<PAGE>

                                  UNITED STATES
                       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, 2006

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934.

     For the transition period from ______________ to ____________________

COMMISSION FILE NUMBER 000-20793

                          SMITHWAY MOTOR XPRESS CORP.
             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                                          <C>
                 NEVADA                                           42-1433844
     (State or Other Jurisdiction of                           (I.R.S. Employer
     Incorporation or Organization)                          Identification No.)
</TABLE>

<TABLE>
<S>                                                               <C>
            2031 QUAIL AVENUE
            FORT DODGE, IOWA                                        50501
(Address of Principal Executive Offices)                          (Zip Code)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (515) 576-7418

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
                                                            NAME OF EACH
         TITLE OF EACH CLASS                        EXCHANGE ON WHICH REGISTERED
         -------------------                        ----------------------------
<S>                                                 <C>
CLASS A COMMON STOCK, $0.01 PAR VALUE                   NASDAQ CAPITAL MARKET
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

YES [ ] NO [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.

YES [ ] NO [X]

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES [X] NO [ ]

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

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

YES [ ] NO [X]

As of June 30, 2006, the aggregate market value of the registrant's common stock
held by non-affiliates of the registrant was $26,600,995.00 based upon the
$10.19 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 March 14, 2007, the registrant had 3,991,124 shares of Class A Common
Stock and 1,000,000 shares of Class B Common Stock outstanding.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                      <C>
                                     PART I

Item 1  Business                                                          Page 3
Item 1A Risk Factors                                                      Page 6
Item 1B Unresolved Staff Comments                                         Page 6
Item 2  Properties                                                        Page 7
Item 3  Legal Proceedings                                                 Page 7
Item 4  Submission of Matters to a Vote of Security Holders               Page 7

                                     PART II

Item 5  Market for Registrant's Common Equity, Related Stockholder
        Matters and Issuer Purchases of Equity Securities                 Page 8
Item 6  Selected Financial Data                                          Page 10
Item 7  Management's Discussion and Analysis of Financial Condition
        and Results of Operations                                        Page 11
Item 7A Quantitative and Qualitative Disclosures About Market Risk       Page 27
Item 8  Financial Statements and Supplementary Data                      Page 27
Item 9  Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure                                         Page 27
Item 9A Controls and Procedures                                          Page 27
Item 9B Other Information                                                Page 28

                                    PART III

Item 10 Directors and Executive Officers of the Registrant               Page 29
Item 11 Executive Compensation                                           Page 30
Item 12 Security Ownership of Certain Beneficial Owners and Management
        and Related Stockholder Matters                                  Page 36
Item 13 Certain Relationships and Related Party Transactions             Page 38
Item 14 Principal Accountant Fees and Services                           Page 38

                                     PART IV

Item 15 Exhibits and Financial Statement Schedules                       Page 40
        Signatures                                                       Page 42
</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 - Risk Factors" 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", "Company", "we", "us", or "our")
is a truckload carrier that provides nationwide transportation of diversified
freight, concentrating primarily on the flatbed segment of the truckload market.
We use our "Smithway Network" of computer-connected field offices, commission
agencies, and company-owned terminals to offer comprehensive truckload
transportation services to shippers located predominantly between the Rocky
Mountains in the West and the Appalachian Mountains in the East, and in eight
Canadian provinces.

     Smithway Motor Xpress Corp. was incorporated in Nevada in January 1995 to
serve as a holding company and conduct our initial public offering, which
occurred in June 1996. References to the "Company", "Smithway", "we", "us", or
"our" herein refer to the consolidated operations of Smithway Motor Xpress Corp.
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.

     Our headquarters are located at 2031 Quail Avenue, Fort Dodge, Iowa 50501,
and our website address is www.smxc.com. Information on our website is not
incorporated by reference into this annual report. Our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all other
reports we file with the SEC pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge through our website
or through the Securities and Exchange Commission's website located at
www.sec.gov.

RECENT DEVELOPMENT

     On March 22, 2007, our company, Western Express, Inc., a Tennessee
corporation ("Western"), and Western Express Acquisition Corporation, a Nevada
corporation ("Acquisition Sub"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") providing for the merger of Acquisition Sub with and
into our company with our company surviving as a wholly-owned subsidiary of
Western (the "Merger"). Pursuant to the Merger Agreement, at the effective time
of the Merger, each outstanding share of our common stock will be converted into
and represent the right to receive $10.63 in cash. The Merger Agreement has been
approved by our Board of Directors and Western's Board of Directors. The
transactions contemplated by the Merger Agreement are subject to the approval of
our stockholders and other customary closing conditions and are expected to
close in the summer of 2007.

OPERATIONS

     We integrate our sales and dispatch functions throughout our
computer-connected "Smithway Network." The Smithway Network consists of our
headquarters in Fort Dodge, Iowa and 10 terminals, field offices, and
independent agencies. The headquarters and 9 terminals and field offices are
managed by Smithway employees, while our agency terminal is managed by an
independent commission agent. 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.

CUSTOMERS AND MARKETING

     Our sales force includes eight sales representatives, personnel at ten
terminals and field offices, and one independent commission agent. National
sales representatives focus on national customers, while sales personnel at
terminals, field offices, and agencies are responsible for regional customer
contact. Our 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 our strategically located Smithway
Network. We believe that few other carriers operating principally in the Midwest
flatbed market offer similar size and service. Consequently, we seek primarily
service-sensitive freight


                                        3

<PAGE>

rather than competing for all freight on the basis of price.

     In 2006, our top 50, 25, ten, and five customers accounted for
approximately 64%, 54%, 36%, and 25% of revenue, respectively.

TECHNOLOGY

     We utilize an operating system and freight selection software to improve
the efficiency of our operations. This software was designed specifically for
the trucking industry to allow managers to coordinate available equipment with
the transportation needs of customers, monitor truck productivity and fuel
consumption, and schedule regular equipment maintenance. It also is designed to
allow immediate access to current information regarding driver and equipment
status and location, special load and equipment instructions, routing, and
dispatching.

     We operate on-board communication units in all company-owned tractors and
offer rental of these units as an option to our independent contractors. Drivers
can immediately report breakdowns or other emergency conditions. The system
enables us to advise customers of the location of freight in transit through its
hourly position reports of each tractor's location.

     We also offer our customers electronic data interchange, which allows
customers to communicate directly with us via computer link or the Internet and
obtain location updates of in-transit freight, expected delivery times, and
account payment instructions.

DRIVERS, INDEPENDENT CONTRACTORS, AND OTHER PERSONNEL

     We seek company and independent contractor drivers who safely manage their
equipment and treat freight transportation as a business. We have historically
operated a fleet comprised of substantial numbers of both company-owned and
independent contractor tractors. We believe a mixed fleet offers competitive
advantages because we are able to recruit from both driver pools. We intend to
retain a mixed fleet in the future to ensure that 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.

     We have implemented several policies to promote driver and independent
contractor recruiting and retention. These include increases in pay rates and
non-monetary methods which include updating our tractor fleet, 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
driver manager to ensure personal contact. In addition, we operate over
relatively short-to-medium distances (611-mile average length of haul in 2006)
to return drivers home as frequently as possible.

     We are not a party to a collective bargaining agreement and our employees
are not represented by a union. At December 31, 2006, we had 789 company
drivers, 247 non-driver employees, and 474 independent contractors. We believe
that we have good relationships with our employees and independent contractors.

SAFETY AND INSURANCE

     Our active safety and loss prevention program has resulted in the
Department of Transportation's highest safety and fitness rating (satisfactory)
and numerous safety awards. Our safety and loss prevention program includes
pre-screening, initial orientation, six weeks of on-the-road training for
drivers without substantial experience, and safety bonuses.

     We maintain insurance covering losses in excess of a $250,000 self-insured
retention for casualty insurance, which includes cargo loss, personal injury,
property damage, and physical damage claims. We also have a $250,000
self-insured retention for workers' compensation claims in states where a
self-insured retention is allowed. Our primary casualty and workers'
compensation insurance policies have a limit of $2.0 million per occurrence. We
reinstated excess coverage on February 1, 2005, which covers losses above our
primary policy limit of $2.0 million up to a per claim loss limit of $5.0
million. All policies are scheduled for renewal in July 2007. Claims that exceed
the limits of insurance coverage, or for which coverage is not provided, may
cause our financial condition and


                                        4

<PAGE>

results of operations to suffer a materially adverse effect.

REVENUE EQUIPMENT

     Our equipment strategy for company-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. In 2004, we
began to replace our tractor fleet in order to shorten our tractor trade cycle
to approximately 500,000 miles. We plan to routinely replace approximately 25%
of our company tractors annually. Increased costs associated with the
manufacturing of the new, EPA-compliant engines, changes in the market for used
tractors, and difficult market conditions faced by tractor manufacturers may
result in increased equipment prices and increased operating expenses.

     We operate conventional (engine forward) tractors with standard engine and
drivetrain components, and trailers with standard brakes and tires to minimize
our inventory of spare parts. All equipment is subject to our regular
maintenance program, and also is inspected and maintained each time it passes
through one of our maintenance facilities.

     The following table shows the number of units and average age of
company-owned revenue equipment as of the indicated dates. The beginning and end
of period numbers include only tractors and trailers that were available for
dispatch.

<TABLE>
<CAPTION>
                                                 Year ended
                                                December 31,
                                           ---------------------
                                            2004    2005    2006
                                           -----   -----   -----
<S>                                        <C>     <C>     <C>
TRACTORS
   Beginning of Period                       750     794     782
      Acquired                               279     252     225
      Disposed                              (212)   (233)   (233)
      Change in availability of tractors     (23)    (31)      1
   End of Period                             794     782     775
Average age at end of period (in months)      36      29      24
TRAILERS
   Beginning of Period                     1,968   1,771   1,721
      Acquired                                 3     340     390
      Disposed                              (200)   (390)   (373)
   End of Period                           1,771   1,721   1,738
Average age at end of period (in months)      78      69      59
</TABLE>

     During 2007, we plan to acquire 150 new tractors and 607 new trailers to
replace old tractors and trailers.

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. We compete 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. We
also compete to a limited extent with rail and rail-truck intermodal service,
but attempt to limit this competition by seeking service-sensitive freight and
focusing on short-to-medium lengths of haul. Although we believe the 853 company
drivers and independent contractors dedicated to our flatbed operation at
December 31, 2006 rank our 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 us.

FUEL AVAILABILITY AND COST

     We actively manage fuel costs. Company drivers purchase virtually all of
our fuel through service centers with which we have volume purchasing
arrangements. Most of our contracts with customers contain fuel surcharge
provisions and we also attempt to recover increases in fuel prices through
higher rates. However, increases in fuel prices generally are not fully offset
through these measures.


                                       5

<PAGE>

     Shortages of fuel, increases in fuel prices, or rationing of petroleum
products could have a materially adverse effect on our operations and
profitability. It is uncertain whether fuel prices will continue to increase or
will decrease, or the extent to which we can recoup a portion of these costs
through fuel surcharges.

REGULATION

     We are a motor carrier regulated by the U.S. Department of Transportation
and other federal and state agencies. Our business activities in the United
States are subject to broad federal, state and local laws and regulations beyond
those applicable to most business activities. Our regulated business activities
include, but are not limited to, service area, routes traveled, equipment
specifications, commodities transported, rates and charges, accounting systems,
financial reporting and insurance coverages. Our Canadian business activities
are subject to similar requirements imposed by the laws and regulations of the
Dominion of Canada and provincial laws and regulations. Motor carrier operations
are subject to safety requirements prescribed by the U.S. Department of
Transportation and by Canadian provincial authorities. Matters such as weight
and equipment dimensions are also subject to federal, state and provincial
regulations.

     The Federal Motor Carrier Safety Administration of the U.S. Department of
Transportation made significant changes to the regulations governing the hours
of service for drivers of commercial motor vehicles that carry freight.
Truckload carriers were required to comply with the revised regulations
effective October 1, 2005, with a transitional period of compliance and
enforcement from October 1, 2005 through December 31, 2005. In general, the new
regulations are intended to increase safety by giving drivers more opportunity
to rest and obtain restorative sleep during each work cycle by, for example,
increasing the minimum off duty time during each work cycle. The maximum on-duty
period after which a driver may no longer drive was shortened and can no longer
be extended by time spent off duty (such as meal stops and other rest breaks)
once the on-duty period has begun. Therefore, delays during a driver's on-duty
time (such as those caused by loading/unloading problems) may limit drivers'
available hours behind the wheel, particularly if such delays occur late in an
on-duty period. This, and other operational issues that the new rules may
create, could increase our operating costs.

     The Environmental Protection Agency adopted new emissions control
regulations, which require progressive reductions in exhaust emissions from
diesel engines manufactured on or after October 1, 2002. The initial reduction
became effective October 1, 2002, with more stringent reductions scheduled to
become effective on January 1, 2007 and 2010. Among other things, the
regulations require diesel engines to use exhaust gas recirculation technology.
Compliance with the regulations has increased the cost of our new tractors and
operating expenses while reducing fuel economy and it is anticipated that the
2007 and 2010 changes will further adversely impact those areas.

     We are subject to federal, state, provincial and local environmental laws
and regulations. We believe that we are in substantial compliance with such laws
and regulations. However, continuing costs of such compliance may have a
material adverse effect on our competitive position, operations or financial
condition or require a material increase in currently anticipated capital
expenditures.

ITEM 1A. RISK FACTORS

     The information set forth under the caption "Risk Factors" in Item 7 of
Part II of this Form 10-K is incorporated herein by reference.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     Not applicable.


                                       6

<PAGE>

ITEM 2. PROPERTIES

     Our headquarters consists of 38,340 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                                       Lease
                                 Maintenance   Recruitment   Dispatch   Sales   Ownership    Expiration
                                 -----------   -----------   --------   -----   ---------   -----------
<S>                              <C>           <C>           <C>        <C>     <C>         <C>
   Company Locations
Birmingham, Alabama...........                      X            X        X     Leased      May 2007
Black Hawk, South Dakota......        X             X            X        X     Owned
Chicago, Illinois.............                                   X        X     Owned
Des Moines, Iowa .............        X                          X        X     Owned
Fort Dodge, Iowa..............        X             X            X        X     Owned
Joplin, Missouri..............                                   X        X     Leased      May 2007
McPherson, Kansas.............        X                          X        X     Owned
Oklahoma City, Oklahoma.......        X             X            X        X     Owned
Oshkosh, Wisconsin............                                   X        X     Leased      Monthly
Phoenix, Arizona..............                                   X        X     Leased      August 2007
   Agent Location
Toledo, Ohio .................                                   X        X     By Agent
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

     From time-to-time we are party to litigation and administrative proceedings
arising in the ordinary course of business. These proceedings primarily involve
claims for personal injury and property damage incurred in the transportation of
freight. We are not aware of any claims or threatened claims that might have a
materially adverse effect upon our results of operations or financial position
or cash flows.

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

     None.


                                       7

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
     ISSUER PURCHASES OF EQUITY SECURITIES

     PRICE RANGE OF COMMON STOCK. Our Class A Common Stock is traded on the
Nasdaq Capital Market under the symbol "SMXC." The following table sets forth,
for the periods indicated, the high and low bid information per share of our
Class A Common Stock as quoted through the Nasdaq Capital Market. Such
quotations reflect inter-dealer prices, without retail markups, markdowns or
commissions and, therefore, may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
     PERIOD         HIGH     LOW
     ------        ------   -----
<S>                <C>      <C>
Fiscal Year 2006
   1st Quarter     $10.01   $8.87
   2nd Quarter     $11.42   $9.09
   3rd Quarter     $11.26   $8.06
   4th Quarter     $11.08   $7.80
</TABLE>

<TABLE>
<CAPTION>
     PERIOD        HIGH     LOW
     ------        -----   -----
<S>                <C>     <C>
Fiscal Year 2005
   1st Quarter     $8.11   $5.48
   2nd Quarter     $6.49   $5.37
   3rd Quarter     $8.01   $5.40
   4th Quarter     $9.54   $6.33
</TABLE>

     As of March 14, 2007, we had approximately 270 stockholders of record of
our Class A Common Stock. However, we believe that many additional holders of
Class A Common Stock are unidentified because a substantial number of our shares
are held of record by brokers or dealers for their customers in street names.

     DIVIDEND POLICY. We have never declared and paid a cash dividend on our
Class A Common Stock. It is the current intention of our board of directors to
continue to retain any earnings to finance the growth of our business rather
than to pay dividends. Future payments of cash dividends will depend upon our
financial condition, results of operations, and capital commitments,
restrictions under then-existing agreements, and other factors deemed relevant
by the board of directors.

     ISSUER PURCHASES OF EQUITY SECURITIES. None.

     PERFORMANCE GRAPH. The following graph compares the cumulative total
stockholder return of our Class A Common Stock with the cumulative total
stockholder return of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq
Trucking & Transportation Stocks.


                                       8

<PAGE>

               Comparison of Five -- Year Cumulative Total Returns
                              Performance Graph for
                           Smithway Motor Xpress Corp.

               Produced on 03/21/2007 including data to 12/29/2006

                               (PERFORMANCE CHART)

                                     Legend

<TABLE>
<CAPTION>
CRSP Total Returns Index for:             12/2001   12/2002   12/2003   12/2004   12/2005   12/2006
-----------------------------             -------   -------   -------   -------   -------   -------
<S>                                       <C>       <C>       <C>       <C>       <C>       <C>
Smithway Motor Xpress Corp.                100.0      41.6     105.4     389.1     482.2     540.5
Nasdaq Stock Market (US Companies)         100.0      69.1     103.4     112.5     114.9     126.2
Nasdaq Trucking & Transportation Stocks    100.0     101.8     145.8     186.9     195.2     227.0
SIC 3700--3799, 4200--4299, 4400--4599, 4700--4799 US & Foreign
</TABLE>

NOTES:

A.   The lines represent monthly index levels derived from compounded daily
     returns that include all dividends.

B.   The indexes are reweighted daily using the market capitalization on the
     previous trading day.

C.   If the monthly interval, based on the fiscal year -- end, is not a trading
     day, the preceding trading day is used.

D.   The index level for all series was set to $100.0 on 12/31/2001.

Prepared by CRSP (www.crsp.uchicago.edu), Center for Research in Security
Prices, Graduate School of Business,

13958/81000000

The University of Chicago. Used with permission. All rights reserved.

                                                              (C) Copyright 2007

     There can be no assurance that our stock performance will continue into the
future with the same or similar trends depicted in the graph above. We will not
make or endorse any predictions as to future stock performance. The CRSP Index
for Nasdaq Trucking & Transportation Stocks includes all publicly held truckload
motor carriers traded on the Nasdaq Stock Market, as well as all Nasdaq
companies within the Standard Industrial Code Classifications 3700-3799,
4200-4299, 4400-4599, and 4700-4799 US & Foreign.


                                        9

<PAGE>

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                      ----------------------------------------------------
                                                        2002       2003       2004       2005       2006
                                                      --------   --------   --------   --------   --------
                                                       (In thousands, except per share and operating data)
<S>                                                   <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue .................................   $169,468   $165,329   $189,001   $220,386   $228,762
Operating expenses:
   Purchased transportation .......................     62,364     55,596     61,638     76,403     80,052
   Compensation and employee benefits .............     51,834     51,506     54,468     56,314     56,423
   Fuel, supplies, and maintenance ................     27,722     29,857     38,427     49,957     53,129
   Insurance and claims ...........................      7,324      4,393      5,636      6,708      5,724
   Uninsured loss .................................         --         --         --         --      1,529
   Taxes and licenses .............................      3,444      3,444      3,653      3,599      3,839
   General and administrative .....................      7,153      6,934      6,929      7,752      7,804
   Communications and utilities ...................      1,783      1,463      1,274      1,189      1,180
   Loss (gain) on disposal of assets ..............       (792)      (439)      (470)    (2,245)    (2,794)
   Depreciation and amortization ..................     17,217     14,678     12,810     11,017     12,355
   Goodwill impairment ............................      3,300         --         --         --         --
                                                      --------   --------   --------   --------   --------
      Total operating expenses ....................    181,349    167,432    184,365    210,694    219,241
                                                      --------   --------   --------   --------   --------
      Earnings (loss) from operations .............    (11,881)    (2,103)     4,636      9,692      9,521
Interest expense (net) ............................     (1,915)    (1,755)    (1,509)    (1,702)    (2,133)
Other income ......................................         --         --        727         --         --
                                                      --------   --------   --------   --------   --------
Loss (earnings) before income taxes ...............    (13,796)    (3,858)     3,854      7,990      7,388
Income taxes (benefit) ............................     (5,118)    (1,270)     1,613      3,749      3,106
                                                      --------   --------   --------   --------   --------
Net (loss) earnings ...............................     (8,678)    (2,588)     2,241      4,241      4,282
                                                      ========   ========   ========   ========   ========
Basic (loss) earnings per common share ............   $  (1.79)  $  (0.53)  $   0.46   $   0.86   $   0.86
                                                      ========   ========   ========   ========   ========
Diluted (loss) earnings per common share ..........   $  (1.79)  $  (0.53)  $   0.45   $   0.84   $   0.84
                                                      ========   ========   ========   ========   ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital ...................................   $ (2,821)  $ (2,107)  $  4,359   $  3,156   $  1,989
Net property and equipment ........................     67,570     54,399     49,276     61,422     72,834
Total assets ......................................     88,581     75,619     77,011     88,692    101,565
Long-term debt, including current maturities ......     43,820     33,617     29,309     33,548     38,485
Total stockholders' equity ........................   $ 23,193   $ 20,605   $ 23,009   $ 27,478   $ 31,919

OPERATING DATA:
Operating ratio (1) ...............................      107.0%     101.3%      97.5%      95.6%      95.8%
Operating ratio, excluding fuel surcharges (2) ....      107.0%     101.3%      97.4%      94.9%      95.1%
Average revenue per tractor per week(3) ...........   $  2,162   $  2,367   $  2,712   $  2,808   $  2,772
Average revenue per loaded mile(3) ................   $   1.37   $   1.37   $   1.46   $   1.56   $   1.62
Average length of haul in miles ...................        664        659        658        621        611
Company tractors at end of period .................        773        750        794        782        775
Independent contractor tractors at end of period ..        521        430        445        470        474
Weighted average tractors during period ...........      1,410      1,234      1,186      1,237      1,265
Trailers at end of period .........................      2,480      2,278      2,101      2,047      2,071
Weighted average shares outstanding:
   Basic ..........................................      4,846      4,846      4,851      4,931      4,982
   Diluted ........................................      4,846      4,846      4,952      5,047      5,082
</TABLE>

----------
(1)  Operating expenses divided by operating revenue.

(2)  Operating expenses minus fuel surcharge revenue, divided by operating
     revenue excluding fuel surcharge revenue. (3) Excludes fuel surcharge,
     brokerage, and other revenue.


                                       10

<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. Our 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 "Risk
Factors," as well as those discussed in this item and elsewhere in this annual
report on Form 10-K.

BUSINESS OVERVIEW

     We are a truckload carrier that provides nationwide transportation of
diversified freight, concentrating primarily on the flatbed segment of the
truckload market. We 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 the southern provinces of Canada.

RECENT DEVELOPMENT

     On March 22, 2007, we entered into the Merger Agreement with Western and
Acquisition Sub providing for the Merger. Pursuant to the Merger Agreement, at
the effective time of the Merger, each outstanding share of our common stock
will be converted into and represent the right to receive $10.63 in cash. The
Merger Agreement has been approved by our Board of Directors and Western's Board
of Directors. The transactions contemplated by the Merger Agreement are subject
to the approval of our stockholders and other customary closing conditions and
are expected to close in the summer of 2007.

REVENUES AND EXPENSES

     We generate substantially all of our revenue by transporting freight for
our customers. Generally, we are paid by the mile for our services. We also
derive revenue from fuel surcharges, loading and unloading activities, equipment
detention, and other accessorial services. The main factors that affect our
revenue are the revenue per mile we receive from our customers, the percentage
of miles for which we are compensated, and the number of miles we generate with
our equipment. These factors relate, among other things, to the United States
economy, inventory levels, the level of capacity in the trucking industry,
specific customer demand, and driver availability. We monitor our revenue
production primarily through average revenue per tractor per week.

     In 2006, our average revenue per tractor per week (excluding fuel
surcharge, brokerage, and other revenues) decreased to $2,772 from $2,808 in
2005. Our operating revenue increased $8.4 million (3.8%), to $228.8 million in
2006 from $220.4 million in 2005, while weighted average tractors increased 2.3%
to 1,265 in 2006 from 1,237 in 2005. Our ending fleet size grew remained
relatively constant at 1,249 units at December 31, 2006 compared to 1,252 units
at December 31, 2005.

     The main factors that impact our profitability on the expense side are the
variable costs of transporting freight for our customers. These costs include
fuel expense, driver-related expenses, such as wages, benefits, training, and
recruitment, and independent contractor costs, which are recorded under
purchased transportation. Expenses that have both fixed and variable components
include maintenance and tire expense and our total cost of insurance and claims.
These expenses generally vary with the miles we travel, but also have a
controllable component based on safety, fleet age, efficiency, and other
factors. Our main fixed costs are the acquisition and financing of long-term
assets, such as revenue equipment and the compensation of non-driver personnel.
Effectively controlling our expenses has been a key component of our profit
improvement plan.


                                       11

<PAGE>

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                            2004    2005    2006
                                           -----   -----   -----
<S>                                        <C>     <C>     <C>
Operating revenue ......................   100.0%  100.0%  100.0%
Operating expenses:
   Purchased transportation ............    32.6    34.7    35.0
   Compensation and employee benefits ..    28.8    25.6    24.7
   Fuel, supplies, and maintenance .....    20.3    22.7    23.2
   Insurance and claims ................     3.0     3.0     2.5
   Uninsured loss ......................     0.0     0.0     0.7
   Taxes and licenses ..................     1.9     1.6     1.7
   General and administrative ..........     3.7     3.5     3.4
   Communication and utilities .........     0.7     0.5     0.5
   Gain on disposal of assets ..........    (0.3)   (1.0)   (1.2)
   Depreciation and amortization .......     6.8     5.0     5.4
                                           -----   -----   -----
   Total operating expenses ............    97.5    95.6    95.8
                                           -----   -----   -----
Earnings from operations ...............     2.5     4.4     4.2
Interest expense, (net) ................    (0.8)   (0.8)   (0.9)
Other income ...........................     0.4      --      --
                                           -----   -----   -----
Earnings before income taxes ...........     2.0     3.6     3.3
Income tax expense .....................     0.9     1.7     1.4
                                           -----   -----   -----
Net earnings ...........................     1.2%    1.9%    1.9%
                                           =====   =====   =====
</TABLE>

COMPARISON OF YEAR ENDED DECEMBER 31, 2006 TO YEAR ENDED DECEMBER 31, 2005.

     Operating revenue increased $8.4 million (3.8%) to $228.8 million in 2006
from $220.4 million in 2005. The increase in operating revenue resulted from
increased average operating revenue per tractor per week and a 3.0% increase in
our weighted average tractors. Operating revenue, excluding fuel surcharge
revenue of $36.1 million, increased $1.7 million (0.9%) to $192.7 million in
2006 from $191.0 million, excluding fuel surcharge revenue of $29.4 million, in
2005. Operating revenue in 2006, excluding fuel surcharge revenue of $36.1
million, brokerage revenue of $8.4 million, and other revenue of $2.0 million,
was $182.3 million. Operating revenue in 2005, excluding fuel surcharge revenue
of $29.4 million, brokerage revenue of $8.8 million, and other revenue of $1.5
million, was $180.6 million.

     Average operating revenue per tractor per week increased to $3,478 in 2006
from $3,426 in 2005. Operating revenue includes revenue from operating our
trucks as well as other, more volatile, revenue items, including fuel surcharge,
brokerage, and other revenue. We believe the analysis of tractor productivity is
more meaningful if fuel surcharge, brokerage, and other revenue are excluded
from the computation. Average revenue per tractor per week (excluding fuel
surcharge, brokerage, and other revenue) decreased to $2,772 in 2006 from $2,808
in 2005, primarily due to decreased production from our seated equipment. For
the year, revenue per loaded mile (excluding fuel surcharge, brokerage, and
other revenue) increased to $1.62 in 2006 from $1.56 in 2005. Fuel surcharge
revenue increased $6.7 million to $36.1 million in 2006 from $29.4 million in
2005. During 2006 and 2005, approximately $20.8 million and $17.0 million,
respectively, of the fuel surcharge revenue collected helped to offset our fuel
costs. The remainder was passed through to independent contractors.

     Our weighted average tractors increased to 1,265 in 2006 from 1,237 in
2005.

     Purchased transportation consists primarily of payments to independent
contractor providers of revenue equipment, expenses related to brokerage
activities, and payments under operating leases of revenue equipment. Purchased
transportation increased $3.6 million (4.8%) to $80.1 million in 2006 from $76.4
million in 2005. As a percentage of revenue, purchased transportation increased
to 35.0% in 2006 from 34.7% in 2005. The changes reflect higher pay to
independent contractors resulting from increases in fuel surcharge revenue and
average revenue per billed mile and an increase in the number of independent
contractors and in the percentage of the fleet supplied


                                       12

<PAGE>

by independent contractors. The percentage of total operating revenue provided
by independent contractors increased to 37.1% in 2006 from 36.4% in 2005.

     Compensation and employee benefits increased $109,000 (0.2%) to $56.4
million in 2006 from $56.3 million in 2005 reflecting increases in company
drivers' pay rates and increases in non-driver employee wages, partially offset
by decreased health insurance costs. As a percentage of revenue, compensation
and employee benefits decreased to 24.7% in 2006 from 25.6% in 2005, reflecting
the changes described above and an increase in our revenue per loaded mile and
fuel surcharge revenue, which increases revenue without a proportionate increase
in wages. Our ratio of tractors to non-driver employees, a key measure of
administrative efficiency, has improved to 5.1 during 2006 compared to 5.0
during 2005. The market for recruiting drivers continues to be challenging. We
have increased driver pay three times since the third quarter of 2005 and expect
that further increases will be necessary. Future increases in driver pay would
negatively impact our results of operations to the extent that corresponding
freight rate increases are not obtained.

     Fuel, supplies, and maintenance increased $3.2 million (6.3%) to $53.1
million in 2006 from $50.0 million in 2005. As a percentage of revenue, fuel,
supplies, and maintenance increased to 23.2% of revenue in 2006 compared with
22.7% in 2005. This reflects higher fuel prices, partially offset by an increase
in our average revenue per loaded mile, which increases revenue without a
corresponding increase in fuel, supplies, and maintenance costs. Maintenance
costs have decreased as we continue to update our fleet with new equipment. Fuel
prices, however, increased approximately 13% to an average of $2.60 per gallon
in 2006 from $2.29 per gallon in 2005. The $0.31 per gallon increase in fuel
prices was partially offset by a $0.24 per gallon ($3.8 million) increase in
fuel surcharge revenue attributable to company-owned tractors which is included
in operating revenue, mitigating 78% of the increase in fuel prices.

     Insurance and claims decreased $1.0 million (14.7%) to $5.7 million in 2006
from $6.7 million in 2005, primarily due to a decrease in accident frequency and
severity. As a percentage of revenue, insurance and claims decreased to 2.5% of
revenue in 2006 compared with 3.0% of revenue in 2005, reflecting a reduction in
the cost of auto liability, physical damage, and cargo claims and an increase in
our average revenue per loaded mile, which increases revenue without a
corresponding increase in insurance and claims costs. Claims that exceed the
limits of our insurance coverage, or claims for which coverage is not provided,
may cause our financial condition and results of operations to suffer a
materially adverse effect. The insurance policies were renewed on July 1, 2006
with no change in our retention levels.

     We incurred an uninsured loss of $1.5 million, including related legal
fees, during the fourth quarter of 2006 in connection with the settlement of
litigation. The defendant in the settled lawsuit was our wholly owned
subsidiary. This uninsured loss will be funded in 2007 with cash provided by
operating activities.

     Taxes and licenses increased $240,000 (6.7%) to $3.8 million in 2006 from
$3.6 million in 2005 reflecting higher over-dimensional permit costs and
normalization of real estate taxes which were $30,000 lower than normal in 2005
due to a successful appeal of the assessed value on one of our locations. As a
percentage of revenue, taxes and licenses increased to 1.7% of revenue in 2006
compared with 1.6% of revenue in 2005, reflecting the items noted above,
partially offset by an increase in our revenue per loaded mile and fuel
surcharge revenue which increases revenue without a proportionate increase in
taxes and licenses.

     General and administrative expenses increased $52,000 (0.7%) in 2006 from
2005 and were approximately $7.8 million in both years. As a percentage of
revenue, general and administrative expenses decreased to 3.4% of revenue in
2006 compared with 3.5% in 2005, reflecting an increase in our revenue per
loaded mile and fuel surcharge revenue which increases revenue without a
proportionate increase in general and administrative expenses.

     Communications and utilities expenses decreased $9,000 (0.8%) in 2006 from
2005 and were approximately $1.2 million in both years. As a percentage of
revenue, communications and utilities remained constant at 0.5% of revenue in
both years.

     Gains on the disposal of assets increased $549,000 (24.5%) to $2.8 million
in 2006 from $2.2 million in 2005. As a percentage of revenue, gains on the
disposal of assets increased to 1.2% of revenue in 2006 compared with 1.0% in
2005. The increase in gains is primarily attributable to the sale of used
trailers. Prior to 2005, very few trailers had been replaced. As we replace our
trailer fleet over the next several years, we expect gains to continue at or
near 2005 levels, assuming consistent market conditions for used equipment.


                                       13

<PAGE>

     Depreciation and amortization increased $1.3 million (12.1%) to $12.4
million in 2006 from $11.0 million in 2005, reflecting the acquisition of new
tractors and trailers to replace older equipment which was no longer being
depreciated. As a percentage of revenue, depreciation and amortization decreased
to 5.4% of revenue in 2006 compared with 5.0% in 2005, reflecting the changes
described above and an increase in our average revenue per loaded mile and fuel
surcharge revenue which increases revenue without a proportionate increase in
depreciation expense. As we continue to upgrade our equipment fleet, we expect
depreciation expense to increase.

     Interest expense, net, increased $431,000 (25.3%) to $2.1 million in 2006
from $1.7 million in 2005. This increase was attributable to higher average debt
outstanding and higher interest rates. As a percentage of revenue, interest
expense, net, remained relatively constant at 0.9% of revenue in 2006 compared
with 0.8% in 2005.

     As a result of the foregoing, our pre-tax margin decreased to 3.3% in 2006
from 3.6% in 2005. Before the uninsured loss of $1.5 million, our pre-tax margin
was 3.9% in 2006.

     Our income tax expense in 2006 was $3.1 million, or 42.0% of earnings
before income taxes. Our income tax expense in 2005 was $3.7 million, or 46.9%
of earnings before income taxes. In 2005, the rate is unusually high because we
recorded additional income tax to adjust deferred tax assets related to various
state net operating losses and credits and to establish a reserve for taxes that
may be owed to states in which tax returns are not filed. In 2006, the rate is
unusually low due to a reduction in the tax rate we use to record net deferred
tax liabilities. 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 us. The impact of
paying per diem travel expenses varies depending upon the ratio of drivers to
independent contractors and the level of our pre-tax earnings or loss.

     As a result of the factors described above, net earnings were $4.3 million
in 2006 (1.9% of revenue), compared with $4.2 million in 2005 (1.9% of revenue).
In addition, our operating ratio (operating expenses as a percentage of
operating revenue) was 95.8% during 2006 as compared with 95.6% during 2005. Our
operating ratio, excluding fuel surcharge revenue, was 95.1% during 2006 as
compared with 94.9% during 2005.

     Before the uninsured loss of $1.5 million, which resulted in a charge of
$948,000 net of the associated tax benefit, net earnings were $5.2 million in
2006 (2.3% of revenue), compared with $4.2 million in 2005 (1.9% of revenue). In
addition, before the net $948,000 charge for the uninsured loss, our operating
ratio (operating expenses as a percentage of operating revenue) was 95.2% during
2006, as compared with 95.6% during 2005. Our operating ratio, excluding fuel
surcharge revenue and the net charge for our uninsured loss, was 94.3% during
2006, as compared with 94.9% during 2005. Financial measures excluding our fuel
surcharge revenue or uninsured loss are not in accordance with, or an
alternative for, generally accepted accounting principles and may be different
from such measures as used by other companies. We believe that the presentation
of these measures provides useful information to investors regarding business
trends relating to our financial condition and results of ongoing operations, as
well as our operating performance between periods.

COMPARISON OF YEAR ENDED DECEMBER 31, 2005 TO YEAR ENDED DECEMBER 31, 2004.

     Operating revenue increased $31.4 million (16.6%) to $220.4 million in 2005
from $189.0 million in 2004. The increase in operating revenue resulted from
increased average operating revenue per tractor per week and a 4.3% increase in
our weighted average tractors. Operating revenue, excluding fuel surcharge
revenue of $29.4 million, increased $15.4 million (8.8%) to $191.0 million in
2005 from $175.6 million, excluding fuel surcharge revenue of $13.4 million, in
2004. Operating revenue in 2005, excluding fuel surcharge revenue of $29.4
million, brokerage revenue of $8.8 million, and other revenue of $1.5 million,
was $180.6 million. Operating revenue in 2004, excluding fuel surcharge revenue
of $13.4 million, brokerage revenue of $7.6 million, and other revenue of
$811,000, was $167.2 million.

     Average operating revenue per tractor per week increased significantly to
$3,426 in 2005 from $3,065 in 2004. Operating revenue includes revenue from
operating our trucks as well as other, more volatile, revenue items, including
fuel surcharge, brokerage, and other revenue. We believe the analysis of tractor
productivity is more meaningful if fuel surcharge, brokerage, and other revenue
are excluded from the computation. Average revenue per tractor per week
(excluding fuel surcharge, brokerage, and other revenue) increased to $2,808 in
2005 from $2,712 in 2004, primarily due to increased production from our seated
equipment. For the year, revenue per loaded mile (excluding fuel surcharge,
brokerage, and other revenue) increased to $1.56 in 2005 from $1.46 in 2004.
Fuel


                                       14

<PAGE>

surcharge revenue increased $16.0 million to $29.4 million in 2005 from $13.4
million in 2004. During 2005 and 2004, approximately $17.0 million and $8.4
million, respectively, of the fuel surcharge revenue collected helped to offset
our fuel costs. The remainder was passed through to independent contractors.

     Our weighted average tractors increased to 1,237 in 2005 from 1,186 in 2004
reflecting an increase in the number of independent contractor providers of
equipment.

     Purchased transportation consists primarily of payments to independent
contractor providers of revenue equipment, expenses related to brokerage
activities, and payments under operating leases of revenue equipment. Purchased
transportation increased $14.8 million (24.0%) to $76.4 million in 2005 from
$61.6 million in 2004. As a percentage of revenue, purchased transportation
increased to 34.7% in 2005 from 32.6% in 2004. The changes reflect higher pay to
independent contractors resulting from increases in fuel surcharge revenue and
average revenue per billed mile, an increase in the number of independent
contractors and in the percentage of the fleet supplied by independent
contractors, and higher payments under operating leases of revenue equipment.
The percentage of total operating revenue provided by independent contractors
increased to 36.4% in 2005 from 35.4% in 2004. In addition, our independent
contractor fleet grew nearly 6% in 2005. During the last half of 2004, we leased
117 new tractors under operating leases. Payments under operating leases, a
component of purchased transportation, increased $1.4 million, to $2.0 million
in 2005 from $540,000 in 2004. If the leased tractors would have been purchased,
instead of leased, we would have incurred a similar amount of depreciation and
interest expense in lieu of purchased transportation expense.

     Compensation and employee benefits increased $1.8 million (3.4%) to $56.3
million in 2005 from $54.5 million in 2004 reflecting increases in the number of
company drivers and their rate of pay, and increases in non-driver employee
wages, partially offset by decreased health insurance costs. As a percentage of
revenue, compensation and employee benefits decreased to 25.6% in 2005 from
28.8% in 2004, reflecting the changes described above and an increase in our
revenue per loaded mile and fuel surcharge revenue, which increases revenue
without a proportionate increase in wages. Our ratio of tractors to non-driver
employees, a key measure of administrative efficiency, has improved to 5.0
during 2005 compared to 4.6 during 2004.

     Fuel, supplies, and maintenance increased $11.5 million (30.0%) to $50.0
million in 2005 from $38.4 million in 2004. As a percentage of revenue, fuel,
supplies, and maintenance increased to 22.7% of revenue in 2005 compared with
20.3% in 2004. This reflects higher fuel prices, partially offset by an increase
in our average revenue per loaded mile, which increases revenue without a
corresponding increase in fuel, supplies, and maintenance costs. Maintenance
costs have stabilized as we continue to update our fleet with new equipment.
Fuel prices, however, increased approximately 33% to an average of $2.29 per
gallon in 2005 from $1.73 per gallon in 2004. The $0.56 per gallon increase in
fuel prices was partially offset by a $0.47 per gallon ($8.7 million) increase
in fuel surcharge revenue attributable to company-owned tractors which is
included in operating revenue, mitigating 83% of the increase in fuel prices.

     Insurance and claims increased $1.1 million (19.0%) to $6.7 million in 2005
from $5.6 million in 2004, primarily due to additional premiums paid for our
reinstated excess insurance coverage. As a percentage of revenue, insurance and
claims remained constant at 3.0% of revenue in both years. This reflects a
reduction in the cost of auto liability, physical damage, and cargo claims and
an increase in our average revenue per loaded mile, which increases revenue
without a corresponding increase in insurance and claims costs, partially offset
by premiums paid for our reinstated excess insurance coverage. On February 1,
2005, we reinstated excess insurance coverage that we had discontinued in July
2003. The additional insurance, which increases our per claim coverage from $2.0
million to $5.0 million, added $1.1 million to our insurance and claims expense
during 2005. Claims that exceed the limits of our insurance coverage, or claims
for which coverage is not provided, may cause our financial condition and
results of operations to suffer a materially adverse effect. The insurance
policies were renewed on July 1, 2005 with no change in our retention levels.

     Taxes and licenses decreased $54,000 (1.5%) to $3.6 million in 2005 from
$3.7 million in 2004. Increases related to the increase in the number of
company-owned tractors subject to annual license and permit costs were more than
offset by reduced over-dimensional permit costs and lower real estate taxes of
$30,000 resulting from a successful appeal of the assessed value on one of our
locations. As a percentage of revenue, taxes and licenses decreased to 1.6% of
revenue in 2005 compared with 1.9% of revenue in 2004, reflecting the items
noted above and an increase in our revenue per loaded mile and fuel surcharge
revenue which increases revenue without a proportionate increase in taxes and
licenses.


                                       15

<PAGE>

     General and administrative expenses increased $823,000 (11.9%) to $7.8
million in 2005 from $6.9 million in 2004, primarily due to increased
professional fees related to Sarbanes-Oxley compliance efforts and driver
recruiting and orientation expenses. As a percentage of revenue, general and
administrative expenses decreased to 3.5% of revenue in 2005 compared with 3.7%
in 2004, reflecting an increase in our revenue per loaded mile and fuel
surcharge revenue which increases revenue without a proportionate increase in
general and administrative expenses.

     Communications and utilities decreased $85,000 (6.7%) to $1.2 million in
2005 from $1.3 million in 2004. As a percentage of revenue, communications and
utilities decreased to 0.5% of revenue in 2005 compared with 0.7% of revenue in
2004, reflecting an increase in our revenue per loaded mile and fuel surcharge
revenue which increases revenue without a proportionate increase in
communications and utilities expenses.

     Gains on the disposal of assets increased $1.8 million (377.7%) to $2.2
million in 2005 from $470,000 in 2004. As a percentage of revenue, gains on the
disposal of assets increased to 1.0% of revenue in 2005 compared with 0.2% in
2004. The increase in gains is primarily attributable to the sale of used
trailers. Prior to 2005, very few trailers had been replaced.

     Depreciation and amortization decreased $1.8 million (14.0%) to $11.0
million in 2005 from $12.8 million in 2004, reflecting the acquisition during
2004 of 117 new tractors under operating leases. Payments under operating leases
are a component of purchased transportation. If the leased tractors would have
been purchased, instead of leased, approximately $1.5 million of depreciation
expense would have been incurred in 2005 in lieu of purchased transportation
expense. Also, some of our older equipment still generates revenue but is no
longer being depreciated. As a percentage of revenue, depreciation and
amortization decreased to 5.0% of revenue in 2005 compared with 6.8% in 2004,
reflecting the changes described above and an increase in our average revenue
per loaded mile and fuel surcharge revenue which increases revenue without a
proportionate increase in depreciation expense.

     Interest expense, net, increased $193,000 (12.8%) to $1.7 million in 2005
from $1.5 million in 2004. This increase was attributable to higher average debt
outstanding and higher interest rates. As a percentage of revenue, interest
expense, net, remained relatively constant at 0.7% of revenue in 2005 compared
with 0.8% in 2004.

     During 2004, we recorded $727,000 of income from life insurance proceeds.
This non-operating income is tax exempt and added $0.15 to our earnings per
share for 2004. This was a one time event that did not recur in 2005 and will
not recur in the future.

     As a result of the foregoing, our pre-tax margin increased to 3.6% in 2005
from 2.0% in 2004.

     Our income tax expense in 2005 was $3.7 million, or 46.9% of earnings
before income taxes. Our income tax expense in 2004 was $1.6 million, or 51.6%
of earnings before life insurance proceeds and 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 us. The impact of paying per diem travel expenses
varies depending upon the ratio of drivers to independent contractors and the
level of our pre-tax earnings or loss.

     As a result of the factors described above, net earnings were $4.2 million
in 2005 (1.9% of revenue), compared with $2.2 million in 2004 (1.2% of revenue).
Without the life insurance proceeds of $727,000, our net earnings would have
been $1.5 million (0.8% of revenue) in the 2004 period. In addition, our
operating ratio (operating expenses as a percentage of operating revenue) was
95.6% during 2005 as compared with 97.5% during 2004. Our operating ratio,
excluding fuel surcharge revenue, was 94.9% during 2005 as compared with 97.4%
during 2004.

LIQUIDITY AND CAPITAL RESOURCES

     USES AND SOURCES OF CASH

     We require cash to fund working capital requirements and to service our
debt. We have historically financed acquisitions of new equipment with
borrowings under installment notes payable to commercial lending institutions
and equipment manufacturers, borrowings under lines of credit, cash flow from
operations, and


                                       16

<PAGE>

equipment leases from third-party lessors. We also have obtained a portion of
our 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.

     Our primary sources of liquidity have been funds provided by operations and
borrowings under credit arrangements with financial institutions and equipment
manufacturers. We are experiencing improved cash flow as we have returned to
profitability. As of the date of this report, we have adequate borrowing
availability on our line of credit to finance any near-term needs for working
capital.

     We had positive working capital of $2.0 million on December 31, 2006 and
$3.2 million on December 31, 2005. Working capital, defined as current assets
minus current liabilities, is not always fully representative of our liquidity
position because cash and trade receivables account for a large portion of our
current assets. Our trade accounts receivable are generally collected within 32
days. Alternatively, current maturities of long term debt, a large portion of
our current liabilities, are paid over one year.

     Our ability to fund cash requirements in future periods will depend on our
ability to comply with covenants contained in financing arrangements and the
availability of other financing options, as well as our financial condition and
results of operations. Our financial condition and results of operations will
depend on insurance and claims experience, general shipping demand by our
customers, fuel prices, the availability of drivers and independent contractors,
and other factors.

     Although there can be no assurance, we believe that cash generated by
operations and available sources of financing for acquisitions of revenue
equipment will be adequate to meet our currently anticipated working capital
requirements and other cash needs through 2007. We will require additional
sources of financing over the long-term to upgrade our tractor and trailer
fleets. To the extent that actual results or events differ from our financial
projections or business plans, our liquidity may be adversely affected and we
may be unable to meet our financial covenants. Specifically, our short- and
long-term liquidity may be adversely affected by one or more of the following
factors: costs associated with insurance and claims; weak freight demand or a
loss in customer relationships or volume; the impact of new hours-of-service
regulations on asset productivity; the ability to attract and retain sufficient
numbers of qualified drivers and independent contractors; elevated fuel prices
and the ability to collect fuel surcharges; inability to maintain compliance
with, or negotiate amendments to, loan covenants; the ability to finance the
tractors and trailers delivered and scheduled for delivery; and the possibility
of shortened payment terms by our suppliers and vendors worried about our
ability to meet payment obligations. Based upon our improved financial results,
anticipated future cash flows, current availability under our financing
arrangement with LaSalle Bank, and sources of equipment financing that are
available, we do not expect to experience significant liquidity constraints in
the foreseeable future. To the extent that actual results or events differ from
our financial projections or business plans, our liquidity may be adversely
affected and we may be unable to meet our financial covenants. In such event, we
believe we could renegotiate the terms of our debt or that alternative financing
would be available, although this cannot be assured.

     Net cash provided by operating activities was $16.8 million, $12.6 million,
and $18.5 million for the years ended December 31, 2004, 2005, and 2006,
respectively. Historically, our principal use of cash is to service debt and to
internally finance acquisitions of revenue equipment. Total receivables
increased (decreased) $2.0 million, $3.0 million, and ($3.0) million for the
years ended December 31, 2004, 2005, and 2006, respectively. The average age of
our trade accounts receivable was approximately 33 days for 2004, 32 days for
2005, and 32 days for 2006. Total accounts payable increased (decreased) $2.5
million, $2.1 million, and ($0.2) million for the years ended December 31, 2004,
2005, and 2006, respectively.

     Net cash provided by (used in) investing activities was $2.0 million,
($1.6) million, and ($4.8) million for the years ended December 31, 2004, 2005,
and 2006, respectively. Such amounts related primarily to purchases and sales of
revenue equipment.

     Net cash used in financing activities of $14.0 million, $15.9 million, and
$11.8 million for the years ended December 31, 2004, 2005, and 2006,
respectively, consisted primarily of net payments of principal under our
long-term debt agreements.

     We have a financing arrangement with LaSalle Bank, which expires on October
31, 2010, and provides for automatic month-to-month renewals under certain
conditions after that date. LaSalle Bank may terminate the arrangement prior to
October 31, 2010, in the event of default, and may terminate at the end of any
renewal term.


                                       17

<PAGE>

The agreement provides for a revolving line of credit which allows for
borrowings up to 85% of eligible receivables. At December 31, 2006, total
borrowings under the revolving line were $0.

     The financing arrangement also includes financing for letters of credit. At
December 31, 2006, we had outstanding letters of credit totaling $8.4 million
for self-insured amounts under our insurance programs. We are required to pay an
annual fee of 1.25% of the outstanding letters of credit. These letters of
credit directly reduce the amount of potential borrowings available under the
financing arrangement discussed above. Any increase in self-insured retention,
as well as increases in claim reserves, may require additional letters of credit
to be posted, which would negatively affect our liquidity.

     The combination of borrowings under the line of credit and outstanding
letters of credit with LaSalle Bank cannot exceed the lower of $15 million or a
specified borrowing base, which at December 31, 2006 was $13.4 million, leaving
$5.0 million in remaining availability at such date. We are required to pay a
facility fee on LaSalle Bank's financing arrangement of .20% of the unused loan
limit. Borrowings under the arrangement are secured by accounts receivable. The
interest rate on outstanding borrowings under the arrangement is equal to a
spread on LaSalle Bank's prime rate or LIBOR, at our option. The spread is
determined by our ratio of funded debt to earnings before interest, taxes,
depreciation, amortization and rent, or EBITDAR, as defined under the agreement.
At December 31, 2006 the applicable interest rate under the arrangement was
equal to the prime rate minus 75 basis points.

     The LaSalle Bank financing arrangement requires compliance with certain
financial covenants, including compliance with a minimum tangible net worth,
debt to EBITDAR, and a fixed charge coverage ratio. We were in compliance with
these requirements at December 31, 2006. We believe we will maintain compliance
with all covenants throughout 2007, although there can be no assurance that the
required financial performance will be achieved. In addition, equipment
financing provided by a manufacturer contains a minimum tangible net worth
requirement. We were in compliance with the required minimum tangible net worth
requirement for December 31, 2006 and we expect to remain in compliance for the
foreseeable future. If we fail to maintain compliance with these financial
covenants, or to obtain a waiver of any noncompliance, the lenders will have the
right to declare all sums immediately due and pursue other remedies. In this
event, we believe we could renegotiate the terms of our debt or that alternative
financing would be available, although this cannot be assured. As of the filing
date, we were in compliance with all financial covenants.

     CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     The following tables set forth the contractual obligations and other
commercial commitments as of December 31, 2006:

<TABLE>
<CAPTION>
                                          PAYMENTS (IN THOUSANDS) DUE BY PERIOD
                                   --------------------------------------------------
                                             LESS THAN     1-3       3-5    MORE THAN
CONTRACTUAL OBLIGATIONS             TOTAL      1 YEAR     YEARS     YEARS    5 YEARS
-----------------------            -------   ---------   -------   ------   ---------
<S>                                <C>       <C>         <C>       <C>         <C>
Long-term debt..................   $38,485    $10,479    $19,255   $8,751      $--
Operating lease obligations.....     3,688      1,971      1,668       49       --
Purchase obligations............    11,552     11,552         --       --       --
                                   -------    -------    -------   ------      ---
   Total .......................   $53,725    $24,002    $20,923   $8,800      $--
                                   =======    =======    =======   ======      ===
</TABLE>

     In our normal course of business we place orders with equipment
manufacturers for future delivery of new tractors and trailers. The orders for
trailers can be cancelled at any time without penalty prior to taking delivery.
The orders for tractors can be cancelled without penalty at any time up to 60
days prior to production of the tractor. If the termination occurs less than 60
days, but more than 45 days, prior to production, we retain the right to cancel
subject to a minimal per truck penalty of $500. Orders generally cannot be
cancelled within 45 days prior to production. At December 31, 2006, we had
commercial commitments of approximately $11.6 million related to tractor orders
that cannot be cancelled.

     Approximately 12% of our long-term debt carries a variable interest rate
making reliable estimates of future interest payments difficult. Using our
weighted average interest rate of 6.48% as of December 31, 2006, the following
approximately represents our expected obligations for future interest payments:


                                       18

<PAGE>

<TABLE>
<CAPTION>
                                    INTEREST PAYMENTS (IN THOUSANDS) DUE BY PERIOD
                                   -----------------------------------------------
                                            LESS THAN     1-3     3-5    MORE THAN
                                    TOTAL     1 YEAR     YEARS   YEARS    5 YEARS
                                   ------   ---------   ------   -----   ---------
<S>                                <C>      <C>         <C>      <C>     <C>
Total interest payments.........   $4,965     $2,154    $2,399    $412      $--
                                   ======     ======    ======    ====      ===
</TABLE>

     We had no other commercial commitments at December 31, 2006.

OFF-BALANCE SHEET ARRANGEMENTS

     Our liquidity is not materially affected by off-balance sheet transactions.
During the last six months of 2004, we leased 116 new tractors under operating
leases. These new leases will increase equipment rent expense, a component of
purchased transportation expense, in future periods. Our obligations under
non-cancelable operating lease agreements are as follows: 2007, $2.0 million;
2008, $1.6 million; 2009, $39,000; 2010, $39,000; 2011, $10,000, thereafter $0.
These obligations exclude potential Terminal Remainder Adjustment Clause (TRAC)
payments or refunds on 116 tractors amounting to 40% of the original purchase
price due at the end of the original 48 month term of the lease. After 48
months, we expect the residual value of the tractors to be greater than 40% of
the original cost, allowing us to return the tractors without penalty.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires us to make decisions based upon
estimates, assumptions, and factors we consider 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 our 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 consolidated financial
statements attached hereto. Other footnotes describe various elements of the
financial statements and the assumptions on which specific amounts were
determined.

     Our critical accounting policies include the following:

     REVENUE RECOGNITION

     We generally recognize operating revenue when the freight to be transported
has been loaded. We operate primarily in the short-to-medium length haul
category of the trucking industry; therefore, our 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. We recognize 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 years for tractors, 7 years for
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. The gain or loss on
retirement or sale is recognized in accordance with Statement of Financial
Accounting Standards No. 153, "Exchange of Nonmonetary Assets."

     ESTIMATED LIABILITY FOR INSURANCE CLAIMS

     Losses resulting from auto liability, physical damage, workers'
compensation, and cargo loss and damage are covered by insurance subject to
certain self-retention levels. Losses resulting from uninsured claims are


                                       19

<PAGE>

recognized when such losses are incurred. We estimate and accrue a liability for
our share of ultimate settlements using all available information. We accrue for
claims reported, as well as for claims incurred but not reported, based upon our
past experience. Expenses depend on actual loss experience and changes in
estimates of settlement amounts for open claims which have not been fully
resolved. However, final settlement of these claims could differ materially from
the amounts we have accrued at year-end. Our judgment concerning the ultimate
cost of claims and modification of initial reserved amounts is an important part
of establishing claims reserves, and is of increasing significance with higher
self-insured retention and lack of excess coverage.

     IMPAIRMENT OF LONG-LIVED ASSETS

     Long-lived assets 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 group to future net undiscounted
cash flows expected to be generated by the asset group. Our judgment concerning
future cash flows is an important part of this determination. 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 exceeds 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.

NEW ACCOUNTING PRONOUNCEMENTS

     In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"),
"Accounting for Uncertainty in Income Taxes." This interpretation prescribes a
recognition threshold and measurement process for recording in the financial
statements uncertain tax positions taken or expected to be taken in a tax
return. Additionally, this interpretation provides guidance on the
derecognition, classification, accounting in interim periods, and disclosure
requirements for uncertain tax positions. The provisions of FIN 48 will be
effective at the beginning of the first fiscal year that begins after December
15, 2006. We do not expect the adoption of FIN 48 to have a material impact on
our financial statements.

     In September 2006, the Securities and Exchange Commission published Staff
Accounting Bulletin ("SAB") No. 108 (Topic 1N), "Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements." SAB No. 108 requires registrants to quantify
misstatements using both the balance-sheet and income-statement approaches, with
adjustment required if either method results in a material error. The provisions
of SAB No. 108 are effective as of the beginning of the first fiscal year that
ends after November 15, 2006. The adoption of SAB No. 108 did not have a
material impact on our financial statements.

     In September 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes
a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value measurements. This
statement does not require any new fair value measurements; however, for some
entities, the application of this statement will change current practice. SFAS
157 is effective for fiscal years beginning after November 15, 2007. We are
evaluating the effect, if any, of SFAS 157 on our consolidated financial
statements.

     In February 2007 the Financial Accounting Standards Board ("FASB") issued
SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities -- Including an Amendment of FASB Statement No. 115." SFAS No. 159
permits many financial instruments and certain other items to be measured at
fair value at the option of the Company. SFAS No. 159 is effective for financial
statements issued for first fiscal years beginning after November 15, 2007. We
are evaluating the effect, if any, of SFAS 159 on our consolidated financial
statements.

INFLATION AND FUEL COSTS

     Most of our 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. We attempt 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 our profitability. Most of our contracts with customers contain
fuel surcharge provisions. Although we


                                       20

<PAGE>

attempt 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 we
experience some seasonality due to the open, flatbed nature of the majority of
our trailers. We at times have experienced delays in meeting shipment schedules
as a result of severe weather conditions, particularly during the winter months.
In addition, our operating expenses have been higher in the winter months due to
decreased fuel efficiency and increased maintenance costs in colder weather.

RISK FACTORS

     We 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. We rely on this safe harbor in
making such disclosures. In connection with this safe harbor provision, we
identify below important factors that could cause actual results to differ
materially from those contained in any forward-looking statement made by us or
on our behalf. Factors that might cause such a difference include, but are not
limited to, the following:

THERE ARE RISKS ASSOCIATED WITH THE PENDING MERGER OF OUR COMPANY WITH A WHOLLY
OWNED SUBSIDIARY OF WESTERN EXPRESS, INC.

     On March 22, 2007, we announced the signing of a definitive merger
agreement by which we would become a wholly owned subsidiary of Western Express,
Inc. and our outstanding common stock would be converted into the right to
receive $10.63 per share in cash from Western Express. The closing of the
transactions contemplated by the merger agreement is subject to the approval of
our stockholders and other customary closing conditions. There are certain risks
associated with this transaction, including the following:

-    The transaction announced may not be completed, or completed within the
     expected timeframe.

-    Unforeseen difficulties associated with the transaction, including business
     disruption and loss of personnel, could delay completion of the transaction
     and/or cause it to be more expensive than anticipated and adversely affect
     our results of operations and financial condition.

     Stockholders should be aware of these risks and the possible closing
delays, termination of the merger agreement or adverse impact on our company
that they may cause.

THE TRANSPORTATION INDUSTRY IS AFFECTED BY BUSINESS RISKS THAT ARE LARGELY OUT
OF OUR CONTROL, ANY OF WHICH COULD SIGNIFICANTLY REDUCE OUR OPERATING MARGINS
AND INCOME.

     Our business is dependent upon a number of factors that may have a
materially adverse effect on our results of operations, many of which are beyond
our control. These factors include excess capacity in the transportation
industry, significant increases or rapid fluctuations in fuel prices, interest
rates, insurance and claims costs, tolls, license and registration fees,
declines in the resale value of used equipment and the cost of healthcare for
our employees, to the extent that the negative impact of these factors is not
offset by increases in freight rates or fuel surcharges. Our results of
operations also are affected by recessionary economic cycles and downturns in
customers' business cycles, particularly in geographic areas, market segments
and industries in which we have a concentration of customers. Our results of
operations are also affected by seasonal factors. Customers tend to reduce
shipments during the winter months.

RAPID CHANGES IN FUEL COSTS AND POTENTIAL CHANGES IN FUEL TAXES COULD IMPACT OUR
FINANCIAL RESULTS.

     Fuel and fuel taxes currently represent 21% of our operating expenses. Fuel
prices have risen and maintained historically high levels throughout 2004, 2005
and 2006. Shortages of fuel, increases in fuel prices, or rationing of petroleum
products could have a materially adverse effect on our operating results.


                                       21

<PAGE>

          We are subject to risk with respect to purchases of fuel. Prices and
availability of petroleum products are subject to political, economic, and
market factors that are generally outside our control. Political events in the
Middle East, Venezuela, and elsewhere, and hurricanes and other weather-related
events, also may cause the price of fuel to increase. Because our operations are
dependent upon diesel fuel, significant increases in diesel fuel costs could
materially and adversely affect our results of operations and financial
condition if we are unable to pass increased costs on to customers through rate
increases or fuel surcharges. Historically, we have sought to recover a portion
of short-term increases in fuel prices from customers through fuel surcharges.
Fuel surcharges that can be collected do not always fully offset the increase in
the cost of diesel fuel. To the extent we are not successful in these
negotiations, our results or operations may be adversely affected. In addition,
we incur additional costs when fuel prices rise that cannot be fully recovered
due to our engines being idled during cold or warm weather and empty or
out-of-route miles that cannot be billed to customers. As of December 31, 2006,
we had no derivative financial instruments to reduce our exposure to fuel price
fluctuations.

          From time to time, various legislative proposals are introduced to
increase federal, state, or local taxes, including taxes on motor fuels. We
cannot predict whether, or in what form, any increase in such taxes that impact
us will be enacted and, if enacted, whether or not our independent contractors
would attempt to pass the increase on to us or whether we will be able to
reflect this potential increased cost of capacity, if any, in prices to
customers. Moreover, competition from other transportation service companies
including those that provide non-trucking modes of transportation and intermodal
transportation would likely increase if federal or state taxes on fuel were to
increase without a corresponding increase in taxes imposed upon other modes of
transportation.

SEASONALITY AND THE IMPACT OF WEATHER AFFECT OUR OPERATIONS AND PROFITABILITY.

          Our tractor productivity decreases during the winter season because
inclement weather impedes operations, and some shippers reduce their shipments
after the winter holiday season. Revenue can also be affected by bad weather and
holidays, since revenue is directly related to available working days of
shippers. At the same time, operating expenses increase and fuel efficiency
declines because of engine idling and harsh weather that creates higher accident
frequency, increased claims, and more equipment repairs. We can also suffer
short-term impacts from weather-related events such as hurricanes, blizzards,
ice storms, and floods that could harm our results or make our results more
volatile.

WE WILL HAVE SIGNIFICANT ONGOING CAPITAL REQUIREMENTS THAT COULD REDUCE OUR
INCOME IF WE ARE UNABLE TO GENERATE SUFFICIENT CASH FROM OPERATIONS.

          The trucking industry is very capital intensive. Historically, we have
depended on cash from operations, equipment financing, and debt financing for
funds to update our revenue equipment fleet. Beginning in 2004, we began to
upgrade our tractor fleet. Going forward, we will need to continue to upgrade
our tractor and trailer fleets. We expect to pay for the projected capital
expenditures and/or operating leases with cash flows from operations and
borrowings from equipment manufacturers or under the financing arrangement with
LaSalle Bank. If we are unable to generate sufficient cash from operations and
obtain financing on favorable terms in the future, we may have to enter into
less favorable financing arrangements or operate our revenue equipment for
longer periods, any of which could have a materially adverse effect on our
operating results.

INCREASED PRICES, REDUCED PRODUCTIVITY, AND RESTRICTED AVAILABILITY OF NEW
REVENUE EQUIPMENT MAY ADVERSELY AFFECT OUR EARNINGS AND CASH FLOWS.

          Going forward, as we continue to upgrade our equipment fleet, we
expect depreciation and/or equipment rent expense, a component of purchased
transportation expense, to increase. Prices for new tractors have been
increasing over the past few years, and we expect this trend to continue,
partially as a result of government regulations applicable to newly manufactured
tractors and diesel engines, in addition to higher commodity prices and better
pricing power among equipment manufacturers. More restrictive emissions
standards for 2007 will require vendors to introduce new engines. As a result,
we expect to continue to pay increased prices for equipment and incur additional
expenses and related financing costs for the foreseeable future. If revenue
production were to decrease, the increased depreciation and/or rent could have a
materially adverse effect on operating results. Furthermore, new engines after
2007 are expected to reduce equipment productivity and lower fuel mileage and,
therefore, increase our operating expenses. In addition, a decreased demand for
used revenue equipment could adversely affect our business and operating
results. We rely on the sale and trade-in of used revenue equipment to offset
the cost of new revenue equipment. The demand for used revenue equipment is
currently stable. However, a


                                       22

<PAGE>

reversal of this trend could result in lower market values. This would increase
our capital expenditures for new revenue equipment and increase our maintenance
costs if management decides to extend the use of revenue equipment in a
depressed market.

DIFFICULTY IN ATTRACTING DRIVERS AND INDEPENDENT CONTRACTORS COULD AFFECT OUR
PROFITABILITY AND ABILITY TO GROW.

          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 which has been
particularly severe during the past few years. The number of independent
contractors has decreased industry-wide for a variety of economic reasons. Our
independent contractors are responsible for paying their own equipment, fuel and
other operating costs, and significant increases in these costs could cause them
to seek higher compensation from us or seek other opportunities within or
outside the trucking industry. Furthermore, competition for drivers continues to
increase. If a shortage of drivers should continue, or if we are unable to
recruit additional drivers and independent contractors, this could force us to
increase compensation or limit fleet size, either of which could have a
materially adverse effect on operating results.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY, AND OUR BUSINESS WILL SUFFER IF WE
ARE UNABLE TO ADEQUATELY ADDRESS POTENTIAL DOWNWARD PRICING PRESSURES AND OTHER
FACTORS THAT MAY ADVERSELY AFFECT OUR OPERATIONS AND SIGNIFICANTLY REDUCE OUR
OPERATING MARGINS AND INCOME.

          Numerous competitive factors could impair our ability to maintain our
current profitability. These factors include the following:

     -    We compete with many other transportation service providers (including
          other truckload carriers, private fleets operated by existing and
          potential customers, and to some extent railroads and railroad
          intermodal service), some of which have a lower cost structure, more
          equipment and greater capital resources than we do or have other
          competitive advantages.

     -    Some of our competitors periodically reduce their prices to gain
          business, especially during times of reduced growth rates in the
          economy, which limits our ability to maintain or increase prices or
          maintain significant growth in our business.

     -    Our customers may negotiate rates or contracts that minimize or
          eliminate our ability to continue to hedge fuel price increases
          through a fuel surcharge on our customers.

     -    Many customers reduce the number of carriers they use by selecting
          so-called "core carriers" as approved transportation service
          providers, and in some instances we may not be selected.

     -    Many customers periodically accept bids from multiple carriers for
          their shipping needs, and this process may depress prices or result in
          the loss of some business to competitors.

     -    The trend towards consolidation in the ground transportation industry
          may continue to create larger carriers with greater financial
          resources and other competitive advantages relating to their size.

     -    Advances in technology require increased investments to remain
          competitive, and our customers may not be willing to accept higher
          prices to cover the cost of these investments.

ONGOING INSURANCE AND CLAIMS EXPENSES COULD SIGNIFICANTLY REDUCE OUR INCOME.

          Our future insurance and claims expenses might exceed historical
levels, which could significantly reduce our earnings. If the number or severity
of claims for which we are self-insured increases, our earnings could be
significantly reduced.

          We currently self-insure for a portion of our claims exposure
resulting from cargo loss, personal injury, property damage and workers'
compensation and a portion of employee health insurance. We also have a limited
amount of excess coverage ($5 million per claim) that, combined with our high
self-insured retention, increases our risk associated with the frequency and
severity of accidents and could increase our expenses or make them more volatile
from period to period. Furthermore, if we experience claims that exceed the
limits of our insurance


                                       23

<PAGE>

coverage, or if we experience claims for which coverage is not provided, our
financial condition and results of operations could suffer a materially adverse
effect. Insurance carriers have also recently raised premiums for most trucking
companies. As a result, our insurance and claims expenses could increase when
some of our current coverages expire in June 2007. If these expenses increase,
and we are unable to offset the increase with higher rates, our earnings could
be materially and adversely impacted.

WE OPERATE IN A HIGHLY REGULATED INDUSTRY, AND COSTS OF COMPLIANCE WITH, OR
LIABILITY FOR VIOLATION OF, EXISTING OR FUTURE REGULATIONS COULD SIGNIFICANTLY
INCREASE OUR COSTS OF DOING BUSINESS.

          The U.S. Department of Transportation and various state and federal
agencies exercise broad powers over our business, generally governing such
activities as authorization to engage in motor carrier operations and safety. If
we do not comply with all state and federal laws and regulations, including
hours-of-service regulations, our operating results may experience a material
adverse effect. The Federal Motor Carrier Safety Administration is studying
rules relating to braking distance and on-board data recorders that could result
in new rules being proposed. Although we are unable to predict the effect of any
proposed rules, the on-board data recorders could increase our compensation
costs, limit our fleet size, and decrease productivity, any of which could
increase costs in our industry and have an adverse effect on our operating
results.

          In addition, the U.S. Environmental Protection Agency recently adopted
new emissions control regulations, which require progressive reductions in
exhaust emissions from diesel engines through 2010, for engines manufactured in
October 2002 and thereafter. In part to offset the costs of compliance with the
new engine design requirements, some manufacturers have significantly increased
new equipment prices and eliminated or sharply reduced the price of repurchase
or trade-in commitments. If new equipment prices were to increase, or if the
fair value of used equipment were to decrease, more than anticipated, we may be
required to increase our depreciation and interest expense or retain some of our
equipment longer, which would result in increased maintenance expense. To the
extent we are unable to offset these potential increases in depreciation,
interest, or maintenance expenses with rate increases or cost savings, our
results of operations could be adversely affected. Our fuel and maintenance
expenses may also increase as a result of our use of new, EPA-compliant engines,
and if we are unable to offset these increases with fuel surcharges or higher
freight rates, our results of operations could be adversely affected. Our
business and operations could be further adversely impacted if we experience
problems with the reliability of the new engines.

OUR MANAGEMENT TEAM IS AN IMPORTANT PART OF OUR BUSINESS AND LOSS OF KEY
PERSONNEL COULD IMPAIR OUR SUCCESS.

          We benefit from the leadership and experience of our senior management
team and depend on their continued services to successfully implement our
business strategy. We have not entered into employment agreements for a fixed
period with members of our current management. The loss of key personnel could
have a material adverse effect on our operating results, business or financial
condition.

FEAR OF TERRORISM AND THE INCREASED COSTS ASSOCIATED WITH HOMELAND SECURITY MAY
NEGATIVELY IMPACT OUR BUSINESS.

          In the aftermath of the terrorist attacks on the United States,
federal, state and municipal authorities have implemented and are implementing
various security measures, including checkpoints and travel restrictions on
large trucks. If the new security measures disrupt or impede the timing of our
deliveries, we may fail to meet the needs of our customers, or may incur
increased expenses to do so. We cannot assure you that these measures will not
significantly increase our costs and reduce our operating margins and income.

          In addition, we cannot predict the effects on the economy or consumer
confidence of actual or threatened armed conflicts or terrorist attacks, efforts
to combat terrorism, military action against a foreign state or group located in
a foreign state, or heightened security requirements. Enhanced security measures
could impair our operating efficiency and productivity and result in higher
operating costs.

WE ARE HIGHLY DEPENDENT ON A FEW MAJOR CUSTOMERS, THE LOSS OF ONE OR MORE OF
WHICH COULD HAVE A MATERIALLY ADVERSE EFFECT ON OUR BUSINESS.

          A significant portion of our revenue is generated from a limited
number of major customers. For the year ended December 31, 2006, our top 25
customers accounted for approximately 54% of our revenue. A reduction in or
termination of our services by one or more of our major customers could have a
materially adverse effect on our


                                       24

<PAGE>

business and operating results.

WE ARE DEPENDENT ON COMPUTER AND COMMUNICATIONS SYSTEMS, AND A SYSTEMS FAILURE
COULD CAUSE A SIGNIFICANT DISRUPTION TO OUR BUSINESS.

          Our business depends on the efficient and uninterrupted operation of
our computer and communications hardware systems and infrastructure. We
currently use a centralized computer network and regular communication to
achieve system-wide load coordination. Our operations and those of our
technology and communications service providers are vulnerable to interruption
by fire, earthquake, power loss, telecommunications failure, terrorist attacks,
Internet failures, computer viruses, and other events beyond our control. In the
event of a significant system failure, our business could experience significant
disruption.

OUR OPERATIONS ARE SUBJECT TO VARIOUS ENVIRONMENTAL LAWS AND REGULATIONS, THE
VIOLATION OF WHICH COULD RESULT IN SUBSTANTIAL FINES OR PENALTIES.

          In addition to direct regulation by the U.S. Department of
Transportation and other agencies, we are subject to various environmental laws
and regulations dealing with the handling of hazardous materials, underground
fuel storage tanks, and discharge and retention of storm-water. We operate in
industrial areas, where truck terminals and other industrial facilities are
located, and where groundwater or other forms of environmental contamination
have occurred. Our operations involve the risks of fuel spillage or seepage,
environmental damage, and hazardous waste disposal, among others.

          If we are involved in a spill or other accident involving hazardous
substances, or if we are found to be in violation of applicable laws or
regulations, it could have a materially adverse effect on our business and
operating results. If we should fail to comply with applicable environmental
regulations, we could be subject to substantial fines or penalties and to civil
and criminal liability.

          Our business also is subject to the effects of new tractor engine
design requirements implemented by the EPA. Changes in the laws and regulations
governing or impacting our industry could affect the economics of the industry
by requiring changes in operating practices or by influencing the demand for,
and the costs of providing, services to shippers.

          Some states and municipalities have begun to restrict the locations
and amount of time where diesel-powered tractors, such as ours, may idle, in
order to reduce exhaust emissions. These restrictions could force us to alter
our drivers' behavior, purchase on-board power units that do not require the
engine to idle, or face a decrease in productivity.

OUR INDEPENDENT CONTRACTORS MAY BE IMPROPERLY CLASSIFIED, AND ANY CHANGES TO
THEIR CLASSIFICATION COSTS MAY INCREASE OUR OPERATING EXPENSES.

          From time to time, various legislative or regulatory proposals are
introduced at the federal or state levels to change the status of independent
contractors' classification to employees for either employment tax purposes
(withholding, social security, Medicare and unemployment taxes) or other
benefits available to employees. Currently, most individuals are classified as
employees or independent contractors for employment tax purposes based on 20
"common-law" factors rather than any definition found in the Internal Revenue
Code or Internal Revenue Service regulations. In addition, under Section 530 of
the Revenue Act of 1978, taxpayers that meet certain criteria may treat an
individual as an independent contractor for employment tax purposes if they have
been audited without being told to treat similarly situated workers as
employees, if they have received a ruling from the Internal Revenue Service or a
court decision affirming their treatment, or if they are following a
long-standing recognized practice.

          We classify all of our independent contractors and independent
commission sales agents as independent contractors for all purposes, including
employment tax and employee benefit purposes. There can be no assurance that
legislative, judicial, or regulatory (including tax) authorities will not
introduce proposals or assert interpretations of existing rules and regulations
that would change the employee/independent contractor classification of
independent contractors or independent commission sales agents currently doing
business with us. Although we believe that there are no proposals currently
pending that would change the employee/independent contractor classification of
independent contractors or independent commission sales agents currently doing
business with our


                                       25

<PAGE>

company, the costs associated with potential changes, if any,
with respect to these independent contractor classifications could have a
material adverse effect on us, including our results of operations and financial
condition if we were unable to reflect them in our fee arrangements with the
independent contractors or independent commission sales agents or in the prices
charged to our customers.

WE MAY NOT MAKE ACQUISITIONS IN THE FUTURE AND ANY ACQUISITIONS WE DO MAKE MAY
FAIL TO ACHIEVE DESIRED RESULTS.

          We have made no acquisitions of companies during the past three years
and there is no assurance that we will make acquisitions in the future. If we
fail to make any future acquisitions, our ability to compete in the industry
could be negatively affected. Furthermore, acquisitions involve numerous risks,
including: difficulties in assimilating the acquired company's operations; the
diversion of management's attention from other business concerns; the risks of
entering into markets in which management has no or only limited direct
experience; and the potential loss of customers, key employees and drivers of
the acquired company, all of which could have a materially adverse effect on our
business and operating results. If we make any acquisitions in the future, there
can be no assurance that we will be able to successfully integrate the acquired
companies or assets into our business.


                                       26

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We are exposed to a variety of market risks, most importantly the
effects of the price and availability of diesel fuel and changes in interest
rates.

Commodity Price Risk

          Our operations are heavily dependent upon the use of diesel fuel. The
price and availability of diesel fuel can vary and are subject to political,
economic, and market factors that are beyond our control. Significant increases
in diesel fuel prices could materially and adversely affect our results of
operations and financial condition.

          We presently use fuel surcharges to address the risk of increasing
fuel prices. We believe these fuel surcharges are an effective means of
mitigating the risk of increasing fuel prices, although the competitive nature
of our industry prevents us from recovering the full amount of fuel price
increases through the use of such surcharges.

          In the past, we have used derivative instruments, including heating
oil price swap agreements, to reduce a portion of our exposure to fuel price
fluctuations. Since 2000 we have had no such agreements in place. We do not
trade in such derivatives with the objective of earning financial gains on price
fluctuations.

Interest Rate Risk

          We also are exposed to market risks from changes in certain interest
rates on our debt. Our financing arrangements with LaSalle Bank and some other
lenders provide for a variable interest rate. At December 31, 2006,
approximately $4.7 million of our total debt, or 12%, carried variable interest
rates. This variable interest exposes us to the risk that interest rates may
rise. Assuming borrowing levels at December 31, 2006, a one-point increase in
the prime rate would increase annual interest expense by approximately $47,000.
The remainder of our other debt carries fixed interest rates.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          Our audited financial statements, including our consolidated balance
sheets and consolidated statements of operations, cash flows, stockholders'
equity, and notes related thereto, are included at pages 44 to 58 of this
report.

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

          None.

ITEM 9A. CONTROLS AND PROCEDURES

          As required by Rule 13a-15 under the Exchange Act, we have carried out
an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the
end of the period covered by this report. This evaluation was carried out under
the supervision and with the participation of our management, including our
Chief Executive Officer and our Chief Financial Officer. Based upon that
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of
December 31, 2006. During our fourth fiscal quarter, there were no changes in
our internal control over financial reporting that have materially affected, or
that are reasonably likely to materially affect, our internal control over
financial reporting. We intend to periodically evaluate our disclosure controls
and procedures as required by the Exchange Act Rules.

          Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include controls and procedures designed to ensure that information required to
be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer as appropriate, to allow timely decisions regarding
disclosures.


                                       27

<PAGE>

          We have confidence in our internal controls and procedures.
Nevertheless, our management, including our Chief Executive Officer and our
Chief Financial Officer, does not expect that our disclosure controls and
procedures or our internal controls will prevent all errors or intentional
fraud. An internal control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of such
internal controls are met. Further, the design of an internal control system
must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all internal control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected.

ITEM 9B. OTHER INFORMATION

          None.


                                       28

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

          Information concerning the names, ages, positions with us, tenure as a
director and business experience of our directors and other executive officers
is set forth below. All references to experience with us include positions with
our operating subsidiary, Smithway Motor Xpress, Inc.

<TABLE>
<CAPTION>
NAME                     AGE                      POSITION                     DIRECTOR SINCE
----                     ---                      --------                     --------------
<S>                      <C>   <C>                                             <C>
G. Larry Owens            69   Chairman of the Board, Chief Executive               1996
                               Officer, President, Secretary and Director
Terry G. Christenberry    60   Director                                             1996
Labh S. Hira              58   Director                                             2004
Herbert D. Ihle           67   Director                                             1996
Marlys L. Smith           67   Director                                             2004
Thomas J. Witt            46   Senior Vice President of Sales and Operations         --
Douglas C. Sandvig        42   Senior Vice President, Chief Financial                --
                               Officer and Treasurer
Chad A. Johnson           41   Vice President of Vehicle Operations                  --
</TABLE>

          G. LARRY OWENS was appointed as Chief Executive Officer, President and
Secretary on March 5, 2004, and Chairman of the Board on April 2, 2004. Mr.
Owens had served prior to that time as Executive Vice President and Chief
Financial Officer from January 1993 and Chief Administrative Officer from August
2001. Mr. Owens also served as Chief Operating Officer from May 1998 to August
2001. Prior to joining us, Mr. Owens spent twenty-five years in the banking
industry, most recently from 1982 through 1992 as President of Boatmen's
Bancshares' regional banks in Spencer and Fort Dodge, Iowa.

          TERRY G. CHRISTENBERRY has been the President and a director of
Christenberry, Collet & Company, Inc., an investment banking firm located in
Kansas City, Missouri, since its incorporation in June 1994. From September 1986
to June 1994, Mr. Christenberry was Executive Vice President and a director of
H.B. Oppenheimer & Company, Inc., also an investment banking firm located in
Kansas City, Missouri.

          LABH S. HIRA has served as the dean of the College of Business at Iowa
State University since July 2001. Prior to serving as dean, Dr. Hira served the
College of Business at Iowa State University as Senior Associate Dean from 2000
through July 2001 and as Associate Dean from 1996 through 2000. Dr. Hira joined
the Iowa State faculty in 1982. Dr. Hira specializes in the taxation of
retirement and insurance products with financial accounting being his teaching
focus. Dr. Hira has a Ph.D. in Agricultural Economics from the University of
Missouri - Columbia.

          HERBERT D. IHLE has been President and owner of Diversified Financial
Services, a Bonita Springs, Florida, management and financial services
consulting firm, since 1989. From 1990 to 1992, Mr. Ihle served as Senior Vice
President - Finance and Controller for Northwest Airlines, and from 1963 to 1989
served in various positions, including Executive Vice President - Finance, for
Pillsbury Co. Mr. Ihle also served as past Chairman of the Board of Regents of
Waldorf College in Forest City, Iowa, and is a past director of Lutheran
Brotherhood Insurance Company.

          MARLYS L. SMITH served in various non-executive capacities for us
between March 1990 and March 1995, and has been one of our controlling
stockholders since 1995.

          THOMAS J. WITT served as Vice President of Sales and Marketing upon
joining us in November 2001 and was appointed to serve as Senior Vice President
of Sales and Operations in February 2003. Mr. Witt announced his resignation
from our company effective April 6, 2007. Prior to joining us, Mr. Witt worked
as an Account Manager in sales for i2 Technologies, a software company serving
motor carriers and third party logistics companies, from November 2000 through
November 2001. From 1998 through November 2000, Mr. Witt served as Vice
President-Sales for Roehl Transport, Inc., a truckload carrier.

          DOUGLAS C. SANDVIG was appointed Chief Financial Officer on March 5,
2004, and has held the title of Senior Vice President since February 2003 and
Treasurer since October 2003. Mr. Sandvig served as Controller from July 1997 to
March 2004 and Chief Accounting Officer from May 2000 to March 2004. Mr. Sandvig
also


                                       29

<PAGE>

served as Vice President from September 2002 to February 2003. Prior to joining
us, Mr. Sandvig worked as a certified public accountant with a regional public
accounting firm from 1990 to 1997.

          CHAD A. JOHNSON has served as Vice President of Vehicle Operations
since joining us in August 2003. Prior to joining us, Mr. Johnson was employed
by Ruan Transportation Management Systems, a transportation management company.
Mr. Johnson was employed by Ruan for approximately 19 years during which time he
worked in many different capacities, including, most recently, from January 2001
until August 2003, as Vice President - Vehicle Maintenance, from July 2000
through December 2000 as Director of Operations - Vehicle Services, from June
1999 through June 2000 as Director of Vehicle Maintenance, and from January 1997
through May 1999 as Corporate Operations Manager.

CODE OF BUSINESS CONDUCT AND ETHICS

          The board of directors has adopted a Code of Business Conduct and
Ethics that applies to all of our directors, officers and employees. The Code of
Business Conduct and Ethics includes provisions applicable to our principal
executive officer, principal financial officer, principal accounting officer and
controller or persons performing similar functions, and constitutes a "code of
ethics" within the meaning of Item 406(b) of Regulation S-K.

AUDIT COMMITTEE

          We maintain a standing audit committee that currently is comprised of
Terry G. Christenberry, Labh S. Hira, and Herbert D. Ihle. Mr. Christenberry
serves as the chairman of the audit committee. Our board of directors has
determined that Mr. Ihle is an "audit committee financial expert," as defined
under Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC, based upon
his education and work experience. Each member of our audit committee, including
Mr. Ihle, satisfies the independence and audit committee membership criteria set
forth in NASD Rule 4350(d)(2).

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

          Our board of directors, based on recommendations from the compensation
committee, seeks to implement compensation policies that (i) attract and retain
excellent management personnel, (ii) remain competitive with compensation
provided by companies similar to ours, and (iii) align the interests of
executive officers with the interests of our stockholders. Our compensation
program consists primarily of the following four components, which are
collectively designed to encourage stable, long-term growth of our company.

          BASE SALARY. We have no pre-established policy or target for
allocating between cash and non-cash or short-term and long-term compensation.
However, the majority of each executive officer's compensation historically has
been paid in the form of base salary. Base salary typically represents
approximately 75 to 85 percent of the total compensation of each of our named
executive officers other than our chief executive officer, Mr. Owens. Mr. Owens'
base salary has historically been a slightly smaller percentage of total
compensation with a corresponding increase in the relative amount of cash
incentive compensation paid to him. Our compensation program for 2006 continued
this trend. Each executive officer receives a base salary to compensate the
executive for performing duties customarily associated with the executive's
respective position. The board of directors determines each executive's base
salary primarily based on the person's contributions to our company. In
formulating recommendations for the board of directors to approve, the
compensation committee considers the relative size of our competitors, growth
rates, geographic considerations and operating performance. The compensation
committee believes that the base salaries of our executive officers have been at
or below the average levels paid by our competitors both historically and in
2006, primarily due to our operating performance and the relatively low cost of
living in Fort Dodge, Iowa, where our principal offices are located.

          CASH INCENTIVE COMPENSATION. The compensation committee implemented a
cash incentive bonus program for 2006. The program is designed to provide an
additional incentive for our executive officers to focus on increasing our
company's net income and maximize the value of our stock for stockholders. The
compensation committee establishes a target cash bonus award for each executive
based on that executive's individual objectives for the year and the overall
goals for our company. An amount equal to 50% of each executive officer's
targeted bonus amount may be earned based on our company's achievement of our
quarterly net income goals. The other


                                       30

<PAGE>

50% of each executive officer's targeted bonus amount may be earned based on the
achievement by each executive officer of specific individual goals tailored to
the executive's area of responsibility within our business. The compensation
committee generally determines whether each executive officer has achieved the
individual goals established for him. Moreover, no cash bonus may be paid for
achievement of individual goals unless our company achieves annual net income
equal to at least 85% of our annual net income goal. The amount each executive
officer earned under our cash incentive bonus program during 2006 is disclosed
in the Summary Compensation Table below in the "Non-Equity Incentive Plan
Compensation" column. The compensation committee implemented a bonus program for
2007 pursuant to which the executive officers are eligible to receive cash
bonuses on similar terms as the 2006 bonus program.

          STOCK-BASED COMPENSATION. The compensation committee believes that the
use of stock-based compensation as a component of potential compensation can
align the interests of executive officers and stockholders and encourage
executive officers to focus on long-term, profitable growth. The committee
exercises its discretion to make or recommend stock option grants or other stock
awards to executive officers from time to time when it believes such awards are
warranted by performance or necessary to provide proper incentive. When our
compensation committee decides to grant or recommend stock-based awards, it
typically grants or recommends option awards to provide an incentive for
executives to remain with our company and focus on the return provided to our
stockholders. The decision of the committee or our board of directors to grant
stock-based compensation to our executive officers generally does not materially
affect our board of directors' decision to increase or decrease the executive's
base salary or cash incentive compensation for a given year. No stock-based
awards were made to our company's executive officers in 2006.

          WELFARE AND RETIREMENT BENEFIT AND PERQUISITES. Our executive officers
participate in employee benefit and welfare plans generally available to all of
our employees, including 401(k), medical and life insurance and disability
plans. Our company needs to make these plans available to our executive officers
to maintain an overall compensation structure that is reasonably competitive
with comparable companies. Our company also provides various perquisites to our
executive officers quantified in the "All Other Compensation" column of the
Summary Compensation Table below. We do not believe these elements of
compensation are material to either our company or to the executives receiving
them. However, we do believe that these elements are important in making our
overall compensation programs comparable with those of other companies with
which we compete for talent.

COMPENSATION COMMITTEE REPORT

          The compensation committee has discussed and reviewed the Compensation
Discussion and Analysis with management. Based upon this review and discussion,
the compensation committee recommended to the board of directors that the
Compensation Discussion and Analysis be included in this report.

                             COMPENSATION COMMITTEE:


                             ---------------------------------------------------
                             Herbert D. Ihle (Chairman)
                             Terry G. Christenberry
                             Labh S. Hira


                                       31

<PAGE>

SUMMARY COMPENSATION TABLE

          The following table summarizes the compensation of our chief executive
officer, chief financial officer and our three other most highly compensated
executive officers (collectively, the "named executive officers") for the fiscal
year ended December 31, 2006.

<TABLE>
<CAPTION>
                                                      NON-EQUITY        ALL OTHER
                                          SALARY    INCENTIVE PLAN    COMPENSATION
  NAME AND PRINCIPAL POSITION     YEAR     ($)     COMPENSATION ($)     ($) (1)      TOTAL ($)
  ---------------------------     ----   -------   ----------------   ------------   ---------
<S>                               <C>    <C>       <C>                <C>            <C>
G. Larry Owens                    2006   238,462        96,000           11,315       345,777
Chairman, Chief Executive
Officer, President and
Secretary

Douglas C. Sandvig                2006   158,846        30,000           3,761        192,607
Senior Vice President, Chief
Financial Officer and Treasurer

Thomas J. Witt                    2006   163,846        30,375           9,144        203,365
Senior Vice President of Sales
and Operations

Chad A. Johnson                   2006   133,846        24,500           11,009       169,355
Vice President of Vehicle
Operations
</TABLE>

(1)  The following table sets forth all other compensation amounts by type:

<TABLE>
<CAPTION>
                     CAR ALLOWANCE /
                     PERSONAL USE OF   REIMBURSEMENT OF COUNTRY    MATCHING 401(K)
NAME                 COMPANY CAR ($)        CLUB DUES ($)         CONTRIBUTIONS ($)   TOTAL ($)
----                 ---------------   ------------------------   -----------------   ---------
<S>                  <C>               <C>                        <C>                 <C>
G. Larry Owens            2,100                  3,000                  6,215           11,315
Douglas C. Sandvig        1,200                     --                  3,761            4,961
Thomas J. Witt            6,000                     --                  3,144            9,144
Chad A. Johnson           7,200                     --                  3,809           11,009
</TABLE>

          For 2006, each of our company's executive officers received increases
in base salary, primarily to reflect a cost-of-living increase. The compensation
committee also implemented a bonus program for 2006 described in the
"Compensation Discussion and Analysis" section above. The component of the bonus
based on our company's net income was earned and paid quarterly while the
component of the bonus based on individual goals was earned on an annual basis
and paid following completion of 2006.

GRANTS OF PLAN-BASED AWARDS IN FISCAL 2006

     The following table sets forth certain information concerning plan-based
awards granted to the named executive officers during 2006.

<TABLE>
<CAPTION>
                                  ESTIMATED MAXIMUM FUTURE PAYOUTS UNDER
       NAME          GRANT DATE    NON-EQUITY INCENTIVE PLAN AWARDS (1)
       ----          ----------   --------------------------------------
<S>                  <C>          <C>
G. Larry Owens         2/10/06                    96,000
Douglas C. Sandvig     2/10/06                    32,000
Thomas J. Witt         2/10/06                    33,000
Chad A. Johnson        2/10/06                    27,000
</TABLE>

(1)  Reflects maximum amount payable pursuant to awards made to our executive
     officers on February 10, 2006 under our 2006 cash incentive bonus program.
     The program did not include threshold or target amounts. Payment of awards
     was based 50% on our quarterly net income goals and 50% on individual
     goals. These awards are reflected above in the Summary Compensation Table
     under Non-Equity Incentive Plan Compensation.


                                       32

<PAGE>

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

     The following table summarizes certain information concerning unexercised
option awards of the named executive officers outstanding as of December 31,
2006.

<TABLE>
<CAPTION>
                                                  OPTION AWARDS
                     -----------------------------------------------------------------------
                      NUMBER OF SECURITIES     NUMBER OF SECURITIES
                     UNDERLYING UNEXERCISED   UNDERLYING UNEXERCISED    OPTION
                             OPTIONS                 OPTIONS           EXERCISE     OPTION
                               (#)                     (#)              PRICE     EXPIRATION
NAME                       EXERCISABLE            UNEXERCISABLE        ($/SHARE)      DATE
----                 ----------------------   ----------------------   --------   ----------
<S>                  <C>                      <C>                      <C>        <C>
G. Larry Owens               25,000                       --           8.875       1/23/2007
Douglas C. Sandvig           10,000                       --           11.81(2)    1/30/2008
                              7,500                       --            1.78(2)    6/23/2010
                              2,350                       --            2.41(2)     2/1/2012
Thomas J. Witt               12,000                    3,000            1.55(2)   12/14/2011
                             22,250                   15,250            0.82(3)    2/14/2013
Chad A. Johnson              15,000                   10,000            1.25(4)   10/24/2009
</TABLE>

(1)  Stock option fully vested at December 31, 2006 and expired on January 23,
     2007.

(2)  Stock option vested at the rate of 20% of the initial grant per year and
     has now fully vested.

(3)  Stock option vests at the rate of 20% of the initial grant per year, with
     vesting dates on February 14 of 2004, 2005, 2006, 2007, and 2008.

(4)  Stock option vests at the rate of 20% of the initial grant per year, with
     vesting dates on October 24 of 2004, 2005, 2006, 2007, and 2008.

OPTION EXERCISES AND STOCK VESTED

          The following table summaries certain information concerning exercises
of stock options by named executive officers during the fiscal year ended
December 31, 2006.

<TABLE>
<CAPTION>
                                                OPTION AWARDS
                     ------------------------------------------------------------------
                     NUMBER OF SHARES ACQUIRED ON EXERCISE   VALUE REALIZED ON EXERCISE
        NAME                           (#)                               ($)
        ----         -------------------------------------   --------------------------
<S>                  <C>                                     <C>
G. Larry Owens                         --                                --
Douglas C. Sandvig                   7,500                             61,369
Thomas J. Witt                         --                                --
Chad A. Johnson                        --                                --
</TABLE>

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL

          CHANGE-IN-CONTROL. We have entered into change-in-control agreements
with each of the named executive officers other than Mr. Witt. The
change-in-control agreements in general provide that if the named executive
officer is involuntarily terminated in connection with the occurrence of certain
change-in-control events, then the named executive officer will be entitled to a
severance payment from us in an amount intended to compensate him for any salary
that he would have otherwise been entitled to receive during the 24-month period
following the occurrence of the change-in-control event (this 24-month period
being referred to as the "transition period"). In addition, the named executive
officer is entitled to receive the maximum bonus to which he would be entitled
for the performance period in which he is terminated during the transition
period, pro-rated for the number of days worked in such performance period. Both
the salary and bonus payments are payable in a lump sum. During the transition
period, the named executive officer also would be entitled to participate in any
health, disability, and life insurance plans in which he participated prior to
his termination, and to be compensated for any legal fees he incurs in
connection with the enforcement of his rights under the change-in-control
agreement. The change-in-control events giving rise to the named executive
officer's rights under the change-in-control agreement include (i) the
acquisition


                                       33

<PAGE>

by certain persons of beneficial ownership, whether directly or indirectly, of
securities representing 35% or more of the combined voting power of our then
outstanding securities, (ii) a failure of the continuing directors to constitute
a majority of the board of directors, (iii) our consummation of a
reorganization, merger or consolidation, or a statutory exchange of our
outstanding voting securities, and (iv) a complete liquidation or dissolution or
sale or other disposition of all or substantially all of our assets.

          In addition, under certain circumstances in which there is a change of
control, holders of outstanding stock options granted under our Incentive Stock
Plan, New Employee Incentive Stock Plan and 2005 Omnibus Stock Plan may be
entitled to exercise these options notwithstanding that these options may
otherwise not have been fully exercisable. Similar rights could be extended to
holders of other awards under our equity compensation plans if any awards are
granted.

          In the event the named executive officers' employment terminated as of
December 31, 2006 in connection with a change-in-control event, the named
executive officers would have realized the benefits and payments set forth
below:

<TABLE>
<CAPTION>
                                                G. LARRY OWENS   DOUGLAS C. SANDVIG   THOMAS J. WITT   CHAD A. JOHNSON
                                                --------------   ------------------   --------------   ---------------
<S>                                             <C>              <C>                  <C>                 <C>
Lump Sum Cash Payment                              $576,000           $352,000              --             $297,000
Two  Year  Participation  in  Insurance Plans      $ 17,000           $ 17,000              --             $ 17,000
Vesting of Unvested Stock Options (1)                    --                 --              --             $ 87,500
                                                   --------           --------             ---             --------
   Total                                           $593,000           $369,000              --             $401,500
</TABLE>

(1)  Reflects the difference between the closing price of our common stock on
     the last trading day of 2006 and the exercise price of the unvested options
     that would have had their vesting accelerated as a result of the
     change-in-control agreement.

          Other than the change-in-control agreements described and quantified
above, our company has no other agreements, plans, or arrangements that provide
for payments to a named executive officer at, following or in connection with
any resignation, severance, retirement, or other termination of a named
executive officer.

COMPENSATION OF DIRECTORS

          The following table summarizes the compensation of our non-employee
directors for the fiscal year ended December 31, 2006.

<TABLE>
<CAPTION>
                                                            OPTION AWARDS
         NAME            FEES EARNED OR PAID IN CASH ($)   ($) (1) (2) (3)   TOTAL ($)
         ----            -------------------------------   ---------------   ---------
<S>                      <C>                               <C>               <C>
Terry C. Christenberry                26,500                    12,119         38,619
Labh S. Hira                          23,000                    12,119         35,119
Herbert D. Ihle                       24,500                    12,119         36,619
Marlys L. Smith                       20,000                    12,119         32,119
</TABLE>

(1)  Valuation for stock option awards is based on the compensation cost we
     recognized during fiscal 2006 for financial statement purposes under FAS
     123(R) for awards granted in fiscal 2006 and prior years utilizing
     assumptions discussed in Note 1 to our financial statements for fiscal
     2006, but disregarding the estimate of forfeitures related to service based
     vesting.

(2)  The following table shows the aggregate number of shares underlying
     outstanding stock options held by our non-employee directors as of December
     31, 2006.

<TABLE>
<CAPTION>
                         SHARES UNDERLYING
                         OUTSTANDING STOCK
                           OPTION AWARDS     EXERCISABLE   UNXERCISABLE
         NAME                   (#)              (#)            (#)
         ----            -----------------   -----------   ------------
<S>                      <C>                 <C>           <C>
Terry C. Christenberry         10,000           7,000          3,000
Labh S. Hira                    6,000           3,000          3,000
Herbert D. Ihle                10,000           7,000          3,000
Marlys L. Smith                 6,000           3,000          3,000
</TABLE>


                                       34

<PAGE>

(3)  The following table shows the grant date fair value of all stock option
     awards made to our non-employee directors during the fiscal year ended
     December 31, 2006.

<TABLE>
<CAPTION>
                         GRANT DATE
                         FAIR VALUE
                          OF OPTION
                          AWARDS IN
         NAME             2006 ($)
         ----            ----------
<S>                      <C>
Terry C. Christenberry     16,360
Labh S. Hira               16,360
Herbert D. Ihle            16,360
Marlys L. Smith            16,360
</TABLE>

          For the year commencing with our 2006 annual meeting of stockholders,
directors who were not employed by us received a $10,000 annual retainer, $1,000
for each meeting of the board of directors attended by the director in person
and $500 if attended telephonically, and $500 per committee meeting attended by
the director (whether in person or telephonically). In addition to the
compensation received by non-employee directors generally, the chairman of our
audit committee received a $5,000 annual retainer and the chairman of our
compensation committee received a $1,500 annual retainer, each paid in advance
at the annual meeting. Directors are also reimbursed for their expenses incurred
in attending the meetings. For the year commencing with our 2007 annual meeting
of stockholders, we anticipate no changes to director compensation. In 2006,
non-employee directors who were elected at the annual meeting received an option
to purchase 3,000 shares of our Class A Common Stock at the closing market price
on the date of the annual meeting. In 2007, we anticipate that non-employee
directors who are elected at the annual meeting, if there is an annual meeting,
will receive an option to purchase 3,000 shares of our Class A Common Stock at
the closing market price on the date of the annual meeting. The options granted
to non-employee directors vest on the one-year anniversary of the date of grant
and expire on the six-year anniversary of the date of grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

          Messrs. Hira, Ihle and Christenberry served as the compensation
committee in 2006. None of these individuals has been our officer or employee
and no interlocking relationship exists between our board of directors or
compensation committee and the board of directors or compensation committee of
any other company.


                                       35

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
     RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of March 14, 2007, the number and
percentage of outstanding shares of Class A and Class B Common Stock
beneficially owned by each person known by us to beneficially own more than 5%
of such stock, by each director, by each named executive officer, and by all of
our directors and executive officers as a group. We had outstanding 3,991,124
shares of Class A Common Stock (each entitled to one vote) and 1,000,000 shares
of Class B Common Stock (each entitled to two votes) as of March 14, 2007.
Unless otherwise noted, the business address for all persons indicated below is
2031 Quail Avenue, Fort Dodge, Iowa 50501.

<TABLE>
<CAPTION>
                                                                            PERCENTAGE OF OUTSTANDING SHARES
                                                                            --------------------------------
                                                        AMOUNT AND NATURE   CLASS A   CLASS B
   NAME OF BENEFICIAL OWNER                               OF BENEFICIAL      COMMON    COMMON
     OR IDENTITY OF GROUP           TITLE OF CLASS        OWNERSHIP (1)      STOCK     STOCK    COMMON STOCK
   ------------------------      --------------------   -----------------   -------   -------   ------------
<S>                              <C>                    <C>                 <C>       <C>       <C>
DIRECTORS AND EXECUTIVE
   OFFICERS:
G. Larry Owens                   Class A Common Stock        265,725 (2)      6.7%        --         5.3%
Terry G. Christenberry           Class A Common Stock         29,800 (3)        *         --           *
Labh S. Hira                     Class A Common Stock          6,000 (4)        *         --           *
Herbert D. Ihle                  Class A Common Stock         18,000 (5)        *         --           *
Marlys L. Smith                  Class A Common Stock      1,089,856 (6)     27.3%        --        21.8%
                                 Class B Common Stock      1,000,000 (6)       --      100.0%       20.0%
Thomas J. Witt                   Class A Common Stock         34,250 (7)        *         --           *
Douglas C. Sandvig               Class A Common Stock         22,600 (8)        *         --           *
Chad A. Johnson                  Class A Common Stock         15,000 (9)        *         --           *
Executive officers and
   directors as a group (8
   persons)                      Class A Common Stock     1,481,231 (10)     36.2%        --        29.1%
                                 Class B Common Stock     1,000,000 (10)       --      100.0%       20.0%

5% OR GREATER STOCKHOLDERS
Mesirow Financial Investment     Class A Common Stock       358,125 (11)      9.0%        --         7.2%
Management
   350 North Clark Street
   Chicago, IL 60610
Dimensional Fund Advisors LP     Class A Common Stock       236,300 (12)      5.9%        --         4.7%
   1299 Ocean Ave., 11th Floor
   Santa Monica, CA 90401
</TABLE>

----------
*    Less than 1%.

(1)  In accordance with applicable rules under the Securities Exchange Act of
     1934, as amended, the number of shares indicated as beneficially owned by a
     person includes shares of Class A Common Stock underlying options that are
     currently exercisable or will be exercisable within 60 days from March 14,
     2007. Shares of Class A Common Stock underlying stock options that are
     currently exercisable or will be exercisable within 60 days from March 14,
     2007, are deemed to be outstanding for purposes of computing the percentage
     ownership of the person holding such options and the percentage ownership
     of any group of which the holder is a member, but are not deemed
     outstanding for purposes of computing the percentage ownership of any other
     person. Unless otherwise indicated all shares are owned directly.

(2)  Consists of (a) 235,695 shares of Class A Common Stock, (b) 29,830 shares
     of Class A Common Stock allocated to the account of Mr. Owens under our
     401(k) plan and (c) 200 shares of Class A Common Stock held as custodian
     for Mr. Owens' minor children under the Uniform Gifts to Minors Act, as to
     which beneficial ownership is disclaimed.

(3)  Consists of (a) 17,300 shares of Class A Common Stock, (b) 2,500 shares of
     Class A Common Stock held under the Christenberry, Collett & Company, Inc.
     401(k) Plan, a unitized plan that has allocated approximately 25% of the
     Plan assets to Mr. Christenberry, as to which beneficial ownership of plan
     assets not allocated to Mr. Christenberry is disclaimed, and (c) options to
     purchase 10,000 shares of Class A Common Stock that are currently
     exercisable or will become exercisable within 60 days from March 14, 2007.

(4)  Consists of options to purchase 6,000 shares of Class A Common Stock that
     are currently exercisable or will become exercisable within 60 days from
     March 14, 2007.


                                       36

<PAGE>

(5)  Consists of (a) 8,000 shares of Class A Common Stock and (b) options to
     purchase 10,000 shares of Class A Common Stock that are currently
     exercisable or will become exercisable within 60 days from March 14, 2007.

(6)  The Class B Common Stock is entitled to two votes per share so long as it
     is beneficially owned by Ms. Smith or certain members of her immediate
     family. As a result of this two-class structure, Ms. Smith beneficially
     owns shares of Class A and Class B Common Stock representing 51.7% of the
     voting power of all outstanding voting shares. Consists of (a) 858,832
     shares of Class A Common Stock, (b) 1,000,000 shares of Class B Common
     Stock, (c) 190,000 shares of Class A Common Stock held in the name of
     Melissa Turner as voting trustee for the benefit of the Smith Family
     Limited Partnership, as to which beneficial ownership is disclaimed, (d)
     35,024 shares of Class A Common Stock held a 401(k) Plan account and (e)
     options to purchase 6,000 shares of Class A Common Stock that are currently
     exercisable or will become exercisable within 60 days from March 14, 2007.
     Melissa Turner is the daughter of Ms. Smith.

(7)  Consists of options to purchase 34,250 shares of Class A Common Stock that
     are currently exercisable or will become exercisable within 60 days from
     March 14, 2007.

(8)  Consists of (a) 2,750 shares of Class A Common Stock and (b) options to
     purchase 19,850 shares of Class A Common Stock that are currently
     exercisable or will become exercisable within 60 days from March 14, 2007.

(9)  Consists of options to purchase 20,000 shares of Class A Common Stock that
     are currently exercisable or will become exercisable within 60 days from
     March 14, 2007.

(10) Consists of (a) 1,380,131 shares of Class A Common Stock, (b) 1,000,000
     shares of Class B Common Stock and (c) options to purchase 101,100 shares
     of Class A Common Stock that are currently exercisable or will become
     exercisable within 60 days from March 14, 2007.

(11) As reported on a Schedule 13G dated February 14, 2007. Mesirow Financial
     Investment Management is an investment adviser. Mesirow Financial
     Investment Management exercises sole dispositive power with respect to all
     the shares and sole voting power with respect to 83,468 of the shares.

(12) As reported on a Schedule 13G dated February 1, 2007. Dimensional Fund
     Advisors LP is an investment adviser. The amount reported represents shares
     of Class A Common Stock held in various advisory accounts. No advisory
     account has an interest relating to more than 5% of the outstanding shares
     of Class A Common Stock. Dimensional Fund Advisors LP exercises sole voting
     and dispositive power with respect to all the shares. Dimensional Fund
     Advisors, Inc. disclaims beneficial ownership of these securities.

EQUITY COMPENSATION PLAN INFORMATION

     The following table provides information as of December 31, 2006 for our
compensation plans under which securities may be issued:

<TABLE>
<CAPTION>
                                 NUMBER OF SECURITIES TO BE     WEIGHTED-AVERAGE        NUMBER OF SECURITIES
                                   ISSUED UPON EXERCISE OF      EXERCISE PRICE OF     REMAINING AVAILABLE FOR
                                    OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,     FUTURE ISSUANCE UNDER
         PLAN CATEGORY               WARRANTS AND RIGHTS       WARRANTS AND RIGHTS   EQUITY COMPENSATION PLANS
         -------------           --------------------------   --------------------   -------------------------
<S>                              <C>                          <C>                    <C>
Equity compensation plans
   approved by securityholders             197,850                    $5.02                   822,500
Equity compensation plans
   not approved by
   securityholders                              --                       --                        --
      Total                                197,850                    $5.02                   822,500
</TABLE>

EQUITY COMPENSATION PLANS NOT APPROVED BY SECURITYHOLDERS

     On July 27, 2000, we made a one-time grant to each of our three
non-employee directors of an option to purchase 4,000 shares of our Class A
Common Stock. The exercise price was set at 85% of the closing price on the date
of the grant ($2.60), and the options vested immediately. During 2004, one
director's option to purchase 4,000 shares was forfeited due to his retirement.
The remaining options were exercised in 2006. These grants were not subject to
stockholder approval.


                                       37

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
     INDEPENDENCE

TRANSACTIONS WITH RELATED PERSONS

     We had no related party transactions in 2006 required to be disclosed in
this report.

     During our three most recently completed fiscal years, we have not had any
related party transactions required to be disclosed by SEC regulations in our
reports on Form 10-K. Although we rarely engage in significant related party
transactions, we have an unwritten policy of reviewing financial transactions in
which we are a participant and in which a related person has a direct or
indirect interest in the transaction involving at least $120,000 in value. For
purposes of this policy, related persons include all of our directors and
executive officers, any nominee for director, any immediate family member of a
director, nominee for director or executive officer of our company and any
holder of more than 5% of either class of our common stock, or an immediate
family member of such holder. Generally, the audit committee of our board of
directors must approve any binding commitment with respect to our transactions
with related persons. However, our board of directors may appoint a special
committee to review a transaction covered by our related party transactions
policy, provided that no member of the special committee has a direct or
indirect interest in the transaction under review and the special committee
includes at least one member of our board of directors. A transaction with a
related person will only be approved by the audit committee or special committee
if the reviewing committee determines that the transaction is beneficial to our
company and the terms of the transaction are fair to us in light of all
circumstances surrounding the transaction.

DIRECTOR INDEPENDENCE

We are subject to standards relating to corporate governance embodied in rules
promulgated by the National Association of Securities Dealers, Inc. Our board of
directors has reviewed business, employment, charitable, legal and familial
relationships between us and each director to determine compliance with the NASD
standard for independence and to evaluate whether there are any other facts or
circumstances that might impair a director or nominee's independence. Based on
that review, the board has determined that Terry G. Christenberry, Labh S. Hira,
and Herbert D. Ihle are "independent" under NASD Rule 4200(a)(15) and have no
relationships that would interfere with their exercise of independent judgment
in carrying out their responsibilities as directors. Mr. Owens is not
independent under the NASD standard because of his employment as our Chief
Executive Officer, President and Secretary. Ms. Smith is not independent because
her husband, William G. Smith, was our former President, Chief Executive Officer
and Secretary and Ms. Smith owns a majority of our outstanding shares of common
stock.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PRINCIPAL ACCOUNTING FEES AND SERVICES

     The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of our annual financial statements for 2005 and 2006,
and fees for other services rendered by KPMG LLP relating to these fiscal years.
KPMG LLP has served as our independent auditors or primary independent
registered public accounting firm since December 1994.

<TABLE>
<CAPTION>
           DESCRIPTION OF FEES               2006       2005
           -------------------             --------   --------
<S>                                        <C>        <C>
Audit Fees(1)                              $115,300   $115,300
Audit-Related Fees(2)                         8,500     11,730
                                           --------   --------
      Total Audit and Audit-Related Fees    123,800    127,030
Tax Fees:
   Tax Compliance Fees                           --         --
   Tax Consultation and Advice Fees(3)           --        575
                                           --------   --------
      Total Tax Fees                             --        575
All Other Fees                                   --         --
                                           --------   --------
      Total                                $123,800   $127,605
                                           ========   ========
</TABLE>

----------
(1)  Audit fees in 2005 and 2006 consisted of the annual audit and quarterly
     reviews of the Company's consolidated financial statements, statutory audit
     and assistance with and review of documents filed with the SEC.

(2)  Audit-related fees in 2005 consisted of an employee benefit plan audit,
     assistance with the filing of a registration statement


                                       38

<PAGE>

     on Form S-8 and assistance in responding to a letter from the Securities
     and Exchange Commission. Audit-related fees in 2006 consisted of an
     employee benefit plan audit.

(3)  Tax consultation and advice fees in 2005 consisted of corporate tax
     research.

APPROVAL OF PRIMARY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM SERVICES AND
FEES

     Our audit committee maintains a policy pursuant to which it pre-approves
all audit, audit-related, tax, and other permissible non-audit services provided
by our primary independent registered public accounting firm in order to assure
that the provision of such services is compatible with maintaining the primary
independent registered public accounting firm's independence. Under this policy,
the audit committee pre-approves, on an annual basis, specific types or
categories of engagements constituting audit, audit-related, tax or other
permissible non-audit services to be provided by the primary independent
registered public accounting firm. Pre-approval of an engagement for a specific
type or category of services generally is provided for up to one year and
typically is subject to a budget comprised of a range of anticipated fee amounts
for the engagement. Management and the primary independent registered public
accounting firm are required to periodically report to the audit committee
regarding the extent of services provided by the primary independent registered
public accounting firm in accordance with the annual pre-approval, and the fees
for the services performed to date. To the extent that management believes that
a new service or the expansion of a current service provided by the primary
independent registered public accounting firm is necessary or desirable, the new
or expanded services are presented to the audit committee for its review and
approval prior to the engagement of the primary independent registered public
accounting firm to render the services. No audit-related, tax, or other
non-audit services were approved by the audit committee pursuant to the de
minimus exception to the pre-approval requirement under Rule 2-01(c)(7)(i)(C) of
Regulation S-X during 2006.


                                       39

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A)  1.   FINANCIAL STATEMENTS.

     Our audited financial statements are set forth at the following pages of
this report:

<TABLE>
<S>                                                                      <C>
Independent Auditors' Report..........................................   Page 43
Consolidated Balance Sheets...........................................   Page 44
Consolidated Statements of Operations.................................   Page 46
Consolidated Statements of  Stockholders' Equity......................   Page 47
Consolidated Statements of Cash Flows.................................   Page 48
Notes to Consolidated Financial Statements............................   Page 49
</TABLE>

     2.   FINANCIAL STATEMENT SCHEDULES.

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

(B)  EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                   EXHIBIT
-------                                   -------
<S>       <C>
2.1       Agreement and Plan of Merger, dated as of March 22, 2007, among
          Smithway Motor Xpress Corp., Western Express, Inc., and Western
          Express Acquisition Corporation (1)

3.1       Articles of Incorporation (2)

3.2       Amended and Restated Bylaws (as in effect on March 5, 2004) (3)

10.1      401(k) Plan adopted August 14, 1992, as amended (4) +

10.2      Form of Outside Director Stock Option Agreement dated July 27, 2000,
          between Smithway Motor Xpress Corp. and each of Terry G. Christenberry
          and Herbert D. Ihle (5) +

10.3      New Employee Incentive Stock Plan, adopted August 6, 2001 (6) +

10.4      Amended and Restated Loan and Security Agreement dated December 30,
          2005, by and among Smithway Motor Xpress, Inc., East West Motor
          Xpress, Inc. and LaSalle Bank National Association (7)

10.5      Master Lease Agreement dated August 6, 2004 between LaSalle National
          Leasing Corporation, as Lessor, and Smithway Motor Xpress Corp. and
          Smithway Motor Xpress, Inc., as Lessee (8)

10.6      Form of Stock Option Agreement for New Employee Incentive Stock Plan
          (9) +

10.7      Smithway Motor Xpress Corp. 2005 Omnibus Stock Plan (10)

10.8      Form of Incentive Stock Option Agreement under Smithway Motor Xpress
          Corp. 2005 Omnibus Stock Plan (11)

10.9      Form of Non-Statutory Stock Option Agreement (Employee) under Smithway
          Motor Xpress Corp. 2005 Omnibus Stock Plan (12)

10.10     Form of Non-Statutory Stock Option Agreement (Director) under Smithway
          Motor Xpress Corp. 2005 Omnibus Stock Plan (13)

10.11     Form of Change-in-Control Agreement with G. Larry Owens, Douglas C.
          Sandvig and Chad A. Johnson (14) +

10.12     Description of Bonus Program (15) +
</TABLE>


                                       40

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                   EXHIBIT
-------                                   -------
<S>       <C>
14        Code of Ethics (16)

21        List of Subsidiaries (17)

23        Consent of KPMG LLP, independent registered public accounting firm*

24        Powers of Attorney*

31.1      Certification pursuant to Item 601(b)(31) of Regulation S-K, as
          adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by
          G. Larry Owens, the Company's principal executive officer*

31.2      Certification pursuant to Item 601(b)(31) of Regulation S-K, as
          adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by
          Douglas C. Sandvig, the Company's principal financial officer*

32.1      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002, by G. Larry Owens,
          the Company's principal executive officer*

32.2      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002, by Douglas C.
          Sandvig, the Company's principal financial officer*
</TABLE>

+    Management compensatory plans and arrangements.

*    Filed herewith.

(1)  Incorporated by reference to exhibit 2.1 to our Current Report on Form 8-K
     dated March 22, 2007. Commission File No. 000-20793, filed March 23, 2007.

(2)  Incorporated by reference to exhibit 3.1 to our Registration Statement on
     Form S-1, Registration No. 33-90356, effective June 27, 1996.

(3)  Incorporated by reference to exhibit 3.2 to our Annual report on Form 10-K
     for the fiscal year ended December 31, 2003. Commission File No. 000-20793,
     dated March 30, 2004.

(4)  Incorporated by reference to exhibit 10.3 to our Registration Statement on
     Form S-1, Registration No. 33-90356, effective June 27, 1996.

(5)  Incorporated by reference to exhibit 10.9 to our Quarterly Report on Form
     10-Q for the period ended September 30, 2000. Commission File No.
     000-20793, dated November 3, 2000.

(6)  Incorporated by reference to exhibit 10.10 to our Annual report on Form
     10-K for the fiscal year ended December 31, 2001. Commission File No.
     000-20793, dated March 28, 2002.

(7)  Incorporated by reference to exhibit 10 to our Current Report on Form 8-K
     dated December 30, 2005. Commission File No. 000-20793, filed January 4,
     2006.

(8)  Incorporated by reference to exhibit 10.22 to our Quarterly Report on Form
     10-Q for the period ended September 30, 2004. Commission File No.
     000-20793, filed November 12, 2004.

(9)  Incorporated by reference to exhibit 10.25 to our Quarterly Report on Form
     10-Q for the period ended September 30, 2004. Commission File No.
     000-20793, filed November 12, 2004.

(10) Incorporated by reference to annex A to our definitive proxy statement for
     our 2005 annual meeting of stockholders. Commission File No. 000-20793,
     filed April 15, 2005.

(11) Incorporated by reference to exhibit 10.2 to our Registration Statement on
     Form S-8, Registration No. 333-126026, effective June 22, 2005.

(12) Incorporated by reference to exhibit 10.3 to our Registration Statement on
     Form S-8, Registration No. 333-126026, effective June 22, 2005.

(13) Incorporated by reference to exhibit 10.4 to our Registration Statement on
     Form S-8, Registration No. 333-126026, effective June 22, 2005.

(14) Incorporated by reference to exhibit 10 to our Quarterly Report on Form
     10-Q for the period ended March 31, 2005. Commission File No. 000-20793,
     filed May 11, 2005.

(15) Incorporated by reference to the description of this program included in
     Item 1.01 of our Current Report on Form 8-K dated February 10, 2006.
     Commission File No. 000-20793, filed February 21, 2006.

(16) Incorporated by reference to exhibit 14 to our Annual report on Form 10-K
     for the fiscal year ended December 31, 2003. Commission File No. 000-20793,
     dated March 30, 2004.

(17) Incorporated by reference to exhibit 21 to our Annual report on Form 10-K
     for the fiscal year ended December 31, 1999. Commission File No. 000-20793,
     dated March 29, 2000.


                                       41

<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: April 2, 2007                     By: /s/ Douglas C. Sandvig
                                            ------------------------------------
                                            Douglas C. Sandvig
                                            Senior Vice President, Chief
                                            Financial Officer, and Treasurer

     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>
<CAPTION>
Signature                                      Position                     Date
---------                                      --------                     ----
<S>                              <C>                                   <C>


/s/ G. Larry Owens               President, Chief Executive Officer,   April 2, 2007
------------------------------   and Secretary; Director
G. Larry Owens                   (principal executive officer)


/s/ Douglas C. Sandvig           Senior Vice President, Chief          April 2, 2007
-----------------------------    Financial Officer, and Treasurer
Douglas C. Sandvig               (principal financial officer and
                                 principal accounting officer)


/s/ *                            Director                              April 2, 2007
------------------------------
Herbert D. Ihle


/s/ *                            Director                              April 2, 2007
------------------------------
Labh S. Hira


/s/ *                            Director                              April 2, 2007
------------------------------
Terry G. Christenberry


/s/ *                            Director                              April 2, 2007
------------------------------
Marlys L. Smith
</TABLE>

*    Douglas C. Sandvig, by signing his name hereto, does hereby sign this
     document on behalf of each of the above-named officers and/or directors of
     the registrant pursuant to powers of attorney duly executed by such
     persons.


                                       42

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Smithway Motor
Xpress Corp. and subsidiaries as of December 31, 2005 and 2006, 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, 2006. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2005 and 2006, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2006, in conformity with U.S. generally accepted
accounting principles.

As discussed in Note 7 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 123
(revised 2004), Shared-Based Payment, on January 1, 2006.


                                        /s/ KPMG LLP

Des Moines, Iowa
March 29, 2007


                                       43

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                 -------------------
                                                   2005       2006
                                                 --------   --------
<S>                                              <C>        <C>
                    ASSETS

Current assets:
   Cash and cash equivalents .................   $    168   $  2,020
Receivables:
      Trade (note 4) .........................     19,209     15,916
      Other ..................................        611        866
      Recoverable income taxes ...............         --      1,025
Inventories ..................................        938      1,158
Deposits, primarily with insurers (note 10)...        976        975
Prepaid expenses .............................      1,597      2,474
Deferred income taxes (note 5) ...............      1,714      2,242
                                                 --------   --------
         Total current assets ................     25,213     26,676
                                                 --------   --------
Property and equipment (note 4):
   Land ......................................      1,137      1,137
   Buildings and improvements ................      7,052      7,144
   Tractors ..................................     72,354     74,036
   Trailers ..................................     36,260     38,724
   Other equipment ...........................      4,323      4,673
                                                 --------   --------
                                                  121,126    125,714
   Less accumulated depreciation .............     59,704     52,880
                                                 --------   --------
      Net property and equipment .............     61,422     72,834
                                                 --------   --------
Goodwill (note 2) ............................      1,745      1,745
Other assets .................................        312        310
                                                 --------   --------
                                                 $ 88,692   $101,565
                                                 ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       44

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                   ------------------
                                                                                     2005      2006
                                                                                   -------   --------
<S>                                                                                <C>       <C>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current maturities of long-term debt (note 4) ...............................   $ 8,363   $ 10,479
   Accounts payable ............................................................     7,401      6,436
   Accrued loss reserves (note 10) .............................................     3,024      4,960
   Accrued compensation ........................................................     2,463      2,274
   Other accrued expenses ......................................................       493        538
   Income tax payable ..........................................................       313         --
                                                                                   -------   --------
         Total current liabilities .............................................    22,057     24,687
Long-term debt, less current maturities (note 4) ...............................    24,425     28,006
Line of credit (note 4) ........................................................       760         --
Accrued loss reserves, less current portion (note 10) ..........................     3,657      3,952
Deferred income taxes (note 5) .................................................    10,315     13,001
                                                                                   -------   --------
         Total liabilities .....................................................    61,214     69,646
                                                                                   -------   --------
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 2005 and 2006 - 4,035,989 shares) ..............................        40         40
      Class B (.01 par value; authorized 5 million shares;
         issued 2005 and 2006 - 1 million shares) ..............................        10         10
   Additional paid-in capital ..................................................    11,511     11,627
   Retained earnings ...........................................................    16,058     20,340
   Reacquired shares, at cost (2005 - 64,365 shares; 2006 - 44,865 shares) .....      (141)       (98)
                                                                                   -------   --------
         Total stockholders' equity ............................................    27,478     31,919
Commitments (note 10)
                                                                                   -------   --------
                                                                                   $88,692   $101,565
                                                                                   =======   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       45

<PAGE>

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

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                 ------------------------------
                                                   2004       2005       2006
                                                 --------   --------   --------
<S>                                              <C>        <C>        <C>
Operating revenue:
   Freight ...................................   $188,190   $218,850   $226,762
   Other .....................................        811      1,536      2,000
                                                 --------   --------   --------
         Operating revenue ...................    189,001    220,386    228,762
                                                 --------   --------   --------
Operating expenses:
   Purchased transportation ..................     61,638     76,403     80,052
   Compensation and employee benefits ........     54,468     56,314     56,423
   Fuel, supplies, and maintenance ...........     38,427     49,957     53,129
   Insurance and claims ......................      5,636      6,708      5,724
   Uninsured loss ............................         --         --      1,529
   Taxes and licenses ........................      3,653      3,599      3,839
   General and administrative ................      6,929      7,752      7,804
   Communications and utilities ..............      1,274      1,189      1,180
   Gain on disposal of assets ................       (470)    (2,245)    (2,794)
   Depreciation and amortization .............     12,810     11,017     12,355
                                                 --------   --------   --------
      Total operating expenses ...............    184,365    210,694    219,241
                                                 --------   --------   --------
      Earnings from operations ...............      4,636      9,692      9,521
Financial (expense) income
   Interest expense ..........................     (1,563)    (1,826)    (2,316)
   Interest income ...........................         54        124        183
   Other income ..............................        727         --         --
                                                 --------   --------   --------
      Earnings before income taxes ...........      3,854      7,990      7,388
Income tax expense (note 5) ..................      1,613      3,749      3,106
                                                 --------   --------   --------
      Net earnings ...........................   $  2,241   $  4,241   $  4,282
                                                 ========   ========   ========
Basic earnings per share (note 8) ............   $   0.46   $   0.86   $   0.86
                                                 ========   ========   ========
Diluted earnings per share (note 8) ..........   $   0.45   $   0.84   $   0.84
                                                 ========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       46

<PAGE>

                  SMITHWAY MOTOR XPRESS CORP. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                  Years ended December 31, 2004, 2005, and 2006
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                      Additional                               Total
                                             Common     paid-in    Retained   Reacquired   stockholders'
                                              stock     capital    earnings     shares         Equity
                                             ------   ----------   --------   ----------   -------------
<S>                                          <C>      <C>          <C>        <C>          <C>
Balance at December 31, 2003 .............     $50      $11,393     $ 9,576     $(414)        $20,605
Net earnings .............................      --           --       2,241        --           2,241
Treasury stock reissued (53,800 shares) ..      --           45          --       118             163
                                               ---      -------     -------     -----         -------
Balance at December 31, 2004 .............      50       11,438      11,817      (296)         23,009
Net earnings .............................      --           --       4,241        --           4,241
Treasury stock reissued (71,003 shares) ..      --           73          --       155             228
                                               ---      -------     -------     -----         -------
Balance at December 31, 2005 .............      50       11,511      16,058      (141)         27,478
Net earnings .............................      --           --       4,282        --           4,282
Treasury stock reissued (19,500 shares) ..      --           51          --        43              94
Share based compensation expense .........      --           65          --        --              65
                                               ---      -------     -------     -----         -------
Balance at December 31, 2006 .............     $50      $11,627     $20,340     $ (98)        $31,919
                                               ===      =======     =======     =====         =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       47


<PAGE>

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

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                                ------------------------------
                                                                  2004       2005       2006
                                                                --------   --------   --------
<S>                                                             <C>        <C>        <C>
Cash flows from operating activities:
   Net earnings .............................................   $  2,241   $  4,241   $  4,282
                                                                --------   --------   --------
   Adjustments to reconcile net earnings to cash provided
      by operating activities:
      Depreciation and amortization .........................     12,810     11,017     12,355
      Gain on Disposal of assets ............................       (470)    (2,245)    (2,794)
      Deferred income tax expense ...........................      1,271        632      2,158
      Change in:
         Receivables ........................................     (2,061)    (3,044)     3,038
         Inventories ........................................        (66)        10       (220)
         Deposits, primarily with insurers ..................          9        (40)         1
         Prepaid expenses ...................................        564        (53)       (79)
         Accounts payable and other accrued liabilities .....      2,472      2,095       (216)
                                                                --------   --------   --------
            Net cash provided by operating activities .......     16,770     12,613     18,525
                                                                --------   --------   --------
Cash flows from investing activities:
   Purchase of property and equipment .......................     (2,063)   (10,367)    (7,811)
   Proceeds from sale of property and equipment .............      4,051      8,750      2,979
   Other ....................................................        (37)        23          2
                                                                --------   --------   --------
         Net cash provided by (used in) investing activities       1,951     (1,594)    (4,830)
                                                                --------   --------   --------
Cash flows from financing activities:
   Net borrowings (repayment) on line of credit .............       (426)       760       (760)
   Principal payments on long-term debt .....................    (13,087)   (16,893)   (11,242)
   Change in checks issued in excess of cash balances .......       (672)        --         --
   Treasury stock reissued ..................................        163        221         94
   Other ....................................................         --          8         65
                                                                --------   --------   --------
         Net cash used in financing activities ..............    (14,022)   (15,905)   (11,843)
                                                                --------   --------   --------
         Net increase (decrease) in cash and cash equivalents      4,699     (4,886)     1,852
Cash and cash equivalents at beginning of year ..............        355      5,054        168
                                                                --------   --------   --------
Cash and cash equivalents at end of year ....................   $  5,054   $    168   $  2,020
                                                                ========   ========   ========
Supplemental disclosure of cash flow information:
   Cash paid during year for:
         Interest ...........................................   $  1,589   $  1,811   $  2,294
         Income taxes .......................................        263      2,798      2,239
                                                                ========   ========   ========
Supplemental schedules of noncash investing and financing
   activities:
   Notes payable issued for tractors and trailers ...........   $  9,205   $ 19,302   $ 16,141
   Fair market value of revenue equipment traded ............      1,179      1,356      5,353
   Notes payable issued for excess insurance premiums .......         --      1,071        798
                                                                ========   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       48

<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", "we", "us", or
"our") is a truckload carrier that provides nationwide transportation of
diversified freight, concentrating primarily in flatbed operations. We generally
operate over short-to-medium traffic routes, serving shippers located
predominantly in the central United States. We also operate in the southern
provinces of Canada. Canadian revenues, based on miles driven, were
approximately $211, $385, and $495 for the years ended December 31, 2004, 2005,
and 2006, 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

     We serve a diverse base of shippers. No single customer accounted for more
than 10% of our total operating revenues during any of the years ended December
31, 2004, 2005, and 2006. Our 10 largest customers accounted for approximately
31%, 25%, and 36% of our total operating revenues during 2004, 2005, and 2006,
respectively. Our largest concentration of customers is in the steel and
building materials industries, which together accounted for approximately 48%,
49%, and 46% of our total operating revenues in 2004, 2005, and 2006,
respectively.

Use of Estimates

     We have made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the period, to prepare these
financial statements in conformity with U.S. generally accepted accounting
principles. Actual results could differ from those estimates.

Cash and Cash Equivalents

     We consider interest-bearing instruments with maturity of three months or
less at the date of purchase to be the equivalent of cash. We did not hold any
cash equivalents as of December 31, 2005 or 2006.

Receivables

     Trade receivables are stated net of an allowance for doubtful accounts of
$363 and $262 at December 31, 2005 and 2006, respectively. We monitor and check
the financial status of customers when granting credit. We routinely have
significant dollar transactions with certain customers, however at December 31,
2005 and 2006, no individual customer accounted for more than 10% of total trade
receivables.

Inventories

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

Prepaid Expenses

     Prepaid expenses consist primarily of prepaid insurance premiums and
prepaid licenses. These expenses are amortized over the remaining term of the
policy or license, which does not exceed 12 months.


                                       49

<PAGE>

Accounting for Leases

     We are a lessee of revenue equipment under operating leases. Equipment rent
expense, a component of purchased transportation expense, is charged to
operations as it is incurred under the terms of the respective leases. Under the
leases for transportation equipment, we are responsible for all repairs,
maintenance, insurance, and all other operating expenses. We are 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 $687 in 2004; $2,071 in 2005; and $2,090 in 2006. We currently lease
116 tractors under operating leases which began during 2004. These leases
increase equipment rent expense, a component of purchased transportation
expense.

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 years for tractors, 7 years for
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. Gains or losses on trade-ins
are recognized in accordance with SFAS 153.

Impairment of Long-Lived Assets

     Long-lived assets 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 group to future net undiscounted
cash flows expected to be generated by the asset group. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

Revenue Recognition

     We generally recognize operating revenue when the freight to be transported
has been loaded. We operate primarily in the short-to-medium length haul
category of the trucking industry; therefore, our 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. We recognize 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 a
$250 deductible, per occurrence. Losses resulting from uninsured claims are
recognized when such losses are known and can be estimated. We estimate and
accrue a liability for our share of ultimate settlements using all available
information. We accrue for claims reported, as well as for claims incurred but
not reported, based upon our past experience. Expenses depend on actual loss
experience and changes in estimates of settlement amounts for open claims which
have not been fully resolved. These accruals are based on our evaluation of the
nature and severity of the claim and estimates of future claims development
based on historical trends. The amount of our self-insured retention makes these
estimates an important accounting judgment. Insurance and claims expense will
vary based on the frequency and severity of claims and the premium expense. In
February 2005 we reinstated $3,000 of excess insurance coverage for losses above
our primary policy limit of $2,000. The cost of this excess insurance will
increase our insurance premiums in the future but provides protection against
unusually large claims.


                                       50

<PAGE>

Litigation Contingencies

     In accordance with Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies," we record an accrual for losses related to
litigation at such time an unfavorable outcome becomes probable and the amount
can be reasonably estimated. In addition, it is our policy to include legal
costs that we expect to incur in connection with a loss contingency as part of
the loss contingency charge. See Note 10 "Commitments and Contingent
Liabilities" of the Notes to the Consolidated Financial Statements for
additional discussion of our loss contingencies.

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

     As of December 31, 2006, we have two stock-based employee compensation
plans, which are described more fully in Note 7. Effective January 1, 2006, we
adopted Statement of Financial Accounting Standards ("SFAS") No. 123 (revised
2004), "Share-Based Payment" ("No. 123R"), using a modified version of the
prospective transition method. Under this transition method, compensation cost
is recognized on or after the required effective date for the portion of
outstanding awards for which the requisite service has not yet been rendered,
based on the grant-date fair value of those awards calculated under for either
recognition or pro forma disclosures.

     In periods prior to January 1, 2006, we accounted for these plans under the
recognition and measurement principles of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
No stock-based employee compensation cost was reflected in our statements of
operations, as all options granted under these plans had an exercise price equal
to the market value of the common stock on the date of the grant.

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. For
the years ended December 31, 2004, 2005 and 2006, respectively, 100,999; 115,927
and 99,727 potential common shares were included in the calculation of diluted
net earnings per common share. The dilutive effect of stock options excludes
59,000, 55,000 and 42,000 shares for 2004, 2005 and 2006, respectively, as the
exercise prices of the underlying options were out of the money and the effect
was anti-dilutive. Stock options outstanding at December 31, 2004, 2005 and 2006
totaled 253,850; 205,350 and 197,850, respectively.

Reclassifications

     Certain prior years' balances have been reclassified to conform to the 2006
presentation.

NOTE 2: GOODWILL

     SFAS 142, "Goodwill and Other Intangible Assets," requires that goodwill no
longer be amortized, but instead be tested for impairment at least annually.
Goodwill is tested for impairment at least annually under SFAS 142. At December
31, 2003, we received an independent appraisal on goodwill and the analysis
indicated no further impairment. At December 31, 2004, 2005 and 2006 we updated
our impairment analysis as required under SFAS 142 using internal calculations
similar to those used in the previous independent appraisal. The analysis
indicated no further impairment.


                                       51

<PAGE>

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, 2006, the carrying amounts of cash and cash equivalents, trade receivables,
other receivables, accounts payable, and accrued liabilities, approximate fair
value because of the short maturity of those instruments. The fair value of our
long-term debt, including current maturities, was $33,413 and $38,426 at
December 31, 2005 and 2006, respectively, based upon estimated market rates.

NOTE 4: LONG-TERM DEBT

     We have a financing arrangement with LaSalle Bank, which expires on October
31, 2010, and provides for automatic month-to-month renewals under certain
conditions after that date. LaSalle Bank may terminate the arrangement prior to
October 31, 2010, in the event of default, and may terminate at the end of any
renewal terms. During 2005, the arrangement was amended to decrease the interest
rate and to voluntarily reduce the maximum borrowing limit to $15,000.

     The agreement provides for a revolving line of credit which allows for
borrowings up to 85% of eligible receivables. At December 31, 2006 there were no
borrowings under the revolving line.

     The financing arrangement also includes financing for letters of credit. At
December 31, 2006, we had outstanding letters of credit totaling $8,425 for
self-insured amounts under our insurance programs. (See note 10). We are
required to pay an annual fee of 1.25% of the outstanding letters of credit.
These letters of credit directly reduce the amount of potential borrowings
available under the financing arrangement discussed above. Any increase in
self-insured retention, as well as increases in claim reserves, may require
additional letters of credit to be posted, which would negatively affect our
liquidity.

     At December 31, 2006, our borrowing limit under the financing arrangement
was $13,396, leaving $4,970 in remaining availability at such date.

     The LaSalle Bank financing arrangement requires compliance with certain
financial covenants, including compliance with a minimum tangible net worth,
debt to EBITDAR (as defined under the agreement), and a fixed charge coverage
ratio. We were in compliance with these requirements at December 31, 2006.

     The weighted average interest rates on debt outstanding at December 31,
2005 and 2006 were approximately 6.11% and 6.48%, respectively. The interest
rate on outstanding borrowings under the arrangement is equal to a spread on
LaSalle Bank's prime rate or LIBOR, at our option. The spread is determined by
our ratio of funded debt to EBITDAR, as defined under the agreement. In
connection with a December 2005 amendment to the LaSalle Bank agreement, the
interest rate spreads on outstanding borrowings under the arrangement were
decreased and our effective rate decreased from LaSalle Bank's prime rate plus
0.25% to the prime rate minus 0.75%. As of December 31, 2006, we pay a facility
fee on the financing arrangement of 0.20% of the unused loan limit. Borrowings
under the agreement are secured by accounts receivable.

     Long-term debt also includes equipment notes with balances of $32,789 and
$38,485 at December 31, 2005 and 2006, respectively. Interest rates on the
equipment notes range from 5.69% to 8.10% with maturities through 2011. The
equipment notes are collateralized by the underlying equipment, and some contain
a minimum tangible net worth requirement. We were in compliance with the
required minimum tangible net worth requirement for December 31, 2006.

     If we fail to maintain compliance with financial covenants in our borrowing
obligations, or to obtain a waiver of any noncompliance, the lenders will have
the right to declare all sums immediately due and pursue other remedies. In such
event, we believe we could renegotiate the terms of our debt or that alternative
financing would be available, although this cannot be assured.

     Future maturities on long-term debt at December 31, 2006 are as follows:
2007, $10,479; 2008, $9,372; 2009, $9,883; 2010, $6,762; 2011, $1,989;
thereafter, $0.


                                       52

<PAGE>

NOTE 5: INCOME TAXES

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

<TABLE>
<CAPTION>
                     2004                       2005                       2006
           ------------------------   ------------------------   ------------------------
           Federal   State   Total    Federal   State    Total   Federal   State    Total
           -------   -----   ------   -------   -----   ------   -------   -----   ------
<S>        <C>       <C>     <C>      <C>       <C>     <C>      <C>       <C>     <C>
Current     $  265    $ 77   $  342    $2,755    $362   $3,117    $  803    $145   $  948
Deferred     1,192      79    1,271       121     511      632     2,007     151    2,158
            ------    ----   ------    ------    ----   ------    ------    ----   ------
            $1,457    $156   $1,613    $2,876    $873   $3,749    $2,810    $296   $3,106
            ======    ====   ======    ======    ====   ======    ======    ====   ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                       ------------------------
                                                        2004     2005     2006
                                                       ------   ------   ------
<S>                                                    <C>      <C>      <C>
Computed "expected" income tax expense                 $1,311   $2,716   $2,512
State income tax expense, net of federal taxes            103      576      195
Permanent differences:
   Nondeductible driver per diem and travel expenses      456      453      371
   Nontaxable life insurance proceeds                    (247)      --       --
   Other                                                  (10)       4       28
                                                       ------   ------   ------
                                                       $1,613   $3,749   $3,106
                                                       ======   ======   ======
</TABLE>

     Temporary differences between the financial statement basis of assets and
liabilities and the related deferred tax assets and liabilities at December 31,
2005 and 2006, were as follows:

<TABLE>
<CAPTION>
                                                          2005       2006
                                                        --------   --------
<S>                                                     <C>        <C>
Deferred tax assets attributable to:
   Net operating loss carryforwards                     $     76   $     58
   Alternative minimum tax (AMT) credit carryforwards         18        320
   Accrued expenses                                        3,133      3,744
   Goodwill                                                  577        495
   Other items                                                --         21
                                                        --------   --------
      Total gross deferred tax assets                      3,804      4,638
                                                        --------   --------
Deferred tax liabilities attributable to:
   Property and equipment                                (12,405)   (15,397)
                                                        --------   --------
      Net deferred tax liabilities                      $ (8,601)  $(10,759)
                                                        ========   ========
</TABLE>

     At December 31, 2006, we have net operating loss carryforwards for state
income tax purposes of approximately $87 which are available to offset future
state taxable income. These net operating losses expire during the years 2019
through 2022. We also have federal and state AMT credit carryforwards which are
available indefinitely to reduce future income tax liabilities to the extent
they exceed state AMT liabilities.

     We have reviewed the need for a valuation allowance relating to the
deferred tax assets, and have determined that no allowance is needed. We believe
the future deductions will be realized principally through future reversals of
existing taxable temporary differences and future taxable income. In addition,
we have the ability to use tax-planning strategies to generate taxable income if
necessary to realize the deferred tax assets. Such strategies include the
recognition of significant tax gains on the disposition of tractors and trailers
through outright sales rather than like kind exchanges, resulting in higher
taxable income through the reversal of deferred tax liabilities.

NOTE 6: STOCKHOLDERS' EQUITY

     On all matters with respect to which our 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


                                       53

<PAGE>

stockholder and will be converted automatically into shares of Class A common
stock upon transfer to any party other than Marlys L. Smith, her children, her
grandchildren, trusts for any of their benefit, and entities wholly owned by
them.

NOTE 7: STOCK PLANS

     We have two active stock-based compensation plans:

     (1) We have reserved 400,000 shares of Class A common stock for issuance
pursuant to an employee incentive stock plan adopted during 2001. Any shares
subject to awards which expire unexercised or are forfeited become available
again for issuance under this plan. Under this plan, no award of incentive stock
options may be made after August 6, 2011.

     (2) We have reserved 500,000 shares of Class A common stock for issuance
pursuant to an omnibus stock plan adopted on May 13, 2005. Any shares subject to
awards which expire unexercised or are forfeited become available again for
issuance under this plan. This plan expires on May 13, 2015.

     Options granted under these plans vest in installments from 12 to 60 months
after the date of grant. The options are exercisable over a period not to exceed
ten years from the date of grant. At December 31, 2006, 822,500 shares were
available for granting additional awards under these plans.

     Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment" ("No. 123R"),
using a modified version of the prospective transition method. Under this
transition method, compensation cost is recognized on or after the required
effective date for the portion of outstanding awards for which the requisite
service has not yet been rendered, based on the grant-date fair value of those
awards calculated under SFAS No. 123R for either recognition or pro forma
disclosures. Stock-based employee compensation expense for the year ended
December 31, 2006 was $65 and is included as an expense within the consolidated
statements of operations, giving rise to a related tax benefit of $19. As of
December 31, 2006, the total compensation cost related to non-vested option
awards not yet recognized was $63 and the weighted-average period over which it
is expected to be recognized was one year. There was no cumulative effect of
initially adopting SFAS No. 123R.

     The following table summarizes stock option activity for the year ended
December 31, 2006:

<TABLE>
<CAPTION>
                                                                WEIGHTED
                                                   WEIGHTED      AVERAGE
                                                    AVERAGE     REMAINING    AGGREGATE
                                       NUMBER OF   EXERCISE    CONTRACTUAL   INTRINSIC
                                        OPTIONS      PRICE    TERM (YEARS)     VALUE
                                       ---------   --------   ------------   ---------
<S>                                    <C>         <C>        <C>            <C>
Outstanding at beginning of period      205,350     $ 4.38
   Options granted                       12,000      11.42
   Options exercised                    (19,500)      2.24
   Options forfeited                         --
   Options expired                           --
                                        -------     ------        ----          ----
Outstanding at end of period            197,850     $ 5.02        4.04          $985
                                        =======     ======        ====          ====
Options exercisable at end of period    161,850     $ 4.81        3.62          $840
</TABLE>

     The following table summarizes options that were granted during the years
ended December 31, 2004, 2005 and 2006 and the assumptions used to estimate the
fair value of those stock options using a Black-Scholes valuation model:

<TABLE>
<CAPTION>
                                                    2004      2005      2006
                                                   ------   -------   -------
<S>                                                <C>      <C>       <C>
Number of options granted                           2,000    25,500    12,000
Risk-free interest rate                              3.23%     3.71%     5.05%
Expected dividend yield                                 0%        0%        0%
Expected volatility                                    69%       69%       66%
Expected term (in years)                              3.0       3.7       3.0
Weighted-average grant-date fair value per share   $ 1.43   $  2.85   $  5.45
</TABLE>

     The risk-free interest rate assumptions were based upon the yield of a US
Treasury interest only strip with a


                                       54

<PAGE>

maturity date corresponding to the estimated term of the option. The expected
volatility was based on historical bi-monthly price changes of our stock since
December 2003. The estimated term was the average number of years that we
estimate the options will be outstanding.

     The following table summarizes options that were exercised during the years
ended December 31, 2004, 2005 and 2006.

<TABLE>
<CAPTION>
                                                  2004      2005      2006
                                                -------   -------   -------
<S>                                             <C>       <C>       <C>
Number of options exercised                      53,800    70,000    19,500
Cash received from exercise of stock  options   $   110   $   189   $    44
Total intrinsic value of options exercised          262       343       145
Tax benefits realized from exercised options         52        26        51
</TABLE>

     Although we do not have a formal policy for issuing shares upon exercise of
stock options, these shares are generally issued from treasury stock. Based on
current treasury stock levels, we do not expect to repurchase additional shares
specifically for stock option exercises during 2007.

     In periods prior to January 1, 2006, we accounted for stock-based
compensation plans under the recognition and measurement principles of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. No stock-based employee compensation
cost was reflected in our statements of operations, as all options granted under
these plans had an exercise price equal to the market value of the common stock
on the date of the grant.

     The following table illustrates the effect on net earnings and earnings per
share if we had applied the fair value recognition provisions of FAS No. 123 to
stock-based employee compensation. For purposes of pro forma disclosures, the
estimated fair value of options is amortized to expense over the options'
vesting periods.

<TABLE>
<CAPTION>
                                                       2004     2005
                                                      ------   ------
<S>                                                   <C>      <C>
Net earnings, as reported                             $2,241   $4,241
Deduct: Total stock-based employee compensation
   expense determined under fair value based method
   for all awards, net of related tax effects            (14)     (19)
                                                      ------   ------
Pro forma net earnings                                $2,227   $4,222
                                                      ======   ======
Basic earnings per share   - as reported              $ 0.46   $ 0.86
                           - pro forma                $ 0.46   $ 0.86
Diluted earnings per share - as reported              $ 0.45   $ 0.84
                           - pro forma                $ 0.45   $ 0.84
</TABLE>

NOTE 8: EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31                             2004         2005         2006
-----------------------                          ----------   ----------   ----------
<S>                                              <C>          <C>          <C>
Net earnings applicable to common stockholders   $    2,241   $    4,241   $    4,282
                                                 ----------   ----------   ----------
Basic weighted-average shares outstanding         4,850,935    4,931,446    4,982,288
   Effect of dilutive stock options                 100,999      115,927       99,727
                                                 ----------   ----------   ----------
Diluted weighted-average shares outstanding       4,951,934    5,047,373    5,082,015
                                                 ==========   ==========   ==========
Basic earnings per share                         $     0.46   $     0.86   $     0.86
Diluted earnings per share                       $     0.45   $     0.84   $     0.84
                                                 ----------   ----------   ----------
</TABLE>


                                       55

<PAGE>

NOTE 9: EMPLOYEES' PROFIT SHARING AND SAVINGS PLAN

     We have 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% 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, 2004, 2005 and 2006 we accrued $211, $269 and $222 for
employer contributions which were made to the plan in the subsequent year. The
plan owns 317,481 shares of the Company's Class A common stock at December 31,
2006.

NOTE 10: COMMITMENTS AND CONTINGENT LIABILITIES

     During the years ended December 31, 2004, 2005 and 2006, our insurance
policies for auto liability, physical damage, cargo losses, and workers'
compensation involved a deductible of $250 per incident. From July 2003 through
January 2005 we had no insurance coverage for losses over our $2.0 million of
primary coverage. We reinstated excess coverage on February 1, 2005 which covers
losses above our primary policy limit of $2.0 million up to $5.0 million. At
December 31, 2005 and 2006, we had $6,681 and $7,457, respectively, accrued for
our estimated liability for the retained portion of incurred losses related to
these policies.

     The insurance companies require us to provide letters of credit to provide
funds for payment of the deductible amounts. At December 31, 2005 and 2006, we
had $7,634 and $8,425 letters of credit issued under the financing arrangement
described in note 4. In addition, funds totaling $887 were held by the insurance
companies as deposits at December 31, 2005 and 2006.

     Our obligations under non-cancelable operating lease agreements are as
follows: 2007, $1,971; 2008, $1,628; 2009, $39; 2010, $39; 2011, $10; thereafter
$0. These obligations exclude potential Terminal Remainder Adjustment Clause
(TRAC) payments or refunds on 116 tractors amounting to 40% of the original
purchase price due at the end of the original 48-month term of the lease. After
48 months we expect the residual value of the tractors to be greater than 40% of
the original cost, allowing us to return the tractors without a TRAC payment. If
the residual value of the tractors falls below 13% of the original cost, the
maximum TRAC payment would be $2.6 million.

     We are committed to purchase $11.6 million of property and equipment during
2007.

     Our 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, 2005 and 2006, we had approximately
$1,183 and $1,038, respectively, accrued for our estimated liability related to
these claims.

     In March 2007, we settled a lawsuit related to a traffic accident that
occurred in a prior year resulting in an uninsured loss of $1.25 million. Legal
fees of $279,000 related to the case were also accrued in accordance with our
policy.

     We are involved in certain legal actions and proceedings arising from the
normal course of operations. We believe that liability, if any, arising from
such legal actions and proceedings will not have a materially adverse effect on
our results of operations or financial position or cash flows.

NOTE 11: TRANSACTIONS WITH RELATED PARTIES

     During the years ended December 31, 2004, 2005 and 2006, there were no
material transactions with related parties.


                                       56

<PAGE>

NOTE 12: QUARTERLY FINANCIAL DATA (UNAUDITED)

     Summarized quarterly financial data for the Company for 2005 and 2006 is as
follows:

<TABLE>
<CAPTION>
                                    MARCH 31   JUNE 30   SEPTEMBER 30   DECEMBER 31(1)
                                    --------   -------   ------------   --------------
<S>                                 <C>        <C>       <C>            <C>
2005
Operating revenue                    $49,724   $55,356      $57,307         $57,999
Earnings from operations               1,326     2,726        3,297           2,343
Net earnings                             503     1,355        1,628             755
Basic earnings per share             $  0.10   $  0.27      $  0.33         $  0.15
Diluted earnings per share           $  0.10   $  0.27      $  0.32         $  0.15

2006
Operating revenue                    $57,689   $60,881      $58,999         $51,193
Earnings from operations               2,350     3,277        3,571             323
Net earnings (loss)                    1,043     1,559        1,722             (42)
Basic earnings (loss) per share      $  0.21   $  0.31      $  0.35         $ (0.01)
Diluted earnings (loss) per share    $  0.21   $  0.31      $  0.34         $ (0.01)
</TABLE>

----------
(1)  During the quarter ended December 31, 2006, the Company incurred an
     uninsured loss of $1,529, including related legal fees, in connection with
     the settlement of litigation.

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

NOTE 13: SUBSEQUENT EVENT

     On March 22, 2007, the Company, Western Express, Inc., a Tennessee
corporation ("Western"), and Western Express Acquisition Corporation, a Nevada
corporation ("Acquisition Sub"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") providing for the merger of Acquisition Sub with and
into the Company with the Company surviving as a wholly-owned subsidiary of
Western (the "Merger"). Pursuant to the Merger Agreement, at the effective time
of the Merger, each outstanding share of the Company's common stock will be
converted into and represent the right to receive $10.63 in cash. The Merger
Agreement has been approved by the Company's Board of Directors and Western's
Board of Directors. The transactions contemplated by the Merger Agreement are
subject to the approval of the Company's stockholders and other customary
closing conditions and are expected to close in the summer of 2007.


                                       57

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                     EXHIBIT                          FILING STATUS
-------   ------------------------------------------   -------------------------
<S>       <C>                                          <C>
   2.1    Agreement and Plan of Merger, dated as of    Incorporated by Reference
          March 22, 2007, among Smithway Motor
          Xpress Corp., Western Express, Inc., and
          Western Express Acquisition Corporation

   3.1    Articles of Incorporation                    Incorporated by Reference

   3.2    Amended and Restated Bylaws (as in effect    Incorporated by Reference
          on March 5, 2004)

  10.1    401(k) Plan adopted August 14, 1992, as      Incorporated by Reference
          amended

  10.2    Form of Outside Director Stock Option        Incorporated by Reference
          Agreement dated July 27, 2000, between
          Smithway Motor Xpress Corp. and each of
          Terry G. Christenberry and Herbert D. Ihle

  10.3    New Employee Incentive Stock Plan, adopted   Incorporated by Reference
          August 6, 2001

  10.4    Amended and Restated Loan and Security       Incorporated by Reference
          Agreement dated December 30, 2005, by and
          among Smithway Motor Xpress, Inc., East
          West Motor Xpress, Inc. and LaSalle Bank
          National Association

  10.5    Master Lease Agreement dated August 6,       Incorporated by Reference
          2004 between LaSalle National Leasing
          Corporation, as Lessor, and Smithway Motor
          Xpress Corp. and Smithway Motor Xpress,
          Inc., as Lessee

  10.6    Form of Stock Option Agreement for New       Incorporated by Reference
          Employee Incentive Stock Plan

  10.7    Smithway Motor Xpress Corp. 2005 Omnibus     Incorporated by Reference
          Stock Plan

  10.8    Form of Incentive Stock Option Agreement     Incorporated by Reference
          under Smithway Motor Xpress Corp. 2005
          Omnibus Stock Plan

  10.9    Form of Non-Statutory Stock Option           Incorporated by Reference
          Agreement (Employee) under Smithway Motor
          Xpress Corp. 2005 Omnibus Stock Plan

 10.10    Form of Non-Statutory Stock Option           Incorporated by Reference
          Agreement (Director) under Smithway Motor
          Xpress Corp. 2005 Omnibus Stock Plan

 10.11    Form of Change-in-Control Agreement with     Incorporated by Reference
          G. Larry Owens, Douglas C. Sandvig and
          Chad A. Johnson

 10.12    Description of Bonus Program                 Incorporated by Reference

    14    Code of Ethics                               Incorporated by Reference

    21    List of Subsidiaries                         Incorporated by Reference

    23    Consent of KPMG LLP, independent             Filed Herewith
          registered public accounting firm

    24    Powers of Attorney                           Filed Herewith

  31.1    Certification pursuant to Item 601(b)(31)    Filed Herewith
          of Regulation S-K, as adopted pursuant to
          Section 302 of the Sarbanes-Oxley Act of
          2002, by G. Larry Owens, the Company's
          principal executive officer
</TABLE>


                                       58

<PAGE>

<TABLE>
<S>       <C>                                          <C>
  31.2    Certification pursuant to Item 601(b)(31)    Filed Herewith
          of Regulation S-K, as adopted pursuant to
          Section 302 of the Sarbanes-Oxley Act of
          2002, by Douglas C. Sandvig, the Company's
          principal financial officer

  32.1    Certification pursuant to 18 U.S.C.          Filed Herewith
          Section 1350, as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of
          2002, by G. Larry Owens, the Company's
          principal executive officer

  32.2    Certification pursuant to 18 U.S.C.          Filed Herewith
          Section 1350, as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of
          2002, by Douglas C. Sandvig, the Company's
          principal financial officer
</TABLE>


                                       59