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, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934.
     For the transition period from      to

Commission file number 000-20793

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


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

       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. [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant was $6,352,333 as of January 31, 2002 (based upon the $2.52 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  10% of a class of
outstanding common stock, and no other persons, are affiliates, and has excluded
stock options.

As of January 31, 2002, the  registrant  had 3,843,980  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  2002  annual  meeting  of
stockholders that will be filed no later than April 29, 2002.

                                        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
<TABLE>
                                     Part I
<S>      <C>                                                             <C>
Item 1   Business                                                        Page 3 through 6 herein
Item 2   Properties                                                      Page 6 herein
Item 3   Legal Proceedings                                               Page 7 herein
Item 4   Submission of Matters to a Vote of Security Holders             Page 7 herein

                                     Part II
Item 5   Market for the Registrant's Common Equity and
         Related Stockholder Matters                                     Page 7 herein
Item 6   Selected Financial Data                                         Page 8 herein
Item 7   Management's Discussion and Analysis of Financial
         Condition and Results of Operations                             Page 9 through 17 herein
Item 7A  Quantitative and Qualitative Disclosures About Market Risk      Page 18 herein
Item 8   Financial Statements and Supplementary Data                     Page 19 herein
Item 9   Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure                             Page 19 herein

                                    Part III
Item 10  Directors and Executive Officers of the Registrant              Proxy Statement
Item 11  Executive Compensation                                          Proxy Statement
Item 12  Security Ownership of Principal Stockholders and
         Management                                                      Proxy Statement
Item 13  Related Party Transactions                                      Proxy Statement

                                     Part IV
Item 14  Exhibits, Financial Statement Schedules, and Reports on         Pages 20 through 21 herein
         Form 8-K
</TABLE>
------------------------------------

         This report contains "forward-looking statements." These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated. See "Management Discussion and
Analysis of Financial Condition and Results of Operations - Factors That May
Affect Future Results" 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 27  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 the Company's
growth.  Management commenced the Company's acquisition strategy in 1995 to take
advantage of opportunities offered by industry consolidation.

     Smithway  acquired the operations of nine trucking  companies  between June
1995 and March 2001. In March 2001, the Company acquired tractors, trailers, and
certain other assets owned or leased by Skipper Transportation,  Inc., a flatbed
carrier headquartered in Birmingham,  Alabama. The Skipper acquisition augmented
Smithway's presence in the southeastern United States.  Through acquisitions and
internal growth the Company expanded from $77 million in revenue in 1995 to $191
million in 2001.

     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, and its wholly owned subsidiaries,  Smithway Motor Xpress, Inc., an
Iowa  corporation,  East West Motor Express,  Inc., a South Dakota  corporation,
SMSD Acquisition  Corp., a South Dakota  corporation,  and New Horizons Leasing,
Inc., an Iowa corporation.

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 26 terminals,  field offices, and
independent  agencies.  The  headquarters and 20 terminals and field offices are
managed by Smithway employees, while the six agencies are managed by independent
commission  agents.  The  customer  sales  representatives  and  agents  at each
location have  front-line  responsibility  for booking freight 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.  Sales and dispatch  functions for traffic are generally
performed at terminals within the 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 more than 10 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  ten  national  sales   representatives,
personnel at 21 terminals  and field  offices,  and six  independent  commission
agents.  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 and service.  Consequently,  the Company seeks primarily  service-sensitive
freight rather than competing for all freight on the basis of price.


                                        3

<PAGE>

     In 2001,  the  Company's  top 50,  25, 10, and 5  customers  accounted  for
approximately  50%,  37%,  24%,  and  17% of  revenue,  respectively,  with  the
remaining  customers  accounting  for  approximately  50% of revenue.  No single
customer accounted for 10% or more of the Company's revenue during 2001.

Technology

     Management  believes that advances in technology  can enhance the Company's
operating  efficiency and customer  service.  During  February 2002, the Company
purchased new  operating  system and freight  selection  software to improve the
efficiency of its  operations.  The Company  expects to have the software  fully
functioning by June 2002. This software  designed  specifically for the trucking
industry will allow the Company's  managers to  coordinate  available  equipment
with the transportation needs of customers,  monitor truck productivity and fuel
consumption,  and schedule  regular  equipment  maintenance.  It also will allow
immediate  access to current  information  regarding driver and equipment status
and location, special load and equipment instructions, routing, and dispatching.

     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.

     Smithway also offers its customers electronic data interchange which allows
customers to  communicate  directly  with the Company via  computer  link or the
Internet 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. 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 several factors may cause  fluctuations in the fleet
mix from time-to-time.

     In 2001,  the  combination  of high fuel  prices,  a slowing  economy,  and
tightened credit  standards placed extreme pressure on independent  contractors.
Many were  forced to exit their  business.  At  year-end,  Smithway's  number of
independent contractors had decreased by approximately 6% from year-end 2000.

     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-to- medium distances (697-mile average length of
haul in 2001) 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, 2001, the Company had
729 Company drivers, 300 non-driver employees,  and 575 independent contractors.
Management  believes that the Company has good  relationships with its employees
and independent contractors.



                                        4

<PAGE>

Safety and Insurance

     Smithway's  active safety and loss  prevention  program has resulted in the
Department of Transportation's  highest safety and fitness rating (satisfactory)
and numerous safety awards.  The Company's  safety and loss  prevention  program
includes pre-screening,  initial orientation, six weeks on-the-road training for
drivers without substantial experience, 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  owned  tractors  (as  opposed  to
independent  contractors'  tractors)  is to operate  tractors  for a period that
balances  capital   expenditure   requirements,   disposition   values,   driver
acceptability,  repair and maintenance expense, and fuel efficiency. As a result
of advances in the  manufacturing of tractors and major  components,  as well as
the depressed  value of used equipment,  the Company  extended its average trade
cycle  mileage from 550,000 to 600,000  miles.  This  mileage  exceeds  warranty
limits.  Based upon projected repair and maintenance needs,  management does not
expect a substantial  increase in repair and maintenance  expense  compared with
the cost of disposing  of tractors on the former  trade  cycle,  but has seen an
increase in maintenance expense in recent periods.  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 38.5 months at December 31, 2001.

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.  Competition is based primarily upon service
and price.  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  and  focusing  on  short-to-medium  lengths of haul.
Although   management   believes  the  approximately  881  company  drivers  and
independent contractors dedicated to its flatbed operation at December 31, 2001,
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 options, futures contracts, and price swap agreements on heating oil, which
is derived  from the same  petroleum  products as diesel  fuel,  in an effort to
partially hedge increases in fuel prices.  The Company did not have any options,
futures  contracts,  or price swap  agreements in place at any time during 2001.
Most of the Company's contracts with customers contain fuel surcharge provisions
and the Company also attempts to recover increases in fuel prices through higher
rates. However,  increases in fuel prices are generally not fully offset through
these measures.

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.

                                        5

<PAGE>

     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,
the 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
and Black Hawk,  South Dakota and Des Moines,  Iowa terminals have  above-ground
fuel storage tanks and fueling  facilities.  The Company's  Cohasset,  Minnesota
terminal has  underground  fuel storage tanks. 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.
Management  believes that its operations are in material compliance with current
laws and  regulations  and does not know of any  existing  condition  that would
cause  compliance with applicable  environmental  regulations to have a material
effect on the Company's capital expenditures, earnings, or competitive position.
If the Company should fail to comply with  applicable  regulations,  the Company
could be subject to  substantial  fines or  penalties  and to civil or  criminal
liability.

ITEM 2.  PROPERTIES

     Smithway's  headquarters consists of 25,000 square feet of office space and
51,000 square feet of equipment  maintenance and wash facilities,  located on 31
acres near Fort Dodge,  Iowa. The Smithway  Network  consists of locations in or
near the following cities with the facilities noted:

<TABLE>
<CAPTION>
                                                         Driver
       Company Locations           Maintenance        Recruitment        Dispatch        Sales        Ownership
       -----------------           -----------        -----------        --------        -----        ---------
<S>                                <C>                <C>                <C>             <C>          <C>
Birmingham, Alabama ..........          X                                    X             X            Leased
Black Hawk, South Dakota......          X                  X                 X             X            Owned
Chicago, Illinois.............                                               X             X            Owned
Cohasset, Minnesota...........          X                                    X             X            Owned
Dallas, Texas.................                             X                 X             X            Leased+
Denver, Colorado..............                                               X             X            Leased+
Des Moines, Iowa .............          X                                    X             X            Owned
Enid, Oklahoma ...............                                               X                          Leased+
Fort Dodge, Iowa..............          X                  X                 X             X            Owned
Houston, Texas................                                               X             X            Leased
Joplin, Missouri..............          X                                    X             X            Owned
Kansas City, Missouri.........                                               X             X            Leased
McPherson, Kansas.............          X                                    X             X            Owned
Oklahoma City, Oklahoma.......          X                  X                 X             X            Owned
Oshkosh, Wisconsin............                                               X             X            Leased+
Phoenix, Arizona..............                                               X             X            Leased
Stockton, California..........                             X                 X             X            Leased
St. Louis, Missouri...........                                               X             X            Leased+
St. Paul, Minnesota...........                                               X             X            Leased+
Yankton, South Dakota.........          X                  X                 X             X            Owned
Youngstown, Ohio..............                             X                 X             X            Leased+
        Agent Locations
        ---------------
Cedar Rapids, Iowa ...........                                               X             X
Chambersburg, Pennsylvania....                                               X             X
Detroit, Michigan ............                                               X             X
Hennepin, Illinois ...........                                               X             X
Norfolk, Nebraska ............                                               X             X
Toledo, Ohio .................                                               X             X

---------------------------
+ Month-to-month leases.
</TABLE>
                                        6

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

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

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

     During the fourth  quarter of the fiscal year ended  December 31, 2001,  no
matters were submitted to a vote of security holders.

                                     PART II

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

     Price Range of Common Stock.  The Company's  Class A Common Stock is traded
on the Nasdaq  National Market under the symbol "SMXC." The following table sets
forth for the calendar periods  indicated the range of high and low sales prices
for the  Company's  Class A Common  Stock as reported by Nasdaq from  January 1,
2000, to December 31, 2001.

           Period                         High                    Low
------------------------------   --------------------    ---------------------
Calendar Year 2001
         1st  Quarter               $     3.25             $      1.63
         2nd  Quarter               $     3.13             $      2.06
         3rd  Quarter               $     2.98             $      1.85
         4th  Quarter               $     2.65             $      1.20


           Period                         High                    Low
------------------------------   --------------------    ---------------------
Calendar Year 2000
         1st  Quarter               $     4.31             $      2.75
         2nd  Quarter               $     3.75             $      1.63
         3rd  Quarter               $     3.25             $      1.84
         4th  Quarter               $     2.94             $      1.63


     As of January 31, 2002, the Company had 332  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.



                                        7

<PAGE>




ITEM 6.  SELECTED FINANCIAL AND OPERATING DATA

<TABLE>
                                                                          Years Ended December 31,
                                                         1997           1998           1999          2000           2001
                                                         ----           ----           ----          ----           ----
Statement of Operations Data:                               (In thousands, except per share and operating data)
<S>                                                <C>            <C>            <C>           <C>            <C>
Operating revenue................................  $    120,117       $161,375  $     196,945 $     198,990  $     190,826
Operating expenses:
  Purchased transportation.......................        47,095         66,495         79,735        77,755         70,129
  Compensation and employee benefits.............        26,904         38,191         49,255        51,718         54,394
  Fuel, supplies, and maintenance................        15,965         19,738         23,754        30,995         32,894
  Insurance and claims...........................         2,206          2,745          4,212         3,426          5,325
  Taxes and licenses.............................         2,299          3,048          4,045         3,943          3,817
  General and administrative.....................         5,391          6,237          7,491         8,319          8,294
  Communications and utilities...................         1,378          1,838          2,190         2,052          2,123
  Depreciation and amortization..................         7,880         11,015         15,800        19,325         18,778
                                                   -------------  -------------  ------------- -------------  -------------
     Total operating expenses....................       109,118        149,307        186,482       197,533        195,754
                                                   -------------  -------------  ------------- -------------  -------------
     Earnings (loss) from operations.............        10,999         12,068         10,463         1,457         (4,928)
Interest expense (net)...........................         1,545          2,965          3,715         4,029          3,004
                                                   -------------  -------------  ------------- -------------  -------------
Earnings (loss) before income taxes..............         9,454          9,103          6,748        (2,572)        (7,932)
Income taxes (benefit)...........................         3,781          3,774          2,822          (581)        (2,721)
                                                   -------------  -------------  ------------- -------------  -------------
Net earnings (loss)..............................         5,673          5,329          3,926        (1,991)        (5,211)
                                                   =============  =============  ============= =============  =============
Basic and diluted earnings (loss) per common share $      1.13    $       1.06  $        0.78 $       (0.40) $       (1.07)
                                                   =============  =============  ============= =============  =============
Operating Data (1)
Operating ratio (2)..............................         90.8%           92.5%          94.7%         99.3%         102.6%
Average revenue per tractor per week (3).........  $     2,342    $      2,330  $       2,299 $       2,261  $       2,189
Average revenue per loaded mile (3)..............  $      1.36    $       1.33  $        1.33 $        1.32  $        1.34
Average length of haul in miles..................          609             659            678           712            697
Company tractors at end of period................          525             815            844           887            939
Independent contractor tractors at end of period.          443             711            689           614            575
Weighted average tractors during period..........          909           1,236          1,532         1,515          1,530
Trailers at end of period........................        1,673           2,720          2,783         2,679          2,781
Weighted averages shares outstanding:
  Basic..........................................        5,001           5,012          5,031         5,009          4,852
  Diluted........................................        5,019           5,037          5,032         5,009          4,852
Balance Sheet Data (at end of period):
Working capital.................................. $     10,100    $      6,811  $       5,159 $       3,300  $         (55)
Net property and equipment.......................       53,132          87,137         94,305        86,748         79,045
Total assets.....................................       74,878         115,494        125,014       115,828        106,436
Long-term debt, including current maturities.....       30,976          61,703         59,515        52,334         49,742
Total stockholders' equity.......................       29,906          35,405         39,508        37,233         31,866
</TABLE>
(1) Excludes brokerage activities except as to operating ratio.
(2) Operating expenses as a percentage of operating revenue.
(3) Net of fuel surcharges.


                                        8

<PAGE>

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

Introduction

     Except for the historical  information  contained herein, the discussion in
this annual report on Form 10-K contains forward-looking statements that involve
risk,  assumptions,  and uncertainties that are difficult to predict. Words such
as "believe," "may," "could,"  "expects,"  "likely,"  variations of these words,
and  similar   expressions,   are  intended  to  identify  such  forward-looking
statements.  The Company's  actual  results could differ  materially  from those
discussed  herein.  Factors that could cause or contribute  to such  differences
include,  but are not limited to, those discussed below in the section  entitled
"Factors  That May Affect  Future  Results," as well as those  discussed in this
item and elsewhere in this annual report on Form 10-K.

General

     The trucking industry operated in a very difficult business  environment in
2000 and 2001. A combination of high fuel prices,  rising insurance premiums,  a
depressed used truck market, a declining number of owner-operators,  and slowing
freight demand associated with an economic  recession affected the profitability
of most trucking companies, including Smithway.

     The Company has historically  expanded its operations through a combination
of acquisitions and internal  growth,  but over the past three years the size of
the Company's  business has  decreased  slightly.  From 1999 to 2001,  operating
revenue  decreased  3.1%, to $191 million in 2001 from $197 million in 1999. For
the year  2001,  Smithway  experienced  a net loss of $5.2  million or $1.07 per
basic and diluted share. The loss included fourth-quarter pre-tax adjustments of
$1.1  million,   including  a  $707,000  write-off  of  the  carrying  value  of
proprietary  operating  software and a $332,000  adjustment to increase reserves
for bad debts primarily as a result of steel company bankruptcies.

     Smithway's  revenue  was  primarily  impacted by a slowing  economy,  which
reduced  revenue  per tractor per week and  brokerage  revenue  versus the prior
year. In addition,  higher fuel prices and insurance premiums and tighter credit
standards by lending institutions caused the number of owner-operators providing
tractors  to  Smithway  to drop by  approximately  6% during  2001.  With  fewer
owner-operators,  higher unseated company tractors,  and lower production caused
by soft  freight  demand,  Smithway's  revenue  base  suffered.  In  addition to
industry pressures, the Company's dry van operation significantly underperformed
the flatbed  operation.  Freight and brokerage revenue  decreased  approximately
$6.0 million  between 2000 and 2001,  and is projected to decrease  $2.0 million
between 2001 and 2002 from customer  bankruptcies.  Management  has sought,  and
will continue to seek, replacement freight, including freight from sectors other
than steel and building materials.

     On the expense side,  Smithway's  profitability  was affected  primarily by
higher insurance premiums,  increased parts and maintenance expense, and the two
previously  mentioned  non-recurring  adjustments.  During the fourth quarter of
2000, three of Smithway'>s  significant customers declared bankruptcy.  In 2000,
the  Company  reserved  $775,000  pre-tax  to  reflect  the full  amount  of the
receivables  owed by these  customers plus certain  amounts for other  customers
experiencing  economic  difficulties.  The $332,000 adjustment during the fourth
quarter of 2001 was made because of additional steel company  bankruptcies.  The
adjustment is reflected in general and administrative expense.

     The  Company   operates  a   tractor-trailer   fleet   comprised   of  both
company-owned  vehicles and  vehicles  obtained  under  leases from  independent
contractors  and  third-party  finance  companies.  Fluctuations  among  expense
categories  may occur as a result of changes in the relative  percentage  of the
fleet obtained  through  equipment that is owned versus equipment that is leased
from independent contractors or financing sources. Costs associated with revenue
equipment acquired under operating leases or through agreements with independent
contractors are expensed as "purchased  transportation." For these categories of
equipment the Company does not incur costs such as interest and  depreciation as
it might with owned equipment.  In addition,  independent  contractor  tractors,
driver compensation, fuel, communications,  and certain other expenses are borne
by the independent  contractors  and are not incurred by the Company.  Obtaining
equipment  from  independent  contractors  and under  operating  leases  reduces
capital  expenditures  and  on-balance  sheet  leverage and  effectively  shifts
expenses from interest to "above the line" operating expenses. The fleet profile
of acquired  companies  and the  Company's  relative  recruiting  and  retention
success with  Company-employed  drivers and independent  contractors  will cause
fluctuations  from time-to-time in the percentage of the Company's fleet that is
owned versus obtained from independent contractors and under operating leases.



                                        9

<PAGE>

Results of Operations

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

<TABLE>
                                                                  1999               2000               2001
                                                                  ----               ----               ----
<S>                                                               <C>                <C>                <C>
Operating revenue.........................................        100.0%             100.0%             100.0%
Operating expenses:
         Purchased transportation.........................         40.5               39.1               36.8
         Compensation and employee benefits...............         25.0               26.0               28.5
         Fuel, supplies, and maintenance..................         12.1               15.6               17.2
         Insurance and claims.............................          2.1                1.7                2.8
         Taxes and licenses...............................          2.1                2.0                2.0
         General and administrative.......................          3.8                4.2                4.3
         Communication and utilities......................          1.1                1.0                1.1
         Depreciation and amortization....................          8.0                9.7                9.8
                                                          ----------------------------------------------------------
         Total operating expenses.........................         94.7               99.3              102.6
                                                          ----------------------------------------------------------
Earnings (loss) from operations...........................          5.3                0.7               (2.6)
Interest expense, net.....................................          1.9                2.0                1.6
                                                          ----------------------------------------------------------
Earnings (loss) before income taxes.......................          3.4               (1.3)              (4.2)
Income taxes (benefit)....................................          1.4               (0.3)              (1.4)
                                                          ----------------------------------------------------------
Net earnings (loss).......................................          2.0%              (1.0)%             (2.7)%
                                                          ==========================================================
</TABLE>

Comparison of year ended December 31, 2001 to year ended December 31, 2000.

     Operating  revenue decreased $8.2 million (4.1%), to $190.8 million in 2001
from  $199.0  million in 2000.  Lower  average  revenue  per  tractor  per week,
decreased   brokerage  revenue,   and  decreased  fuel  surcharge  revenue  were
responsible for the decrease in operating  revenue.  Average revenue per tractor
per week  (excluding  revenue from  brokerage  operations  and fuel  surcharges)
decreased  to  $2,189 in 2001 from  $2,261  in 2000,  primarily  due to a higher
number of unseated  company  tractors,  lower weekly  production  caused by soft
freight demand,  and lower weekly  production of tractors  acquired from Skipper
Transportation,  Inc. In  addition,  soft freight  demand  caused a $2.9 million
decrease in brokerage  revenue,  to $9.5  million in 2001 from $12.3  million in
2000. Finally,  fuel surcharge revenue decreased $1.0 million to $6.3 million in
2001 from $7.3 million in 2000. During 2001 and 2000, approximately $3.5 million
and $3.9 million,  respectively,  of the fuel surcharge revenue collected helped
to offset  Company fuel costs.  The remainder was passed  through to independent
contractors.  These factors were partially  offset by an increase in revenue per
loaded mile, net of surcharges, to $1.34 in 2001 from $1.32 in 2000.

     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  decreased  $7.6 million  (9.8%),  to $70.1  million in 2001 from
$77.8  million  in  2000,  as the  Company  contracted  with  fewer  independent
contractor providers of revenue equipment. As a percentage of revenue, purchased
transportation  decreased to 36.8% in 2001 from 39.1% in 2000.  This  reflects a
decrease in the  percentage  of the  Company'>s  fleet  supplied by  independent
contractors.   Management   believes  the  decline  in  independent   contractor
percentage is attributable  to high fuel costs,  high insurance  costs,  tighter
credit  standards,  and slow freight  demand,  which have diminished the pool of
drivers interested in becoming or remaining independent contractors.

     Compensation and employee benefits  increased $2.7 million (5.2%), to $54.4
million  in 2001  from  $51.7  million  in 2000.  As a  percentage  of  revenue,
compensation  and  employee  benefits  increased  to 28.5% in 2001 from 26.0% in
2000.  The  increases  were  primarily  attributable  to  the  increase  in  the
percentage  of the  Company's  fleet  represented  by  Company-owned  equipment.
Additionally, wages paid to drivers for unloaded miles increased during the year
as weak freight  demand caused  deadhead  miles to increase.  Finally,  workers'
compensation  claims and premiums  increased  in 2001  compared  with 2000,  and
management expects this trend to continue in future periods.

                                       10

<PAGE>

     Fuel,  supplies,  and maintenance  increased $1.9 million (6.1%),  to $32.9
million in 2001 from $31.0 million in 2000.  As a percentage  of revenue,  fuel,
supplies,  and  maintenance  increased to 17.2% of revenue in 2001 compared with
15.6% in  2000.  This  was  attributable  primarily  to (i) an  increase  in the
percentage of the Company's fleet supplied by Company- owned  equipment,  (ii) a
slightly older fleet of Company-owned  equipment as the Company has extended its
trade cycle for  tractors,  and (iii)  higher  non-billable  miles for which the
Company incurs fuel expense,  but does not recoup  increased  costs through fuel
surcharges.  These factors were  partially  offset by a decrease in fuel prices,
which  decreased  4% to an  average  of $1.38 per  gallon in 2001 from $1.45 per
gallon in 2000. Fuel surcharge  revenue  attributable to loads hauled by Company
trucks remained  relatively  constant at $3.5 million in 2001 compared with $3.9
million in 2000.  The  extension  of the trade cycle for tractors is expected to
continue to impact maintenance expense in future periods.

     Insurance and claims  increased  $1.9 million  (55.4%),  to $5.3 million in
2001 from $3.4 million in 2000. As a percentage of revenue, insurance and claims
increased to 2.8% of revenue in 2001  compared  with 1.7% in 2000.  The increase
was  attributable  to a  substantial  increase in insurance  premiums on July 1,
2001,  when  the  Company's  insurance  policies  were  renewed.   Additionally,
liability  claims paid and  reserved  increased.  High  premiums  and claims are
expected to continue to impact this category in future periods.

     Taxes and licenses  decreased $126,000 (3.2%), to $3.8 million in 2001 from
$3.9 million in 2000, reflecting a decrease in the number of shipments requiring
special  permits.  The special  permits are paid for by the  shippers,  which is
included in freight  revenue.  As a  percentage  of revenue,  taxes and licenses
remained constant at 2.0% of revenue in 2001and 2000.

     General and administrative  expenses remained  essentially constant at $8.3
million  in 2001 and 2000.  During the fourth  quarter  of 2001,  steel  company
bankruptcies  caused the Company to increase its allowance for doubtful accounts
by $332,000. Similarly, during the fourth quarter of 2000, three major customers
declared  bankruptcy  causing the Company to increase its allowance for doubtful
accounts  by   $775,000.   General  and   administrative   expenses,   excluding
bankruptcies,  increased  $418,000 in 2001 as the Company  incurred higher costs
associated with recruiting and training new drivers. As a percentage of revenue,
general and  administrative  expenses  remained  relatively  constant at 4.3% of
revenue in 2001  compared  with 4.2% of revenue in 2000.  However,  without  the
increases in allowance for doubtful  accounts during 2001 and 2000,  general and
administrative expenses would have increased to 4.2% of revenue in 2001 compared
with 3.8% in 2000.

     Communications and utilities remained  essentially constant at $2.1 million
in 2001 and 2000.  As a  percentage  of revenue,  communications  and  utilities
remained  relatively  constant at 1.1% of revenue in 2001  compared with 1.0% of
revenue in 2000.

     Depreciation and amortization  decreased  $547,000 (2.8%), to $18.8 million
in 2000 from $19.3 million in 2000. In 2001, the Company  committed to a plan to
replace its  proprietary  computer  operating  system with third party software.
Accordingly,  the Company wrote off the $707,000  carrying value of its existing
software during the fourth  quarter.  In 2000 and 2001, the market value of used
tractors  declined in the United States.  In response,  management  assessed the
valuation of its long-lived assets and identified  tractors with carrying values
in excess of recoverable value. The carrying value of these tractors was reduced
by $1.0 million in 2000. In accordance with industry practices, the gain or loss
on retirement,  sale, or write-down of equipment is included in depreciation and
amortization.  In 2001 and 2000, the Company  recognized net gains on equipment,
excluding  one-time  write-downs,   of  $187,000  and  $119,000,   respectively.
Additionally,   increasing   costs  of  new  equipment   continued  to  increase
depreciation  per  tractor.  As  a  percentage  of  revenue,   depreciation  and
amortization  remained  essentially constant at 9.8% of revenue in 2001 and 9.7%
in 2000.

     Interest expense,  net, decreased $1.0 million (25.4%),  to $3.0 million in
2001 from $4.0 million in 2000. This decrease was attributable to lower interest
rates and lower average debt outstanding.  As a percentage of revenue,  interest
expense, net, decreased to 1.6% of revenue in 2001 compared with 2.0% in 2000.

     As a result of the foregoing,  the Company's  pre-tax  margin  decreased to
(4.2%) in 2001 from (1.3%) in 2000.

     The Company's income tax benefit was $2.7 million,  or 34.3% of loss before
income taxes. The Company's income tax benefit in 2000 was $581,000, or 22.6% of
loss before  income  taxes.  In both years,  the effective tax rate is different
from 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  level of the
Company's pre-tax earnings.

                                       11

<PAGE>

     As a result of the factors  described  above,  net loss was $5.2 million in
2001 (2.7% of revenue),  compared with net loss of $2.0 million in 2000 (1.0% of
revenue).

Comparison of year ended December 31, 2000 to year ended December 31, 1999.

     Operating  revenue increased $2.1 million (1.0%), to $199.0 million in 2000
from $196.9 million in 1999. A substantial increase in fuel surcharge revenue to
$7.3 million in 2000 from  $489,000 in 1999 was largely  offset by lower revenue
per tractor per week (excluding revenue from brokerage operations), and slightly
lower  weighted  average  tractors.  Approximately  $3.9  million  of  the  fuel
surcharge  revenue  helped to offset  Company fuel costs and the  remainder  was
passed through to independent contractors.  Revenue per tractor per week (net of
fuel surcharges) decreased $38 per week (1.7%), to $2,261 in 2000 from $2,299 in
1999,  primarily  caused by a $.01 decrease in average  revenue per loaded mile.
Weighted  average  tractors  decreased  1.1%, to 1,515 in 2000 from 1,532 during
1999 as the Company's owner operator fleet  decreased due to economic  pressures
that forced many to leave the  trucking  industry.  Revenue  from the  Company's
brokerage  operations  increased  $752,000 (6.5%), to $12.3 million in 2000 from
$11.6 million in 1999.

     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  decreased  $1.9 million  (2.5%),  to $77.8  million in 2000 from
$79.7  million  in  1999,  as the  Company  contracted  with  fewer  independent
contractor providers of revenue equipment. As a percentage of revenue, purchased
transportation  decreased to 39.1% in 2000 from 40.5% in 1999.  This  reflects a
decrease in the  percentage  of the  Company's  fleet  supplied  by  independent
contractors  which was  partially  offset by an  increase in the  percentage  of
revenue  paid  to the  independent  contractors  as  they  receive  100% of fuel
surcharges attributable to the loads they haul.

     Compensation and employee benefits  increased $2.5 million (5.0%), to $51.7
million  in 2000  from  $49.3  million  in 1999.  As a  percentage  of  revenue,
compensation  and  employee  benefits  increased  to 26.0% in 2000 from 25.0% in
1999.  The increase was  primarily  attributable  to an increase in the per-mile
wage paid to flatbed  drivers in October 1999 and an increase in the  percentage
of the Company's  revenue  attributable  to  company-owned  equipment.  This was
partially  offset by a decrease in workers'  compensation  and health  insurance
claims in 2000 compared with 1999.

     Fuel,  supplies,  and maintenance  increased $7.2 million (30.5%), to $31.0
million in 2000 from $23.8 million in 1999.  As a percentage  of revenue,  fuel,
supplies,  and maintenance increased dramatically to 15.6% in 2000 from 12.1% in
1999 caused  primarily by higher fuel price.  Average  fuel prices  increased to
$1.45 per gallon  during 2000 from $1.09 per gallon in 1999.  This  increase was
partially offset by $3.9 million of fuel surcharges attributable to loads hauled
by Company  trucks and  $667,000 in gains from fuel  hedging  transactions.  The
Company  attempted to recover  increases in fuel prices through fuel  surcharges
and  higher  rates,  however,  the costs  were not fully  offset  through  these
measures. The Company's fuel hedging positions expired in June 2000.

     Insurance and claims decreased  $786,000  (18.7%),  to $3.4 million in 2000
from $4.2 million in 1999.  As a  percentage  of revenue,  insurance  and claims
decreased to 1.7% of revenue in 2000  compared  with 2.1% in 1999,  reflecting a
decrease in liability and physical damage claims paid and reserved.

     Taxes and licenses  decreased $102,000 (2.5%), to $3.9 million in 2000 from
$4.0 million in 1999, reflecting a decrease in the number of shipments requiring
special  permits.  The special  permits are paid for by the  shippers,  which is
included in freight  revenue.  As a  percentage  of revenue,  taxes and licenses
remained  relatively  constant at 2.0% of revenue in 2000  compared with 2.1% of
revenue in 1999.

     General and administrative  expenses  increased  $828,000 (11.1%),  to $8.3
million in 2000 from $7.5  million in 1999,  caused by an  increase  in bad debt
expense.  During the fourth  quarter of 2000,  three  major  customers  declared
bankruptcy  causing the Company to increase its allowance for doubtful  accounts
by $775,000.  Other  general and  administrative  expenses  remained  relatively
unchanged.  As a  percentage  of revenue,  general and  administrative  expenses
increased  to 4.2% of  revenue  in 2000  compared  with 3.8% of revenue in 1999.
Without  the  increase  in  allowance   for  doubtful   accounts,   general  and
administrative  expenses would have remained  constant at approximately  3.8% of
revenue in each year.

     Communications and utilities  decreased $138,000 (6.3%), to $2.1 million in
2000 from $2.2 million in 1999. As a percentage of revenue,  communications  and
utilities remained  relatively constant at 1.0% of revenue in 2000 compared with
1.1% of revenue in 1999.

                                       12

<PAGE>

     Depreciation  and  amortization  increased $3.5 million  (22.3%),  to $19.3
million in 2000 from $15.8  million in 1999.  In 2000,  the market value of used
tractors  declined in the United States.  In response,  management  assessed the
valuation of its long-lived assets and identified  tractors with carrying values
in excess of recoverable value. The carrying value of these tractors was reduced
by $1.0 million.  In accordance  with  industry  practices,  the gain or loss on
retirement,  sale, or write-down  of equipment is included in  depreciation  and
amortization.  In 2000,  the  Company  recognized  net  losses on  equipment  of
$881,000,  adjusting for the $1.0 million  write-down of equipment,  compared to
net gain of $954,000 in 1999,  causing a $1.8 million  increase in  depreciation
and  amortization  expense.  Additionally,  increasing  costs  of new  equipment
continued  to increase  depreciation  per tractor.  As a percentage  of revenue,
depreciation and amortization  increased to 9.7% of revenue in 2000 from 8.0% in
1999,  reflecting losses on equipment,  higher cost of new equipment,  and lower
revenue per tractor that less efficiently spread this fixed cost.

     Interest expense,  net,  increased $314,000 (8.5%), to $4.0 million in 2000
from $3.7 million in 1999.  This increase was  attributable  to higher  interest
rates,  offset partially by lower average debt  outstanding.  As a percentage of
revenue,  interest expense,  net,  increased slightly to 2.0% of revenue in 2000
compared with 1.9% in 1999.

     As a result of the foregoing,  the Company's  pre-tax  margin  decreased to
(1.3%) in 2000 from 3.4% in 1999.

     The Company's  income tax benefit for 2000 was  $581,000,  or 22.6% of loss
before income taxes. The Company's income tax expense for 1999 was $2.8 million,
or 41.8% of earnings before income taxes. In both years,  the effective tax rate
is different from 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 level of
the Company's pre-tax earnings.

     As a result of the factors  described  above,  net loss was $2.0 million in
2000 (1.0% of revenue), compared with net earnings of $3.9 million in 1999 (2.0%
of revenue).

Liquidity and Capital Resources

     The size of the Company's  business has remained  essentially  constant for
the past three  years.  During this  period the  Company  has  reduced  debt and
invested in new revenue equipment to replace older equipment.  New equipment has
been financed in recent years with borrowings under installment notes payable to
commercial lending  institutions and equipment  manufacturers,  borrowings under
lines  of  credit,  cash  flow  from  operations,   and  equipment  leases  from
third-party  lessors.  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.  The Company
reduced  its  borrowing  by $2.6  million  during  2001 as cash  generated  from
operations  paid down  long-term  debt.  The  Company has  experienced  a recent
decrease in the ratio of its current assets to current liabilities, primarily as
a  result  of a  decrease  in  trade  receivables  and an  increase  in  current
maturities of long- term debt. The increase in current maturities  resulted from
a  restructuring  of  the  Company's  financing  agreement  with  LaSalle  Bank.
Management  expects this trend to continue in future  periods  until the Company
returns to profitability.  Management believes that its sources of liquidity are
adequate to meet its currently anticipated working capital requirements, capital
expenditures, and other needs at least through 2002.

     Net cash provided by operating activities was $24.0 million, $18.7 million,
and $14.3  million  for the years  ended  December  31,  1999,  2000,  and 2001,
respectively.  The Company's principal use of cash from operations is to service
debt  and  to  internally  finance  acquisitions  of  revenue  equipment.  Total
receivables  increased  (decreased)  $3.4 million,  ($1.4)  million,  and ($2.8)
million for the years ended December 31, 1999, 2000, and 2001, respectively. The
average age of the Company's trade accounts receivable was approximately 35 days
for 1999, 37 days for 2000, and 37 days for 2001.

     Net cash used in investing activities was $14.7 million,  $2.6 million, and
$4.0  million  for  the  years  ended   December  31,  1999,   2000,  and  2001,
respectively.  Such amounts related primarily to purchases, sales, and trades of
revenue   equipment   and  payments   made  for  the   acquisition   of  Skipper
Transportation,   Inc.  in  2001.  The  Company  expects  capital   expenditures
(primarily for revenue  equipment and satellite  communications  units),  net of
revenue equipment trade-ins,  to be approximately $7.7 million during 2002. Such
projected  capital  expenditures  are  expected to be funded with cash flow from
operations, borrowings, or operating leases.

                                       13

<PAGE>

     Net cash used in financing  activities of $9.9 million,  $16.5 million, and
$9.9  million  for  the  years  ended   December  31,  1999,   2000,  and  2001,
respectively,  consisted  primarily  of net  payments  of  principal  under  the
Company's long-term debt agreements.

     On December  28,  2001,  the Company  amended and  restated  its  financing
agreement with LaSalle Bank. The new agreement expires on December 31, 2004, and
provides for automatic one-year renewals under certain conditions. The agreement
provides for a term loan, a revolving line of credit, and a capital  expenditure
loan. The term loan has a balance of $18.5  million,  and is payable in 72 equal
monthly  installments  of $257,000 in principal.  The  revolving  line of credit
allows for  borrowings  up to 85 percent of  eligible  receivables.  The capital
expenditure  loan allows for borrowing up to 80 percent of the purchase price of
revenue  equipment  purchased with such advances  provided  borrowings under the
capital expenditure loan are limited to $2.0 million annually,  and $4.0 million
over the term of the agreement.  The  combination of all loans with LaSalle Bank
can not exceed $32.5  million.  At December 31, 2001,  the  Company's  borrowing
limit was $28.7 million,  including the letters of credit  discussed  below, and
total borrowings under the revolving line were $585,000.

     The financing  agreement also includes  financing for letters of credit. At
December 31, 2001, the Company had  outstanding  letters of credit totaling $5.5
million for self-insured amounts under its insurance programs.  These letters of
credit  directly reduce the amount of potential  borrowings  available under the
financing agreement discussed above.

     All borrowings under this financing arrangement bear interest at the bank's
prime rate,  and the Company is required to pay a facility fee on the  financing
agreement of .25% of the maximum loan limit ($32.5  million).  Borrowings  under
the agreement are secured by liens on revenue  equipment,  accounts  receivable,
and certain other assets.

     The financing  arrangement also requires  compliance with certain financial
covenants,  including  compliance  with a minimum  tangible  net worth,  capital
expenditure  limits,  and a fixed  charge  coverage  ratio.  The  Company was in
compliance with these covenants at December 31, 2001.

Contractual Obligations and Commercial Commitments

     The  following  tables  set forth  the  contractual  obligations  and other
commercial commitments as of December 31, 2001:

<TABLE>
                                                                 Principal Payments Due by Year
                                                                         (In Thousands)

                                                                 Less than                                     After
Contractual Obligations                             Total        One year        2-3 years      4-5 years     5 years
-----------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>              <C>           <C>
Long-term debt                                    $49,742         $12,052         $22,983        $11,623       $3,084

Operating leases                                      859             676             178              5            -

Purchase and installation of
    new software system                               686             686               -              -            -
                                                ------------   -------------  -------------    ------------  -----------
Total contractual cash obligations                $51,287         $13,414         $23,161        $11,628       $3,084
                                                ============   =============  =============    ============  ===========
</TABLE>


The Company had no other commercial commitments at December 31, 2001.

                                       14

<PAGE>

Critical Accounting Policies

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make decisions based upon estimates,  assumptions,  and factors it
considers as relevant to the circumstances. Such decisions include the selection
of  applicable   accounting   principles  and  the  use  of  judgment  in  their
application,  the results of which  impact  reported  amounts  and  disclosures.
Changes in future economic conditions or other business circumstances may affect
the outcomes of  management's  estimates and  assumptions.  Accordingly,  actual
results  could  differ  from those  anticipated.  A summary  of the  significant
accounting  policies  followed in  preparation  of the  financial  statements is
contained in Note 1 of the financial statements attached hereto. Other footnotes
describe  various  elements of the financial  statements and the  assumptions on
which specific amounts were determined.

     The Company's critical accounting policies include the following:

Revenue Recognition

     The Company generally  recognizes  operating revenue when the freight to be
transported   has  been   loaded.   The  Company   operates   primarily  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.  The Company  recognizes
operating  revenue  when the  freight is  delivered  for longer haul loads where
delivery  is  completed  more  than one day after  pickup.  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.

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.  Tires  purchased  as part of  revenue
equipment are  capitalized  as a cost of the  equipment.  Replacement  tires are
expensed when placed in service.  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 operation. Gains or losses on
trade-ins are included in the basis of the new asset.

Estimated Liability for Insurance Claims

     Losses  resulting  from  personal  liability,   physical  damage,  workers'
compensation,  and cargo  loss and damage are  covered by  insurance  subject to
certain deductibles.  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.
The Company accrues for health insurance claims reported,  as well as for claims
incurred but not reported,  based upon the Company's past  experience.  Expenses
depend on actual loss experience and changes in estimates of settlement  amounts
for open claims which haven not been fully resolved.  However,  final settlement
of these claims could differ materially from the amounts the Company has accrued
at year-end.

Impairment of Long-lived Assets

     Long-lived  assets and certain  identifiable  intangibles  are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future net undiscounted  cash flows expected to be generated by the asset. If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured  by the amount by which the  carrying  amount of the assets  exceed the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less the costs to sell.

                                       15

<PAGE>

New Accounting Pronouncements

     Statement of Financial  Accounting  Standard (SFAS) 142, Goodwill and Other
Intangible  Assets,  will be  effective  for the Company for the year  beginning
January 1, 2002. Under SFAS 142, which  establishes new accounting and reporting
requirements for goodwill and other intangible assets, all goodwill amortization
will cease  effective  January 1, 2002. The Company has tested for impairment of
its goodwill by comparing  the fair value of the company to its carrying  value.
Fair value was based upon an independent  appraisal.  These impairment tests are
required  to be  performed  at  adoption  of  SFAS  142  and at  least  annually
thereafter. On an ongoing basis (absent any impairment indicators),  the Company
expects to perform  the  impairment  tests  during the fourth  quarter.  Initial
impairment tests indicated no impairment of goodwill.

     In 2001,  Financial  Accounting Standards Board (FASB) issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement
establishes  a  single  accounting  model  for the  impairment  or  disposal  of
long-lived  assets. The Company plans to adopt the provisions of SFAS No. 144 in
2002, as required.  Management has not yet determined  what impact,  if any, the
adoption of SFAS No. 144 will have on the  Company's  results of  operations  or
financial condition.

Related Party Transactions

     During the years ended  December 31, 1999,  2000,  and 2001,  there were no
material transactions with related parties.

Inflation and Fuel Costs

     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, the compensation paid to drivers, and fuel prices. 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  attempts  to limit the  effects of  inflation
through increases in freight rates and certain cost control efforts. The failure
to obtain rate  increases in the future could  adversely  affect  profitability.
High  fuel  prices  also  decrease  the  Company's  profitability.  Most  of the
Company's contracts with customers contain fuel surcharge  provisions.  Although
the Company  attempts to pass  through  increases in fuel prices to customers in
the form of surcharges and higher rates,  the fuel price 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.

Factors That May Affect Future Results

     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:

     General Economic and Business Factors.  The Company's business is dependent
upon a number of factors that may have a material  adverse effect on its results
of  operations,  many of which are beyond the Company's  control.  These factors
include excess capacity in the trucking industry, significant increases or rapid
fluctuations  in fuel prices,  interest  rates,  fuel taxes,  and  insurance and
claims  costs,  to the extent not offset by increases  in freight  rates or fuel
surcharges.   The  Company's   results  of  operations   also  are  affected  by
recessionary  economic  cycles and  downturns  in  customers'  business  cycles,
particularly  in market  segments  and  industries  in which the  Company  has a
concentration

                                       16

<PAGE>

of customers.  In addition,  the Company's results of operations are affected by
seasonal factors. Customers tend to reduce shipments during the winter months.

     Capital Requirements.  The trucking industry is very capital intensive. The
Company depends on cash from operations,  operating  leases,  and debt financing
for funds to  maintain  modern  revenue  equipment.  The  Company has slowed its
growth and extended  its trade cycle on tractors  and trailers to limit  capital
expenditures. If the Company's operating results do not improve, and the Company
is unable in the  future to enter into  acceptable  financing  arrangements,  it
might be required to operate its revenue  equipment  for longer  periods,  which
could have a material  adverse effect on the Company's  operating  results.  The
failure  of the  Company  to  maintain  compliance  with  all  covenants  in its
borrowing  obligations,  or obtain a waiver  thereof,  could have a  significant
impact on the Company's liquidity and operating results.

     Resale of Used  Revenue  Equipment.  In years  prior to 2000,  the  Company
frequently  recognized a gain on the sale of its revenue  equipment.  The market
for used equipment weakened dramatically since late 1999. If the resale value of
the Company's revenue equipment were to remain low or decline, the Company could
find it  necessary  to dispose of its  equipment  at a lower gain or a loss,  or
retain some of its  equipment  longer,  with a resulting  increase in  operating
expenses,  all of which could have a materially  adverse effect on the Company's
operating results.

     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.  The
Company has suffered from an excessive number of Company-owned  tractors without
drivers for the past several quarters. In addition, independent contractors have
decreased  industry-wide  for a  variety  of  economic  reasons.  The  Company's
shortage  of  drivers  and  independent   contractors  has  constrained  revenue
production.  Failure to recruit additional  drivers and independent  contractors
could force the Company to increase  compensation or limit fleet size, either of
which could have a materially adverse effect on operating results.

     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.

     Acquisitions.  A significant  portion of the Company's growth prior to 1999
occurred through acquisitions. In March 2001, the Company acquired the assets of
Skipper   Transportation,   Inc.,  a  small  flatbed  carrier  headquartered  in
Birmingham,  Alabama.  This is the only  acquisition the Company has made during
the past three years.

     Van Division.  The  Company's van division has generated an operating  loss
for the past three years. Failure to turn around the operating losses may result
in either continued  operating losses or sale of the division at a time when the
sale price of used equipment is depressed. Either result could have a materially
adverse effect on operating results.

     Operating  Losses.  The Company has reported  operating losses for the past
two years. Failure to turn around the operating losses could result in violation
of bank  covenants,  which  could  accelerate  the  Company's  debt  and  have a
materially adverse effect on the Company's liquidity. Continued operating losses
also could impair the Company's  growth and ability to replace capital assets on
the desired schedule, which could raise operating expenses.


                                       17

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risks from changes in (i) certain interest
rates on its debt and (ii) certain commodity prices.

Interest Rate Risk

     The Company's  financing  agreement  with LaSalle Bank,  provided there has
been no default, carries a variable interest rate based on LaSalle's prime rate.
In addition,  approximately  $23.3 million of the  Company's  other debt carries
variable  interest rates. This variable interest exposes the Company to the risk
that interest rates may rise.  Assuming borrowing levels at December 31, 2001, a
one-point  increase  in the  prime  rate  would  increase  interest  expense  by
approximately  $424,000. The remainder of the Company's other debt carries fixed
interest rates and exposes the Company to the risk that interest rates may fall.
At December 31, 2001, approximately 85% of the Company's debt carries a variable
interest rate and the remainder is fixed.

Commodity Price Risk

     The Company in the past has used derivative instruments,  including heating
oil price swap  agreements,  to reduce a portion of its  exposure  to fuel price
fluctuations.  During the year ended  December 31, 2001, the Company had no such
agreements in place.  The Company does not trade in these  derivatives  with the
objective of earning financial gains on price fluctuations, nor does it trade in
these instruments when there are no underlying transaction related exposures.


                                       18

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's  audited  financial  statements,  including its  consolidated
balance  sheets  and   consolidated   statements  of  operations,   cash  flows,
stockholders'  equity, and notes related thereto, are included at pages 23 to 38
of this report. The supplementary quarterly financial data follows:

<TABLE>
                                                                      Quarterly Financial Data
                                                         (Dollars in thousands, except earnings per share)
                                                 ------------------------------------------------------------------
                                                 First Quarter    Second Quarter    Third Quarter   Fourth Quarter
                                                      2001             2001             2001            2001
                                                 -------------- ------------------ -------------- -----------------
<S>                                              <C>            <C>               <C>             <C>
Operating revenue................................$     47,379   $      51,754     $     48,571    $       43,122
Earnings (loss) from operations..................      (1,127)           338           (1,114)           (3,025)
Earnings (loss) before income taxes..............      (1,975)          (469)          (1,845)           (3,643)
Income taxes (benefit)...........................        (687)           (85)            (633)           (1,316)
Net earnings (loss)..............................      (1,288)          (384)          (1,212)           (2,327)
Basic and diluted earnings (loss) per share......$      (0.26)  $       (0.08)    $     (0.25)    $       (0.48)



                                                 First Quarter    Second Quarter    Third Quarter   Fourth Quarter
                                                      2000             2000             2000            2000
                                                 -------------- ------------------ -------------- -----------------
Operating revenue................................$     50,748   $      51,094     $     50,206    $       46,942
Earnings (loss) from operations..................       1,519           1,206            1,204            (2,472)
Earnings (loss) before income taxes..............         521             170              174            (3,437)
Income taxes (benefit)...........................         283             163              153            (1,180)
Net earnings (loss)..............................         238               7               21            (2,257)
Basic and diluted earnings (loss) per share......$       0.05   $        0.00     $       0.00    $        (0.46)
</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, 2001,  involving a change of  accountants  or  disagreements  on
accounting and financial disclosure.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information respecting executive officers and directors set forth under
the captions  "Election  of  Directors;  Information  Concerning  Directors  and
Executive   Officers"  and  "Section  16(a)   Beneficial   Ownership   Reporting
Compliance" of the  Registrant's  Proxy Statement for the 2002 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;
provided,  that the  "Audit  Committee  Report  for 2001"  and the  Stock  Price
Performance  Graph  contained in the Proxy  Statement  are not  incorporated  by
reference.

ITEM 11. EXECUTIVE COMPENSATION

     The  information  respecting  executive  compensation  set forth  under the
caption "Executive  Compensation" in 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" in the Proxy  Statement is incorporated  herein by
reference.

                                       19

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  respecting  certain  relationships  and  transactions  of
management  set forth under the  captions  "Compensation  Committee  Interlocks,
Insider Participation, and Related Party Transactions" in 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............................................    23
Consolidated Balance Sheets.............................................    24
Consolidated Statements of Operations...................................    26
Consolidated Statements of  Stockholders' Equity........................    27
Consolidated Statements of Cash Flows...................................    28
Notes to Consolidated Financial Statements..............................    30

    2.   Financial Statement Schedules.

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

    3.   Exhibits

     See list under Item 14(c) below,  with  management  compensatory  plans and
arrangements  being listed under 10.2, 10.3, 10.5, 10.7, 10.8, 10.9,  10.10, and
10.12.

(b) Reports on Form 8-K

    None

                                       20

<PAGE>

(c)      Exhibits

Exhibit                  Description
Number

3.1     *     Articles of Incorporation.
3.2     *     Bylaws.
4.1     *     Articles of Incorporation.
4.2     *     Bylaws.
10.1    *     Outside Director Stock Plan dated March 1, 1995.
10.2    *     Incentive Stock Plan adopted March 1, 1995.
10.3    *     401(k) Plan adopted August 14, 1992, as amended.
10.4    *     Form of Agency Agreement between Smithway Motor Xpress, Inc. and
              its independent commission agents.
10.5    *     Memorandum of officer incentive compensation policy.
10.6    *     Form of Independent Contractor Agreement between Smithway  Motor
              Xpress, Inc. and its independent contractor providers of tractors.
10.7    **    1997 Profit Incentive Plan, adopted May 8, 1997.
10.8    ***   Amendment No. 2 to Smithway Motor Xpress Corp. Incentive Stock
              Plan, adopted May 7, 1999.
10.9    ****  Form of Outside Director Stock Option Agreement dated July 27,
              2000, between Smithway Motor Xpress Corp. and each of its
              non-employee directors.
10.10   #     New Employee Incentive Stock Plan, adopted August 6, 2001 (plan
              subject to stockholder approval at next annual meeting to obtain
              incentive stock option treatment for option grants).
10.11   #     Amended and Restated Loan and Security Agreement dated
              December 28, 2001, between LaSalle Bank National Association,
              Smithway Motor Xpress, Inc., as Borrower, and East West Motor
              Xpress, Inc., as Borrower.
10.12   #     Letter Agreement dated August 6, 2001, between Smithway Motor
              Xpress, Inc. and Donald A. Orr.
21      ***** List of Subsidiaries.
23      #     Consent of KPMG LLP, independent auditors.

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

**    Incorporated by reference from the Company's Quarterly Report on Form 10-Q
      for the period ended March 31, 2000. Commission File No. 000-20793, dated
      May 5, 2000.

***   Incorporated by reference from the Company's Quarterly Report on Form 10-Q
      for the period ended June 30, 1999. Commission File No. 000-20793, dated
      August 13, 1999.

****  Incorporated by reference from the Company's Quarterly Report on Form 10-Q
      for the period ended September 30, 2000. Commission File No. 000-20793,
      dated November 3, 2000.

***** Incorporated by reference from the Company's Annual Report on Form 10-K
      for the fiscal year ended December 31, 1999.  Commission File No.
      000-20793, dated March 29, 2000.

#     Filed herewith.

                                       21

<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 28, 2002            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.

<TABLE>
      Signature                                      Position                                   Date

<S>                                       <C>                                                 <C>
                                          Chairman of the Board, President, and Chief
/s/ William G. Smith                      Executive Officer; Director (principal executive
----------------------                    officer)                                            March 28, 2002
William G. Smith

/s/ G. Larry Owens                        Executive Vice President, Chief Administrative
------------------                        Officer, and Chief Financial Officer; Director      March 28, 2002
G. Larry Owens

/s/ Donald A. Orr                         Executive Vice President and Chief Operating
-----------------                         Officer; Director                                   March 28, 2002
Donald A. Orr

/s/ Douglas C. Sandvig                    Controller and Chief Accounting Officer
----------------------                    (principal financial and accounting officer)        March 28, 2002
Douglas C. Sandvig

/s/ Herbert D. Ihle
-------------------
Herbert D. Ihle                           Director                                            March 28, 2002

/s/ Robert  E. Rich
-------------------
Robert E. Rich                            Director                                            March 28, 2002

/s/ Terry G. Christenberry
--------------------------
Terry G. Christenberry                    Director                                            March 28, 2002
</TABLE>










                                       22

<PAGE>

                          Independent Auditors' Report


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

     We have audited the  accompanying  consolidated  balance sheets of Smithway
Motor Xpress Corp.  and  subsidiaries  as of December 31, 2001 and 2000, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the years in the  three-year  period ended  December 31, 2001.
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  auditing  standards  generally
accepted in the United States of America.  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  subsidiaries  as of December 31, 2001 and 2000, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended  December  31,  2001,  in  conformity  with  accounting
principles generally accepted in the United States of America.



KPMG LLP


/s/ KPMG LLP

Des Moines, Iowa
February 7, 2002























                                       23

<PAGE>


                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                  (Dollars in thousands, except per share data)
<TABLE>
                                                                                          December 31,
                                                                              -------------------------------------
                                                                                     2000               2001
                                                                              ------------------ ------------------
                                    ASSETS
<S>                                                                           <C>                <C>
Current assets:
  Cash and cash equivalents...................................................$              349 $              722
  Receivables:
    Trade (note 4)............................................................            17,832             13,649
    Other.....................................................................             1,310              1,020
    Recoverable income taxes..................................................                17              1,820
  Inventories.................................................................             1,586              1,561
  Deposits, primarily with insurers (note 10).................................               160                539
  Prepaid expenses............................................................               910                926
  Deferred income taxes (note 5)..............................................             1,384              1,726
                                                                              ------------------ ------------------
         Total current assets.................................................            23,548             21,963
                                                                              ------------------ ------------------
Property and equipment (note 4):
  Land........................................................................             1,412              1,548
  Buildings and improvements..................................................             7,006              8,175
  Tractors....................................................................            77,098             79,472
  Trailers....................................................................            43,167             44,784
  Other equipment.............................................................             7,497              7,318
                                                                              ------------------ ------------------
                                                                                         136,180            141,297
  Less accumulated depreciation...............................................            49,432             62,252
                                                                              ------------------ ------------------
         Net property and equipment...........................................            86,748             79,045
                                                                              ------------------ ------------------
Intangible assets, net (note 2)...............................................             5,191              5,016
Other assets..................................................................               341                412
                                                                              ------------------ ------------------
                                                                              $          115,828 $          106,436
                                                                              ================== ==================
</TABLE>











          See accompanying notes to consolidated financial statements.

                                       24

<PAGE>
                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                  (Dollars in thousands, except per share data)
<TABLE>
                                                                                          December 31,
                                                                              -------------------------------------
                                                                                     2000               2001
                                                                              ------------------ ------------------
                     LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                           <C>                <C>
Current liabilities:
  Current maturities of long-term debt (note 4)...............................$            8,636 $           12,052
  Accounts payable............................................................             5,669              4,589
  Accrued compensation........................................................             2,505              2,258
  Accrued loss reserves (note 10).............................................             2,344              2,327
  Other accrued expenses......................................................             1,094                792
                                                                              ------------------ ------------------
         Total current liabilities............................................            20,248             22,018
Long-term debt, less current maturities (note 4)..............................            43,698             37,105
Deferred income taxes (note 5)................................................            14,649             14,862
Line of credit (note 4).......................................................                 -                585
                                                                              ------------------ ------------------
         Total liabilities....................................................            78,595             74,570
                                                                              ------------------ ------------------
Stockholders' equity (notes 6 and 7):
  Preferred stock (.01 par value; authorized 5 million shares; issued none)...                 -                  -
  Common stock:
    Class A (.01 par value; authorized 20 million shares;
                   issued 2000 and 2001 - 4,035,989 shares)...................                40                 40
    Class B (.01 par value; authorized 5 million shares;
                  issued 1 million shares)....................................                10                 10
  Additional paid-in capital..................................................            11,396             11,394
  Retained earnings...........................................................            26,053             20,842
  Reacquired shares, at cost (2000 - 119,625 shares; 2001 - 192,009 shares)...              (266)              (420)
                                                                              ------------------ ------------------
         Total stockholders' equity...........................................            37,233             31,866
Commitments (note 10)
                                                                              ------------------ ------------------
                                                                              $          115,828 $          106,436
                                                                              ================== ==================
</TABLE>












          See accompanying notes to consolidated financial statements.

                                       25

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                  (Dollars in thousands, except per share data)

<TABLE>
                                                                          Years ended December 31,
                                                          ---------------------------------------------------------
                                                                1999                2000                2001
                                                          -----------------  ------------------  ------------------
<S>                                                        <C>               <C>                 <C>
Operating revenue:
     Freight..............................................$         196,420  $          198,247  $          190,165
     Other..............................................                525                 743                 661
                                                          -----------------  ------------------  ------------------
           Operating revenue..............................          196,945             198,990             190,826
                                                          -----------------  ------------------  ------------------
Operating expenses:
     Purchased transportation.............................           79,735              77,755              70,129
     Compensation and employee benefits...................           49,255              51,718              54,394
     Fuel, supplies, and maintenance......................           23,754              30,995              32,894
     Insurance and claims.................................            4,212               3,426               5,325
     Taxes and licenses...................................            4,045               3,943               3,817
     General and administrative...........................            7,491               8,319               8,294
     Communications and utilities.........................            2,190               2,052               2,123
     Depreciation and amortization........................           15,800              19,325              18,778
                                                          -----------------  ------------------  ------------------
          Total operating expenses........................          186,482             197,533             195,754
                                                          -----------------  ------------------  ------------------
            Earnings (loss) from operations...............           10,463               1,457             (4,928)
Financial (expense) income
     Interest expense.....................................          (3,829)             (4,124)             (3,052)
     Interest income......................................              114                  95                  48
                                                          -----------------  ------------------  ------------------
             Earnings (loss) before income taxes..........            6,748             (2,572)             (7,932)
Income taxes (benefit) (note 5)...........................            2,822               (581)             (2,721)
                                                          -----------------  ------------------  ------------------
             Net earnings (loss)..........................$           3,926  $          (1,991)  $          (5,211)
                                                          =================  ==================  ==================
Basic and diluted earnings (loss) per share (note 8)......$            0.78  $           (0.40)  $           (1.07)
                                                          =================  ==================  ==================
</TABLE>





















          See accompanying notes to consolidated financial statements.

                                       26

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                  Years ended December 31, 1999, 2000, and 2001
                             (Dollars in thousands)

<TABLE>
                                                       Additional                                     Total
                                           Common        paid-in       Retained     Reacquired     stockholders'
                                           stock         capital       earnings       shares          equity
                                        -----------------------------------------------------------------------
<S>                                      <C>         <C>          <C>            <C>           <C>
Balance at December 31, 1998............ $        50 $     11,311 $       24,118 $        (74) $       35,405
Net earnings............................           -            -          3,926            -           3,926
Issuance of stock bonuses...............           -           56              -            -              56
Treasury stock reissued for stock
bonuses (13,885 shares).................           -           47              -           74             121
                                        -----------------------------------------------------------------------
Balance at December 31, 1999............          50       11,414         28,044            -          39,508
Net earnings (loss).....................           -            -         (1,991)           -          (1,991)
Treasury stock acquired (167,922 shares)           -            -              -         (456)           (456)
Treasury stock reissued for stock
bonuses (48,297 shares).................           -          (18)             -          190             172
                                        -----------------------------------------------------------------------
Balance at December 31, 2000............          50       11,396         26,053         (266)         37,233
Net earnings (loss).....................           -            -         (5,211)           -          (5,211)
Treasury stock acquired (77,900 shares)            -            -              -         (166)           (166)
Treasury stock reissued for stock
bonuses (5,516 shares)..................           -           (2)             -           12              10
                                         ----------------------------------------------------------------------
Balance at December 31, 2001............ $        50 $     11,394 $       20,842 $       (420) $       31,866
                                         ======================================================================
</TABLE>























          See accompanying notes to consolidated financial statements.

                                       27

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
                                                                               Years ended December 31,
                                                                   ------------------------------------------------
                                                                        1999            2000             2001
                                                                   --------------   -------------   ---------------
<S>                                                                <C>              <C>             <C>
Cash flows from operating activities:
  Net earnings (loss)..............................................$        3,926   $      (1,991)  $        (5,211)
                                                                   ---------------   -------------   ---------------
  Adjustments to reconcile net earnings (loss) to cash provided
  by operating activities:
      Depreciation and amortization................................        15,800          19,325            18,778
      Deferred income taxes (benefit)..............................         2,884            (489)             (129)
      Stock bonuses................................................           177             172                10
      Change in:
           Receivables.............................................        (3,431)          1,389             2,783
           Inventories.............................................           (74)             25                29
           Deposits, primarily with insurers.......................           110             121              (379)
           Prepaid expenses........................................           531            (331)               95
           Accounts payable and other accrued liabilities..........         4,120             486            (1,653)
                                                                   ---------------   -------------   ---------------
               Total adjustments...................................        20,117          20,698            19,534
                                                                   ---------------   -------------   ---------------
                Net cash provided by operating activities..........        24,043          18,707            14,323
                                                                   ---------------   -------------   ---------------
Cash flows from investing activities:
  Payments  for acquisitions.......................................             -               -            (2,954)
  Purchase of property and equipment...............................       (18,342)         (4,366)           (2,537)
  Proceeds from sale of property and equipment.....................         3,478           1,905             1,541
  Other............................................................           130             (97)              (71)
                                                                   ---------------   -------------   ---------------
             Net cash used in investing activities.................       (14,734)         (2,558)           (4,021)
                                                                   ---------------   -------------   ---------------
Cash flows from financing activities:
   Borrowings on line of credit....................................             -               -               585
   Proceeds from long-term debt....................................             -           8,500            24,759
   Principal payments on long-term debt............................        (9,900)        (24,529)          (35,107)
   Other...........................................................             -            (456)             (166)
                                                                   ---------------   -------------   ---------------
            Net cash used in financing activities..................        (9,900)        (16,485)           (9,929)
                                                                   ---------------   -------------   ---------------
            Net (decrease) increase in cash and cash equivalents...          (591)           (336)              373
Cash and cash equivalents at beginning of year.....................         1,276             685               349
                                                                   ---------------   -------------   ---------------
Cash and cash equivalents at end of year...........................$          685   $         349   $           722
                                                                   ===============   =============   ===============
</TABLE>









          See accompanying notes to consolidated financial statements.

                                       28

<PAGE>


                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)

<TABLE>
                                                                               Years ended December 31,
                                                                   ------------------------------------------------
                                                                        1999            2000             2001
                                                                   --------------   -------------   ---------------
<S>                                                                <C>            <C>           <C>
Supplemental disclosure of cash flow information:
  Cash paid (received) during year for:
          Interest.................................................$      3,806   $       4,181   $        3,075
          Income taxes.............................................         689          (1,096)            (788)
                                                                   ==============   =============   ===============

Supplemental schedules of noncash investing and financing
activities:
   Notes payable issued for tractors and trailers..................$      7,712   $       8,848   $        7,171
   Issuance of stock bonuses.......................................         177             172               10
                                                                   ==============   =============   ===============

Cash payments for acquisitions:
   Revenue equipment...............................................$          -   $           -   $        2,088
   Intangible assets...............................................           -               -              526
   Land, buildings and other assets................................           -               -              340
                                                                   --------------   -------------   ---------------
                                                                   $          -   $           -   $        2,954
                                                                   ==============   =============   ===============
</TABLE>































          See accompanying notes to consolidated financial statements.

                                       29

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
             (Dollars in thousands, except share and per share data)


Note 1:  Summary of Significant Accounting Policies


Operations

     Smithway Motor Xpress Corp. and  subsidiaries  (the Company) is a truckload
carrier  that  provides  nationwide   transportation  of  diversified   freight,
concentrating  primarily  in flatbed  operations.  It  generally  operates  over
short-to-medium  traffic routes,  serving shippers located  predominantly in the
central  United States.  The Company also operates in the southern  provinces of
Canada. Canadian revenues, based on miles driven, were approximately $667, $670,
and $649 for the years ended December 31, 1999,  2000,  and 2001,  respectively.
The  consolidated  financial  statements  include the accounts of Smithway Motor
Xpress  Corp.  and  its  three  wholly  owned   subsidiaries.   All  significant
intercompany balances and transactions have been eliminated in consolidation.

Customers

     The Company serves a diverse base of shippers. No single customer accounted
for more than 10 percent of the Company's total operating revenues during any of
the years ended  December 31, 1999,  2000,  and 2001.  The  Company's 10 largest
customers accounted for approximately 27 percent, 25 percent,  and 24 percent of
the  Company's   total  operating   revenues   during  1999,   2000,  and  2001,
respectively.  The Company's largest  concentration of customers is in the steel
and building materials industries, which together accounted for approximately 43
percent, 41 percent, and 42 percent of the Company's total operating revenues in
1999, 2000, and 2001, respectively.

Drivers

     The Company faces intense industry  competition in attracting and retaining
qualified  drivers and independent  contractors.  This  competition from time to
time results 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, 2000 cash equivalents consisted $1,170 of commercial paper and United States
Treasury bills. The Company did not hold any cash equivalents as of December 31,
2001.

Receivables

     Trade  receivables are stated net of an allowance for doubtful  accounts of
$855 and $1,265 at  December  31,  2000 and 2001,  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.  During 2000 and 2001, various customers declared  bankruptcy causing
the Company to increase its  allowance  for doubtful  accounts by $775 and $332,
respectively.  At December 31, 2000 and 2001, 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.

                                       30

<PAGE>

Prepaid Expenses

     Prepaid  expenses  consist  primarily  of the  cost  of  tarps,  which  are
amortized over 36 months and licenses which are amortized over 12 months.

Accounting for Leases

     The  Company is a lessee of  revenue  equipment  under a limited  number of
operating leases.  Rent expense is charged to operations as it is incurred under
the  terms  of the  respective  leases.  Under  the  leases  for  transportation
equipment, the Company is responsible for all repairs,  maintenance,  insurance,
and all other  operating  expenses.  The  Company  is also a lessee of  terminal
property under various short term operating leases.

     Rent charged to expense on the above leases, expired leases, and short-term
rentals was $653 in 1999; $543 in 2000; and $1.1 million in 2001.

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.  Tires  purchased  as part of  revenue
equipment are  capitalized  as a cost of the  equipment.  Replacement  tires are
expensed when placed in service.  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 operations.  Gains or losses
on trade-ins are included in the basis of the new asset.

     In 2000 the market value of used tractors declined in the United States. In
response,  management  assessed  the  valuation  of its  long-lived  assets  and
identified  tractors with carrying  values in excess of recoverable  value.  The
carrying  value of these  tractors  was reduced by $1,033  which is reflected in
depreciation and amortization expense for the year.

     In 2001 the  Company  decided  to  discontinue  the use of its  proprietary
operating  system  and  replace  it with  third  party  software.  In  response,
management wrote off the $707 carrying value of the existing software.

Intangibles

     Intangible  assets,  primarily  goodwill,  are  recorded  at  cost  and are
amortized  using the  straight-line  method over  periods  ranging  from 5 to 15
years.  Accumulated  amortization of $1,803 and $2,505, at December 31, 2000 and
2001,  respectively,  has been netted against these intangible assets.  Goodwill
represents the excess of purchase price over fair value of net assets  acquired.
The Company assesses the  recoverability of this intangible asset by determining
whether the  amortization of the goodwill balance over its remaining life can be
recovered  through  undiscounted  future  operating  cash flows of the  acquired
operation.  The amount of goodwill  impairment,  if any,  is  measured  based on
projected   discounted  future  operating  cash  flows  using  a  discount  rate
reflecting  the  Company's   average  cost  of  funds.  The  assessment  of  the
recoverability  of goodwill will be impacted if estimated  future operating cash
flows are not achieved.

     SFAS 142, "Goodwill and Other Intangible Assets," will be effective for the
Company  for  the  year  beginning  January  1,  2002.  Under  SFAS  142,  which
establishes  new  accounting and reporting  requirements  for goodwill and other
intangible  assets,  all goodwill  amortization  will cease effective January 1,
2002.  The Company has tested for  impairment  of its goodwill by comparing  the
fair value of the company to its  carrying  value.  Fair value was based upon an
independent  appraisal.  These  impairment tests are required to be performed at
adoption  of SFAS 142 and at least  annually  thereafter.  On an  ongoing  basis
(absent  any  impairment  indicators),   the  Company  expects  to  perform  the
impairment  tests  during the  fourth  quarter.  Our  initial  impairment  tests
indicated no impairment of goodwill.



                                       31

<PAGE>

Revenue Recognition

     The Company generally  recognizes  operating revenue when the freight to be
transported   has  been   loaded.   The  Company   operates   primarily  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.  The Company  recognizes
operating  revenue  when the  freight is  delivered  for longer haul loads where
delivery  is  completed  more  than one day after  pickup.  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.

Insurance and Claims

     Losses  resulting  from  personal  liability,   physical  damage,  workers'
compensation,  and cargo  loss and damage are  covered by  insurance  subject to
certain deductibles.  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

     The Company has elected the pro forma  disclosure  option of  Statement  of
Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for  Stock-Based
Compensation."  The Company  will  continue  applying the  accounting  treatment
prescribed by the provisions of APB Opinion No. 25, "Accounting for Stock Issued
to  Employees."  Pro forma net  earnings  and pro forma net  earnings per common
share have been  provided as if SFAS No. 123 were  adopted  for all  stock-based
compensation plans.

Derivative Instruments

     Prior to January 1, 2001, the Company  occasionally  used purchased options
and futures  contracts  to hedge a portion of its  anticipated  fuel  purchases.
These  derivative  instruments  are  linked  to  heating  oil  which  has a high
correlation to diesel fuel. These  derivative  instruments meet the criteria for
hedge accounting and have been accounted for on this basis. The Company does not
hold or issue  options and futures  contracts for trading  purposes.  Unrealized
gains and losses  related to  qualifying  hedges are deferred and  recognized in
income when the fuel  purchases are made, or  immediately  if the commitment has
been canceled.

     Prior to January 1, 2001, the Company also  occasionally  used "floating to
fixed"  heating oil price swap  agreements to limit its exposure to  potentially
adverse fluctuations in fuel prices. As the fuel is purchased,  the differential
to be paid or received on the swap  agreements is recognized as an adjustment to
fuel,  supplies,  and  maintenance  expense  in the  consolidated  statement  of
operations.

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities,"  became  effective  for the  Company  beginning  January  1,  2001.
Management  has conducted a review of the Company's  operations and believes the
options and futures  contracts used to hedge fuel costs are the only  derivative
instruments which will require  valuation in the financial  statements under the
provisions of SFAS 133. The Company did not have any options, futures contracts,
or price swap  agreements in place at any time during 2001, and thus there is no
effect on the financial statements from the adoption of the pronouncement.



                                       32

<PAGE>

Net Earnings Per Common Share

     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.
Because the Company  suffered a net loss for the years ended  December  31, 2000
and 2001,  the  effects of  potential  common  shares  were not  included in the
calculation as their effects would be anti-dilutive.  Stock options  outstanding
at December 31, 2000 and 2001 totaled 345,000 and 623,000, respectively.

Note 2:  Acquisitions

     In March 2001, the Company acquired tractors,  trailers,  and certain other
assets owned or leased by Skipper Transportation,  Inc. of Birmingham,  Alabama.
In  exchange  for these  assets,  the Company  assumed and repaid  approximately
$1,483 in  equipment  financing  secured  by these  assets  and paid $944 to the
former  owners of the acquired  assets.  In addition,  the Company paid $526 for
goodwill.  This  acquisition  was  accounted  for  by  the  purchase  method  of
accounting.

Note 3:  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, 2001, the carrying amounts of cash and cash equivalents,  trade receivables,
other receivables,  line of credit,  accounts payable,  and accrued liabilities,
approximate fair value because of the short maturity of those  instruments.  The
fair value of the Company's long-term debt,  including current  maturities,  was
$51,999  and $49,227 at December  31,  2000 and 2001,  respectively,  based upon
estimated market rates.

Note 4:  Long-Term Debt

     On December  28,  2001,  the Company  amended and  restated  its  financing
agreement with LaSalle Bank. The new agreement expires on December 31, 2004, and
provides for automatic one-year renewals under certain conditions. The agreement
provides for a term loan, a revolving line of credit, and a capital  expenditure
loan. The term loan has a balance of $18,500, and is payable in 72 equal monthly
installments  of $257 in  principal.  The  revolving  line of credit  allows for
borrowings  up to 85 percent of eligible  receivables.  The capital  expenditure
loan  allows for  borrowing  up to 80 percent of the  purchase  price of revenue
equipment  purchased with such advances  provided  borrowings  under the capital
expenditure loan are limited to $2,000 annually, and $4,000 over the term of the
agreement.  The  combination  of all  loans  with  LaSalle  Bank can not  exceed
$32,500.  At December  31,  2001,  the  Company's  borrowing  limit was $28,700,
including the letters of credit  discussed below, and total borrowings under the
revolving line were $585.

     The financing  agreement also includes  financing for letters of credit. At
December 31, 2001, the Company had outstanding letters of credit totaling $5,513
for  self-insured  amounts under its insurance  programs.  (See note 10).  These
letters of credit directly reduce the amount of potential  borrowings  available
under the financing agreement discussed above.

     All borrowings under this financing arrangement bear interest at the bank's
prime rate,  and the Company is required to pay a facility fee on the  financing
agreement  of .25% of the maximum  loan limit  ($32,500).  Borrowings  under the
agreement are secured by liens on revenue equipment,  accounts  receivable,  and
certain other assets. The weighted average interest rates on debt outstanding at
December  31,  2000  and  2001  were   approximately   7.92  and  4.75  percent,
respectively.

     The financing  arrangement also requires  compliance with certain financial
covenants,  including  compliance  with a minimum  tangible  net worth,  capital
expenditure  limits,  and a fixed  charge  coverage  ratio.  The  Company was in
compliance with these covenants at December 31, 2001.

     Long-term debt also includes  equipment  notes with balances of $33,834 and
$30,656 at  December  31,  2000 and 2001,  respectively.  Interest  rates on the
equipment notes range from 3.27 percent to 6.58 percent with maturities  through
2006. The equipment notes are collateralized by the underlying equipment.



                                       33

<PAGE>

     Future  maturities  on long-term  debt at December 31, 2001 are as follows:
2002,  $12,052;  2003,  $12,113;  2004,  $10,870;  2005,  $6,606;  2006, $5,017;
thereafter, $3,084.

Note 5:  Income Taxes

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

<TABLE>
                             1999                                   2000                                    2001
              -----------------------------------    -----------------------------------    -------------------------------------
                   Federal     State        Total        Federal      State        Total        Federal       State         Total
              ------------  --------  -----------    ----------- ----------  -----------    ----------- ----------- -------------
<S>           <C>           <C>       <C>            <C>         <C>         <C>            <C>         <C>         <C>
Current       $       (50)  $   (12)  $      (62)    $      (74) $     (18)  $      (92)    $   (2,541) $      (51) $     (2,592)
Deferred             2,422       462        2,884           (50)       (98)        (489)          (112)        (17)         (129)
              ------------  --------  -----------    ----------- ----------  -----------    ----------- ----------- -------------
              $      2,372  $    450  $     2,822    $     (465) $    (116)  $     (581)    $   (2,653) $      (68) $     (2,721)
              ============  ========  ===========    =========== ==========  ===========    =========== =========== =============
</TABLE>

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

<TABLE>
                                                                          Years ended December 31,
                                                                          ------------------------
                                                                    1999              2000            2001
                                                              ----------------- ---------------- --------------
<S>                                                           <C>               <C>              <C>
Computed "expected" income tax expense (benefit)              $         2,294   $        (677)   $    (2,696)
State income tax expense net of federal taxes                             297             (77)          (313)
Permanent differences, primarily nondeductible
  portion of driver per diem and  travel expenses                         291             278            288
Other                                                                     (60)           (105)             -
                                                              ----------------- ---------------- --------------
                                                              $         2,822   $        (581)   $    (2,721)
                                                              ================= ================ ==============
</TABLE>

     Temporary  differences  between the financial statement basis of assets and
liabilities and the related  deferred tax assets and liabilities at December 31,
2000 and 2001, were as follows:

<TABLE>
<S>                                                                  <C>                <C>
Deferred tax assets:                                                       2000               2001
                                                                     -----------------  -----------------
     Net operating loss carryforwards                                $           3,383  $           5,041
     Alternative minimum tax (AMT) credit carryforwards                          2,512                271
     Accrued expenses                                                            1,458              1,656
     Other                                                                         155                156
                                                                     -----------------  -----------------
         Total gross deferred tax assets                                         7,508              7,124
                                                                     -----------------  -----------------
Deferred tax liabilities:
     Property and equipment                                                    (20,773)           (20,260)
                                                                     -----------------  -----------------
         Net deferred tax liabilities                                $         (13,265) $         (13,136)
</TABLE>

     At December 31, 2001, the Company has net operating loss  carryforwards for
income tax  purposes of  approximately  $13,000,  which are  available to offset
future taxable income.  These net operating  losses expire during the years 2019
through 2021. The AMT credit carryforwards are available  indefinitely to reduce
future income tax liabilities to the extent they exceed AMT liabilities.

     The Company has reviewed the need for a valuation allowance relating to the
deferred tax assets, and has determined that no allowance is needed. The Company
believes  the future  deductions  will be realized  principally  through  future
reversals of existing  taxable  temporary  differences,  and to a lesser extent,
future  taxable  income.  In  addition,  the  Company has the ability to use tax
planning  strategies  to generate  taxable  income if  necessary  to realize the
deferred tax assets.

                                       34

<PAGE>


Note 6:  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.

Note 7:  Stock Plans

     The Company has reserved 25,000 shares of Class A common stock for issuance
pursuant to an outside director stock option plan. The term of each option shall
be six years from the grant date.  Options vest on the first  anniversary of the
grant date.  The  exercise  price of each stock option is 85 percent of the fair
market value of the common stock on the date of grant. In July, 2000 the Company
granted outside directors 12,000 stock options not covered by this plan.

     The  Company  has  reserved  500,000  shares  of Class A common  stock  for
issuance  pursuant to an incentive  stock  option plan.  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  has  reserved  400,000  shares  of Class A common  stock  for
issuance  pursuant to a new employee  incentive stock option plan adopted during
2001.  Any shares which expire  unexercised  or are forfeited  become  available
again for issuance under the plan.  Under this plan, no award of incentive stock
options may be made after  August 6, 2011.  The  treatment  of option  grants as
incentive stock options is subject to stockholder approval at the Company's next
annual meeting.

     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
1999 would  have been  immaterial.  For 2000 and 2001,  pro forma net loss would
have been  $2,117 and $5,317,  and pro forma  basic and  diluted  loss per share
would  have been $.42 and $1.10 per share,  respectively.  For  purposes  of pro
forma  disclosures,  the estimated fair value of options is amortized to expense
over the options' vesting periods.

     A summary of stock option  activity and  weighted-average  exercise  prices
follows:

<TABLE>
                                                    1999                       2000                       2001
                                          ------------------------- --------------------------  -------------------------
                                            Shares      Exercise       Shares       Exercise      Shares       Exercise
                                                          price                      price                      price
                                          ----------- ------------- ------------- ------------  -----------  ------------
<S>                                       <C>         <C>           <C>           <C>           <C>          <C>
Outstanding at beginning of year              149,000         $9.90       152,000        $9.85      345,000         $5.50
    Granted                                     3,000          7.60       193,000         2.07      278,000          2.70
    Exercised                                       -             -             -            -            -             -
    Forfeited                                       -             -             -            -            -             -
                                          ----------- ------------- ------------- ------------  -----------  ------------
Outstanding at end of year                    152,000         $9.85       345,000        $5.50      623,000         $4.25
                                          =========== ============= ============= ============  ===========  ============
Options exercisable at end of year            106,800         $9.50       220,400        $6.71      296,400         $5.77
Weighted-average fair value of
options granted during the year                               $5.45                      $1.66                      $1.49
</TABLE>


                                       35

<PAGE>


     A summary of stock options  outstanding  and exercisable as of December 31,
2001, follows:

<TABLE>
                                      Options outstanding                                Options exercisable
                   ----------------------------------------------------------     ---------------------------------
Range of exercise      Number       Weighted average      Weighted average            Number     Weighted average
      prices        outstanding  remaining life (years)    exercise price          exercisable    exercise price
-----------------------------------------------------------------------------     ---------------------------------
<S>                   <C>                      <C>             <C>                   <C>                <C>
 $1.55 -  $3.47       471,000                  8.98             $2.44                157,200             $2.31
 $7.23 -  $9.50       117,000                  3.45             $9.21                117,000             $9.21
$11.81 - $14.05        35,000                  5.77            $12.00                 22,200            $12.11
                   ----------------------------------------------------------     ---------------------------------
                      623,000                  7.76             $4.25                296,400             $5.77
                   ==========================================================     =================================
</TABLE>

     The Company used the  Black-Scholes  option  pricing model to determine the
fair value of stock  options for the years ended  December 31, 1999,  2000,  and
2001. The following assumptions were used in determining the fair value of these
options: weighted-average risk-free interest rate, 5.64% in 1999, 5.05% in 2000,
and 4.26% in 2001;  weighted-average  expected life, 3 years in 1999, 5 years in
2000,  and 5 years in 2001; and  weighted-average  expected  volatility,  83% in
1999, 55% in 2000, and 60% in 2001. There were no expected dividends.

     The Company has reserved 55,000 shares of Class A common stock for issuance
pursuant to an independent  contractor  driver bonus plan.  The Company  awarded
11,362,  33,646,  and -0-  shares  under  the  plan in  1999,  2000,  and  2001,
respectively.

     The Company  also has a Class A common stock  profit  incentive  plan under
which 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 2000
the Company issued 13,401 shares of Class A common stock to  participants in the
plan. No shares were awarded in 2001 under the plan.

     In 1996,  the  Company  granted  a common  stock  bonus of 2,254  shares of
nonvested  Class A common  stock with a fair  value of $8.88 on the grant  date.
During  1999,  the final  1,127  shares  became  vested  and were  issued by the
Company.

Note 8:  Earnings per Share

     A summary of the basic and diluted  earnings (loss) per share  computations
is presented below:

<TABLE>
Years ended December 31                                                1999              2000               2001
---------------------------------------------------------------  ----------------- ----------------- ------------------
<S>                                                              <C>                <C>                <C>
Net earnings (loss) applicable to common  stockholders           $         3,926    $      (1,991)     $     (5,211)
                                                                 ----------------- ----------------- ------------------
Basic weighted-average shares outstanding                              5,030,959        5,008,759          4,852,067

     Effect of dilutive stock options                                      1,394                -                  -
                                                                 ----------------- ----------------- ------------------
Diluted weighted-average shares outstanding                            5,032,353        5,008,759          4,852,067
                                                                 ================= ================= ==================
Basic earnings (loss) per share                                  $          0.78    $       (0.40)     $       (1.07)
Diluted earnings (loss) per share                                $          0.78            (0.40)     $       (1.07)
</TABLE>


                                       36

<PAGE>

Note 9:  Employees' Profit Sharing and Savings Plan

     The Company has an Employees'  Profit Sharing and Savings Plan,  which is a
qualified  plan  under the  provisions  of  Sections  401(a)  and  501(a) of the
Internal  Revenue  Code.  Eligible  employees  are allowed to contribute up to a
maximum of 15 percent of pre-tax  compensation into the plan. Employers may make
savings,   matching,  and  discretionary   contributions,   subject  to  certain
restrictions.  During the years ended December 31, 1999, 2000, and 2001, Company
contributions totaled $330, $180, and $-0-, respectively.  The plan owns 528,123
shares of the Company's Class A common stock at December 31, 2001.

Note 10: Commitments and Contingent Liabilities

     The Company's  insurance program for personal  liability,  physical damage,
and cargo  losses  involves a  deductible  of $50 per  incident.  The  Company's
insurance  program for workers'  compensation  involves a deductible of $100 per
incident.  At December 31, 2000 and 2001, the Company had  approximately  $2,344
and $2,327,  respectively,  accrued for its  estimated  liability  for  incurred
losses related to these programs.

     The insurance companies require the Company to provide letters of credit to
provide funds for payment of the  deductible  amounts.  At December 31, 2000 and
2001,  the  Company  had $4,878 and $5,513  letters of credit  issued  under the
financing  agreement  described in note 4. In addition,  funds totaling $105 and
$413 were held by the  insurance  companies as deposits at December 31, 2000 and
2001, respectively.

     The Company's  obligations under non-cancelable  operating lease agreements
are as follows:  2002, $676;  2003, $158; 2004, $20; 2005, $5;  thereafter $-0-.
There are no equipment  re-purchase  commitments or lease residual guarantees in
place on the  Company's  fleet.  In addition,  the Company has no fuel  purchase
commitments as of December 31, 2001.

     The Company's health  insurance  program is provided as an employee benefit
for all eligible  employees and contractors.  The plan is self funded for losses
up to $125 per covered  member.  At December 31, 2000 and 2001,  the Company had
approximately $799 and $871,  respectively,  accrued for its estimated liability
related to these claims.

     The Company is 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.

Note 11: Transactions with Related Parties

     During the years ended  December  31,  1999,  2000,  and 2001 there were no
material transactions with related parties.



                                       37

<PAGE>


Note 12: Quarterly Financial Data (Unaudited)

     Summarized quarterly financial data for the Company for 2000 and 2001 is as
follows:

<TABLE>
                                                       March 31          June 30        September 30      December 31
                                                 -----------------------------------------------------------------------
<S>                                                     <C>               <C>              <C>              <C>
2000
----
Operating revenue                                       $50,748           $51,094          $50,206          $46,942
Earnings (loss) from operations                           1,519             1,206            1,204          (2,472)
Net earnings (loss)                                         238                 7               21          (2,257)
Basic and diluted earnings (loss) per share               $0.05             $0.00            $0.00          ($0.46)

2001
----
Operating revenue                                       $47,379           $51,754          $48,571          $43,122
Earnings (loss) from operations                         (1,127)               338          (1,114)          (3,025)
Net earnings (loss)                                     (1,288)             (384)          (1,212)          (2,327)
Basic and diluted earnings (loss) per share             ($0.26)           ($0.08)          ($0.25)          ($0.48)
</TABLE>

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







                                       38