on-time
pickup and delivery,  one of the nation's  largest fleets of flatbed  equipment,
safe and professional drivers, logistics management, dedicated fleet capability,
and its  strategically  located Smithway Network.  Management  believes that few
other carriers operating principally in the Midwest flatbed market offer similar
size,  service,  and the reliability of a late-model  fleet.  Consequently,  the
Company seeks primarily  service-sensitive freight rather than competing for all
freight on the basis of price.

          In 1996,  the Company's top 50, 25, 10, and 5 customers  accounted for
64.3%,  54.7%,  31.9%,  and 21.2% of revenue,  respectively,  with more than 450
customers  accounting  for the remaining  35.7% of revenue.  No single  customer
accounted for more than 6.0% of Smithway's revenue during 1996.


                                        5

<PAGE>



Technology

         Management  believes  that  advances  in  technology  can  enhance  the
Company's   operating   efficiency  and  customer   service.   Three   principal
technologies   used   by   Smithway   includes   freight   selection   software,
satellite-based  tracking and  communication  with trucks,  and Electronic  Data
Interchange ("EDI") with customers.  In July 1993, the Company initiated the use
of the Spectrum freight selection  software.  Spectrum ranks each potential load
based upon rate per loaded mile, empty mile exposure, and history of obtaining a
profitable return load from the proposed destination.

          Smithway  has   installed   Qualcomm   satellite-based   tracking  and
communication units in all of its Company-owned  tractors and has offered rental
of these units as an option to its independent contractors.  Management believes
on-board communication  capability can reduce unnecessary stops and out-of-route
miles because  drivers are not forced to find a telephone to contact the Company
or receive instructions.  In addition, drivers can immediately report breakdowns
or other  emergency  conditions.  The system also  enables the Company to advise
customers  of the  location of freight in transit  through  its hourly  position
reports of each tractor's location.

          Smithway  also  offers  its  customers  EDI  technology.   EDI  allows
customers to  communicate  directly with the Company via computer link and, with
the aid of  satellite  communication,  obtain  location  updates  of  in-transit
freight, expected delivery times, and account payment instructions.

Drivers, Independent Contractors, And Other Personnel

         Smithway seeks drivers and  independent  contractors  who safely manage
their  equipment and treat  freight  transportation  as a business.  The Company
historically  has  operated a fleet  comprised  of  substantial  numbers of both
Company-owned and independent  contractor tractors.  Management believes a mixed
fleet offers competitive  advantages because the Company is able to recruit from
both  personnel  pools to facilitate  fleet  expansion.  The Company  intends to
retain a mixed fleet in the future to insure that its recruiting  efforts toward
either group are not damaged by becoming  categorized as predominantly  either a
Company-owned or independent  contractor fleet,  although  acquisitions or other
factors may cause fluctuations in the fleet mix from time to time.

         Smithway  has  implemented  several  policies  to  promote  driver  and
independent  contractor  recruiting and retention.  These include maintaining an
open-door policy with easy access to senior  executives,  appointing an advisory
board  comprised  of top drivers and  independent  contractors  to consult  with
management, and assigning each driver and independent contractor to a particular
dispatcher  to insure  personal  contact.  In  addition,  the  Company  utilizes
conventional  (engine-forward)  tractors,  which  are more  comfortable  for the
driver, and operates over relatively short distances (568-mile average length of
haul in 1996) to return drivers home as frequently as possible.

         Smithway is not a party to a collective  bargaining  agreement  and its
employees are not  represented by a union. At December 31, 1996, the Company had
434 Company drivers, 228 non-driver employees,  and 404 independent contractors.
Management  believes that the Company has good  relationships with its employees
and independent contractors.

Safety and Insurance

         Smithway's active safety and loss prevention  program has resulted in a
"satisfactory"  safety and fitness rating from the DOT (the highest  rating) and
numerous  driving  awards.  Its safety  and loss  prevention  program  includes,
pre-screening,  initial orientation,  six weeks on-the-road training for drivers
without substantial experience, 100% log monitoring, and safety bonuses.

         The Company maintains  insurance covering losses in excess of a $50,000
self-insured  retention for cargo loss,  personal injury,  property damage,  and
physical damage claims. The Company has a $100,000 deductible

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<PAGE>



for workers'  compensation  claims in states where a deductible is allowed.  Its
primary personal injury and property damage insurance policy has a limit of $2.0
million per occurrence, and the Company carries excess liability coverage, which
management  believes  is  adequate to cover  exposure  to claims  exceeding  its
retention limit.

Revenue Equipment

         Smithway's  equipment  strategy  for its own  tractors  (as  opposed to
independent  contractors'  tractors) is to operate late-model tractors and trade
or  dispose  of  its  tractors  prior  to  the  expiration  of  major  component
warranties.  Management  believes that  operating  newer  equipment can minimize
repair  and  maintenance  expense  and offer  improvements  in fuel  efficiency.
Smithway orders conventional  (engine forward) tractors with standard engine and
drivetrain  components,  and trailers with standard brakes and tires to minimize
its inventory of spare parts. All equipment is subject to the Company's  regular
maintenance  program,  and is also inspected and maintained  each time it passes
through a Smithway maintenance facility. Smithway's tractor fleet had an average
age of 21.4 months at December 31, 1996.

Competition

         The truckload  segment of the trucking  industry is highly  competitive
and fragmented, and no carrier or group of carriers dominates the flatbed or van
market.  Smithway competes  primarily with other regional,  short-to-medium-haul
carriers  and private  truck  fleets used by  shippers  to  transport  their own
products in proprietary equipment. The Company competes to a limited extent with
rail and rail-truck  intermodal service,  but attempts to limit this competition
by seeking  service-sensitive  freight,  focusing on short-to-medium  lengths of
haul  (568-mile  average)  and  emphasizing  destinations  not  conveniently  or
expeditiously  served by rail.  Although  management  believes the 1,252 flatbed
trailers it operated at December 31, 1996,  rank its flatbed  division among the
ten  largest  such fleets in that  industry  segment,  there are other  trucking
companies,  including  diversified  carriers  with large  flatbed  fleets,  that
possess  substantially  greater  financial  resources and operate more equipment
than Smithway.

Fuel Availability and Cost

         The Company actively  manages its fuel costs.  Company drivers purchase
virtually all of the Company's fuel through  service centers with which Smithway
has volume purchasing arrangements.  In addition, management periodically enters
into futures  contracts on heating oil, which is derived from the same petroleum
products as diesel  fuel,  in an effort to  partially  hedge  increases  in fuel
prices. The Company historically has recovered most increases in fuel prices and
taxes by passing the costs  through to  customers  in the form of higher  rates,
although short-term price increases may not be recovered.  Most of the Company's
shipping  contracts  contain  clauses  permitting fuel  surcharges.  The Company
implemented  surcharges with many major  customers,  in response to increases in
fuel prices in 1996.

Regulation

         Historically,  the Interstate  Commerce  Commission ("ICC") and various
state agencies regulated motor carriers'  operating rights,  accounting systems,
mergers and acquisitions,  periodic financial  reporting,  and other matters. In
1995,  federal  legislation  preempted state regulation of prices,  routes,  and
services of motor carriers and  eliminated  the ICC.  Several ICC functions were
transferred to the Department of  Transportation  ("DOT").  Management  does not
believe that  regulation by the DOT or by the states in their remaining areas of
authority will have a material effect on the Company's operations. The Company's
drivers  and  independent  contractors  must  comply with the safety and fitness
regulations promulgated by the DOT, including those relating to drug and alcohol
testing and hours of service.

         The Company's  operations are subject to various  federal,  state,  and
local environmental laws and regulations, implemented principally by the EPA and
similar state regulatory agencies, governing the management of hazardous wastes,
other discharge of pollutants  into the air and surface and underground  waters,
and the

                                        7

<PAGE>



disposal of certain substances.  The Company transports certain commodities that
may be deemed hazardous substances,  and its Fort Dodge, Iowa,  headquarters has
an above-ground fuel storage tank and fueling facility. If the Company should be
involved in a spill or other accident  involving  hazardous  substances,  if any
such substances were found on the Company's  properties,  or if the Company were
found to be in violation of applicable laws and  regulations,  the Company could
be  responsible  for  clean-up  costs,  property  damage,  and  fines  or  other
penalties,  any one of which  could  have a  materially  adverse  effect  on the
Company.  Smithway  does not have  underground  fuel storage tanks at any of its
properties,  and the above-ground fuel tank at Fort Dodge, installed in 1990, is
the only  fueling  site at a  Company  location.  Management  believes  that its
operations are in material compliance with current laws and regulations and does
not know of any existing  condition that would cause  compliance with applicable
environmental  regulations  to have a material  effect on the Company's  capital
expenditures,  earnings,  or competitive position. If the Company should fail to
comply with applicable regulations,  the Company could be subject to substantial
fines or penalties and to civil or criminal liability.(*)

ITEM 2.  PROPERTIES

         Smithway's  headquarters consists of 21,000 square feet of office space
and 44,800 square feet of equipment maintenance and wash facilities,  located on
31 acres near Fort Dodge, Iowa. Driver recruitment  activity takes place at Fort
Dodge, Iowa; Joplin, Missouri;  Oklahoma City, Oklahoma;  Yankton, South Dakota;
and Youngstown,  Ohio.  Maintenance and repair shops are operated at Fort Dodge,
Joplin,  and Yankton.  Of the 19 locations at which sales and dispatch functions
are  performed,  11 are  located in or near  truckstops,  to afford  drivers and
independent contractors access to required facilities without capital investment
by Smithway.

<TABLE>
         The Smithway  Network  consists of  locations in or near the  following
cities:

<CAPTION>
Company Locations                             Ownership       Agent Locations
<S>                                            <C>            <C>
Chicago, Illinois............................  Owned          Cedar Rapids, Iowa
Dallas, Texas................................  Leased<F1>     Cincinnati, Ohio
Denver, Colorado.............................  Leased<F1>     Detroit, Michigan
Fort Dodge, Iowa.............................  Owned          Hennepin, Illinois
Joplin, Missouri.............................  Owned          Houston, Texas
Kansas City, Missouri........................  Leased<F1>     Norfolk, Nebraska
McPherson, Kansas............................  Leased         Toledo, Ohio
Memphis, Tennessee...........................  Leased
Montgomery, Alabama..........................  Leased
Oklahoma City, Oklahoma......................  Owned
Oshkosh, Wisconsin...........................  Leased<F1>
Philadelphia, Pennsylvania...................  Leased<F1>
Stockton, California.........................  Leased<F1>
St. Louis, Missouri..........................  Leased<F1>
St. Paul, Minnesota..........................  Leased<F1>
Yankton, South Dakota........................  Leased
Youngstown, Ohio.............................  Leased<F1>

-----------------------------------
<FN>
<F1> Month-to-month leases.
</FN>
</TABLE>
--------
         (*)      May contain "forward-looking" statements.

                                        8

<PAGE>



ITEM 3.  LEGAL PROCEEDINGS

         The Company from time to time is a party to  litigation  arising in the
ordinary course of its business,  substantially all of which involves claims for
personal injury and property damage incurred in the  transportation  of freight.
The  Company is not aware of any claims or  threatened  claims that might have a
materially adverse effect upon its operations or financial position.


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

         During the fourth  quarter of the fiscal year ended  December 31, 1996,
no matters were submitted to a vote of security holders.


                                     PART II

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

         Price Range of Common  Stock.  The  Company's  Class A common stock has
been traded on the Nasdaq National Market, under the symbol SMXC, since June 27,
1996, the date of the Company's  initial public  offering.  The following  table
sets  forth for the  calendar  periods  indicated  the range of high and low bid
quotations  for the  Company's  Class A common  stock as reported by Nasdaq from
June 27, 1996, to December 31, 1996.

<TABLE>
<CAPTION>
         Period                               High                    Low
--------------------------------------------------------------------------------
<S>                                          <C>                    <C>
Calendar Year 1996
         2nd Quarter (from June 27, 1996)    $   8 1/2              $   8 1/2
         3rd Quarter                         $   8 1/2              $   7 1/2
         4th Quarter                         $   9 3/8              $   8
</TABLE>

         The prices  reported  reflect  interdealer  quotations  without  retail
mark-ups,  mark-downs or commissions, and may not represent actual transactions.
As of March 1, 1997,  the Company had 42  stockholders  of record of its Class A
common stock.  However,  the Company  believes that many  additional  holders of
Class A common  stock  are  unidentified  because  a  substantial  number of the
Company's shares are held of record by brokers or dealers for their customers in
street names.

         Dividend  Policy.  The  Company  has  never  declared  and  paid a cash
dividend  on its  Class A  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 payments
of  cash  dividends  will  depend  upon  the  financial  condition,  results  of
operations  and  capital   commitments  of  the  Company,   restrictions   under
then-existing  agreements,  and other  factors  deemed  relevant by the Board of
Directors.




                                        9

<PAGE>


<TABLE>
ITEM 6.  SELECTED FINANCIAL AND OPERATING DATA
<CAPTION>
                                              Years Ended December 31,
                                     1992     1993     1994     1995      1996
                                   ---------------------------------------------
                     (in thousands, except per share and operating data amounts)
                                   ---------------------------------------------
<S>                            <C>       <C>       <C>       <C>       <C>
Statement of Operations Data:
Operating revenue ...........    $56,073  $59,931    $69,180   $77,339   $93,667
Operating expenses:
  Purchased transportation ...    23,131   23,797     27,420    31,621    37,386
  Compensation and employee
    benefits .................    13,039   13,840     15,877    17,182    20,800
  Fuel, supplies, and
    maintenance ..............     8,054    8,876      9,368    10,183    12,347
  Insurance and claims .......     2,236    2,318      2,238     1,827     1,995
  Taxes and licenses .........     1,346    1,492      1,454     1,588     1,856
  General and administrative .     3,050    3,357      3,512     3,592     4,214
  Communications and utilities       563      543        585       758       971
  Depreciation and
   amortization ..............     2,551    2,821      2,774     3,879     5,740
                               -------------------------------------------------
    Total operating expenses .    53,970   57,044     63,228    70,630    85,309
                               -------------------------------------------------
    Total operating income ...     2,103    2,887      5,952     6,709     8,358
Interest expense (net) .......     1,345    1,179        966     1,225     1,548
                               -------------------------------------------------
Earnings before income taxes
  and accounting change ......       758    1,708      4,986     5,484     6,810
Income taxes .................       228      603      1,879     2,393     2,860
Accounting change ............        --       86        --        --        --
                               -------------------------------------------------
Net earnings .................       530    1,019      3,107     3,091     3,950
Pro Forma Data:
Pro forma provision for
 income taxes <F1> ...........       155      177        232      --        --
                               -------------------------------------------------
Pro forma net earnings <F1> ..  $    375  $   842    $ 2,875   $ 3,091   $ 3,950
                               =================================================
Pro forma net earnings per
 common share <F1><F2> .......  $   0.11  $  0.25    $  0.82   $  0.88   $  0.93
                               =================================================
Pro forma weighted averages
 shares outstanding<F2> ...... 3,430,524 3,428,270 3,498,212 3,524,042 4,249,890
Operating Data<F3>:
Operating ratio<F4> .........       96.3%     95.2%     91.4%     91.3%    91.1%
Adjusted operating ratio<F4>.       93.2%     92.9%     89.6%     88.5%    88.9%
Average revenue per tractor
 per week ...................   $  2,015  $  2,129   $ 2,272   $ 2,160   $ 2,243
Average revenue per loaded
 mile .......................   $   1.30<F5> $1.33   $  1.39   $  1.38   $  1.37
Empty miles percentage ......       16.0      15.5      15.1      15.1     15.3%
Average length of haul in
 miles ......................        599       583       571       563       568
Company tractors at end of
 period .....................        261       288       302       376       458
Independent contractor
 tractors at end of period ..        229       219       258       303       406
Weighted average tractors
 during period ..............        489       497       532       619       747
Trailers at end of period ...        818       814       911     1,167     1,492
Balance Sheet Data (at end of
 period):
Working capital (deficit) ...   $ (2,835) $ (2,236)  $   371   $ 2,516   $ 1,893
Net property and equipment ..     12,771    14,211    15,824    27,843    39,170
Total assets ................     20,471    22,569    25,229    40,702    55,330
Long-term debt, including
 current maturities .........      9,744    10,899    11,775    23,219    15,904
Total stockholders' equity ..      2,050     2,513     4,789     7,871    24,193
------------------------------------
<FN>
<F1>     Adjusted to reflect a provision  for pro forma income taxes for certain
         related  entities  acquired by Smithway, the earnings of which were not
         subject to corporate income.  Such transactions were accounted for in a
         manner  similar  to  a  pooling  of  interests.   See Notes 1 and 14 to
         Consolidated Financial Statements.

<F2>     Adjusted to reflect the issuance of 3,513,697 shares of Common Stock by
         the  Company in the formation of the holding company and acquisition of
         the  related  entities  referred  to  in Note (1) above.  See Note 1 to
         Consolidated Financial Statements.

<F3>     Excludes brokerage activities except as to operating ratio.

<F4>     Operating  expenses as a percentage of operating  revenue.  The Company
         finances some of its revenue  equipment under  operating  leases rather
         than  through  debt  financing  or  capitalized   leases  and  utilizes
         independent contractors whose compensation includes the implied cost of
         financing the equipment owned by them. As a result, the financing costs
         associated with such equipment are characterized as operating expenses.
         The Company's  Adjusted  Operating Ratio removes such implied financing
         costs  from  operating  expenses.  See  "Management's   Discussion  and
         Analysis of Financial  Condition and Results of Operations"  for a more
         complete explanation of Adjusted Operating Ratio.

<F5>     Net of fuel surcharges.
</FN>
</TABLE>

                                       10

<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

General

         The Company  focused  upon net earnings  growth  during the period from
1991 to 1995. During that period,  management  emphasized  conservative  revenue
growth  and  improved  profitability,  while  implementing  systems  to  support
sustained  growth.  After  establishing  a more  efficient  base,  in  1995  and
continuing  through 1996 the Company  increased its rate of revenue growth.  The
Company expanded internally and through  acquisitions of the assets and business
of three  trucking  companies.  In addition,  the Company  concluded its initial
public offering on July 2, 1996, and used the approximately $10.7 million in net
proceeds,  after  deducting  underwriting  discounts  and  offering expenses, to
reduce  outstanding  debt.   The Company's revenue grew 35.4% from 1994 to 1996.
Net  earnings  improved  27.1%  and  net earnings per share 13.4% over the  same
period.

         The Company  operates a fleet comprised of both  Company-owned  revenue
equipment  and  revenue  equipment  owned  by  independent  contractors.   Using
independent  contractors reduces fixed costs, capital requirements,  and revenue
equipment  debt.  This can improve the  Company's  return on equity.  The use of
independent  contractors  affects the Company's expense categories by increasing
purchased  transportation  while decreasing  compensation and employee benefits;
fuel,  supplies,  and maintenance;  insurance and claims;  and depreciation.  In
addition,  the  independent  contractors'  implied  financing  costs  for  their
equipment and the implied  interest  component of operating leases are reflected
as operating expenses (purchased  transportation)  rather than interest expense,
which negatively impacts the Company's operating ratio. As a result,  management
evaluates the Company's  operating  efficiency  through the Company's  "Adjusted
Operating  Ratio." The Adjusted  Operating  Ratio is calculated by assuming that
all  tractors and  trailers  obtained  from  independent  contractors  and under
operating  leases  were  Company-owned  equipment  having  a value  equal to the
average net book value of the tractors and trailers  owned by the Company,  with
such amount  financed at an interest rate equal to the average  interest rate on
the Company's  equipment  debt. The average net book value of the  Company-owned
tractors  and  the  weighted  average  number  of  tractors   provided  by  both
independent contractors and third-party lessors, respectively,  were $34,271 and
391 in 1992,  $40,846 and 374 in 1993,  $36,649 and 366 in 1994, $64,371 and 380
in  1995,  and  $59,094  and 423 in 1996.  The  average  net  book  value of the
Company-owned  trailers and the weighted average number of trailers  provided by
both independent contractors and third-party lessors, respectively,  were $9,092
and 241 in 1992,  $7,587 and 236 in 1993, $8,437 and 247 in 1994, $9,843 and 316
in 1995,  and $13,408 and 375 in 1996.  The Company's  average  interest rate on
equipment debt in such years was 11.1%,  7.9%,  7.8%, 7.8%, and 7.5%. The amount
of assumed interest expense is subtracted from operating  expenses to produce an
operating  ratio that  excludes  financing  costs.  The total  amount of assumed
interest  expense  subtracted  from operating  expenses was  approximately  $1.7
million,  $1.3 million,  $1.2 million, $2.2 million, and $2.3 million in each of
1992 through 1996, respectively. Management believes that the Company's Adjusted
Operating Ratio reflects operating efficiency more accurately than its operating
ratio because the Adjusted  Operating  Ratio excludes the effects of fluctuating
numbers of independent contractors and assets obtained under operating leases.

         The Company's  effective  income tax rate  reflected  herein and in its
Consolidated  Financial  Statements is different  from the combined  federal and
state  expected tax rate for a corporation  headquartered  in Iowa. In 1992, the
Company began absorbing driver per diem travel expenses,  a significant  portion
of which are not  deductible  and inflate the Company's  effective tax rate. The
impact of the Company's  paying driver per diem travel expenses varies depending
upon the ratio of drivers  to  independent  contractors  and the  Company's  net
earnings.  In addition,  prior to 1995,  the  Company's  effective  tax rate was
affected  because the net earnings of two former  affiliated  entities that were
not subject to  corporate  income taxes were  combined  with the  Company's  net
earnings  because  of  common  ownership.  The  Company  acquired  the  entities
effective  January 31, 1995, and since such date has paid corporate taxes on the
pretax  earnings  attributable  to such  entities.  The pro forma  provision for
income taxes  reflected in this report reflects the income taxes that would have
been payable on the pretax earnings of such entities.


                                       11

<PAGE>



Results of Operations

<TABLE>
         The following  table sets forth the percentage  relationship of certain
items to revenue for the periods indicated:

<CAPTION>
                                                    1994      1995       1996
                                                    ----------------------------
<S>                                                 <C>       <C>        <C>
Operating revenue.............................      100.0%    100.0%     100.0%
Operating expenses:
         Purchased transportation.............       39.6      40.9       39.9
         Compensation and employee benefits. .       23.0      22.2       22.2
         Fuel, supplies, and maintenance......       13.5      13.2       13.2
         Insurance and claims................         3.2       2.4        2.1
         Taxes and licenses...................        2.1       2.1        2.0
         General and administrative...........        5.1       4.6        4.5
         Communication and utilities..........        0.8       1.0        1.0
         Depreciation and amortization........        4.0       5.0        6.1
                                                    ----------------------------
         Total operating expenses.............       91.4      91.3       91.1
                                                    ----------------------------
Earnings from operations......................        8.6       8.7        8.9
Interest expense (net)........................        1.4       1.6        1.7
                                                    ----------------------------
Earnings before income taxes..................        7.2       7.1        7.3
Income taxes including pro forma provision for
 income taxes.................................        3.0       3.1        3.1
                                                    ----------------------------
Pro forma net earnings........................        4.2%      4.0%       4.2%
                                                    ============================
</TABLE>

Comparison of year ended December 31, 1996 to year ended December 31, 1995.

         Operating revenue increased $16.3 million (21.1%),  to $93.7 million in
1996 from $77.3 million in 1995. The revenue increase resulted  primarily from a
20.7% increase in weighted average tractors, to 747 in 1996 from 619 during 1995
as the Company  expanded  internally  to meet  customer  demand and acquired the
business of Smith Trucking, Inc. in January 1996, and Marquardt  Transportation,
Inc. in October 1996.  Equipment  utilization (miles per tractor) increased 3.1%
in 1996 over 1995. In addition,  revenue from the Company's  brokerage  division
increased 0.6%, to $6.4 million in 1996. These factors were offset by a decrease
in revenue per loaded mile to $1.37 in 1996 from $1.38 in 1995,  including  fuel
surcharge  revenue of $473,000 in 1996.  Revenue per tractor per week (excluding
revenue from brokerage operations) increased 3.8%, to $2,243 in 1996 from $2,160
in 1995.

         Purchased  transportation  increased  $5.8  million  (18.2%),  to $37.4
million  in 1996  from  $31.6  million  in 1995.  As a  percentage  of  revenue,
purchased  transportation  decreased  to 39.9% in 1996 from 40.9% in 1995,  as a
reduction in the number of tractors  financed under  operating  leases more than
offset a slight  increase in the percentage of revenue  generated by independent
contractors.  Compensation and employee benefits increased $3.6 million (21.1%),
to $20.8 million in 1996 from $17.2 million in 1995, but remained unchanged as a
percentage  of  revenue.  An  increase in  non-driver  employees  as a result of
acquisitions  offset a slight decline in the  percentage of revenue  produced by
Company-owned tractors.

         Fuel,  supplies,  and  maintenance  increased  $2.1 million (21.3%), to
$12.3  million  in 1996 from $10.2 million in 1995.  As a percentage of revenue,
fuel, supplies, and maintenance remained constant at 13.2% in 1996 and 1995,  as
reduced repair and maintenance  expense  attributable  to a newer  Company-owned
tractor fleet was offset by higher  average fuel costs.  The  Company's  average
fuel cost increased to $1.18 per gallon in 1996 from $1.08 in 1995.

         Insurance and claims increased $168,000 (9.2%), to $2.0 million in 1996
from $1.8 million in 1995.  As a  percentage  of revenue,  insurance  and claims
decreased to 2.1% of revenue in 1996 from 2.4% in 1995,  as the Company  reduced
its self-retention without a corresponding increase in premiums paid.


                                       12

<PAGE>



         Taxes and licenses increased $268,000 (16.9%),  to $1.9 million in 1996
from $1.6  million in 1995.  As a  percentage  of  revenue,  taxes and  licenses
decreased  to 2.0% of revenue in 1996 from 2.1% in 1995,  as the Company  hauled
fewer loads requiring special permits.

         General and administrative expenses increased $622,000 (17.3%), to $4.2
million in 1996 from $3.6 million in 1995. As a percentage  of revenue,  general
and  administrative  expenses  decreased to 4.5% of revenue in 1996 from 4.6% in
1995,  as  the  percentage  of  revenue  generated  by the  Company's  employees
increased  and the  percentage of revenue  generated by  Smithway's  independent
commission  agents and  third-party  freight  brokers (who  receive  commissions
larger than the revenue bonuses received by the Company's employees)  decreased.
In addition, certain fixed costs remained constant while revenue increased.

         Communications and utilities increased $213,000 (28.1%), to $971,000 in
1996 from  $758,000 in 1995.  As a  percentage  of revenue,  communications  and
utilities remained constant at 1.0% of revenue.

         Depreciation and amortization  increased $1.9 million (48.0%),  to $5.7
million  in 1996  from  $3.9  million  in  1995.  As a  percentage  of  revenue,
depreciation and amortization  increased to 6.1% of revenue in 1996 from 5.0% in
1995. The increase was attributable to a newer fleet of  Company-owned  tractors
and trailers,  which increased the cost of the equipment being depreciated,  and
an increase in Company  tractors  financed with borrowing  rather than operating
leases.  These  factors  were  partially  offset by an  increase  in revenue per
tractor.

         As a result of the foregoing, the Company's operating ratio improved to
91.1% in 1996 from 91.3% in 1995.  The Company's  Adjusted  Operating  Ratio was
88.9% in 1996 compared with 88.5% in 1995.

         Interest expense increased  $323,000  (26.4%),  to $1.5 million in 1996
from  $1.2  million  in 1995.  As a  percentage  of  revenue,  interest  expense
increased  to 1.7% of  revenue  in 1996  from  1.6% in 1995,  because  increased
average debt  balances  associated  with  expanding  the fleet of  Company-owned
tractors and trailers  ($19.7  million in 1996  compared  with $17.4  million in
1995),  more than offset lower average interest rates 7.5% in 1996 compared with
8.4% in 1995) and  reduction of debt with the  approximately  $10.7  million net
proceeds of the Company's initial public offering.

         The  Company's  effective tax rate was 42.0% in 1996 (3.1% of revenue),
compared with 43.6% in 1995 (3.1% of revenue) in each case including the cost of
nondeductible driver per diem expense absorbed by the Company.

         As a result of the factors  described above, net earnings  increased to
$4.0 million in 1996 (4.2% of revenue) from net earnings of $3.1 million in 1995
(4.0% of revenue).

Comparison of year ended December 31, 1995 to year ended December 31, 1994.

         Operating revenue  increased $8.2 million (11.8%),  to $77.3 million in
1995 from $69.2 million in 1994. The revenue increase resulted  primarily from a
16.4% increase in weighted average tractors, to 619 in 1995 from 532 during 1994
as the Company  expanded to meed demand and a 32.8% increase in revenue from the
Company's brokerage division, to $6.3 million. Revenue per loaded mile and empty
miles percentage  remained  essentially  constant in 1994 and 1995.  Revenue per
tractor  per week  declined  4.9%,  to $2,160,  in 1995 as  overcapacity  in the
truckload industry and a slowing economy reduced productivity.

         Purchased  transportation  increased  $4.2  million  (15.3%),  to $31.6
million  in 1995  from  $27.4  million  in 1994.  As a  percentage  of  revenue,
purchased  transportation  increased  to  40.9%  in 1995  from  39.6%  in  1994.
Purchased  transportation  increased as revenue from the brokerage  division and
associated  expenses  increased  faster than  revenue  from  Company-transported
loads. Compensation and employee benefits increased $1.3 million (8.2%) to $17.2
million in 1995 from $15.9  million in 1994.  As a  percentage  of revenue,  the
decrease  to 22.2% in 1995  from  23.0% in 1994 was  principally  a result  of a
decrease  in  workers'  compensation  expense  attributable  to  lower  premiums
negotiated by management.


                                       13

<PAGE>



         Fuel,  supplies,  and maintenance  increased  $815,000 (8.7%), to $10.2
million in 1995 from $9.4  million in 1994.  As a percentage  of revenue,  fuel,
supplies,  and  maintenance  decreased  to  13.2%  in 1995  from  13.5% in 1994,
reflecting  reduced  repair  and  maintenance  expense  attributable  to a newer
Company-owned  tractor  fleet and lower  average  fuel costs as a result of more
efficient  use of a fuel  provider  network.  The  Company's  average  fuel cost
decreased to $1.08 per gallon in 1995 from $1.10 in 1994.

         Insurance and claims  decreased  $411,000  (18.4%),  to $1.8 million in
1995 from $2.2 million in 1994. As a percentage of revenue, insurance and claims
decreased to 2.4% of revenue in 1995 from 3.2% in 1994, as the Company's  safety
record resulted in premium reductions while revenue increased.

         Taxes and licenses  increased  $134,000 (9.2%), to $1.6 million in 1995
from $1.5  million in 1994.  As a  percentage  of  revenue,  taxes and  licenses
remained constant at 2.1% of revenue during each period.

         General and  administrative  expenses increased $80,000 (2.3%), to $3.6
million in 1995 from $3.5 million in 1994. As a percentage  of revenue,  general
and  administrative  expenses  decreased to 4.6% of revenue in 1995 from 5.1% in
1994,  as  the  percentage  of  revenue  generated  by the  Company's  employees
increased  and the  percentage of revenue  generated by  Smithway's  independent
commission  agents and  third-party  freight  brokers (who  receive  commissions
larger than the revenue bonuses received by the Company's employees)  decreased.
In addition, certain fixed costs remained constant while revenue increased.

         Communications and utilities increased $173,000 (29.6%), to $758,000 in
1995 from  $585,000 in 1994.  As a  percentage  of revenue,  communications  and
utilities increased to 1.0% of revenue in 1995 from 0.8% in 1994, as the Company
equipped   substantially  all  of  its  Company-owned   tractors  with  Qualcomm
satellite-based tracking and communications systems.

         Depreciation and amortization  increased $1.1 million (39.8%),  to $3.9
million  in 1995  from  $2.8  million  in  1994.  As a  percentage  of  revenue,
depreciation and amortization  increased to 5.0% of revenue in 1995 from 4.0% in
1994. The increase was attributable to a newer fleet of  Company-owned  tractors
and trailers,  and the addition of Qualcomm  units,  both of which increased the
cost of the equipment being  depreciated.  Also  contributing to the increase in
depreciation  were  decreases in revenue per tractor and gain on sale of revenue
equipment  to  $96,000 in 1995 from  $437,000  in 1994 also  contributed  as the
Company's  replacement  cycle  resulted in the  disposal of fewer  tractors  and
trailers.

         As a result of the foregoing, the Company's operating ratio improved to
91.3% in 1995 from 91.4% in 1994.  The Company's  Adjusted  Operating  Ratio was
88.5% in 1995 compared with 89.6% in 1994.

         Interest expense increased  $259,000  (26.8%),  to $1.2 million in 1995
from $966,000 in 1994. As a percentage of revenue, interest expense increased to
1.6% of  revenue  in 1995  from 1.4% in 1994,  because  increased  average  debt
balances  associated  with  expanding  the fleet of  Company-owned  tractors and
trailers ($17.4 million in 1995 compared with $11.0 million in 1994),  more than
offset lower average  interest  rates (8.4% in 1995 compared with 9.1% in 1994).
In addition,  lower revenue per tractor affected this fixed cost as a percentage
of revenue.

         The  Company's  effective tax rate was 43.6% in 1995 (3.1% of revenue),
compared with 42.3% in 1994 (3.0% of revenue,  including pro forma provision for
income taxes), in each case including the cost of nondeductible  driver per diem
expense absorbed by the Company.

         As a result of the factors  described above, net earnings  increased to
$3.1  million  in 1995 (4.0% of  revenue)  from pro forma net  earnings  of $2.9
million in 1994 (4.2% of revenue).


                                       14

<PAGE>



Liquidity and Capital Resources

         The  growth  of  the  Company's   business  has  required   significant
investments in new revenue  equipment.  Smithway  historically  has financed its
revenue  equipment  requirements with borrowings under installment notes payable
to commercial lending institutions and equipment manufacturers, borrowings under
a $5.75 million line of credit, cash flow from operations, equipment leases from
third-party lessors, funds provided by its initial public offering in June 1996,
and through the use of independent contractors. The Company's primary sources of
liquidity currently are funds provided by operations and borrowings under credit
agreements with financial institutions and equipment manufacturers.(*)

         Net cash  provided  by  operating  activities  was $7.0  million,  $6.5
million, and $7.1 million for the years ended December 31, 1994, 1995, and 1996,
respectively.  The Company's principal use of cash from operations is to service
debt and internally  finance accounts  receivable  associated with growth in the
business.  Customer accounts receivable increased $993,000,  $404,000,  and $4.0
million for the years ended December 31, 1994, 1995, and 1996, respectively. The
average age of the Company's  accounts  receivable was approximately 30 days for
each of 1994, 1995, and 1996.

         Net cash provided by (used in) investing activities was $81,000,  ($2.6
million),  and ($8.4 million) for the years ended  December 31, 1994,  1995, and
1996, respectively. In each instance, the investing activities related primarily
to  purchases,  sales,  and trades of revenue  equipment.  The  Company  expects
capital  expenditures  (primarily  for  revenue  equipment  and  satellite-based
tracking and communication units), net of revenue equipment sales and trade-ins,
to be approximately $12.3 million for 1997. Such projected capital  expenditures
will be funded with cash flow from operations,  borrowings, or operating leases.
In prior years,  substantially  all revenue  equipment  additions  were financed
through borrowing or leasing transactions.(*)

         Net  cash  used  in  financing  activities  of  ($7.5  million),  ($2.1
million), and ($766,000), for the years ended December 31, 1994, 1995, and 1996,
respectively, consisted primarily of net payments of $3.9 million, $1.7 million,
and $16.1 million of principal under the Company's long-term debt agreements and
net  borrowings  (payments)  of ($3.3  million),  $0, and $4.5 million under the
Company's line of credit.

         The maximum amount available under the Company's primary line of credit
at December 31,  1996,  was $5.75  million,  on which the Company had drawn $4.5
million.  The interest  rate on the line of credit is .5% above the bank's prime
rate. The line of credit is collateralized by accounts receivable and inventory.
At December 31, 1996,  the Company had  outstanding  long-term  debt  (including
current maturities) consisting of approximately $15.9 million, most of which was
comprised of obligations for the purchase of revenue  equipment.  Interest rates
on this debt range  from  5.67% to 7.9%,  and the  principal  amounts  mature at
various dates through July 2001.

         Although the Company  historically  has  experienced a working  capital
deficit  common to many  truckload  carriers  that have  expanded  by  financing
revenue  equipment  purchases,  management  believes that the Company's  working
capital deficits have had little impact upon liquidity. Management believes that
available  borrowings  under  the  line  of  credit,  future  revenue  equipment
borrowings or leases,  and cash flow  generated  from  operations  will meet its
working capital requirements,  anticipated capital expenditures, and obligations
under operating leases at least through 1997.(*)

--------
         (*)      May contain "forward-looking" statements.

                                       15

<PAGE>



Inflation and Fuel Costs

         Most of the Company's operating expenses are inflation-sensitive,  with
inflation generally  producing increased costs of operation.  With the exception
of occasional fuel price increases,  inflation has had a minimal effect upon the
Company's  profitability  in recent  years.  In 1996,  a sharp  increase in fuel
prices occurred  nationwide as a result of a perceived  shortage in supply.  The
Company  historically has been able to pass through most long-term  increases in
fuel prices and taxes to customers in the form of  surcharges  and higher rates.
Shorter-term  increases are not fully  recovered.  As of December 31, 1996,  the
Company had entered into fuel  surcharge  agreements  with [the majority] of its
customers.  The surcharges recovered approximately 27.3% of the increase in fuel
prices.  The fuel  surcharges are adjusted  weekly based on the national  weekly
average price of diesel fuel published by the  Department of Energy.  Management
expects to maintain the fuel surcharges and seek additional rate increases.

Seasonality

         In the trucking industry, results of operations show a seasonal pattern
because customers  generally reduce shipments during the winter season,  and the
Company  experiences  some  seasonality  due to the open,  flatbed nature of the
majority of its trailers. The Company at times has experienced delays in meeting
its shipment  schedules as a result of severe weather  conditions,  particularly
during  the  winter  months.  In  addition,  the  Company's  operating  expenses
historically  have been  higher  in the  winter  months  due to  decreased  fuel
efficiency and increased maintenance costs in colder weather.

Cautionary Statement Regarding Forward-Looking Statements

         The Company may from time-to-time make written or oral  forward-looking
statements.  Written  forward-looking  statements may appear in documents  filed
with the Securities and Exchange Commission,  in press releases,  and in reports
to stockholders. The Private Securities Litigation Reform Act of 1995 contains a
safe harbor for  forward-looking  statements.  The  Company  relies on this safe
harbor in making  such  disclosures.  In  connection  with  this  "safe  harbor"
provision,  the Company is hereby identifying important factors that could cause
actual results to differ materially from those contained in any  forward-looking
statement  made by or on behalf of the Company.  Factors that might cause such a
difference include, but are not limited to, the following:

         Economic  Factors;  Fuel  Prices.  Negative  economic  factors  such as
         recessions,   downturns  in   customers'   business   cycles,   surplus
         inventories,  inflation,  and higher  interest  rates could  impair the
         Company's  operating  results by decreasing  equipment  utilization  or
         increasing  costs of  operations.  Increases in fuel prices usually are
         not fully recovered.  Accordingly, high fuel prices can have a negative
         impact on the Company's profitability.

         Resale  of  Used  Revenue  Equipment.   The  Company  historically  has
         recognized a gain on the sale of its revenue equipment.  The market for
         used equipment has  experienced  greater supply than demand in 1995 and
         1996. If the resale value of the Company's  revenue  equipment  were to
         decline,  the  Company  could  find  it  necessary  to  dispose  of its
         equipment at lower prices or retain some of its equipment longer,  with
         a resulting increase in operating expenses.

         Recruitment,  Retention,  and  Compensation  of  Qualified  Drivers and
         Independent  Contractors.   Competition  for  drivers  and  independent
         contractors  is  intense  in  the  trucking  industry.  There  is,  and
         historically has been, an industry-wide  shortage of qualified  drivers
         and independent  contractors.  This shortage could force the Company to
         significantly increase the compensation it pays to driver employees and
         independent contractors or curtail the Company's growth.

         Competition.  The  trucking   industry   is  highly   competitive  and
         fragmented. The Company  competes  with  other  truckload   carriers,
         private  fleets operated  by  existing and potential customers, and to
         some  extent  railroads  and  rail -intermodal service. Competition is
         based primarily on service, efficiency, and freight

                                       16

<PAGE>



         rates.  Many competitors  offer  transportation  service at lower rates
         than the  Company.  The  Company's  results  could  suffer if it cannot
         obtain  higher  rates  than  competitors  that  offer a lower  level of
         service.

         Acquisitions.  A significant portion of the Company's growth since June
         1995  has  occurred  through  acquisitions,  and  acquisitions  are  an
         important  component of the Company's growth strategy.  Management must
         continue to identify desirable target companies and negotiate,  finance
         and close acceptable transactions or the Company's growth could suffer.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
         The Company's audited financial statements,  including its consolidated
balance  sheets  and  consolidated  statements  of  earnings,  cash  flows,  and
stockholders'  equity, and notes related thereto, are included at pages 23 to 42
of this report. The supplementary quarterly financial data follow:

Quarterly Financial Data:
<CAPTION>
                               First    Second    Third     Fourth
                              Quarter   Quarter  Quarter    Quarter
                               1995      1995      1995      1995
                              ------    ------    ------    ------
<S>                           <C>       <C>       <C>       <C>
Operating revenue ........... 18,273    19,075    20,695    19,297
Earnings from operations ....  1,680     1,775     2,016     1,239
Earnings before income taxes.  1,503     1,721       832
Income taxes ................    617       650       689       439
Net earnings ................    813       853     1,032       393
Net earnings per share......  $ 0.23    $ 0.24    $ 0.29    $ 0.11

<S>                           <C>       <C>       <C>       <C>
                              ------    ------    ------    ------
                               First    Second    Third     Fourth
                              Quarter   Quarter  Quarter    Quarter
                               1996      1996      1996      1996
                              ------    ------    ------    ------
Operating revenue............ 19,860    23,411    24,937    25,459
Earnings from operations.....  1,296     2,524     2,534     2,005
Earnings before income taxes.    882     1,972     2,294     1,662
Income taxes.................    369       818       964       710
Net earnings.................    513     1,154     1,330       952
Net earnings per share....... $ 0.15    $ 0.33    $ 0.27    $ 0.19
</TABLE>

As a result  of  rounding,  the  total of the four  quarters  may not  equal the
Company's results for the full year.

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

         No reports on Form 8-K have been filed  within the  twenty-four  months
prior to December 31, 1996,  involving a change of accountants or  disagreements
on accounting and financial disclosure.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information  respecting  executive officers and directors set forth
under the captions "Election of Directors  Information  Concerning Directors and
Executive   Officers"  and  "Section  16(a)   Beneficial   Ownership   Reporting
Compliance"  on pages 2, 3, and 4 of the  Registrant's  Proxy  Statement for the
1997 annual meeting of stockholders, which will be filed with the Securities and
Exchange  Commission  in  accordance  with  Rule  14a-6  promulgated  under  the
Securities  Exchange  Act  of  1934,  as  amended  (the  "Proxy  Statement")  is
incorporated by reference.

                                       17

<PAGE>




ITEM 11. EXECUTIVE COMPENSATION

         The information  respecting executive  compensation set forth under the
caption   "Executive   Compensation"  on  page  4  of  the  Proxy  Statement  is
incorporated  herein by reference;  provided,  that the "Compensation  Committee
Report  on  Executive  Compensation"  contained  in the Proxy  Statement  is not
incorporated by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information  respecting  security  ownership of certain  beneficial
owners  and  management  set forth  under the  caption  "Security  Ownership  of
Principal  Stockholders  and  Management"  on page 6 of the Proxy  Statement  is
incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information  respecting  certain  relationships and transactions of
management set forth under the captions  "Compensation  Committee Interlocks and
Insider  Participation"  on page 3 and "Certain  Transactions"  on page 7 of the
Proxy Statement is incorporated herein by reference.


                                     PART IV

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

(a)      1.       Financial Statements.

         The  Company's  audited  financial  statements  are  set  forth  at the
following pages of this report:


                                                                            Page
Independent Auditors' Report.............................................    22
Consolidated Balance Sheets..............................................    23
Consolidated Statements of Earnings......................................    25
Consolidated Statements of  Stockholders' Equity.........................    26
Consolidated Statements of Cash Flows....................................    27
Notes to Consolidated Financial Statements...............................    29

         2.       Financial Statement Schedules.

         Financial  statement  schedules  are not required  because all required
information is included in the financial statements.

(b)      Reports on Form 8-K

         There were no reports on Form 8-K filed during the fourth quarter ended
December 31, 1996.



                                       18

<PAGE>



(c)      Exhibits
<TABLE>
<CAPTION>

 Exhibit
 Number     Description
<S>   <C>   <C>
 1    <F1>  Form of Underwriting Agreement.
 2.1  <F1>  Exchange  Agreement  dated  as  of  March 1, 1995, among William G.
            and  Marlys  L.  Smith,  William  G.  Smith d/b/a Smith Leasing, G.
            Larry  Owens,  Smithway Motor Xpress, Inc. Employee Stock Ownership
            Plan   and   Trust, and  Smithway  Motor  Xpress  Corp.,  a  Nevada
            corporation.
2.2   <F1>  Asset  Purchase  Agreement dated May 31, 1995, among Smithway Motor
            Xpress,  Inc., Van  Tassel,  Inc.,  Teresa  Van  Tassel and Douglas
            Van Tassel.
2.3   <F1>  Amendment  No. 1  to  Exchange Agreement dated as of June 29, 1995,
            among William  G. and Marlys L. Smith, William G. Smith d/b/a Smith
            Leasing, G. Larry Owens, Smithway Motor Xpress, Inc. Employee Stock
            Ownership Plan and Trust, and Smithway Motor Xpress Corp., a Nevada
            corporation.
2.4   <F1>  Asset  Purchase  Agreement  dated  January 10, 1996,  among Smithway
            Motor Xpress,  Inc., an Iowa corporation,  Smith Trucking Company, a
            Kansas corporation, and Delmar Smith.
2.5   <F2>  Asset  Purchase  Agreement  dated  October  4, 1996, among Smithway
            Motor  Xpress,  Inc.,  an  Iowa  corporation, Smithway Motor Xpress
            Corp., a  Nevada  corporation,  Marquardt  Transportation,  Inc., a
            South Dakota corporation, and Ralph and Lucille Marquardt.
2.6   <F2>  First  Amendment  to  Asset Purchase  Agreement  dated as of October
            24, 1996,  among Smithway Motor Xpress,  Inc., an Iowa  corporation,
            Smithway  Motor  Xpress  Corp.,  a  Nevada  corporation,   Marquardt
            Transportation,  Inc.,  a South  Dakota  corporation,  and Ralph and
            Lucille Marquardt.
2.7   <F2>  Second  Amendment to  Asset Purchase  Agreement dated as of December
            27, 1996,  among Smithway Motor Xpress,  Inc., an Iowa  corporation,
            Smithway  Motor  Xpress  Corp.,  a  Nevada  corporation,   Marquardt
            Transportation,  Inc.,  a South  Dakota  corporation,  and Ralph and
            Lucille Marquardt.
3.1   <F1>  Articles of Incorporation.
3.2   <F1>  Bylaws.
4.1   <F1>  Articles of Incorporation.
4.2   <F1>  Bylaws.
10.1  <F1>  Omnitracs   Contract   dated  January  5,  1995,  between  Qualcomm,
            Incorporated and Smithway Motor Xpress,  Inc., an Iowa  corporation,
            for communications equipment and services.
10.2  <F1>  Outside Director Stock Plan dated March 1, 1995.
10.3  <F1>  Incentive Stock Plan, adopted March 1, 1995.
10.4  <F1>  401(k) Plan, adopted August 14, 1992, as amended.
10.5  <F1>  Employee Stock Ownership Plan and Trust adopted January 1, 1986, as
            amended.
10.7  <F1>  Memorandum of  arrangement  between  Ray Steward and Smithway Motor
            Xpress, Inc., an Iowa corporation, concerning Spectrum software.
10.8  <F1>  Voting Trust  Agreement  dated  March 1, 1995, among William G. and
            Marlys L. Smith and Melissa Sue Osterberg, as Trustee.


                                       19

<PAGE>


<CAPTION>

 Exhibit
 Number     Description
<S>   <C>   <C>
10.9  <F1>  Exchange  Agreement  dated as of March 1, 1995, among William G. and
            Marlys L.  Smith,  William G. Smith d/b/a  Smith  Leasing,  G. Larry
            Owens, Smithway Motor Xpress, Inc. Employee Stock Ownership Plan and
            Trust, and Smithway Motor Xpress Corp., a Nevada corporation,  filed
            as  Exhibit  2.1 to this  Registration  Statement  and  incorporated
            herein by reference.
10.10 <F1>  Form  of  Agency  Agreement between Smithway Motor Xpress, Inc. and
            its independent commission agents.
10.12 <F1>  Memorandum of officer incentive compensation policy.
10.14 <F1>  Form  of  Independent  Contractor  Agreement  between Smithway Motor
            Xpress, Inc. and its independent contractor providers of tractors.
10.15 <F1>  Amendment  No. 1  to  Exchange Agreement dated as of June 29, 1995,
            among William  G. and Marlys L. Smith, William G. Smith d/b/a Smith
            Leasing, G. Larry Owens, Smithway Motor Xpress, Inc. Employee Stock
            Ownership Plan and Trust, and Smithway Motor Xpress Corp., a Nevada
            corporation.
10.16 <F1>  Asset  Purchase  Agreement dated  May 31, 1995, among Smithway Motor
            Xpress,  Inc., Van Tassel,  Inc., Teresa Van Tassel, and Douglas Van
            Tassel,  filed as Exhibit  2.2 to this  Registration  Statement  and
            incorporated by this reference.
10.17 <F1>  Asset  Purchase  Agreement  dated  January 10, 1996,  among Smithway
            Motor Xpress,  Inc., an Iowa corporation,  Smith Trucking Company, a
            Kansas  corporation,  and Delmar Smith, filed as Exhibit 2.4 to this
            Registration Statement and incorporated by reference.
10.18 <F2>  Asset  Purchase  Agreement  dated  October  4, 1996, among Smithway
            Motor  Xpress,  Inc.,  an  Iowa  corporation, Smithway Motor Xpress
            Corp., a  Nevada  corporation,  Marquardt  Transportation,  Inc., a
            South Dakota corporation, and Ralph and Lucille Marquardt.
10.19 <F2>  First  Amendment  to  Asset Purchase  Agreement  dated as of October
            24, 1996,  among Smithway Motor Xpress,  Inc., an Iowa  corporation,
            Smithway  Motor  Xpress  Corp.,  a  Nevada  corporation,   Marquardt
            Transportation,  Inc.,  a South  Dakota  corporation,  and Ralph and
            Lucille Marquardt.
10.20 <F2>  Second  Amendment  to Asset Purchase  Agreement dated as of December
            27, 1996,  among Smithway Motor Xpress,  Inc., an Iowa  corporation,
            Smithway  Motor  Xpress  Corp.,  a  Nevada  corporation,   Marquardt
            Transportation,  Inc.,  a South  Dakota  corporation,  and Ralph and
            Lucille Marquardt.
16    <F1>  Letter regarding change in certified accountant.
21    <F2>  List of subsidiaries.
23    <F2>  Consent of KPMG Peat Marwick LLP, independent accountants.
27    <F2>  Financial Data Schedule.

------------------
<FN>
<F1> Filed as an exhibit to the registrant's Registration Statement on Form S-1,
     Registration No. 33-90356, effective June 27, 1996.

<F2> Filed herewith.
</FN>
</TABLE>

                                       20

<PAGE>



                                   SIGNATURES


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

                                                     SMITHWAY MOTOR XPRESS CORP.



Date:    March 26, 1997                     By:      /s/ William G. Smith
         ---------------------------                 --------------------
                                                     William G. Smith
                                                     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.


      Signature                    Position                          Date

/s/ William G. Smith        Chairman of the Board,
--------------------------  President, and Chief
William G. Smith            Executive Officer; Director
                            (principal executive officer)        March 26, 1997

/s/ G. Larry Owens          Executive Vice President and
--------------------------  Chief Financial Officer;
G. Larry Owens              Director                             March 26, 1997

/s/ Michael E. Oleson       Treasurer and Chief Accounting
--------------------------  Officer (principal financial
Michael E. Oleson           and accounting officer)              March 26, 1997

/s/ Herbert D. Ihle
--------------------------
Herbert D. Ihle             Director                             March 26, 1997

/s/ Robert E. Rich
--------------------------
Robert E. Rich              Director                             March 26, 1997

/s/ Terry G. Christenberry
--------------------------
Terry G. Christenberry      Director                             March 26, 1997



                                       21

<PAGE>

                          INDEPENDENT AUDITORS' REPORT





To the Stockholders and Board of Directors
Smithway Motor Xpress Corp.:

We have audited the accompanying  consolidated  balance sheets of Smithway Motor
Xpress Corp.  and  subsidiary as of December 31, 1996 and 1995,  and the related
consolidated statements of earnings, non-redeemable common stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
1996. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements 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 consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Smithway  Motor
Xpress Corp. and subsidiary as of December 31, 1996 and 1995, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.


                                                           KPMG Peat Marwick LLP

Des Moines, Iowa
February 14, 1997


                                       22

<PAGE>



<TABLE>
                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
                           Consolidated Balance Sheets
                             (Dollars in thousands)
<CAPTION>
                                                      December 31,
                                                   -------   -------
                  Assets                             1995      1996
------------------------------------------------   -------   -------
<S>                                                <C>       <C>
Current assets:
    Cash and cash equivalents ..................   $ 2,976       940
    Short-term investment (note 12) ............       500         0
    Receivables (note 5):
       Trade ...................................     5,708     9,676
       Other ...................................       399       985
       Recoverable income taxes ................         9       211
    Inventories (note 5) .......................       416       713
    Deposits, primarily with insurers (note 12).       854       921
    Prepaid expenses ...........................       921       846
    Deferred income taxes (note 7) .............       176       282
                                                   -------   -------
             Total current assets ..............    11,959    14,574
                                                   -------   -------
Property and equipment (note 6):
    Land .......................................       481       531
    Buildings and improvements .................     3,626     4,375
    Tractors ...................................    20,423    28,245
    Trailers ...................................    13,852    19,514
    Other equipment ............................     3,049     3,543
                                                   -------   -------
                                                    41,431    56,208
    Less accumulated depreciation ..............    13,588    17,038
                                                   -------   -------
             Net property and equipment             27,843    39,170
                                                   -------   -------
Other assets, net (notes 3 and 13) .............       900     1,586
                                                   -------   -------

                                                   $40,702    55,330
                                                   =======   =======
</TABLE>









          See accompanying notes to consolidated financial statements.


                                       23

<PAGE>



<TABLE>
                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
                           Consolidated Balance Sheets
                             (Dollars in thousands)

                                                               December 31,
                    Liabilities and                        --------  --------
                   Stockholders' Equity                      1995      1996
-------------------------------------------------------    --------  --------
<S>                                                        <C>       <C>
Current liabilities:
    Line of credit (note 5) ...........................    $      0     4,490
    Current maturities of long-term debt (note 6) .....       4,861     3,260
    Accounts payable ..................................       1,972     2,211
    Accrued loss reserves (note 12) ...................       1,370     1,267
    Other accrued expenses ............................       1,240     1,453
                                                           --------  --------
               Total current liabilities ..............       9,443    12,681
Long-term debt, less current maturities (note 6) ......      18,358    12,644
Deferred income taxes (note 7) ........................       3,618     5,812
                                                           --------  --------
               Total liabilities ......................      31,419    31,137
                                                           --------  --------
Redeemable Class A common stock (note 9) ..............       1,412         0
                                                           --------  --------
Non-redeemable common stockholders' equity (note 8):
    Preferred stock ...................................           0         0
    Common stock:
        Class A .......................................          18        40
        Class B .......................................          10        10
    Additional paid-in capital ........................           0    11,104
    Retained earnings .................................       8,138    13,116
    Reacquired shares, at cost ........................         (52)      (77)
    Equity reduction for Employee Stock
        Ownership Plan (ESOP) debt (note 9) ...........        (243)        0
                                                           --------  --------
               Total non-redeemable common stockholders'
                equity                                        7,871    24,193
                                                           --------  --------
Commitments (notes 11 and 12)
                                                           $ 40,702    55,330
                                                           ========  ========
</TABLE>








          See accompanying notes to consolidated financial statements.


                                       24

<PAGE>



<TABLE>
                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
                       Consolidated Statements of Earnings
                  (Dollars in thousands, except per share data)
<CAPTION>

                                                   Years ended December 31,
                                              ---------------------------------
                                                   1994       1995       1996
                                              ---------------------------------
<S>                                           <C>          <C>        <C>
Operating revenue:
   Freight ...............................    $    69,044     77,020     93,428
   Other .................................            136        319        239
                                              ---------------------------------
         Operating revenue ...............         69,180     77,339     93,667
                                              ---------------------------------
Operating expenses:
   Purchased transportation ..............         27,420     31,621     37,386
   Compensation and employee benefits ....         15,877     17,182     20,800
   Fuel, supplies, and maintenance .......          9,368     10,183     12,347
   Insurance and claims ..................          2,238      1,827      1,995
   Taxes and licenses ....................          1,454      1,588      1,856
   General and administrative ............          3,512      3,592      4,214
   Communications and utilities ..........            585        758        971
   Depreciation and amortization .........          2,774      3,879      5,740
                                              ---------------------------------
         Total operating expenses ........         63,228     70,630     85,309
                                              ---------------------------------
         Earnings from operations ........          5,952      6,709      8,358
Financial (expense) income:
   Interest expense ......................         (1,066)    (1,456)    (1,705)
   Interest income .......................            100        231        157
                                              ---------------------------------
         Earnings before income taxes ....          4,986      5,484      6,810
Income taxes (note 7) ....................          1,879      2,393      2,860
                                              ---------------------------------
         Net earnings ....................    $     3,107      3,091      3,950
                                              =================================
Pro forma data (unaudited - note 14):
    Historical net earnings ..............    $     3,107      3,091      3,950
    Pro forma provision for income taxes .            232          0          0
                                              ---------------------------------
    Pro forma net earnings ...............    $     2,875      3,091      3,950
                                              =================================
Net earnings per common share (pro forma
  in 1994) ...............................    $      0.82       0.88       0.93
                                              =================================
Weighted-average common shares outstanding
    (pro forma in 1994) ..................      3,498,212  3,524,042  4,249,890
                                              =================================
</TABLE>




          See accompanying notes to consolidated financial statements.


                                       25

<PAGE>



<TABLE>
                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
      Consolidated Statements of Non-redeemable Common Stockholders' Equity
                  Years ended December 31, 1994, 1995, and 1996
                             (Dollars in thousands)
<CAPTION>

                                                                       Total
                            Non-                              Equity     non-
                           redeem-                          reduction redeemable
                            able Additional                    for     common
                           common paid-in Retained Reacquired ESOP stockholders'
                            stock capital earnings   shares   debt    equity
                           -----------------------------------------------------
<S>                        <C>     <C>     <C>        <C>     <C>     <C>
Balance at December 31,

    1993 ................. $    28      0   2,965      (37)   (443)    2,513
Net earnings .............       0      0   3,107        0       0     3,107
Net distributions ........       0      0    (534)       0       0      (534)
Reduction of ESOP debt ...       0      0       0        0      95        95
Sale of 147,879
    common shares ........       1    219       0        0       0       220
Acquisition of common
    shares (note 8) ......       0   (219)    (91)     (21)      0      (331)
Change in value and number
    of redeemable common
    shares (note 8) ......      (1)     0    (280)       0       0      (281)
                            ----------------------------------------------------
Balance at December 31,
    1994 .................      28      0   5,167      (58)   (348)    4,789
Net earnings .............       0      0   3,091        0       0     3,091
Net contributions ........       0    127       0        0       0       127
Net undistributed earnings
    of "S" corporation
    and sole proprietorship
    at date of termination
    (note 1) .............       0     47     (47)       0       0         0
Cancellation of reacquired
    common shares (note 8)       0    (58)      0       58       0         0
Reduction of ESOP debt ...       0      0       0        0     105       105
Change in price of common
    shares repurchased which
    was provided for in 1994
    (note 9) .............       0    203       0        0       0       203
Acquisition of common
     shares (note 8) .....       0      0       0      (52)      0       (52)
Change in value and number
    of redeemable common
    shares (note 8) ......       0   (319)    (73)       0       0      (392)
                            ----------------------------------------------------
Balance at December 31,
    1995 .................      28      0   8,138      (52)   (243)    7,871

Net earnings .............       0      0   3,950        0       0     3,950
Reduction of ESOP debt ...       0      0       0        0     243       243
Acquisition of common shares
 (note 8) ................       0      0       0      (25)      0       (25)
Shares sold for cash, net of
    issuance costs (note 8)     15 10,727       0        0       0    10,742
Change in value and number of
    redeemable common shares
    (note 8) ..............      7    377   1,028        0       0     1,412
                            ----------------------------------------------------
Balance at December 31,
    1996 .................. $   50 11,104  13,116      (77)      0    24,193
                            ====================================================
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       26

<PAGE>



<TABLE>
                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<CAPTION>
                                                    Years ended December 31,
                                                 -------------------------------
                                                    1994      1995      1996
<S>                                              <C>       <C>       <C>
Cash flows from operating activities:

   Net earnings ........................         $  3,107     3,091     3,950
                                                 --------  --------  --------
   Adjustments to reconcile net earnings
      to net cash provided by operating
      activities:
         Depreciation and amortization .            2,774     3,879     5,740
         Deferred income taxes .........              809     1,184     2,088
         Changes in:
            Trade receivables ..........             (993)     (404)   (3,968)
            Other receivables ..........               43       (90)     (586)
            Income taxes ...............              625      (791)     (202)
            Inventories ................              (41)      (72)     (210)
            Deposits, primarily with
              insurers .................              (90)      (46)      (67)
            Prepaid expenses ...........              (45)     (408)       90
            Accounts payable ...........              519       319       139
            Accrued loss reserves ......              183       131      (103)
            Other accrued expenses .....              154      (270)      213
                                                 --------  --------  --------
               Total adjustments .......            3,938     3,432     3,134
                                                 --------  --------  --------
               Net cash provided by
                  operating act ........            7,045     6,523     7,084
                                                 --------  --------  --------
Cash flows from investing activities:
   Payments for acquisition of Marquardt
      Transportation, Inc. .............                0         0    (3,834)
   Purchase of property and equipment ..             (424)   (2,836)   (6,341)
   Proceeds from sale of property and
      equipment ........................              428       211     1,321
   Payments received on notes receivable               77         0         0
   Purchase of short-term investments ..             (500)     (500)        0
   Proceeds from short-term investments               500       500       500
                                                 --------  --------  --------
               Net cash provided by (used in)
                   investing activities                81    (2,625)   (8,354)
                                                 --------  --------  --------
Cash flows from financing activities:
   Proceeds from long-term debt ........                0     2,869         0
   Principal payments on long-term debt            (3,873)   (4,593)  (16,068)
   Borrowings on line of credit agreement          66,610    77,606    93,593
   Payments on line of credit agreement           (69,911)  (77,606)  (89,103)
   Payments for reacquired shares ......              (21)      (52)      (25)
   Proceeds from issuance of common stock, net        220         0    11,232
   Distributions .......................             (574)      (55)        0
   Contributions .......................               40       182         0
   Other ...............................                0      (448)     (395)
                                                 --------  --------  --------
               Net cash (used in) provided by
                   financing activities            (7,509)   (2,097)     (766)
                                                 --------  --------  --------
               Net (decrease) increase in
                  cash and cash equivalents          (383)    1,801    (2,036)
Cash and cash equivalents at beginning of year      1,558     1,175     2,976
                                                 --------  --------  --------
Cash and cash equivalents at end of year         $  1,175     2,976       940
                                                 ========  ========  ========
</TABLE>

           See accompanying notes to consolidated financial statements

                                       27

<PAGE>



<TABLE>
                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
                Consolidated Statements of Cash Flows, Continued
                             (Dollars in thousands)
<CAPTION>
                                                     Years ended December 31,
                                                   -----------------------------
                                                    1994       1995       1996
<S>                                                <C>       <C>       <C>
Supplemental disclosures of cash flow
 information:
   Cash paid during the year for:
       Interest ..............................     $ 1,070     1,401     1,732
       Income taxes ..........................         445     2,151       971
                                                   =======   =======   =======
Supplemental schedule of noncash investing and
 financing activities:
       Notes payable:
           Tractors and trailers .............     $ 4,844    13,273     8,996
           Tires on above:
              Prepaid at end of year .........         133       232       207
              Expensed .......................         209       365       439
       Notes receivable issuance for
           sale of property and equipment ....         453         0         0
       Principal payments made by ESOP .......          95       105       243
       Liability established for fractional
           shares to be acquired (note 8) ....         310      (203)        0
       Liability established for remaining
           payment for intangible assets
           related to acquisition of
           Marquardt Transportation, Inc. ....           0         0       100
                                                   =======   =======   =======



Cash payments for acquisition of Marquardt
    Transportation, Inc. (note 3):
       Revenue equipment .....................                         $ 3,004
       Intangible assets .....................                             727
       Inventories ...........................                              87
       Prepaid expenses ......................                              16
                                                                       -------
                                                                       $ 3,834
                                                                       =======
</TABLE>






          See accompanying notes to consolidated financial statements.


                                       28

<PAGE>


                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 1995 and 1996

                             (Dollars in thousands)

(1)      Consolidated Entity

         Smithway Motor Xpress Corp. and subsidiary is a Fort Dodge, Iowa, based
                  truckload  motor carrier,  primarily  serving  shippers in the
                  central  United  States and southern  provinces of Canada.  It
                  operates over  short-to-medium  traffic routes,  concentrating
                  primarily on the flatbed segment of the truckload market.

         Smithway  Motor  Xpress Corp. was incorporated as a Nevada corporation
                  on  January  17,  1995,  to  acquire  the  stock  of Smithway
                  Motor  Xpress,  Inc.;  the  stock  of Smithway Transportation
                  Brokerage, Inc.;  the  stock  of  Wilmar  Truck Leasing, Inc.
                  an "S" corporation);  and  the  net  assets  of Smith Leasing
                  a sole proprietorship), in preparation for its initial public
                  offering of  Class  A  common stock.  Smithway Transportation
                  Brokerage, Inc.  and  Wilmar  Truck Leasing, Inc. were merged
                  into Smithway Motor Xpress, Inc.  Unless otherwise indicated,
                  the companies and sole proprietorship named in this paragraph
                  are collectively referred to as the "Company."

         The  transactions  described  above  were between entities under common
                  control; accordingly, they have been accounted for in a manner
                  similar  to  a  pooling  of  interests,  and  the accompanying
                  consolidated  financial  statements  represent the  historical
                  combined operations of such companies.  Name references in the
                  consolidated  financial  statements and the notes thereto have
                  been  changed  to  reflect  these  transactions,   which  were
                  effective  as of  January  31,  1995.  All share and per share
                  information  for all periods has been  restated to reflect the
                  conversion into Smithway Motor Xpress Corp. common stock based
                  upon the actual shares issued.
<TABLE>
         Pursuant to the  acquisitions  described  above,  Smithway Motor Xpress
                  Corp. issued 3,513,697 shares of its common stock as follows:
<CAPTION>

    Stockholder           Shares or Assets Relinquished   Smithway Motor Xpress
                                                           Corp. Shares Issued
<S>                       <C>                             <C>
William G. Smith and      788,000 common shares of        942,146 Class A
    Marlys L. Smith           Smithway Motor Xpress, Inc.    common shares
                                                             and 1,000,000
                                                             Class B common
                                                             shares (a)
                          All common shares of             269,500 Class A
                              Smithway Transportation         common shares
                              Brokerage, Inc.
                          All common shares of             2,308 Class A
                              Wilmar Truck Leasing, Inc.      common shares
                              Assets of Smith Leasing,        55,126 Class A
                              net of liabilities assumed      common shares
G. Larry Owens            60,000 common shares of          147,879 Class A
                              Smithway Motor Xpress, Inc.     common shares (b)
Smithway Motor Xpress,    444,987 common shares of        1,096,738 Class A
    Inc. Employee Stock       Smithway Motor Xpress, Inc.     common shares
    Ownership Plan (ESOP)
</TABLE>


                                       29

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(1)      Consolidated Entity, Continued

         (a)      Management of the Company believes the fair value of the Class
                  A common stock is not  materially  different  from that of the
                  Class B common stock.

         (b)      The original  60,000 shares  (147,879 Class A common shares of
                  the  Company)  issued  to  G.  Larry  Owens,   Executive  Vice
                  President of the  Company,  in 1994 were issued for cash based
                  upon the appraised value of the stock for ESOP purposes.

         On July 2, 1996,  the  Company  sold  1.5 million shares of its Class A
                  common  stock  in an initial public offering.  The shares were
                  sold at $8.50 per share, for a total  consideration of $12,750
                  before  underwriting   discounts  and  offering  expenses.  In
                  addition,  certain  shareholders  sold  650,000  shares in the
                  initial public offering.

(2)      Summary of Significant Accounting Policies

         Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
                  Company as described in note 1. All  significant  intercompany
                  balances   and   transactions    have   been   eliminated   in
                  consolidation.

         Customers

         The Company  serves  a  diverse  base  of shippers.  No single customer
                  accounted  for more than 10  percent  of the  Company's  total
                  operating  revenues during any of the years ended December 31,
                  1994,  1995,  and 1996.  The  Company's  10 largest  customers
                  accounted for  approximately  34 percent and 32 percent of the
                  Company's  total  operating  revenues  during  1995 and  1996,
                  respectively. The Company's largest concentration of customers
                  is in the  steel  and  building  materials  industries,  which
                  together accounted for approximately 51 percent and 47 percent
                  of the Company's  total  operating  revenues in 1995 and 1996,
                  respectively.

         Drivers

         The  Company  faces  intense  industry  competition  in  attracting and
                  retaining qualified drivers and independent contractors.  This
                  competition  could  result in the Company  temporarily  idling
                  some of its revenue  equipment or increasing the  compensation
                  the Company pays to its drivers and independent contractors.

         Use of Estimates

         Management  of  the  Company  has  made  a  number  of  estimates   and
                  assumptions   relating   to  the   reporting   of  assets  and
                  liabilities  and  the  disclosure  of  contingent  assets  and
                  liabilities   to  prepare   these   financial   statements  in
                  conformity  with  generally  accepted  accounting  principles.
                  Actual results could differ from those estimates.

         Cash and Cash Equivalents

         The  Company  considers  interest-bearing  instruments with maturity of
                  three  months  or  less  at  the  date of  purchase  to be the
                  equivalent of cash.


                                       30

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)

(2)      Summary of Significant Accounting Policies, Continued

         Short-Term Investment

         Short-term investment, which consisted of a certificate of deposit with
                  a maturity of greater  than three  months,  is stated at cost,
                  which approximated market value.

         Receivables

         The  financial  status  of  customers  is  checked and monitored by the
                  Company  when  granting  credit.  The  Company  routinely  has
                  significant  dollar  transactions with certain  customers.  At
                  December 31, 1995, one customer accounted for approximately 13
                  percent of total trade  receivables.  At December 31, 1996, no
                  individual  customer  accounted  for more than 10  percent  of
                  total trade receivables.

         Inventories

         Inventories  consist  of  tractor  and  trailer   supplies  and  parts.
                  Inventories are stated at lower of cost  (first-in,  first-out
                  method) or market.

         Prepaid Expenses

         Prepaid  expenses  consist  primarily  of the cost of tarps,  which are
                  amortized over 36 months and the cost of tires  purchased with
                  new  equipment,  which are amortized six months in the year of
                  purchase  and  six  months  in  the   subsequent   year.   The
                  unamortized cost is included in prepaid expenses.  Replacement
                  and recapped tires are expensed when placed in service.

         Accounting for Leases

         The  Company  is  a lessee of revenue equipment under operating leases.
                  Rent  expense  is  charged  to  operations  as  it is incurred
                  under the terms of the respective leases.

         Property and Equipment

         Property and equipment are recorded at cost.  Depreciation  is provided
                  by use of the straight-line and declining-balance methods over
                  lives of 5 to 31 years for buildings and improvements,  5 to 7
                  years for tractors and  trailers,  and 3 to 10 years for other
                  equipment.

         Expenditures  for   maintenance   and  minor  repairs  are  charged  to
                  operations,   and  expenditures  for  major  replacements  and
                  betterments are capitalized.  The cost and related accumulated
                  depreciation  on property and equipment  retired,  traded,  or
                  sold are eliminated from the property  accounts at the time of
                  retirement, trade, or sale.

         In  accordance  with industry practices, the gain or loss on retirement
                  or  sale  is  included in depreciation and amortization in the
                  consolidated statements of earnings. Gains or losses on trade-
                  ins  are  included in the basis of the new asset.

         Intangibles

         Included in other  assets  are  certain  intangibles  which  are  being
                  amortized using the straight-line  method over periods ranging
                  from five to ten  years.  Accumulated  amortization  of $8 and
                  $55, at December  31, 1995 and 1996,  respectively,  have been
                  netted against these intangible assets.


                                       31

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)

(2)      Summary of Significant Accounting Policies, Continued

         Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

         The Company adopted the provisions of Statement of Financial Accounting
                  Standards  (SFAS)  No. 121, "Accounting  for the Impairment of
                  Long-Lived  Assets  and  for Long-Lived  Assets to Be Disposed
                  Of,"  on  January 1, 1996.  This statement requires that long-
                  lived  assets and certain identifiable intangibles be reviewed
                  for  impairment  whenever  events  or changes in circumstances
                  indicate  that  the  carrying  amount  of  an asset may not be
                  recoverable.  Recoverability  of assets to be held and used is
                  measured by a comparison of the carrying amount of an asset to
                  future  net  cash flows expected to be generated by the asset.
                  If  such  assets are considered to be impaired, the impairment
                  to  be  recognized  is  measured  by  the  amount by which the
                  carrying  amount  of  the  assets exceed the fair value of the
                  assets.  Assets to be disposed of are reported at the lower of
                  the carrying amount or fair value less costs to sell. Adoption
                  of  this  statement  did not  have a  material  impact  on the
                  Company's  financial  position,   results  of  operations,  or
                  liquidity.

         Revenue Recognition

         The  Company  recognizes  operating  revenue  when  the  freight  to be
                  transported  has been loaded.  Amounts  payable to independent
                  contractors for purchased  transportation,  to Company drivers
                  for wages,  and other  direct  expenses  are accrued  when the
                  related  revenue is  recognized.  The Company  operates in the
                  short-to-medium length haul category of the trucking industry,
                  therefore,   the  Company's   typical  customer   delivery  is
                  completed  one day after pickup.  Accordingly,  this method of
                  revenue   recognition   is  not   materially   different  from
                  recognizing revenue based on completion of delivery.

         ESOP Indebtedness

         At  December  31, 1995, long-term indebtedness of the Company-sponsored
                  leveraged  ESOP was recorded in the consolidated balance sheet
                  as  a  liability  under  the  captions  "Current maturities of
                  long-term  debt" and "Long-term debt, less current maturities"
                  with  a  corresponding reduction in stockholders' equity under
                  the  caption  "Equity  reduction for ESOP debt."  As principal
                  payments  were  made  on  the  debt by the ESOP, the Company's
                  long-term  debt and related stockholders' equity reduction was
                  reduced.  The  outstanding  debt  was retired during 1996 with
                  proceeds the ESOP received from the sale of shares owned by it
                  in the initial public offering.

         Insurance and Claims

         Losses resulting from personal liability, physical damage, and workers'
                  compensation  are  covered  by  insurance  subject  to certain
                  deductibles,  and  claims resulting from cargo loss and damage
                  are  self-insured.  Losses resulting from uninsured claims are
                  recognized  when  such  losses are known and can be estimated.
                  The Company estimates and accrues a liability for its share of
                  ultimate settlements using all available information. Expenses
                  depend  on  actual loss experience and changes in estimates of
                  settlement  amounts  for open claims which have not been fully
                  resolved.


                                       32

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(2)      Summary of Significant Accounting Policies, Continued

         Income Taxes

         Prior  to  the  transactions described in note 1, Wilmar Truck Leasing,
                  Inc.,  had elected "S"  Corporation  status under the Internal
                  Revenue  Code and  Smith  Leasing  was a sole  proprietorship.
                  Accordingly, for 1994, there was no provision for income taxes
                  in the consolidated  financial statements related to these two
                  entities, since the income tax liability or benefit accrued to
                  the stockholders or owner and not to the Company. As discussed
                  in note 14, a pro forma provision for income taxes (unaudited)
                  relating  to the  earnings  of the "S"  Corporation  and  sole
                  proprietorship was reflected in the pro forma data included in
                  the  accompanying  consolidated  statement of earnings for the
                  year ended December 31, 1994.

         Income taxes  are  accounted for under the asset and liability  method.
                  Deferred tax assets and  liabilities  are  recognized  for the
                  future tax  consequences  attributable to differences  between
                  the financial  statement  carrying  amounts of existing assets
                  and liabilities  and their  respective tax bases and operating
                  loss and tax  credit  carryforwards.  Deferred  tax assets and
                  liabilities  are measured  using enacted tax rates expected to
                  apply to taxable income in the years in which those  temporary
                  differences  are  expected to be  recovered  or  settled.  The
                  effect of a change in tax rates on  deferred  tax  assets  and
                  liabilities  is  recognized  in  income  in  the  period  that
                  includes the enactment date.

         Stock Option Plans

         Prior  to  January  1, 1996, the Company accounted for its stock option
                  plans  in  accordance   with  the   provisions  of  Accounting
                  Principles  Board (APB) Opinion No. 25,  "Accounting for Stock
                  Issued to Employees,"  and related  interpretations.  As such,
                  compensation  expense  would be  recorded on the date of grant
                  only if the  current  market  price  of the  underlying  stock
                  exceeded the exercise  price.  On January 1, 1996, the Company
                  adopted SFAS 123,  "Accounting for Stock-Based  Compensation,"
                  which  permits  entities  to  recognize  as  expense  over the
                  vesting period the fair value of all stock-based awards on the
                  date of grant. Alternatively, SFAS 123 also allows entities to
                  continue  to apply the  provisions  of APB  Opinion No. 25 and
                  provide pro forma net  earnings and pro forma net earnings per
                  common share disclosures for employee stock option grants made
                  in 1995 and  future  years as if the  fair-value-based  method
                  defined in SFAS 123 had been applied.  The Company has elected
                  to continue to apply the  provisions of APB Opinion No. 25 and
                  provide the pro forma disclosure provisions of SFAS 123.

         Net Earnings Per Common Share

         Net earnings per common share (pro forma in 1994 - unaudited) have been
                  computed  by  dividing  net  earnings  by the weighted-average
                  outstanding Class A and Class B common shares and common stock
                  equivalents  during  each of the years  (see note 14).  Common
                  stock equivalents  include dilutive stock options issued under
                  the Company's stock option plans.



                                       33

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(3)      Acquisitions

         On  May  31,  1995, the Company entered into a five-year consulting and
                  noncompete clause with the shareholder of Van Tassel, Inc. for
                  $72 and assumed certain leases for trailers.  The Company also
                  purchased  certain  office  equipment  of Van Tassel, Inc. for
                  approximately  $37.  The  effect  of  this  transaction is not
                  material  to  the  consolidated  financial  statements  of the
                  Company.

         In  January  1996,  the Company purchased certain trailers, flat racks,
                  and office equipment from Smith Trucking Company.  The Company
                  also  entered  into  a  two-year noncompete agreement with the
                  shareholder  of Smith Trucking Company.  The Company agreed to
                  pay total consideration of $381 in the transaction. The effect
                  of  this  transaction  is  not  material  to  the consolidated
                  financial statements of the Company.

         On  October  4,  1996,  the Company acquired certain assets and assumed
                  certain  liabilities  and  leases of Marquardt Transportation,
                  Inc., of Yankton, South Dakota. Included in the total purchase
                  price   of  $3,934  was  revenue  equipment  totaling  $3,004;
                  intangible  assets  of $827; and various other assets totaling
                  $103. The acquisition was accounted for by the purchase method
                  of accounting. The consolidated statement of earnings reflects
                  these  operations  from the date of acquisition.  A summary of
                  unaudited  pro  forma  financial statement data, assuming this
                  transaction  had  occurred  on January 1, 1995, is as follows:
                  operating   revenue,   $106,996  and  $93,100;  earnings  from
                  operations,  $8,626  and  $6,908;  net  earnings,  $3,905  and
                  $2,786;  and  net  earnings per common share, $0.92 and $0.79,
                  for 1996 and 1995, respectively.

(4)      Fair Value of Financial Instruments

         SFAS  107,  "Disclosures  About  Fair  Value of Financial Instruments,"
                  defines the fair value of a financial instrument as the amount
                  at which  the  instrument  could  be  exchanged  in a  current
                  transaction between willing parties. The following methods and
                  assumptions were used to estimate the fair value of each class
                  of financial instruments:

                  Cash  and   cash  equivalents,  short-term  investment,  trade
                           receivables,  other  receivables,  accounts  payable,
                           accrued loss  reserves,  and other accrued  expenses:
                           The carrying  amounts  approximate fair value because
                           of the short maturity of those instruments.



                                       34

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(4)      Fair Value of Financial Instruments, Continued

                  Line  of  credit:  The carrying value of the Company's line of
                           credit  approximates fair value, since borrowings are
                           at current interest rates.

                  Long-term  debt:  The  fair value  of the Company's  long-term
                           debt  was  estimated  by  discounting the future cash
                           flows   of   each   instrument   at  rates  currently
                           offered  to the Company for similar debt  instruments
                           of comparable maturities  by the  Company's  bankers.
                           The  carrying  value  of  long-term  debt at December
                           31, 1996,  was $15,904;   the  fair  value  of  long-
                           term debt was $15,108.

(5)      Line of Credit

         The  Company has a line of credit agreement which allows advances up to
                  the  lesser of 85 percent of qualifying accounts receivable or
                  $5,750 (see note 12). Any borrowings under this line of credit
                  are  secured  by  accounts  receivable and inventories.  There
                  were  no  outstanding  borrowings  at  December  31, 1995.  At
                  December  31 , 1996, the Company had outstanding borrowings of
                  $4,490.  This line of credit bore interest at .50 percent over
                  prime  at  December 31, 1995 and 1996. The interest rate would
                  have been 9.00 percent at December 31, 1995. The interest rate
                  at December 31, 1996 was 8.75 percent.

(6)      Long-Term Debt
<TABLE>
         The  following  is a summary of long-term debt at December 31, 1995 and
1996:
<CAPTION>
                               Payable        Current
                               through     interest rates      1995        1996
                               -------     --------------    -------     ------
<S>                             <C>        <C>               <C>         <C>
Equipment notes                 2001       5.67% to 7.90%    $21,902     15,904
Mortgages                         -              -             1,074        -
Debt of Company-sponsored ESOP    -              -               243        -
                                                             -------     ------
                                                              23,219     15,904
Less current maturities                                        4,861      3,260
                                                             -------    -------
                                                             $18,358     12,644
                                                             =======     ======
</TABLE>

         The  Company  has  pledged property and equipment with an undepreciated
                  value  of  $18,674 at December 31, 1996, as security for these
                  debts.



                                       35

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(6)      Long-Term Debt, Continued

         Future  maturities  on long-term debt for years ending December 31, are
                  as follows:  1997, $3,260;  1998, $3,477;  1999, $3,010; 2000,
                  $3,482; and 2001, $2,675.

(7)      Income Taxes
<TABLE>

         Income taxes consisted of the following  components for the three years
ended December 31:

<CAPTION>

                   1994                  1995                   1996
           -------------------   -------------------   --------------------
           Federal State Total   Federal State Total   Federal  State Total
<S>        <C>     <C>   <C>     <C>     <C>   <C>     <C>      <C>   <C>
Current    $  905   165  1,070    1,088   121  1,209      725     47    772
Deferred      704   105    809    1,034   150  1,184    1,712    376  2,088
            -----   ---  -----    -----   ---  -----    -----    ---  -----
           $1,609   270  1,879    2,122   271  2,393    2,437    423  2,860
            =====   ===  =====    =====   ===  =====    =====    ===  =====
</TABLE>

<TABLE>
         Total  income tax expense differs from the amount of income tax expense
                  computed  by  applying the normal United States federal income
                  tax  rate  of  34 percent to income before income tax expense.
                  The reasons for such differences are as follows:

<CAPTION>
                                           Years ended December 31,
                                         ---------------------------
                                           1994       1995      1996
<S>                                      <C>        <C>       <C>
Computed "expected"
         income tax expense ............ $ 1,695     1,865     2,315
State income tax expense,
         net of federal benefit ........     179       179       279
Permanent differences, primarily
         nondeductible portion
         of driver per diem
         and travel expenses ...........     142       153       176
Tax effect (at expected federal
         rate) on income from nontaxable
         sole proprietorship and
         "S" Corporation ...............    (210)     --        --
Other ..................................      73       196        90
                                         -------    ------    ------
                                         $ 1,879     2,393     2,860
                                         =======    ======    ======
</TABLE>



                                       36

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(7)      Income Taxes, Continued
<TABLE>
         Temporary differences between the financial  statement  basis of assets
                  and  liabilities  and the  related  deferred  tax  assets  and
                  liabilities at December 31, 1995 and 1996, were as follows:
<CAPTION>

                                                             1995         1996
<S>                                                        <C>          <C>
Deferred tax assets:
         Alternative minimum tax (AMT)
         credit carryforwards ....................             353          780
         Accrued expenses ........................             334          464
                                                           -------      -------
                  Total gross deferred tax assets              687        1,244
                                                           -------      -------
Deferred tax liabilities:
         Prepaid expenses ........................            (158)        (182)
         Property and equipment ..................          (3,971)      (6,592)
                                                           -------      -------
                  Total gross deferred tax liabilities      (4,129)      (6,774)
                                                           -------      -------
                  Net deferred tax liabilities ...         $(3,442)      (5,530)
                                                           =======      =======
</TABLE>

         At  December  31, 1995 and 1996, the Company had approximately $353 and
                  $780, respectively, in AMT credit carryforwards. These credits
                  are   available  indefinitely  to  reduce  future  income  tax
                  liabilities to the extent they exceed AMT liabilities.

(8)      Stockholders' Equity

         The  total  number  of shares of capital stock of all classes which the
                  Company  has  the authority to issue is 30 million shares, all
                  having  a  par  value  of  one  cent per share.  Capital stock
                  authorized  consists  of  20  million shares of Class A common
                  stock, 5 million shares of Class B common stock, and 5 million
                  shares of preferred stock.

         On  all matters with respect to which the Company's stockholders have a
                  right  to vote, each share of Class A common stock is entitled
                  to  one  vote,  while  each  share  of Class B common stock is
                  entitled to two votes. The Class B common stock is convertible
                  into shares of Class A common stock on a share-for-share basis
                  at  the  election  of  the  stockholder  and will be converted
                  automatically  into  shares  of  Class  A  common  stock  upon
                  transfer  to  any party other than William G. Smith, his wife,
                  Marlys  L.  Smith, their children, their grandchildren, trusts
                  for any of their benefit, and entities wholly owned by them.

         Pursuant to the  transactions  described  in note 1,  the  Company  had
                  outstanding  2,513,697  shares  of  Class A  common  stock,  1
                  million  shares  of Class B common  stock,  and no  shares  of
                  preferred  stock  prior to the  initial  public  offering  and
                  reacquired shares described below.

         The  Company  reacquired  14,899 common shares during 1994 at a cost of
                  $21.  These  common  shares  were canceled by the Company as a
                  result of the  transactions  described  in note 1. The Company
                  also reacquired 9,627 and 4,777 common shares in 1995 and 1996
                  at a cost of $52 and $25, respectively.


                                       37

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(8)      Stockholders' Equity, Continued

         Effective July 2, 1996,  the  Company  sold 1.5  million  shares of its
                  Class A common stock in an initial public offering. The shares
                  were sold at $8.50 per  share,  for a total  consideration  of
                  $12,750.  Underwriting  discounts  and offering  expenses were
                  $2,008, resulting in net proceeds to the Company of $10,742.

         At December 31, 1994, the Company provided  a current liability of $310
                  for certain  minority  common shares of the Company which were
                  not  acquired  in  the  transaction described in note 1.  Such
                  amount was charged to additional  paid-in capital and retained
                  earnings,  since these shares were  reacquired  as  fractional
                  shares after a reverse stock split by the Company in 1995. The
                  actual purchase price of these  fractional  shares during 1995
                  differed  from $310 due to a change in the  purchase  price of
                  the  fractional  shares  from an  anticipated  initial  public
                  offering  price  to the  appraised  value  of the  Company  at
                  December  31,  1994,  and a change  in the  number  of  shares
                  repurchased.  The  effect  of these  changes  was $203 and was
                  reflected in additional paid-in capital during 1995.

         The Company  adopted  an  outside  director stock option plan effective
                  March  1,  1995.   The  Company  has reserved 25,000 shares of
                  Class  A  common  stock  for  issuance  pursuant  to  the plan
                  agreement.  The  term  of  each option shall be six years from
                  the  grant date.  Options vest on the first anniversary of the
                  grant date.  Exercise price of each stock option is 85 percent
                  of  the  fair market value of the common stock on the last day
                  of the calendar month immediately preceding the date of grant.
                  In  July  1996,  the  Company  granted  options covering 3,000
                  shares with an exercise price of $7.23 per share.

         The Company  adopted  an incentive stock option plan effective March 1,
                  1995.  The  Company  has  reserved  225,000  shares of Class A
                  common stock for issuance  pursuant to the plan agreement.  On
                  March 1, 1995, the Company  granted  options  covering  85,000
                  shares to certain  employees at an exercise price of $9.50 per
                  share.  Such options become  excercisable  between  January 1,
                  1996, and January 1, 2000, at the rate of 20 percent per year.
                  As of December 31, 1996,  none of the 17,000  eligible  shares
                  had been exercised and no additional  shares had been granted.
                  Any shares which expire  unexercised  or are forfeited  become
                  available again for issuance under the plan.  Under this plan,
                  no  awards  of  incentive  stock  options  may be  made  after
                  December 31, 2004.

         The Company  applied  APB  Opinion  No.  25 in accounting for its stock
                  option plans; and,  accordingly,  no compensation  expense has
                  been recognized in the consolidated financial statements.  Had
                  the Company determined compensation based on the fair value at
                  the grant date for its  outstanding  stock  options under SFAS
                  123, the effect on Company's net earnings and net earnings per
                  common share for 1995 and 1996 would have been immaterial. The
                  full impact of calculating compensation cost for stock options
                  under SFAS 123 is reflected over the options' vesting period.



                                       38

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(8)      Stockholders' Equity, Continued
<TABLE>
         The assumptions used by the Company in estimating the fair value of its
                  outstanding stock options at grant date and the results of its
                  calculations are as follows:
<CAPTION>
                                      Outside director            Incentive
                                      stock option plan       stock option plan
                                      -----------------       -----------------
<S>                                   <C>                     <C>
Pricing model                           Black Scholes           Minimum value
Risk-free interest rate                     6.44%                   7.12%
Expected life                              3 years                 6 years
Expected volatility                           20%                     N/A
Expected dividends                            None                    None
Estimated fair value at grant date       $2.72/per share              None
</TABLE>

(9)      ESOP and Redeemable Class A Common Stock

         In  connection  with  a purchase of common stock from a previous stock-
                  holder,  the ESOP incurred a note payable, which had a balance
                  of  $243  as  of December 31, 1995.  Such debt was recorded in
                  the  accompanying  consolidated  balance  sheets - see note 6.
                  The  outstanding debt was retired by the ESOP during 1996 with
                  the  proceeds  the  ESOP  received  from  stock it sold in the
                  initial  public offering.  Actual interest expense on the ESOP
                  debt was $41, $31, and $11 during the years ended December 31,
                  1994,  1995, and 1996, respectively. Contributions made to the
                  plan  for  the  years ended December 31, 1994, 1995, and 1996,
                  were $138, $138, and $-0-. The ESOP owned 1,080,677 and 58,454
                  shares  of  the Company's Class A common stock at December 31,
                  1995 and 1996, respectively.

         The  plan  provides for 100 percent vesting after six years of service.
                  Vested  benefits  will normally be distributed to the partici-
                  pant  from  the  plan  upon death or retirement in the form of
                  cash  or  Company  stock. Participants may sell the stock they
                  received to a third party;  however, the Company had the right
                  of first refusal to purchase the stock,  until the date of the
                  initial  public  offering,  at which  time the  right of first
                  refusal expired.

         The participant  or  beneficiary  had  two  put options to the employer
                  which  required  the  Company  purchase  the shares at a price
                  equal to its value in cash or in installments over a period of
                  five  years.  The  first  60-day  put  option  began  the  day
                  following   the  date  the  stock  was   distributed   to  the
                  participant or beneficiary. The second 60-day put option began
                  the first day of the  fifth  month of the plan year  following
                  the date of such stock  distribution.  Distribution  of shares
                  only occurs upon termination of employment or retirement.



                                       39

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(9)      ESOP and Redeemable Class A Common Stock, Continued

         Due  to  the put option, the total appraised value at which the Company
                  would  have  to repurchase the shares at December 31, 1995, of
                  the  649,710  vested  shares  of  Class  A  common  stock, was
                  classified  as  redeemable  Class A common stock in the accom-
                  panying consolidated balance sheets and not as part of consol-
                  idated non-redeemable common stockholders' equity. A change in
                  the  balance  of redeemable Class A common stock resulted from
                  the  change  in  the number of vested shares and the change in
                  the appraised value during the periods.

         In accordance  with  provisions  of  the  ESOP  and applicable law, the
                  rights  to  these  put  options  no  longer  existed  upon the
                  effective date of the initial public  offering of common stock
                  by the Company.

(10)     Employees' Profit Sharing and Savings Plan

         The Company has an Employees' Profit Sharing and Savings Plan, which is
                  a  qualified  plan under the provisions of Sections 401(a) and
                  and  501(a)  of the Internal Revenue Code.  Eligible employees
                  are  allowed  to  contribute  up to a maximum of 15 percent of
                  pretax compensation into the plan. Employers may make savings,
                  matching,  and discretionary contributions, subject to certain
                  restrictions.  During the years ended December 31, 1994, 1995,
                  and  1996,  Company  contributions totaled $50, $64, and $-0-,
                  respectively.  Effective  January 1, 1997, the ESOP was merged
                  into the Employees' Profit Sharing and Savings Plan.

(11)     Lease Commitments

         The Company  has  entered  into  various noncancelable operating leases
                  for  transportation  equipment and buildings which will expire
                  over the next five years.  Under the leases for transportation
                  equipment,  the  Company is responsible for all repairs, main-
                  tenance, insurance, and all other operating expenses.

         Approximate future minimum lease payments under noncancelable operating
                  leases as of December 31, 1996, totaled $4,028 and are payable
                  as follows: 1997, $1,586; 1998, $1,583; 1999, $699; 2000,$156;
                  and 2001,$4.

         Certain leases  on  transportation  equipment  require  the  Company to
                  guarantee  the value at the  maturity  of the lease at amounts
                  varying  from  10  percent  to  20  percent  of  the  original
                  equipment  cost. The maximum  contingent  liability under such
                  leases is approximately $883 from 1997 to 2001.

         Rent charged to expense on the above leases, expired leases, and short-
                  term rentals was $1,621 in 1994; $1,901 in 1995; and $1,462 in
                  1996.


                                       40

<PAGE>



                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(12)     Contingent Liabilities

         The  Company's  insurance  program  for  personal  liability,  physical
                  damage, and workers' compensation involves  self-insurance for
                  losses up to $50 per claim, $50 per claim, and $100 per claim,
                  respectively.

         At  December  31,  1995 and 1996,  the Company had approximately $1,370
                  and  $1,267, respectively, accrued for its estimated liability
                  for  incurred  losses  related  to  these programs.  Losses in
                  excess  of  the  self-insured  amount per claim are covered by
                  insurance companies.

         The  insurance  companies  require  the  Company  to provide letters of
                  credit  to  provide  funds  for  payment  of the  self-insured
                  amounts.  At December  31,  1995,  the Company had two standby
                  letters of credit  from a  commercial  bank in the  amounts of
                  $500 and $100,  both expiring on January 11, 1996. The letters
                  of credit  were  secured  by a  certificate  of deposit in the
                  amount of $500 at  December  31,  1995,  held by a  commercial
                  bank.  At December  31, 1995 and 1996,  the Company also had a
                  $1,000 letter of credit from a commercial  bank. The letter of
                  credit is secured by the  collateral  described  in note 5 for
                  the $5,750 line of credit  with the same bank.  This letter of
                  credit  directly  reduces the amount of  potential  borrowings
                  available  under  this  line of  credit.  In  addition,  funds
                  totaling $801 and $862 were held by the insurance companies as
                  deposits at December 31, 1995 and 1996, respectively.

         The Company's  insurance  program  for  health insurance provided as an
                  employee  benefit  for  all  eligible employees involves self-
                  insurance for losses up to $60 per claim and an aggregate loss
                  of  $940.   At  December  31,  1995  and 1996, the Company had
                  approximately  $400 and $268,  respectively,  accrued  for its
                  estimated liability related to these claims.

         The  Company  is also involved in certain legal actions and proceedings
                  arising  from  the  normal  course  of operations.  Management
                  believes  that  liability,  if  any,  arising  from such legal
                  actions  and  proceedings  will  not  have  a material adverse
                  effect on the financial position of the Company.

(13)     Transactions with Related Parties

         At  December  31,  1995  and  1996,  other  receivables included $66 in
                  receivables from an officer and a related party.

(14)     Pro Forma Data (Unaudited)

         Unaudited  pro  forma  corporate  income  taxes on the earnings for the
                  year  ended  December 31, 1994, of Wilmar Truck Leasing, Inc.,
                  an "S" Corporation,  and Smith Leasing, a sole proprietorship,
                  as  if  those  operations had been subject to corporate income
                  taxes  would  have been federal income taxes of $200 and state
                  income taxes of $32. Pro forma corporate income taxes relating
                  to these operations for the period January 1, 1995, to January
                  31, 1995, the effective date of the transactions  described in
                  note 1, were insignificant.

         The  difference  between  the  pro  forma  expected  income tax expense
                  (computed using the federal income tax rate of 34 percent) and
                  the pro forma income tax expense is the effect of state income
                  taxes, net of federal benefit.



                                       41

<PAGE>


                   SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

                             (Dollars in thousands)


(14)     Pro Forma Data (Unaudited), Continued

         Pro forma net earnings per common share have been based upon the number
                  of common shares which would have been outstanding considering
                  the  actual  conversion  ratio  of Smithway Motor Xpress, Inc.
                  shares  into  Smithway Motor Xpress Corp. shares and as though
                  the  326,934  common  shares  issued  in  connection  with the
                  Smithway Transportation Brokerage, Inc.; Wilmar Truck Leasing,
                  Inc.;  and  Smith  Leasing  acquisitions  had been outstanding
                  during  all  periods presented, which assumes the transactions
                  described in note 1 had taken place January 1, 1994.

(15)     Quarterly Financial Data (Unaudited)
<TABLE>
         Summarized  unaudited quarterly financial data for the Company for 1995
is as follows:
<CAPTION>

                                   March     June    September  December
                                    31         30        30       31
                                  -------   -------   -------   -------
<S>                               <C>        <C>       <C>       <C>
Operating revenue ............    $18,273    19,075    20,695    19,297
Earnings from operations .....      1,680     1,775     2,016     1,239
Net earnings .................        813       853     1,032       393
Net earnings per common share         .23       .24       .29       .11
                                  =======    ======    ======    ======
</TABLE>

<TABLE>
         Summarized  unaudited quarterly financial data for the Company for 1996
is as follows:
<CAPTION>

                                   March     June    September  December
                                     31       30         30        31
                                  -------    ------    ------    ------
<S>                               <C>        <C>       <C>       <C>
Operating revenue ...........     $19,860    23,411    24,937    25,459
Earnings from operations ....       1,296     2,524     2,534     2,005
Net earnings ................         513     1,154     1,330       952
Net earnings per common share         .15       .33       .27       .19
                                  ========   ======    ======    ======
</TABLE>


         As a result of rounding,  the total of the four  quarters may not equal
the Company's results for the year.

(16)     Subsequent Event (Unaudited)

         In  February 1997, the Company acquired tractors, trailers, and certain
                  other assets of Pirie Motor Freight, Inc. of Fort Dodge, Iowa.
                  In  exchange  for these assets, the Company assumed and repaid
                  approximately  $1.25 million in equipment financing secured by
                  these assets and paid a percentage of revenue for a noncompete
                  and  consulting  agreement.   Pirie Motor Freight had approxi-
                  mately $2.8 million of revenue during 1996.


                                       42

<PAGE>