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, 1997
                                              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)

                          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)

          2031 Quail Avenue
          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  $_______  as of March 9, 1998,  (based  upon the $___ 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 9, 1998, the registrant had 4,009,447 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 1998 annual  meeting of
stockholders that will be filed no later than April 30, 1998.



                                    1

<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 8 herein
Item 4   Submission of Matters to a Vote of Security         
         Holders                                                  Page 8 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 16 herein
Item 9   Changes in and Disagreements with Accountants on                    
            Accounting and Financial Disclosure                  Page 16 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 7 of Proxy Statement
Item 13  Certain Transactions                         Page 8 of Proxy Statement
                               Part IV
Item 14  Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K                         Pages 17 through 39 herein


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


        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.

        Prior  to  1984,  the  Company  specialized  in  transporting   building
materials on flatbed trailers.  William G. Smith became President of Smithway in
1984,  and led the Company's  effort to diversify its customer and freight base,
form the  Smithway  Network  of  locations,  and  implement  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 five trucking companies between June
1995 and September 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 goodwill or 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.  In  September  1997,  Smithway  acquired  the  business  of Royal
Transport,  Ltd. of Grand Rapids,  Michigan,  primarily a flatbed  carrier.  The
Royal acquisition provided Smithway a regional niche specializing in heavy loads
hauled  primarily on multiple axle trailers.  Through  acquisitions and internal
growth the Company expanded from $77.3 million revenue in 1995 to $120.1 million
in 1997.

        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 Motor
Xpress,  Inc.,  an  Iowa  corporation  ("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.

Growth Strategy

        Management believes that the flatbed and dry van truckload markets offer
growth opportunities  because of several identifiable trends.  First, many major
shippers are reducing the number of carriers they use in favor of service-based,
ongoing relationships with 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.   Second,  some  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  frequently can provide
similar service at less cost.  Third,  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


                                    3

<PAGE>



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.  These  factors  can  differentiate  Smithway  in a highly  fragmented
flatbed market segment characterized primarily by smaller, less diversified, and
less technologically  advanced 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 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 own Smithway stock through the
Company's 401(k) plan.

        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  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 26 months
at December 31, 1997) to enhance fuel  efficiency and driver  recruitment  while
reducing maintenance downtime.
--------
        (*)    May contain "forward-looking" statements.


                                    4

<PAGE>



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 18 terminals and field offices
are  managed  by  Smithway  employees,  while  the 5  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 19  terminals  and  field  offices  and 5  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 1997,  the Company's  top 50, 25, 10, and 5 customers  accounted for
49%,  40%, 32%, and 20% of revenue,  respectively,  with more than 450 customers
accounting for the remaining 51% of revenue.  No single  customer  accounted for
more than 5% of Smithway's revenue during 1997.

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 tractors,  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 operates  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.



                                    5

<PAGE>



         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 (609-mile average length of
haul in 1997) 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, 1997, the Company had
519 Company drivers, 234 non-driver employees,  and 447 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 the
Department of  Transportation's  highest  safety and fitness rating and numerous
safety 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  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 Company-owned tractor fleet
had an average age of 26 months at December 31, 1997.



                                    6

<PAGE>



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.  Although  management  believes the 1,293 flatbed  trailers it operated at
December 31, 1997,  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.  Most of the Company's  contracts with customers  contain fuel surcharge
provisions. Although 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.(*)

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  disposal  of  certain  substances.   The  Company  transports  certain
commodities that may be deemed hazardous  substances,  and its Fort Dodge, Iowa,
headquarters has above-ground fuel storage tanks and fueling facilities.  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 at December 31, 1997, the above-ground  fuel tank at Fort Dodge
was the only fueling site at Company  locations.  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.(*)




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


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



                                    7

<PAGE>



ITEM 2.        PROPERTIES

        Smithway's  headquarters  consists of 25,000 square feet of office space
and 59,800 square feet of equipment maintenance and wash facilities,  located on
31 acres near Fort Dodge, Iowa. Driver recruitment activity takes place at Grand
Rapids,  Michigan;  Fort  Dodge,  Iowa;  Joplin,  Missouri;  McPherson,  Kansas;
Oklahoma  City,  Oklahoma;   Yankton,   South  Dakota;  and  Youngstown,   Ohio.
Maintenance and repair shops are operated at Fort Dodge, Joplin,  McPherson, and
Yankton.  Of  the 18  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>  
Cincinnati, Ohio............................. Leased      Cedar Rapids, Iowa
Chicago, Illinois............................ Owned       Detroit, Michigan
Dallas, Texas................................ Leased<F1>  Hennepin, Illinois
Denver, Colorado............................. Leased<F1>  Norfolk, Nebraska
Fort Dodge, Iowa............................. Owned       Toledo, Ohio
Grand Rapids, Michigan....................... Leased
Joplin, Missouri............................. Owned
Kansas City, Missouri........................ Leased<F1>
McPherson, Kansas............................ Leased
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>


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, 1997, no
matters were submitted to a vote of security holders.






                                    8

<PAGE>



                                 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, 1997.

<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>
<TABLE>
<CAPTION>

             Period                             High           Low
---------------------------------------   ------------------------------
<S>                                       <C>                <C> 
Calendar Year 1997
      1st  Quarter                        $      9 3/4       $     8
      2nd Quarter                         $     12 1/4       $     8 1/2
      3rd Quarter                         $     14 1/4       $    11
      4th Quarter                         $     14 3/4       $    11 1/4
</TABLE>


        The  prices  reported  reflect  interdealer  quotations  without  retail
mark-ups, mark-downs, or commissions, and may not represent actual transactions.
As of March 2, 1998, the Company had 158  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,
                                      1997         1996        1995        1994        1993
                                  ----------    ----------  ----------  ----------  ----------
                                   (in thousands, except per share and operating data amounts)
                                  ----------    ----------  ----------  ----------  ----------
<S>                               <C>           <C>         <C>         <C>         <C>  
Statement of Operations Data:
Operating revenue.................$  120,117    $   93,667  $   77,339  $   69,180  $   59,931
Operating expenses: 
  Purchased transportation........    47,095        37,386      31,621      27,420      23,797
  Compensation and employee
    benefits......................    26,904        20,800      17,182      15,877      13,840
  Fuel, supplies, and maintenance.    15,965        12,347      10,183       9,368       8,876
  Insurance and claims............     2,206         1,995       1,827       2,238       2,318
  Taxes and licenses..............     2,299         1,856       1,588       1,454       1,492
  General and administrative......     5,391         4,214       3,592       3,512       3,357
  Communications and utilities....     1,378           971         758         585         543
  Depreciation and amortization...     7,880         5,740       3,879       2,774       2,821
                                  ----------    ----------  ----------  ----------  ----------
    Total operating expenses......   109,118        85,309      70,630      63,228      57,044
                                  ----------    ----------  ----------  ----------  ----------
    Total operating income........    10,999         8,358       6,709       5,952       2,887
Interest expense (net)............     1,545         1,548       1,225         966       1,179
                                  ----------    ----------  ----------  ----------  ----------
Earnings before income taxes and 
  accounting change...............     9,454         6,810       5,484       4,986       1,708
Income taxes......................     3,781         2,860       2,393       1,879         603
Accounting change.................         -             -           -           -          86
                                  ----------    ----------  ----------  ----------  ----------
Net earnings......................     5,673         3,950       3,091       3,107       1,019
Pro Forma Data:
Pro forma provision for income 
  taxes<F1>.......................         -             -           -         232         177
                                  ----------    ----------  ----------  ----------  ----------
Pro forma net earnings<F1>........$    5,673    $    3,950  $    3,091  $    2,875  $      842
Pro forma basic and diluted
  earnings per common 
  share<F1><F2>...................$    (1.13)   $     0.93  $     0.88  $     0.82  $     0.25
Pro forma weighted averages shares
  outstanding<F2>
  Basic earnings per common share. 5,000,860     4,249,893   3,524,042   3,498,212   3,428,270
  Diluted earnings per common
    share......................... 5,019,247     4,250,051   3,524,042   3,498,212   3,428,270
Operating Data<F3>:
Operating ratio<F4>...............      90.8%         91.1%       91.3%       91.4%       95.2%
Average revenue per tractor per
  week............................$    2,342    $    2,243  $    2,160  $    2,272  $    2,129
Average revenue per loaded mile...$     1.36<F5>      1.37  $     1.38  $     1.39  $     1.33
Average length  of haul in miles..       609           568         563         571         583
Company tractors at end of period.       525           458         376         302         288
Independent contractor tractors at 
  end of period...................       443           406         303         258         219
Weighted average tractors during 
  period..........................       909           747         619         532         497
Trailers at end of period.........     1,673         1,492       1,167         911         814
Balance Sheet Data (at end of 
  period):
Working capital (deficit).........$   10,100    $    1,893  $    2,516  $      371  $   (2,236)
Net property and equipment........    53,132        39,170      27,843      15,824      14,211
Total assets......................    74,878        55,330      40,702      25,229      22,569
Long-term debt, including current 
  maturities......................    30,976        15,904      23,219      11,775      10,899
Total stockholders' equity..........  29,906        24,193       7,871       4,789       2,513

------------------------
<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 Note 1 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.

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


                                    10

<PAGE>



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

GENERAL

        From 1995 to 1997 the Company  expanded its operating  revenue by 55.3%,
to $120.1  million in 1997 from $77.3 million in 1995.  This revenue  growth was
accompanied  by a 83.5%  increase in net earnings,  to $5.7 million in 1997 from
$3.1 million in 1995. The Company's growth during the period was attributable to
internal  expansion to meet  customer  demand and  acquisitions  of the trucking
assets  and  business  of  five  trucking  companies.  Economies  of  scale  and
continuing cost control efforts contributed to expansion of the Company's pretax
margin to 7.9% in 1997 from 7.1% in 1995. Pretax margin is used by management to
evaluate  the  Company's  performance  because the  relative  percentage  of the
Company's  revenue  equipment  fleet obtained from  independent  contractors and
under  operating  leases over different  time periods can affect  comparisons of
operating ratio without relation to the effect on earnings.


RESULTS OF OPERATIONS
<TABLE>
        The following  table sets forth the percentage  relationship  of certain
items to revenue for the periods indicated:
<CAPTION>
                                                         1997   1996   1995
                                                        ------ ------ ------
<S>                                                     <C>    <C>    <C>  
Operating revenue....................................   100.0% 100.0% 100.0%
Operating expenses:
      Purchased transportation.......................    39.2   39.9   40.9
      Compensation and employee benefits.............    22.4   22.2   22.2
      Fuel, supplies, and maintenance................    13.3   13.2   13.2
      Insurance and claims...........................     1.8    2.1    2.4
      Taxes and licenses.............................     1.9    2.0    2.1
      General and administrative.....................     4.5    4.5    4.6
      Communication and utilities....................     1.1    1.0    1.0
      Depreciation and amortization..................     6.6    6.1    5.0
                                                        ------ ------ ------
      Total operating expenses.......................    90.8   91.1   91.3
                                                        ------ ------ ------
Earnings from operations.............................     9.2    8.9    8.7
Interest expense, net................................     1.3    1.7    1.6
                                                        ------ ------ ------
Earnings before income taxes.........................     7.9    7.3    7.1
Income taxes.........................................     3.2    3.1    3.1
                                                        ------ ------ ------
Net earnings.........................................     4.7%   4.2%   4.0%
                                                        ====== ====== ======
</TABLE>

Comparison of year ended December 31, 1997 to year ended December 31, 1996.

        Operating revenue increased $26.5 million (28.2%),  to $120.1 million in
1997 from $93.7 million in 1996. The revenue increase resulted  primarily from a
21.7% increase in weighted average tractors, to 909 in 1997 from 747 during 1996
as the Company  expanded  internally  to meet  customer  demand and acquired the
business of Pirie Motor Freight, Inc. in February 1997, and Royal Transport Ltd.
in  September  1997.  Revenue  per  tractor  per week  (excluding  revenue  from
brokerage  operations)  increased  $99 per week  (4.4%),  to $2,342 in 1997 from
$2,243 in 1996.  In addition,  revenue  from the  Company's  brokerage  division
increased $900,000 (14.1%), to $7.3 million in 1997 from $6.4 million in 1996.

        Purchased  transportation  consists primarily of payments to independent
contractor  providers  of  revenue  equipment,  expenses  related  to  brokerage
activities, and payments under operating leases of revenue equipment.  Purchased
transportation  increased  $9.7 million  (26.0%),  to $47.1 million in 1997 from
$37.4  million in 1996,  as the  Company's  business  expanded  and the  Company
contracted with more independent contractor providers of revenue equipment. As a
percentage of revenue,  purchased transportation decreased to 39.2% in 1997 from
39.9% in 1996, as the increase in expenses related to brokerage revenue was more
than offset by the decrease in the  percentage  of the  Company's  overall fleet
comprised of tractors and trailers  leased from  independent  contractors  and a
decrease  in  the  amount  of  fuel  surcharge  passed  through  to  independent
contractors and tractors utilized by the brokerage division.


                                    11

<PAGE>



        Compensation  and employee  benefits  increased $6.1 million  (29.4%) to
$26.9  million in 1997 from $20.8  million in 1996.  As a percentage of revenue,
compensation  and  employee  benefits  increased  to 22.4% in 1997 from 22.2% in
1996,  because  of the  increase  in the  percentage  of the  Company's  revenue
equipment fleet being operated by employee drivers.

        Fuel, supplies, and maintenance increased $3.6 million (29.3%), to $16.0
million in 1997 from $12.3 million in 1996.  As a percentage  of revenue,  fuel,
supplies,  and  maintenance  increased  slightly  to 13.3% in 1997 from 13.2% in
1996,  because  the  increase in the  percentage  of the  Company's  fleet being
comprised of Company-owned tractors, for which the Company pays fuel costs, more
than offset decreasing per gallon fuel prices.

        Insurance and claims increased $211,000 (10.6%), to $2.2 million in 1997
from $2.0 million in 1996.  As a  percentage  of revenue,  insurance  and claims
decreased to 1.8% of revenue in 1997 from 2.1% in 1996,  as the Company  reduced
its  insurance  reserves  as claims  were  ultimately  resolved at less than the
reserve amount.

        Taxes and licenses increased  $443,000 (23.9%),  to $2.3 million in 1997
from $1.9  million in 1996.  As a  percentage  of  revenue,  taxes and  licenses
remained  relatively  constant  at 1.9% and 2.0% of  revenue  for 1997 and 1996,
respectively.

        General and administrative  expenses increased $1.2 million (27.9%),  to
$5.4  million in 1997 from $4.2  million in 1996.  As a  percentage  of revenue,
general and  administrative  expenses were unchanged at 4.5% of revenue for each
year.

        Communications and utilities increased $407,000 (41.9%), to $1.4 million
in 1997 from $1.0 million in 1996.  As a percentage  of revenue,  communications
and  utilities  increased  to 1.1% in 1997  from  1.0% in 1996 as a result of an
increase in the number of  Company-owned  terminals,  for which the Company pays
telephone  costs,  and an  increase  in the costs  relating  to usage of mobile,
satellite-based tracking and communication units.

        Depreciation  and amortization  increased $2.1 million (37.3%),  to $7.9
million  in 1997  from  $5.7  million  in  1996.  As a  percentage  of  revenue,
depreciation and amortization  increased to 6.6% of revenue in 1997 from 6.1% in
1996. The increase was attributable to a newer and larger fleet of Company-owned
tractors  and  trailers,  which  increased  the  cost  of  the  equipment  being
depreciated,  and an increase in Company tractors financed with debt rather than
operating leases.  These factors were partially offset by an increase in revenue
per  tractor  per  week,  which  more  efficiently  spread  the  fixed  cost  of
depreciation over a larger revenue base.

        Interest expense,  net remained  unchanged at $1.5 million in each year.
As a percentage of revenue,  interest expense,  net decreased to 1.3% of revenue
in 1997 from 1.7% in 1996, as the increase in average debt balance was offset by
lower average interest rates of 7.1% in 1997 compared with 7.5% in 1996.

         As a result of the foregoing,  the Company's  pretax margin improved to
7.9% in 1997 from 7.3% in 1996.

         The Company's  effective tax rate was 40.0% in 1997 (3.2% of revenue),
compared with 42.0% in 1996 (3.1% of revenue).  The effective tax rate is higher
than the expected combined tax rate for a company  headquartered in Iowa because
of the cost of  nondeductible  driver per diem expense  absorbed by the Company.
The impact of the Company's  paying per diem travel  expenses  varies  depending
upon the ratio of drivers  to  independent  contractors  and the  Company's  net
earnings.

        As a result of the factors  described above,  net earnings  increased to
$5.7  million  in 1997  (4.7% of  revenue),  from $4.0  million in 1996 (4.2% of
revenue).



                                    12

<PAGE>



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.  Revenue per tractor  per week  (excluding  revenue  from
brokerage  operations)  increased  $83 (3.8%),  to $2,243 in 1996 from $2,160 in
1995. In addition, revenue from the Company's brokerage division increased 0.6%,
to $6.4 million in 1996.

        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.

        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.

        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.

        As a result of the foregoing,  the Company's  pretax margin  improved to
7.3% in 1996 from 7.1% in 1995.


                                    13

<PAGE>



        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).  The effective tax rate is higher
than the expected combined tax rate for a company  headquartered in Iowa because
of the cost of  nondeductible  driver per diem expense  absorbed by the Company.
The impact of the Company's  paying per diem travel  expenses  varies  depending
upon the ratio of drivers  to  independent  contractors  and the  Company's  net
earnings.

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

LIQUIDITY AND CAPITAL RESOURCES

        The  growth  of  the   Company's   business  has  required   significant
investments in new revenue equipment that the Company  historically has financed
with  borrowing   under   installment   notes  payable  to  commercial   lending
institutions and equipment manufacturers, borrowings under lines of credit, cash
flow from operations, equipment leases from third-party lessors, and proceeds of
the Company's  initial public offering.  The Company also has obtained a portion
of its revenue equipment fleet from independent  contractors who own and operate
the equipment,  which reduces overall capital expenditure  requirements compared
with  providing  a fleet of  entirely  Company-owned  equipment.  The  Company's
primary  sources of liquidity  currently are funds  provided by  operations  and
borrowings  under credit  agreements with financial  institutions  and equipment
manufacturers. Management believes that its sources of liquidity are adequate to
meet its current anticipated working capital requirements, capital expenditures,
and other needs at least through 1998.(*)

        Net cash  provided  by  operating  activities  was $14.9  million,  $7.1
million,  and $6.5 million for the years ended December 31, 1997, 1996, and 1995
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 $1.4 million, $4.0 million, and
$404,000 for the years ended December 31, 1997, 1996, and 1995 respectively. The
average age of the Company's  accounts  receivable was approximately 34 days for
1997, and 30 days for 1996 and 1995.

        Net cash used in financing  activities of $10.0 million,  $766,000,  and
$2.1  million  for  the  years  ended   December  31,  1997,   1996,  and  1995,
respectively,  consisted  primarily  of net  payments  of  $5.5  million,  $16.1
million,  and $1.7  million of  principal  under the  Company's  long-term  debt
agreements, and net (payments) borrowings of ($4.5 million), $4.5 million, $0, 
under the Company's former line of credit, which was paid off during 1997.

        At  December  31,  1997,  the  Company had  outstanding  long-term  debt
(including current maturities)  consisting of approximately $31.0 million,  most
of which was  comprised of  obligations  for the purchase of revenue  equipment.
Approximately $21.0 million consisted of borrowings from financial  institutions
and equipment  manufacturers and $10 million  represented the amount drawn under
the Credit Agreement. Interest rates on this debt range from 5.67% to 7.90% with
maturities through 2005.

        At December 31, 1997, the Credit Agreement provided for borrowings of up
to $15.0 million,  based upon certain accounts  receivable and revenue equipment
values.  The interest rate under the Credit  Agreement is 1% plus the LIBOR rate
for the  corresponding  period.  The Credit  Agreement is unsecured and contains
covenants  that impose certain  minimum  financial  ratios and limit  additional
liens,  the size of  certain  mergers  and  acquisitions,  dividends,  and other
matters. The Company was in compliance with the Credit Agreement at December 31,
1997.



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


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


                                    14

<PAGE>



INFLATION AND FUEL COST

        Most of the Company's operating expenses are  inflation-sensitive,  with
inflation  generally  producing  increased  costs of operation.  During the past
three years,  the most  significant  effects of  inflation  have been on revenue
equipment prices and the compensation paid to drivers.  Innovations in equipment
technology  and comfort have resulted in higher  tractor  prices,  and there has
been an  industry-wide  increase in wages paid to attract  and retain  qualified
drivers.  The Company  historically has limited the effects of inflation through
increases  in freight  rates and certain cost  control  efforts.  The failure to
obtain  rate   increases  in  the  future  could  have  an  adverse   effect  on
profitability. In addition to inflation,  fluctuations in fuel prices can affect
profitability.  Most of the  Company's  contracts  with  customers  contain fuel
surcharge  provisions.  Although 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.(*)

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 have
been higher in the winter months due to decreased fuel  efficiency and increased
maintenance costs in colder weather.

YEAR 2000

        The  Company  has   identified   fifteen  Year  2000  issues,   and  has
successfully  written and tested programs to deal with seven of these issues. It
is anticipated that programs  addressing the remaining issues will be written by
the end of 1998.  All  programs  are  expected to be fully  tested and  problems
resolved  by June 30,  1999.  Management  expects  the Year 2000  issues to have
minimal impact on the Company's  results of operations,  liquidity,  and capital
resources.(*)

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
        through  1997. 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.



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


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



                                    15

<PAGE>



        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  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 21 to 39
of this report. The supplementary quarterly financial data follow:

Quarterly Financial Data:
<CAPTION>

                                  First    Second     Third    Fourth
                                 Quarter   Quarter   Quarter   Quarter
                                   1997      1997      1997      1997
                                --------- --------- --------- ---------
<S>                             <C>       <C>       <C>       <C> 
Operating revenue.............. $ 26,908  $ 30,614  $ 31,834  $ 30,761
Earnings from operations.......    1,955     3,107     3,369     2,569
Earnings before income taxes...    1,639     2,650     2,899     2,267
Income taxes...................      688     1,114     1,204       775
Net earnings...................      951     1,536     1,695     1,492
Basic and diluted earnings per
  share........................     0.19      0.31      0.34      0.30

                                  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
Basic and diluted 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, 1997,  involving a change of accountants or  disagreements
on accounting and financial disclosure.




                                    16

<PAGE>



                                    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, 4, and 5 of the Registrant's  Proxy Statement for the
1998 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.

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 7 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 4 and "Certain  Transactions"  on page 8 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...........................................   21
Consolidated Balance Sheets............................................   22
Consolidated Statements of Earnings....................................   24
Consolidated Statements of  Stockholders' Equity.......................   25
Consolidated Statements of Cash Flows..................................   26
Notes to Consolidated Financial Statements.............................   28

        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, 1997.




                                    17

<PAGE>



(c)     Exhibits
<TABLE>
<CAPTION>
Exhibit
Number    Description
<S>  <C>  <C> 
1    <F1> Form of Underwriting Agreement.
2.1  <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.
2.2  <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.
2.3  <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.
2.4  <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> Outside Director Stock Plan dated March 1, 1995.
10.2 <F1> Incentive Stock Plan, adopted March 1, 1995.
10.3 <F1> 401(k) Plan, adopted August 14, 1992, as amended.
10.4 <F1> Form of  Agency  Agreement between Smithway Motor Xpress, Inc. and its
          independent commission
          agents.
10.5 <F1> Memorandum of officer incentive compensation policy.
10.6 <F1> Form  of  Independent  Contractor  Agreement  between  Smithway  Motor
          Xpress, Inc. and its independent contractor providers of tractors.
10.7 <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.
10.8 <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.
10.9 <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.
10.10<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.



                                    18

<PAGE>



Exhibit
Number    Description
10.11<F3> Credit  Agreement  dated September 3, 1997,  between  Smithway Motor
          Xpress Corp., as Guarantor,  Smithway Motor Xpress, Inc., as Borrower,
          and LaSalle National Bank.
21   <F2> List of subsidiaries.
23   <F4> Consent of KPMG Peat Marwick LLP, independent accountants.
27   <F4> Financial Data Schedule.

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

<FN>
<F1>      Incorporated by reference from the Company's Registration Statement on
          Form S-1, Registration No. 33-90356, effective June 27, 1996.

<F2>      Incorporated  by  reference from  the Company's Yearly Report on Form 
          10-K for the fiscal  year  ended  December  31, 1996. Commission File 
          No.000-20793, dated March 31, 1997.

<F3>      Incorporated by reference from the Company's Quarterly  Report on Form
          10-Q for the period ended  September  30,  1997.  Commission  File No.
          000-20793, dated November 12, 1997.

<F4>      Filed herewith.
</FN>
</TABLE>


                                    19

<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 11, 1998              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 11, 1998
                                   
/s/ G. Larry Owens          Executive Vice President and
---------------------------   Chief Financial Officer;
G. Larry Owens                Director                          March 11, 1998

/s/ Michael E. Oleson       Treasurer and Chief Accounting
---------------------------   Officer (principal financial
Michael E. Oleson             and accounting officer)           March 11, 1998

/s/ Herbert D. Ihle
-------------------
Herbert D. Ihle             Director                            March 11, 1998

/s/ Robert  E. Rich
-------------------
Robert E. Rich              Director                            March 11, 1998

/s/ Terry G. Christenberry  Director                            March 11, 1998
---------------------------
Terry G. Christenberry



                                    20


<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, 1997 and 1996,  and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for each of the years in the  three-year  period ended  December 31, 1997.
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, 1997 and 1996,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.


                                                           KPMG Peat Marwick LLP



Des Moines, Iowa
February 4, 1998



                                    21

<PAGE>


<TABLE>


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

                                                      December 31,
                                                 -----------------------
                     Assets                        1997         1996
                     ------                        -----        ----
<S>                                             <C>           <C> 
Current assets:
   Cash and cash equivalents                    $     4,082$         940
   Receivables (note 6):
      Trade                                          11,040        9,676
      Other                                           1,261          985
      Recoverable income taxes                            -          211
   Inventories                                        1,064          713
   Deposits, primarily with insurers (note 13)          770          921
   Prepaid expenses                                   1,160          846
   Deferred income taxes (note 7)                       350          282
                                                 ----------  -----------
           Total current assets                      19,727       14,574
                                                 ----------  -----------
Property and equipment (note 6):
   Land                                                 531          531
   Buildings and improvements                         5,100        4,375
   Tractors                                          38,217       28,245
   Trailers                                          24,233       19,514
   Other equipment                                    5,308        3,543
                                                 ----------  -----------
                                                     73,389       56,208
   Less accumulated depreciation                     20,257       17,038
                                                 ----------  -----------
           Net property and equipment                53,132       39,170
                                                 ----------  -----------
Other assets, net (notes 3 and 14)                    2,019        1,586
                                                 ----------  -----------

                                                $    74,878$      55,330
                                                 ==========  ===========

</TABLE>







      See accompanying notes to consolidated financial statements.



                                    22

<PAGE>



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

                                                                 December 31,
                       Liabilities and                      --------------------
                      Stockholders' Equity                     1997       1996
                      --------------------                     -----      ----
<S>                                                       <C>           <C>  
Current liabilities:
    Line of credit (note 5)                               $        -    $ 4,490
    Current maturities of long-term debt (note 6)              3,971      3,260
    Accounts payable                                           2,277      2,211
    Accrued compensation                                       1,278        760
    Income taxes payable                                         275          -
    Accrued loss reserves (note 13)                              905      1,267
    Other accrued expenses                                       921        693
                                                            ---------  ---------
            Total current liabilities                          9,627     12,681
Long-term debt, less current maturities (note 6)              27,005     12,644
Deferred income taxes (note 7)                                 8,340      5,812
                                                            ---------  ---------
            Total liabilities                                 44,972     31,137
                                                            ---------  ---------
Stockholders' equity (note 8 and 9):
    Preferred stock (.01 par value; authorized 5 million
      shares; issued none)                                         -          -
    Common stock:
      Class A (.01 par value; authorized 20 million shares;
      issued 1997 4,003,068; 1996 - 3,999,293 shares)             40         40
      Class B (.01 par value; authorized 5 million shares; 
      issued 1 million shares)                                    10         10
    Additional paid-in capital                                11,144     11,104
    Retained earnings                                         18,789     13,116
    Reacquired shares, at cost (14,404 shares)                   (77)       (77)
                                                            ---------  ---------
            Total stockholders' equity                        29,906     24,193
                                                            ---------  ---------
Commitments (notes 12 and 13).
                                                          $   74,878    $55,330
                                                           =========  =========

</TABLE>






            See accompanying notes to consolidated financial statements.



                                    23

<PAGE>



<TABLE>

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

                                                             Years ended December 31,
                                                     -----------------------------------------
                                                        1997           1996          1995
                                                        -----          ----          ----
<S>                                                <C>            <C>            <C> 
Operating revenue:
   Freight                                         $      119,688 $      93,428$        77,020
   Other                                                      429           239            319
                                                     ------------  ------------  -------------
       Operating revenue                                  120,117        93,667         77,339
                                                     ------------  ------------  -------------
Operating expenses:
   Purchased transportation                                47,095        37,386         31,621
   Compensation and employee benefits                      26,904        20,800         17,182
   Fuel, supplies, and maintenance                         15,965        12,347         10,183
   Insurance and claims                                     2,206         1,995          1,827
   Taxes and licenses                                       2,299         1,856          1,588
   General and administrative                               5,391         4,214          3,592
   Communications and utilities                             1,378           971            758
   Depreciation and amortization                            7,880         5,740          3,879
                                                     ------------  ------------  -------------
       Total operating expenses                           109,118        85,309         70,630
                                                     ------------  ------------  -------------
       Earnings from operations                            10,999         8,358          6,709
Financial (expense) income:
   Interest expense                                       (1,654)       (1,705)        (1,456)
   Interest income                                            109           157            231
                                                     ------------  ------------  -------------
       Earnings before income taxes                         9,454         6,810          5,484
Income taxes (note 7)                                       3,781         2,860          2,393
                                                     ------------  ------------  -------------
       Net earnings                                $        5,673 $       3,950 $        3,091
                                                     ============  ============  =============
Basic and diluted earnings per share (note 10)     $         1.13 $        0.93$          0.88
                                                     ============  ============  =============

</TABLE>






                 See accompanying notes to consolidated financial statements.



                                    24

<PAGE>


<TABLE>

                 SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
               Consolidated Statements of Stockholders' Equity
                 Years ended December 31, 1997, 1996, and 1995
                           (Dollars in thousands)

<CAPTION>
                                                                              Equity
                                                                             reduction 
                                           Additional                          for          Total
                                    Common paid-in     Retained  Reacquired    ESOP      stockholders'
                                    stock  capital     earnings  shares        debt          equity
                                   ------- ----------- --------- ----------- ----------- --------------
<S>                                <C>     <C>         <C>       <C>         <C>         <C>
Balance at December 31, 1994       $    28 $        -  $  5,167  $      (58) $     (348) $       4,789
Net earnings                             -          -     3,091           -           -          3,091
Net contributions                        -        127         -           -           -            127
Net undistributed earnings of
     "S" corporation
     and sole proprietorship
     at date of termination              -         47       (47)          -           -              -
Cancellation of reacquired 
     common shares                       -        (58)        -          58           -              -
Reduction of ESOP debt                   -          -         -           -         105            105
Change in price of common shares
     repurchased which was 
     provided for in 1994 (note 8)       -        203         -           -           -            203
Acquisition of 9,627 common shares       -          -         -         (52)          -            (52)
Change in value and number of 
     redeemable common shares            -       (319)      (73)          -           -           (392)
                                   ------- ----------- --------- ----------- ----------- --------------
Balance at December 31, 1995            28          -     8,138         (52)       (243)         7,871

Net earnings                             -          -     3,950           -           -          3,950
Reduction of ESOP debt                   -          -         -           -         243            243
Acquisition of 4,777 common shares       -          -         -         (25)          -            (25)
Shares sold for cash, net of
   issuance costs (note 8)              15     10,727         -           -           -         10,742
Change in value and number of
   redeemable common shares              7        377     1,028           -           -          1,412
                                   ------- ----------- --------- ----------- ----------- -------------
Balance at December 31, 1996            50     11,104    13,116         (77)          -         24,193

Net earnings                             -          -     5,673           -           -          5,673
Issuance of stock bonuses                -         40         -           -           -             40
                                   ------- ----------- --------- ----------- ----------- -------------
Balance at December 31, 1997      $     50 $   11,144  $ 18,789  $      (77) $        -  $      29,906
                                  ======== ========== ========== =========== =========== =============


</TABLE>






         See accompanying notes to consolidated financial statements.



                                    25

<PAGE>



<TABLE>
                SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
                  Consolidated Statements of Cash Flows
                         (Dollars in thousands)
<CAPTION>
                                                 Years ended December 31,
                                            ---------------------------------
<S>                                         <C>         <C>            <C>  
                                               1997         1996         1995
Cash flows from operating activities:
   Net earnings                             $  5,673    $     3,950    $  3,091
                                            ---------   ------------   ---------
   Adjustments to reconcile net earnings to  
   cash provided by operating
     activities:
        Depreciation and amortization          7,880          5,740       3,879
        Deferred income taxes                  2,460          2,088       1,184
        Provision for bad debts                   60             --          --
        Stock bonuses                             40             --          --
        Change in:
          Receivables                         (1,214)        (4,756)     (1,285)
          Inventories                           (326)          (210)        (72)
          Deposits, primarily with insurers      151            (67)        (46)
          Prepaid expenses                      (264)            90        (408)
          Accounts payable and other accrued 
            liabilities                          450            249         180
                                            ---------   ------------   ---------
            Total adjustments                  9,237          3,134       3,432
                                            ---------   ------------   ---------
            Net cash provided by operating 
            activities                        14,910          7,084       6,523
                                            ---------   -----------    ---------


Cash flows from investing activities:
   Payments for acquisitions                  (2,599)        (3,834)          --
   Purchase of property and equipment           (357)        (6,341)     (2,836)
   Proceeds from sale of property and 
     equipment                                 1,317          1,321         211
   Purchase of other assets                     (117)            --        (500)
   Proceeds from short-term investments          ---            500         500
                                            ---------   ------------   ---------
            Net cash used in investing
            activities                        (1,756)        (8,354)     (2,625)
                                            ---------   ------------   ---------


Cash flows from financing activities:
   Proceeds from long-term debt               14,300             --       2,869
   Principal payments on long-term debt      (19,822)       (16,068)     (4,593)
   Borrowings on line of credit agreement     44,670         93,593      77,606
   Payments on line of credit agreement      (49,160)       (89,103)    (77,606)
   Proceeds from issuance of common stock,
     net                                          --         11,232          --
   Other                                          --           (420)       (500)
                                            ---------   ------------   ---------
            Net cash used in financing
            activities                        (10,012)         (766)     (2,097)
                                            ----------  ------------   ---------
            Net increase (decrease) in
               cash and cash equivalents        3,142        (2,036)      1,801
Cash and cash equivalents at beginning of
   year                                           940         2,976       1,175
                                            ----------  ------------   ---------
Cash and cash equivalents at end of year    $   4,082   $       940    $  2,976
                                            ==========  ============   =========
</TABLE>


                 See accompanying notes to consolidated financial statements.



                                    26

<PAGE>



<TABLE>
                 SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
               Consolidated Statements of Cash Flows, Continued
                          (Dollars in thousands)
<CAPTION>
                                                 Years ended December 31,
                                            --------------------------------
<S>                                         <C>         <C>            <C> 
                                               1997         1996          1995
Supplemental disclosure of cash flow 
information: Cash paid during the year for:
      Interest                              $   1,455   $     1,732    $  1,401
      Income taxes                                835           971       2,151
                                            ==========  ============   =========

Supplemental schedules of noncash investing 
and financing activities:
      Notes payable issued for tractors and 
        trailers                            $  20,594   $     8,996    $ 13,273
      Principal payments made by ESOP              --           243         105
      Issuance of stock bonuses                    40            --          --
      Liability issued for intangible assets       --           100          --
                                            ----------  ------------   ---------

Cash payments for acquisitions:
     Revenue equipment                      $   1,990   $     3,004    $     --
     Intangible assets                            472           727          --
    Other assets                                  137           103          --
                                            ----------  ------------   ---------
                                            $   2,599   $     3,834    $     --
                                            ==========  ============   =========


</TABLE>


















          See accompanying notes to consolidated financial statements.

                                    27
<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

                          December 31, 1997 and 1996

            (Dollars in thousands, except share and per share data)

(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.

        Pursuant to the  acquisitions  described  above,  Smithway  Motor Xpress
               Corp.  issued  2,513,697  shares of its Class A Common  Stock and
               1,000,000  shares  of its  Class B Common  Stock to the  previous
               owners of the Companies.  Management of the Company  believes the
               fair  value  of the  Class A  Common  Stock  was  not  materially
               different from that of the Class B Common Stock.

        On     July 2, 1996,  the Company sold 1.5 million shares of its Class A
               Common Stock in an initial public offering. 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.



                                    28

<PAGE>



                 SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

           Notes to Consolidated Financial Statements, Continued

            (Dollars in thousands, except share and per share data)

(2)     Summary of Significant Accounting Policies, Continued

        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,
               1997,  1996,  and  1995.  The  Company's  10  largest   customers
               accounted  for  approximately  23  percent,  32  percent,  and 34
               percent of the Company's  total  operating  revenues during 1997,
               1996, and 1995, respectively. The Company's largest concentration
               of customers is in the steel and building  materials  industries,
               which  together  accounted  for  approximately  51  percent,   47
               percent, and 51 percent of the Company's total operating revenues
               in 1997, 1996, and 1995, 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.  At December  31,  1997 cash  equivalents  consisted  of
               $3,700 of commercial  paper.  There were no cash  equivalents  at
               December 31, 1996.

        Receivables

        Trade  receivables are stated net of an allowance for doubtful  accounts
               of $60 and $-0- at December 31, 1997 and 1996, respectively.  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, 1997 and 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.











                                    29

<PAGE>



                SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY

           Notes to Consolidated Financial Statements, Continued

          (Dollars in thousands, except share and per share data)

(2)     Summary of Significant Accounting Policies, Continued

        Prepaid Expenses

        Prepaidexpenses  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 over 2 years. 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 39 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 5 to 10 years.  Accumulated amortization of $211 and $55, at
               December  31,  1997 and  1996,  respectively,  have  been  netted
               against these intangible assets.

        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.




                                    30

<PAGE>



                SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARY
          
             Notes to Consolidated Financial Statements, Continued

           (Dollars in thousands, except share and per share data)

(2)     Summary of Significant Accounting Policies, Continued

        ESOP Indebtedness

        At     December    31,    1995,    long-term    indebtedness    of   the
               Company-sponsored  leveraged Employee Stock Ownership Plan (ESOP)
               was recorded as long-term debt with a corresponding  reduction in
               stockholders'  equity.  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.

        Income Taxes

        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

        On     January 1, 1996, the Company  adopted the provisions of Statement
               of Financial  Accounting  Standards  (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  Accounting
               Principles  Board  (APB)  Opinion No. 25,  "Accounting  for Stock
               Issued to Employees," and related interpretations 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.  APB Opinion No. 25 requires  compensation
               expense to be  recorded  only if on the date of grant the current
               market price of the underlying stock exceeded the exercise price.
               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.




                                    31

<PAGE>



                 SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

             Notes to Consolidated Financial Statements, Continued

            (Dollars in thousands, except share and per share data)

(2)     Summary of Significant Accounting Policies, Continued

        Net Earnings Per Common Share

        The    Company adopted the provisions of SFAS 128,  "Earnings per Share"
               effective  December 31, 1997.  SFAS 128 is  retroactive  to prior
               years,  however,  the  adoption  had no  effect  on prior  years'
               earnings per share as previously reported.

        Basic  earnings per share have been computed by dividing net earnings by
               the  weighted-average  outstanding  Class A and  Class  B  common
               shares during each of the years.  Diluted earnings per share have
               been  calculated by also including in the  computation the effect
               of employee stock options,  nonvested  stock,  and similar equity
               instruments granted to employees as potential common shares.

(3)     Acquisitions

        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  $1,260 in equipment  financing  secured by
               these  assets  and paid  $140  for a  noncompete  and  consulting
               agreement. The effect of this transaction was not material to the
               consolidated financial statements of the Company.

        In     September  1997, the Company  acquired  tractors,  trailers,  and
               certain  other assets of Royal  Transport,  Ltd. of Grand Rapids,
               Michigan.  In  exchange  for these  assets,  the  Company  repaid
               approximately $669 in equipment financing secured by these assets
               and paid $179 to the former  owners of Royal  Transport,  Ltd. In
               addition,  the Company  agreed to pay $376 for a  noncompete  and
               consulting  agreement.  The  effect of this  transaction  was not
               material to the consolidated financial statements of the Company.

        In     January 1996, the Company  purchased  certain trailers and office
               equipment from Smith Trucking Company and entered into a two-year
               noncompete  agreement.  The Company paid total  consideration  of
               $381 in the transaction.

        In     October 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 above  acquisitions  were  accounted  for by the purchase  method of
               accounting.




                                    32

<PAGE>



                 SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

            Notes to Consolidated Financial Statements, Continued

           (Dollars in thousands, except share and per share data)

(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.  At December  31,  1997,  the carrying
               amounts of cash and cash equivalents,  trade  receivables,  other
               receivables,   accounts   payable,   and   accrued   liabilities,
               approximate  fair value  because of the short  maturity  of those
               instruments.  The carrying  amounts of long-term debt and line of
               credit  approximate  fair value because the applicable  borrowing
               rates are tied to current market rates.

(5)     Line of Credit

        At     December  31,  1996 the  Company  had a line of credit  agreement
               which  allowed  advances  up  to  the  lesser  of 85  percent  of
               qualifying  accounts  receivable or $5,750. At December 31, 1996,
               the Company had  outstanding  borrowings of $4,490.  The interest
               rate at December 31, 1996 was 8.75  percent.  The Company  repaid
               this line of credit during 1997.

(6)     Long-Term Debt

        Long-term debt  includes an  unsecured  credit  agreement,  entered into
               during 1997,  with an outstanding  balance of $10,000 at December
               31,  1997,  which  allows for  borrowings  up to the lesser of 85
               percent of eligible accounts receivable and 75 percent of the net
               book value of  unencumbered  revenue  equipment  or $15,000.  The
               agreement expires August 31, 2001 and contains certain compliance
               covenants.  The Company was in compliance with these covenants at
               December 31, 1997. The interest rate on the  outstanding  balance
               is defined in the  agreement  and at  December  31, 1997 was 6.87
               percent. The credit agreement also includes financing for letters
               of credit.  At  December  31,  1997,  the Company had a letter of
               credit of $1,000 outstanding for self-insured  amounts related to
               its  insurance  programs.  (See note  13.) This  letter of credit
               directly  reduced the amount of  potential  borrowings  available
               under the credit agreement.

        Long-term debt also  includes  equipment  notes with balances of $20,976
               and $15,904 at December 31, 1997 and 1996, respectively. Interest
               rates on the  equipment  notes  range  from 5.67  percent to 7.90
               percent with  maturities  through 2005.  The equipment  notes are
               collateralized by the underlying equipment.


        Future maturities on long-term debt for years ending December 31, are as
               follows: 1998, $3,971; 1999, $4,100; 2000, $14,628; 2001, $2,680;
               and 2002, $4,851.




                                    33

<PAGE>



                 SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

            Notes to Consolidated Financial Statements, Continued

           (Dollars in thousands, except share and per share data)

(7)     Income Taxes
<TABLE>
Income taxes  consisted of the  following  components  for the three years ended
     December 31:
<CAPTION>

                      Federal                 State                  Total
<S>                <C>                    <C>                    <C> 
1997
Current            $      1,082           $        239           $      1,321
Deferred                  2,016                    444                  2,460
                   ------------           ------------           ------------
                   $      3,098           $        683           $      3,781
                   ============           ============           ============
1996
Current            $        725           $         47           $        772
Deferred                  1,712                    376                  2,088
                   ------------           ------------           ------------
                   $      2,437           $        423           $      2,860
                   ============           ============           ============
1995
Current            $      1,088           $        121           $      1,209
Deferred                  1,034                    150                  1,184
                   ------------           ------------           ------------
                   $      2,122           $        271           $      2,393
                   ============           ============           ============
</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,
                                    --------------------------------------
<S>                                 <C>           <C>            <C>  
                                        1997          1996         1995
Computed "expected" income tax
  expense                           $     3,214   $    2,315     $   1,865
State income tax expense, net of
  federal benefit                           451          279           179
Permanent differences, primarily 
  nondeductible portion of driver 
  per diem and travel expenses              230          176           153
Other                                      (114)          90           196
                                    ------------  -----------    ----------
                                    $     3,781   $    2,860     $   2,393
                                    ============  ===========    ==========
</TABLE>

<TABLE>
Temporary differences between  the  financial  statement  basis  of  assets  and
     liabilities and the related deferred tax assets and liabilities at December
     31, 1997 and 1996, were as follows:
<CAPTION>

<S>                                             <C>              <C> 
                                                       1997          1996
Deferred tax assets:
     Alternative minimum tax (AMT) credit
       carryforwa$ds                                       91$           780
     Accrued expenses                                     540            464
                                                --------------   ------------
        Total gross deferred tax assets                 1,450          1,244
                                                --------------   ------------
Deferred tax liabilities:
     Prepaid expenses                                     (17)          (182)
     Property and equipment                            (9,423)        (6,592)
                                                --------------   ------------
        Total gross deferred tax liabilities           (9,440)        (6,774)
                                                --------------   ------------
        Net deferred tax liabilities            $      (7,990)   $    (5,530)
                                                ==============   ============


</TABLE>
                                    34

<PAGE>




                  SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

             Notes to Consolidated Financial Statements, Continued

            (Dollars in thousands, except share and per share data)


(7)     Income Taxes, Continued

        The AMT credit carryforwards are available indefinitely to reduce future
        income tax liabilities to the extent they exceed AMT liabilities.

(8)     Stockholders' Equity

        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 of Class A Common Stock and certain  reacquired
        shares.

        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. 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.

(9)     Stock Plans

        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 date of
        grant.

        The Company also 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.  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 1997 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.





                                    35

<PAGE>





                 SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

            Notes to Consolidated Financial Statements, Continued

            (Dollars in thousands, except share and per share data)


(9)     Stock Plans, Continued

<TABLE>
        A summary of stock option activity and weighted-average  exercise prices
        follows:
<CAPTION>

                                                     1997                     1996                     1995
                                    Shares       exercise    Shares       exercise    Shares       exercise
                                                    price                    price                    price
                                  ----------   ----------   ---------   ----------   ---------    ---------
<S>                               <C>          <C>          <C>         <C>          <C>          <C>
Outstanding at beginning of year      88,000   $     9.42      85,000   $     9.50         ---    $     ---
    Granted                           28,000         8.73       3,000         7.23      85,000         9.50
    Exercised                            ---          ---         ---          ---         ---          ---
    Forfeited                         (2,000)        9.50         ---          ---         ---          ---
                                  -----------  ----------   ---------   ----------   ---------    ---------
Outstanding at end of year           114,000   $     9.25      88,000   $     9.42      85,000    $    9.50
                                  -----------  ----------   ---------   ----------   ---------    ---------

Options exercisable at end of year    48,700   $     9.20      16,600   $     9.50         ---    $     ---
Weighted-average fair value of    $     2.22                $    2.72                      ---
   options granted during the year
</TABLE>

        At December 31, 1997, the weighted-average remaining contractual life of
        the outstanding options was 7.45 years.

        The Company used the Black-Scholes option pricing model to determine the
        fair value of stock  options for the years ended  December  31, 1997 and
        1996. The following  assumptions were used in determining the fair value
        of these options:  weighted-average  risk-free  interest rate,  6.12% in
        1997 and 6.44% in 1996;  weighted-average expected life, 5 years in 1997
        and 3 years in 1996; and weighted-average  expected  volatility,  21% in
        1997 and 20% in 1996. There were no expected dividends.

        Other  stock  awards  granted  during  1997  included  6,539  shares  of
        non-vested  common stock with a fair value of $13 on the grant date.  In
        1996, the Company granted 1,690 shares of non-vested common stock with a
        fair value of $8.88 on the grant date.  No stock  awards for  non-vested
        shares were made in 1995.

        The  Company  adopted  an  independent   contractor  driver  bonus  plan
        effective  January 1, 1997.  The maximum  number of shares to be awarded
        under the plan are 50,000  shares of Class A Common  Stock.  The Company
        awarded 3,211 shares under the plan in 1997.

        The Company also adopted a Class A Common Stock profit incentive plan in
        1997. Under the plan, the Company will set aside for delivery to certain
        participants  the  number  of shares  of Class A Common  Stock  having a
        market value on the distribution  date equal to a designated  percentage
        (as determined by the board of directors) of the Company's  consolidated
        net  earnings  for the  applicable  fiscal  year.  In 1997,  the Company
        awarded $85 to certain  employees  for which common stock will be issued
        in 1998.




                                    36

<PAGE>



                SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

           Notes to Consolidated Financial Statements, Continued

           (Dollars in thousands, except share and per share data)


(10)    Earnings Per Share

<TABLE>
        A summary of the basic and diluted  earnings per share  computations for
        the years ended December 31, 1997, 1996, and 1995 is presented below:
<CAPTION>

                                   For the year ended 1997                   For the year ended 1996
                          ----------------------------------------   --------------------------------------
                              Net         Shares                         Net         Shares
                           earnings     (denominator)    Per share     earnings    (denominator)    Per Share
                          (numerator)                     amount      (numerator)                    amount
                          -----------   -------------    ---------   ------------  -------------    ---------
<S>                       <C>           <C>              <C>         <C>           <C>              <C>
Basic EPS
Net earnings available to
    common stockholders        $5,673     5,000,860          $1.13        $3,950     4,249,893        $0.93
Effect of dilutive 
  securities
Common stock options              ---        18,011                          ---           158
Common stock awards               ---           376                          ---           ---
                          -----------   -----------    -----------   -----------   -----------   ----------
Diluted EPS                    $5,673     5,019,247          $1.13        $3,950     4,250,051        $0.93
                          -----------   -----------    -----------   -----------   -----------   ----------

</TABLE>

        For the year ended 1995, net earnings available for common  stockholders
        was $3,091  and  weighted-average  shares  outstanding  were  3,524,042,
        resulting  in basic  earnings  per share of $.88.  Diluted  earnings per
        share was also $.88 as all common stock options outstanding in 1995 were
        anti-dilutive.

(11)    Employees' Profit Sharing and Savings Plan and ESOP

        The Company has an Employees'  Profit Sharing and Savings Plan, which is
        a qualified plan under the  provisions of Sections  401(a) 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,
        1997, 1996, and 1995, Company contributions totaled $150, $-0-, and $64,
        respectively.  The Plan owns  486,794  shares of the  Company's  Class A
        Common Stock at December 31, 1997.

        The  Company  previously  sponsored  an ESOP which was  merged  into the
        Employees'  Profit Sharing and Savings Plan,  effective January 1, 1997.
        The ESOP had  previously  incurred  a note  payable  with a  balance  at
        December  31,  1996 of $243 in  connection  with the  purchase of common
        stock of the Company. This 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 $11 and $31
        during  the  years  ended  December  31,  1996 and  1995,  respectively.
        Contributions made to the ESOP for the years ended December 31, 1996 and
        1995, were $-0- and $138.












                                    37

<PAGE>





                  SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

            Notes to Consolidated Financial Statements, Continued

           (Dollars in thousands, except share and per share data)


(12)    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,  maintenance,  insurance,  and all other
        operating expenses.  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 $576 from 1998 to 2001.

        Approximate future minimum lease payments under noncancelable  operating
        leases as of  December  31,  1997,  totaled  $2,074  and are  payable as
        follows: 1998, $1,172; 1999, $629; 2000, $269; and 2001, $4.


        Rent  charged  to  expense  on the above  leases,  expired  leases,  and
        short-term  rentals  was $1,740 in 1997;  $1,462 in 1996;  and $1,901 in
        1995.

(13)    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,  1997 and 1996,  the  Company  had  approximately  $905 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,  1997,  the Company had a $1,000  letter of credit  issued under the
        credit agreement  described in note 6. In addition,  funds totaling $683
        and $862 were held by the  insurance  companies  as deposits at December
        31, 1997 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,  1997 and  1996,  the  Company  had  approximately  $250  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.

(14)    Transactions with Related Parties

        At  December  31,  1997 and  1996,  other  receivables  included  $66 in
        receivables from an officer and a related party.




                                    38

<PAGE>


                 SMITHWAY MOTOR XPRESS CORP.  AND SUBSIDIARY

             Notes to Consolidated Financial Statements, Continued

            (Dollars in thousands, except share and per share data)



(15)    Quarterly Financial Data (Unaudited)

<TABLE>

        Summarized  unaudited  quarterly financial data for the Company for 1997
        and 1996 is as follows:
<CAPTION>

                              March 31     June 30   September 30  December 31
                            ------------ ----------- ------------ -------------
<S>                         <C>          <C>         <C>          <C> 
1997
Operating revenue           $     26,908      30,614       31,834        30,761
Earnings from operations           1,955       3,107        3,369         2,569
Net earnings                         951       1,536        1,695         1,492
Basic and diluted earnings 
  per share                         0.19        0.31         0.34          0.30
                            ============ =========== ============ =============
</TABLE>

<TABLE>
<CAPTION>

                              March 31     June 30   September 30  December 31
                            ------------ ----------- ------------ -------------
<S>                         <C>          <C>         <C>          <C> 
1996
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
Basic and diluted 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 year.

(16)    Subsequent Event (Unaudited)

        In February 1998, the Company acquired tractors,  trailers,  and certain
        other  assets of East West Motor  Express,  Inc.  of Black  Hawk,  South
        Dakota.  In exchange for these  assets,  the Company paid  approximately
        $6,852 to the previous owners,  assumed and repaid  approximately $4,017
        in equipment  financing secured by these assets and agreed to pay $2,229
        for goodwill. East West Motor Express, Inc. had approximately $31,000 in
        revenue during 1997.



                                    39

<PAGE>