**UNITED
          STATES SECURITIES AND EXCHANGE COMMISSION**
  **Washington,
          D.C. 20549**
  **FORM
          10-K**
  x ANNUAL
          REPORT
          PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
          1934
 FOR
          THE YEAR ENDED
          DECEMBER 31, 2006
  OR
  o TRANSITION
          REPORT
          PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
          1934
 
 **Commission
          File Number 0-24806**
  (Exact
            name of
            registrant as specified in its charter)
   **Nevada**
                  (State
                    or
                    Other Jurisdiction of Incorporation or Organization)
                **62-1378182**
                  (I.R.S.
                    Employer Identification No.)**4080
                    Jenkins Road****Chattanooga,
                    Tennessee**
                  (Address
                    of
                    Principal Executive Offices)
                **37421**
                  (Zip
                    Code)
 
 **(423)
          510-3000**
 (Registrant’s
          telephone number, including area code)
   **Securities
          Registered Pursuant to Section 12(b) of the Act: Class A Common Stock,
          $0.01 Par
          Value - The NASDAQ Stock Market LLC**
  **Securities
          Registered Pursuant to Section 12(g) of the Act: None**
  Indicate
          by check
          mark whether the registrant is a well-known seasoned issuer, as defined
          in Rule
          405 of the Securities Act. Yes
o 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
o 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
o.
  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-Ko.
  Indicate
          by check
          mark whether the registrant is a large accelerated filer, an accelerated
          filer,
          or a non-accelerated filer. See definition of “accelerated filer and large
          accelerated filer” in Rule 12b-2 of the Act.
  Large
          accelerated
          filer o Accelerated
          filerxNon-accelerated
          filer o
  Indicate
          by check
          mark whether the registrant is a shell company (as defined in Rule 12b-2
          of the
          Exchange Act.) Yes
o 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 $262,138,583 (based upon the $27.02
          closing
          sale 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.
  As
          of March 12,
          2007 **,** the
          registrant had
          12,181,572 shares of Class A Common Stock ****** and
          3,040,262
          shares of Class B Common Stock outstanding.
  **DOCUMENTS
          INCORPORATED BY REFERENCE:** The information
          set forth under Part III, Items 10, 11, 12, 13 and 14 of this Report is
          incorporated by reference from the registrant’s definitive proxy statement
          mailed to stockholders for the 2007 Annual Meeting of Stockholders to be
          held on
          May 11, 2007.


*Table
          of Contents*


**U.S.
      XPRESS ENTERPRISES, INC.**


**TABLE
      OF
      CONTENTS**




**ITEM
                NO.**
            
            **PAGE
                NO.****PART
                I**Item
                1
            Business
            3Item
                1A
            Risk
                Factors
            8Item
                1B
            Unresolved
                Staff Comments
            12Item
                2
            Properties
            13Item
                3
            Legal
                Proceedings
            13Item
                4
            Submission
                of
                Matters to a Vote of Security Holders
            13**PART
                II**Item
                5
            Market
                for
                Registrant’s Common Equity, Related Stockholder Matters
                and
                Issuer Purchases of Equity Securities
            14Item
                6
            Selected
                Financial Data
            16Item
                7
            Management’s
                Discussion and Analysis of Financial Condition
                and
                Results of Operations
            17Item
                7A
            Quantitative
                and Qualitative Disclosures About Market Risk
            27Item
                8
            Financial
                Statements and Supplementary Data
            28Item
                9
            Changes
                in
                and Disagreements with Accountants onAccounting
                and Financial Disclosure
            48Item
                9A
            Controls
                and
                Procedures
            48Item
                9B
            Other
                Information
            49**PART
                III**Item
                10
            Directors,
                Executive Officers, and Corporate Governance
            49Item
                11
            Executive
                Compensation
            49Item
                12
            Security
                Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters
            49Item
                13
            Certain
                Relationships and Related Transactions and Director
                Independence
            50Item
                14
            Principal
                Accounting Fees and Services
            50**PART
                IV**Item
                15
            Exhibits,
                Financial Statement Schedules
            50Signatures
            54Exhibits





2
 *Table
          of Contents*


**PART
      I**






**ITEM
      1****.****BUSINESS**




*This
      Annual
      Report contains certain statements that may be considered forward-looking
      statements within the meaning of Section 27A of the Securities Act of 1933,
      as
      amended and Section 21E of the Securities Exchange Act of 1934, as amended.
      All
      statements, other than statements of historical fact, are statements that could
      be deemed forward-looking statements, including without limitation: any
      projections of earnings, revenues, or other financial items; any statement
      of
      plans, strategies, and objectives of management for future operations; any
      statements concerning proposed new services or developments; any statements
      regarding future economic conditions or performance; and any statements of
      belief and any statement of assumptions underlying any of the foregoing. Such
      statements may be identified by their use of terms or phrases such as "expects,"
      "estimates," "projects," "believes," "anticipates," "intends," and similar
      terms
      and phrases. Forward-looking statements are inherently subject to risks and
      uncertainties, some of which cannot be predicted or quantified, which could
      cause future events and actual results to differ materially from those set
      forth
      in, contemplated by, or underlying the forward-looking statements. Readers
      should review and consider the factors discussed in "* *Risk
      Factors* *"
      of this
      Annual Report on Form 10-K, along with various disclosures in our press
      releases, stockholder reports, and other filings with the Securities and
      Exchange Commission.*





*All
      such
      forward-looking statements speak only as of the date of this Annual Report.
      You
      are cautioned not to place undue reliance on such forward-looking statements.
      The Company expressly disclaims any obligation or undertaking to release
      publicly any updates or revisions to any forward-looking statements contained
      herein to reflect any change in the Company's expectations with regard thereto
      or any change in the events, conditions, or circumstances on which any such
      statement is based.*




***References
      in this Annual Report to “we,” “us,” “our,” or the “Company” or similar terms
      refer to U.S. Xpress Enterprises, Inc. and its consolidated subsidiaries.***






**GENERAL**




We
      are the fifth
      largest publicly traded truckload carrier in the United States, measured by
      revenue, according to *Transport
      Topics* ,
      a publication of
      the American Trucking Association, or ATA. Our primary business is offering
      a
      broad range of truckload services to customers throughout the United States
      and
      in portions of Canada and Mexico. We also offer transportation, warehousing,
      and
      distribution services to the floorcovering industry. Since becoming a public
      company, we have increased our operating revenue to $1.5 billion in 2006
      from $215.4 million in 1994, a compounded annual growth rate of 17.4%. Our
      growth has come through expansion of business with new and existing customers
      and complementary acquisitions. Our operating revenue increased 26.4% to $1.5
      billion in 2006 from $1.2 billion in 2005. Net income for the year increased
      113.1% to $20.1 million, or $1.29 per diluted share, compared with net income
      of
      $9.4 million, or $0.59 per diluted share for the prior year period.




In
      2006, our Xpress
      Global Systems segment positively impacted the results of operations by
      continued improvement in pricing and yield management, operational efficiencies
      and reduced overhead expenditures, as well as the divestiture of our
      unprofitable airport-to-airport business during 2005.




***Truckload
      Segment***


Our
      truckload
      segment, U.S. Xpress, Inc. (“U.S. Xpress”), Arnold Transportation, Inc.
      (“Arnold”), and Total Transportation of Mississippi LLC (“Total”), which
      comprised approximately 94% of our total operating revenue in 2006, includes
      the
      following six strategic business units, each of which is significant in its
      market:




●*U.S.
                  Xpress dedicated*
              Our
                  approximately 1,620 tractor dedicated unit offers our customers
                  dedicated
                  equipment, drivers, and on-site personnel to address customers’ needs for
                  committed capacity and service levels, while affording us consistent
                  equipment utilization during the contract term.●*U.S.
                  Xpress regional and solo over-the-road*
              Our
                  approximately 3,050 tractor regional and solo over-the-road unit
                  offers
                  our customers a high level of service in dense freight markets
                  of the
                  Southeast, Midwest, and West, in addition to providing nationwide
                  coverage.●*U.S.
                  Xpress expedited intermodal rail*
              Our
                  railroad
                  contracts for high-speed train service enable us to provide our
                  customers
                  incremental capacity and transit times comparable to solo-driver
                  service
                  in medium-to-long haul markets, while lowering our
                  costs.●*U.S.
                  Xpress expedited team*
              Our
                  approximately 750 team driver unit offers our customers a service
                  advantage over medium-to-long haul rail and solo-driver truck service
                  at a
                  much lower cost than airfreight, while affording us premium rates
                  and
                  improved utilization of equipment.●*Arnold*
              Arnold
                  is a
                  dry van truckload carrier headquartered in Florida with approximately
                  1,500 trucks, and offers regional, dedicated, and medium length-of-haul
                  service primarily in the Northeast, Southeast, and Southwest United
                  States.●*Total*
              Total
                  is a
                  dry van truckload carrier headquartered in Mississippi with approximately
                  600 trucks, and offers regional, dedicated, and medium length-of-haul
                  services primarily in the eastern United
                  States.




3
 *Table
          of Contents*


We
      primarily
      generate revenue by transporting freight for our customers. Generally, we are
      paid a predetermined rate per mile for our truckload services. We enhance our
      truckload revenue by charging for tractor and trailer detention, loading and
      unloading activities, and other specialized services, as well as through the
      collection of fuel surcharges to mitigate the impact of increases in the cost
      of
      fuel. The main factors that affect our truckload revenue are the revenue per
      mile we receive from our customers, the percentage of miles for which we are
      compensated, and the number of shipments and miles we generate. These factors
      relate, among other things, to the general level of economic activity in the
      United States, inventory levels, specific customer demand, the level of capacity
      in the trucking industry, and driver availability. Our primary measures of
      revenue generation for our truckload business are average revenue per loaded
      mile and average revenue per tractor per week, in each case excluding fuel
      surcharge revenue.




The
      main factors
      that impact our profitability in terms of expenses 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
      purchased transportation expenses, which include compensating independent
      contractors and providers of expedited intermodal rail services. 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 include rentals and
      depreciation of long-term assets, such as revenue equipment and terminal
      facilities, and the compensation of non-driver personnel.




***Our
      Xpress Global Systems Segment***


Our
      Xpress Global
      Systems segment, which comprised approximately 6% of our total operating revenue
      in 2006, offers transportation, warehousing, and distribution services to the
      floorcovering industry. During the year ended December 31, 2006, our Xpress
      Global Systems segment experienced operating income of $4.6 million, compared
      to
      an operating loss of $13.5 million, which includes a $2.8 million charge for
      the
      sale and exit from the airport-to-airport business, in the same period in
      2005.




We
      primarily
      generate revenue by transporting less-than-truckload freight for our customers.
      Generally, we are paid a predetermined rate per square yard for carpet and
      per
      pound for all other commodities. The rates vary based on miles, type of service,
      and type of freight we are hauling. We enhance our less-than-truckload revenue
      by charging for storage, warehousing, and other specialized services, as well
      as
      through the collection of fuel surcharges to mitigate the impact of increases
      in
      the cost of fuel. The main factors that affect our less-than-truckload revenue
      are the revenue per pound we receive from our customers, the average weight
      per
      shipment we haul and the number of shipments we generate. These factors relate,
      among other things, to the general level of economic activity in the United
      States, especially in the housing industry, inventory levels, specific customer
      demand, the level of capacity in the trucking industry, and driver availability.
      Our primary measures of revenue generation for our less-than-truckload business
      are average revenue per pound (excluding fuel surcharge revenue), total tonnage,
      and number of loads hauled per day.




The
      main factors
      that impact our profitability in terms of expenses are the variable costs of
      transporting the freight for our customers. These costs include purchased
      transportation, fuel expense, and the cost paid to our agents to deliver the
      freight. Expenses that have both fixed and variable components include driver
      and dock related expenses, such as wages, benefits, training, and recruitment,
      maintenance and tire expense and our total cost of insurance and claims. These
      expenses generally vary with the miles we travel and the tonnage of freight
      we
      handle, but also have a controllable component based on load factor, safety,
      fleet age, efficiency, and other factors. Our main fixed costs include rentals
      and depreciation of long-term assets, such as revenue equipment and terminal
      facilities and the compensation of non-driver and non-dock worker personnel.




Please
      refer to
      Note 18 to our financial statements included under Item 8 of this Form 10-K
      for
      financial information regarding segments.





**BUSINESS
      ACQUISITIONS**




In
      the fourth
      quarter of 2004, we acquired 49% of the outstanding stock of ATS Acquisition
      Holding Co. ("ATS"), the parent company of Arnold. In the second quarter of
      2005, we acquired 49% of the outstanding stock of Transportation Investments
      Inc. ("TII"), the parent company of Total, and certain affiliated companies
      (together with TII, the "Total Companies"). Certain members of Arnold’s current
      management team controlled the remaining 51% interest as well as a majority
      of
      the board of directors of ATS, and certain members of the Total management
      team
      controlled the remaining 51% interest and a majority of the boards of directors
      of the Total Companies. We did not guarantee any of ATS' or the Total Companies'
      debt and did not have any obligation to provide funding, services, or assets.
      We
      accounted for ATS' and the Total Companies' operating results using the equity
      method of accounting.




On
      February 28,
      2006, we increased our ownership interest in both Arnold and the Total Companies
      to 80% for approximately $7.9 million in cash, through the purchase of stock
      owned by the current management teams of Arnold and Total. The Arnold and Total
      management teams continue to hold 20% of the outstanding stock of Arnold and
      the
      Total Companies, respectively. The Arnold management team, led by President
      and
      Chief Executive Officer Mike Walters, and the Total management team, led by
      Co-Chief Executive Officers Rick Kale and John Stomps, continue to manage their
      respective operations and utilize their existing facilities. In connection
      with
      these transactions, Arnold and the Total Companies became parties to and
      guarantors of our revolving credit facility. We have guaranteed approximately
      $20 million of Arnold’s and the Total Companies' debt under their
      respective credit facilities in order to obtain required consents from their
      lenders to permit Arnold and the Total Companies to guarantee our revolving
      credit facility.




In
      the
      transactions, we also obtained the right to elect a majority of the members
      of
      the board of directors of Arnold. We retain options to purchase the remaining
      20% of each of Arnold and the Total Companies through December 8, 2007 and
      October 1, 2008, respectively. If we fail to exercise such options prior to
      such
      dates, the members of the current Arnold and Total management teams will have
      similar options to repurchase our interests in Arnold and the Total
      Companies.




4
 *Table
          of Contents*


***Equity
      Investment***


In
      August 2006, we
      acquired a 49% interest in Abilene Motor Express, Inc. (“Abilene”) for
      approximately $3.0 million. Certain members of the Abilene management team
      control the remaining 51% interest and a majority of the board of directors.
      We
      have not guaranteed any of Abilene’s debt and have no obligation to provide
      funding, services or assets. Under the agreement with the Abilene management
      team, we have a four-year option to acquire 100% of Abilene by purchasing
      management’s interest at a specified price plus an agreed upon annual return,
      and the Abilene management team has the right to acquire the Abilene stock
      held
      by us in the subsequent four years following the expiration of our four-year
      option. We have accounted for Abilene’s operating results using the equity
      method of accounting.





**BUSINESS
      STRATEGY**




Our
      customer-focused business strategy emphasizes identifying customer needs and
      market opportunities, using strategic business units to pursue those
      opportunities, allocating our assets to the business units that afford the
      most
      favorable market opportunities, and managing the assets within each business
      unit to enhance asset productivity and financial returns. The following table
      represents revenues achieved in each of our truckload business units over the
      past three years:




**Truckload
      Revenue Before Fuel Surcharge and**


**Other
      Miscellaneous Revenue**


**For
      the
      Years Ended December 31,**


(Dollars
      in
      thousands)




**2006**
            
            **2005**
            
            **2004****Type
                of Service**
            
            Revenue
            
            %
            
            Revenue
            
            %
            
            Revenue%
            
            %Dedicated
            
            $
            225,512
            
            
            19
            %
            $
            204,892
            
            
            22
            %
            $
            139,120
            
            
            16
            %Expedited
                -
                Intermodal rail
            
            
            112,077
            
            
            10
            
            
            130,701
            
            
            14
            
            
            99,352
            
            
            11Expedited
                team
            
            
            179,447
            
            
            15
            
            
            182,051
            
            
            20
            
            
            154,683
            
            
            17Regional
                and
                solo over-the-road
            
            
            389,093
            
            
            34
            
            
            393,867
            
            
            44
            
            
            494,995
            
            
            56Arnold/Total
            
            
            258,282
            
            
            22
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,164,411
            
            
            100
            %
            $
            911,511
            
            
            100
            %
            $
            888,150
            
            
            100
            %





*
      As of March 1,
      2006, the operating results for both Arnold and Total have been consolidated
      into our operating results, as our investment in the respective companies
      increased to 80%.




In
      conjunction with
      reallocating our assets, we charged each business unit with improving its
      operating results. Our primary area of focus remains on improving our business
      units’ yield management and asset productivity. We seek to do this by raising
      freight rates where justified and also replacing less profitable freight. In
      this process, we evaluate rates, non-revenue miles, miles per tractor, the
      total
      time our assets are committed to the freight movement, the efficiency of our
      equipment positioning before and after the movement, total costs associated with
      the movement, drivers’ domiciles and preferences, the overall customer
      relationship, and other factors. Based on our criteria, our sales and operations
      personnel work together to select more profitable freight.





**OPERATIONS**




Our
      corporate and
      U.S. Xpress, Arnold and Total truckload operations are headquartered in
      Chattanooga, Tennessee, Jacksonville, Florida and Jackson, Mississippi,
      respectively. We maintain fifteen truckload full service operation centers
      and
      numerous offices and drop yard facilities throughout the continental United
      States. Xpress Global Systems is headquartered in Tunnel Hill, Georgia,
      approximately 25 miles from our Chattanooga location, and maintains a nationwide
      network of 42 company and agent facilities providing floorcovering logistics
      services.




Our
      fifteen
      truckload full service operation centers are actively engaged in the management
      of our truckload business. Fleet managers at each of our operations centers
      plan
      load coverage according to customer requirements and relay pick-up, delivery,
      routing, and fueling instructions to our drivers. Our fleet managers focus
      on
      balancing traffic movements, reducing empty miles, and improving the reliability
      of delivery schedules. We use proven technology, including freight optimization
      software that permits us to perform sophisticated analyses of profitability
      and
      other factors on each customer, route, and load. We equip our tractors with
      a
      satellite or cellular based tracking and communications system that permits
      direct communication between drivers and fleet managers. We believe that this
      system enhances our operating efficiency and improves customer service and
      fleet
      management. This system also updates the tractor’s position hourly, which allows
      us and our customers to locate freight and accurately estimate pick-up and
      delivery times.




5
 *Table
          of Contents*


As
      an additional
      service to customers, we offer Xpress Connect - an electronic data interchange
      and Internet-based communication tool for use in tendering loads and accessing
      information such as cargo position, delivery times, and billing information.
      These services allow us to communicate electronically with our customers,
      permitting real-time information flow, thereby reducing or eliminating
      paperwork, and allowing us and our customers to operate with fewer clerical
      personnel. We
      emphasize safety
      in all aspects of our operations. In connection with our commitment to safety,
      we have implemented various equipment specifications, active safety and loss
      prevention programs, and driver hiring standards that exceed United States
      Department of Transportation (“DOT”) requirements. With respect to equipment, we
      have adopted various specifications designed to reduce the risk of accidents,
      including anti-lock brakes, electronic engines, special mirrors, conspicuity
      tape, and side tracker cameras. Our safety and loss prevention programs
      reinforce the importance of safe driving habits, abiding by all laws and
      regulations, such as speed limits and hours-of-service, and performing regular
      equipment inspections and maintenance. We also maintain an accident review
      committee that meets regularly to review any new accidents, take appropriate
      action related to drivers involved in accidents, examine accident trends, and
      recommend and implement changes in procedures or communications to address
      safety issues.




The
      primary claims
      arising in our business consist of cargo loss, workers’ compensation, physical
      damage, and auto liability (personal injury and property damage). For 2006
      we
      were self-insured for personal injury and property damage liability up to a
      maximum limit of $3.0 million per occurrence; we were self-insured for
      workers’ compensation up to a maximum limit of $1.0 million per occurrence; and
      we were self-insured for cargo claims up to $250 thousand per occurrence. The
      estimated cost of self-insured claims, which include estimates for incurred
      but
      unreported claims, are accrued as liabilities in the consolidated balance sheets
      and are based upon our evaluation of the type and severity of individual claims
      and historical information, primarily our claims experience, along with
      assumptions about future events.





**CUSTOMERS
      AND MARKETING**




We
      have a
      customer-focused business strategy. We analyze freight market trends and
      specific customer needs, respond to customer requests for differentiated service
      levels or capacity when the yield justifies, and offer a broad range of services
      through our strategic business units. We believe that few competitors offer
      significant capacity with the broad range of services we offer through our
      strategic business units. In addition, we cross-market between business units
      through programs such as our on demand service that optimizes capacity for
      high-priority loads.




Our
      primary
      customers include retailers and manufacturers, as well as other transportation
      companies such as less-than-truckload carriers, third-party freight
      consolidators, and freight forwarders that seek a high level of service at
      commensurate rates. As evidence of our commitment to customer service, we have
      earned recognition in the Quest for Quality transportation award by *Logistics
      Management* magazine over each
      of the past five years. We have a diversified customer base, with no single
      customer accounting for more than five percent of our truckload revenue in
      2006.
      Home Depot accounted for approximately 38% of our Xpress Global Systems revenues
      for the year ended December 31, 2006.




We
      provide
      expedited intermodal rail service to our customers through contractual
      relationships for expedited intermodal rail services with the Burlington
      Northern Santa Fe, Union Pacific, and Norfolk Southern railroads. In general,
      these agreements establish rates and priority space on expedited trains. We
      also
      purchase expedited rail service from the CSX, Canadian National, Florida East
      Coast, and Kansas City Southern railroads on a non-guaranteed
      basis.





**REVENUE
      EQUIPMENT**




We
      believe that
      operating high quality, late-model equipment contributes to operating
      efficiency, helps us recruit and retain drivers, and is an important part of
      providing excellent customer service. Our policy is to operate most of our
      tractors while under warranty to minimize repair and maintenance costs and
      reduce service interruptions caused by breakdowns. We also order most of our
      equipment with uniform specifications to reduce our parts inventory and
      facilitate maintenance. At December 31, 2006, our company tractors had an
      average age of 22 months and our trailers had an average age of 48 months.




We
      purchase or
      lease Freightliner or Volvo tractors for the majority of the additions and
      replacements to our over-the-road fleet. Tractors are generally replaced every
      36 to 48 months, generally well in advance of the need for major engine
      overhauls. A majority of our over-the-road tractors are equipped with electronic
      speed controls, anti-lock braking systems, and automatic traction control for
      improved safety. In addition, substantially all of our over-the-road tractors
      are equipped with Eaton automatic shift transmissions, and all engines have
      fuel
      incentive programming for increased fuel economy.




We
      have a
      multi-year agreement with our primary tractor and trailer manufacturers
      concerning purchases of equipment. Our tractor arrangements also cover the
      disposal of a substantial portion of our tractors at a defined value, a portion
      of which are dependent upon replacement tractors from those vendors. We expect
      our agreements to reduce the risks associated with decreased market values
      for
      used tractors.




We
      currently
      acquire Duraplate trailers from Wabash National Corporation for substantially
      all of the additions and replacements to our trailer fleet. We believe that
      these Wabash trailers are more durable and have greater cubic capacity than
      conventional aluminum trailers. In addition, substantially all of our trailers
      are equipped with air ride suspension, leading to softer rides that result
      in
      less load damage. Approximately 85% of our trailers were Duraplates at December
      31, 2006.




6
 *Table
          of Contents*


**EMPLOYEES
      AND INDEPENDENT CONTRACTORS**




At
      December 31,
      2006, we employed 10,885 full-time associates, of whom 7,385 were drivers,
      425
      were mechanics and other maintenance personnel, and 3,075 were office or other
      associates. We consider relations with our employees to be good.




We
      believe that it
      is paramount to recruit, train, and retain a professional driver workforce.
      We
      also realize that competition for qualified drivers remains high. As a result,
      we have initiated various programs to enhance recruiting and retention efforts.
      We believe that there are several key elements to attracting and keeping
      experienced professional drivers, such as offering an attractive compensation
      and benefits package and providing equipment with desirable driver amenities.
      We
      believe that our current driver pay scales are competitive within the industry.
      Our fleet of late-model tractors is designed for driver comfort and safety.
      Standard equipment includes automatic transmissions, air ride suspensions,
      double sleeper bunks, air conditioning, power steering, and electronic engine
      brakes.




We
      also believe
      that maintaining a culture of driver support through flexible work schedules
      that enable drivers to accommodate personal obligations and lifestyles,
      leveraging technology (such as in-cab e-mail and Internet services) that enables
      drivers to remain in touch with their families, managing driver home time,
      seeking drivers’ input in the decision-making process to achieve mutually
      satisfactory solutions, and providing career advancement opportunities for
      drivers are key factors in recruiting and retaining experienced professional
      drivers. In addition, we believe that our decision to expand our dedicated
      and
      regional service operations provides us a greater opportunity to attract and
      retain drivers by allowing more frequent returns home and offering more
      predictable schedules and regular routes.




In
      addition to our
      employee drivers, we also augment our service capacity through the use of
      independent contractors. Independent contractors provide their own tractors
      and
      pay for all the expenses of operating their own equipment, including wages
      and
      benefits, fuel, physical damage insurance, maintenance, highway use taxes,
      and
      debt service. By utilizing the services of independent contractors in targeted
      areas, we can reduce the amount of capital required for our growth. As of
      December 31, 2006, we had 858 independent contractors.





**INDUSTRY**




According
      to the
      ATA, the trucking industry generates approximately $600 billion in annual
      revenues and accounts for approximately 85% of domestic spending on freight
      transportation. The industry is projected to grow in line with the overall
      U.S.
      economy. The trucking industry includes both private fleets and “for-hire”
carriers. We operate primarily in the highly fragmented for-hire truckload
      segment of this market, which the ATA estimates generates revenues of
      approximately $270 billion annually. We also compete in the private fleet
      market, which consists of trucks owned and operated by shippers that move their
      own goods and accounts for approximately $280 billion in revenues annually.
      We believe the private fleet market offers us significant opportunities for
      expansion, particularly through our dedicated business, because shippers
      increasingly are focused on operating within, and conserving capital for, their
      core competencies, which often do not include freight transportation.




The
      United States
      trucking industry is highly competitive and includes thousands of for-hire
      motor
      carriers, none of which dominates the market. Service and price are the
      principal means of competition in the trucking industry. Measured by annual
      revenue, the ten largest dry van truckload carriers account for approximately
      $12 billion, or approximately 5%, of annual for-hire truckload revenues. We
      compete to some extent with railroads and rail-truck service but differentiate
      ourselves from railroad and rail-truck carriers on the basis of service.
      Railroad and rail-truck movements are subject to delays and disruptions arising
      from rail yard congestion, which reduces the effectiveness of this service
      to
      customers with time-definite pick-up and delivery schedules, particularly when
      the rail service is not the expedited service we offer.




**REGULATION**




Our
      operations are
      regulated and licensed by various U.S., Canadian, and Mexican agencies. Our
      company drivers and independent contractors also must comply with the safety
      and
      fitness regulations of the United States Department of Transportation, or DOT,
      including those relating to drug and alcohol testing and hours-of-service.
      Such
      matters as weight and equipment dimensions are also subject to U.S. and Canadian
      regulations. We also may become subject to new or more restrictive regulations
      relating to fuel emissions, drivers' hours-of-service, ergonomics, or other
      matters affecting safety or operating methods. Other agencies, such as the
      EPA
      and the Department of Homeland Security, or DHS, also regulate our equipment,
      operations, and drivers.




The
      DOT, through
      the Federal Motor Carrier Safety Administration, or FMCSA, imposes safety and
      fitness regulations on us and our drivers. The primary areas of regulation
      that
      affect our operations include driver qualifications, drug and alcohol testing,
      hours-of-service limitations, and procedures to verify driver logs and safety.
      The FMCSA is studying rules relating to braking distance and on-board data
      recorders that could result in new rules being proposed.




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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
      motor carrier
      operations are also subject to environmental laws and regulations, including
      laws and regulations dealing with underground fuel storage tanks, the
      transportation of hazardous materials, and other environmental matters that
      import inherent environmental risks. We maintain bulk fuel storage and fuel
      islands at several of our facilities. Our operations involve the risks of fuel
      spillage or seepage, environmental damage, and hazardous waste disposal, among
      others. We have instituted programs to monitor and control environmental risks
      and assure compliance with applicable environmental laws. As part of our safety
      and risk management program, we periodically perform internal environmental
      reviews so that we can achieve environmental compliance and avoid environmental
      risk. Our facilities were designed, after consultation with environmental
      advisors, to contain and properly dispose of hazardous substances and petroleum
      products used in connection with our business. We transport a small amount
      of
      environmentally hazardous materials and, to date, have experienced no
      significant claims for hazardous materials shipments. If we should fail to
      comply with applicable regulations, we could be subject to substantial fines
      or
      penalties and to civil and criminal liability.





**SEASONALITY**




In
      the trucking
      industry, results of operations generally show a seasonal pattern as customers
      increase shipments prior to and reduce shipments during and after the winter
      holiday season. Additionally, shipments can be adversely impacted by winter
      weather conditions. Our operating expenses have historically been higher in
      the
      winter months due primarily to decreased fuel efficiency, increased maintenance
      costs of revenue equipment in colder weather and increased insurance and claims
      costs due to adverse winter weather conditions. Revenue can also be affected
      by
      bad weather and holidays, since revenue is directly related to available working
      days of shippers.





**COMPANY
      INFORMATION**




We
      were
      incorporated in Nevada in 1989. Our principal executive offices are located
      at
      4080 Jenkins Road, Chattanooga, Tennessee 37421, and our telephone number is
      (423) 510-3000. Our website address is http://www.usxpress.com .
      This Annual
      Report on Form 10-K, our quarterly reports on Form 10-Q, our current
      reports on Form 8-K, and all other reports filed with the Securities and
      Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”), can be obtained free of
      charge by visiting our website. Information contained in our website is not
      incorporated by reference into, and you should not consider such information
      to
      be part of, this Annual Report on Form 10-K.






**ITEM
      1A.****RISK
      FACTORS**




Our
      future results
      may be affected by a number of factors over which we have little or no control.
      The following issues, uncertainties, and risks, among others, should be
      considered in evaluating our business and growth outlook.




**Our
      business is subject to general economic and business factors that are largely
      out of our control, any of which could have a materially adverse effect on
      our
      operating results.**




Our
      business is
      dependent on a number of factors that may have a materially adverse effect
      on
      our results of operations, many of which are beyond our control. The most
      significant of these factors are recessionary economic cycles, changes in
      customers’ inventory levels, excess tractor or trailer capacity, and downturns
      in customers’ business cycles, particularly in market segments and industries
      where we have a significant concentration of customers, and in regions of the
      country where we have a significant amount of business. Economic conditions
      may
      adversely affect our customers and their ability to pay for our services.
      Customers encountering adverse economic conditions represent a greater potential
      for loss, and we may be required to increase our allowance for doubtful
      accounts. We also are affected by increases in interest rates, fuel prices,
      taxes, tolls, license and registration fees, insurance costs, and the rising
      costs of healthcare for our employees. We could be affected by strikes or other
      work stoppages at our facilities or at customer, port, border, or other shipping
      locations.




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.
      Any
      of these could lead to border crossing delays or the temporary closing of the
      United States/Canada or United States/Mexico border. Enhanced security measures
      could impair our operating efficiency and productivity and result in higher
      operating costs.




8
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**We
      operate
      in a highly competitive industry, and our business may suffer if we are unable
      to adequately address downward pricing pressures and other results of
      competition.**




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




·
            We
                compete
                with many other truckload carriers of varying sizes and, to a lesser
                extent, with less-than-truckload carriers, railroads, and other
                transportation companies. Many of our competitors have more equipment,
                a
                wider range of services, greater capital resources, or other competitive
                advantages.·
            Many
                of our
                competitors periodically reduce their freight rates to gain business,
                especially during times of reduced growth in the economy. This may
                limit
                our ability to maintain or increase freight rates or to continue
                to expand
                our business.·
            Many
                of our
                customers also operate their own private trucking fleets, and they
                may
                decide to transport more of their own freight.·
            In
                recent
                years, many shippers have reduced the number of carriers they use
                by
                selecting “core carriers” as approved service providers. As this trend
                continues, some of our customers may not select us as a “core
                carrier.”·
            Many
                customers periodically solicit bids from multiple carriers for their
                shipping needs, and this process may depress freight rates or result
                in a
                loss of business to competitors.




**If
      we are
      unable to successfully execute our business strategy, our growth and
      profitability could be adversely affected.**




Our
      strategy for
      increasing our revenue and profitability includes continuing to allocate more
      of
      our resources to our dedicated and expedited intermodal rail strategic business
      unit, our investment in Arnold and Total, and improving the profitability of
      all
      of our strategic business units through yield management and cost control
      efforts. We may experience difficulties and higher than expected expenses in
      reallocating our assets and developing new business. If we are unable to
      continue to grow and improve the profitability of our business units, our growth
      prospects, results of operations, and financial condition will be adversely
      affected.




**Ongoing
      insurance and claims expenses could significantly affect our earnings.**




Our
      future
      insurance and claims expenses may exceed historical levels, which could reduce
      our earnings. We self-insure for a significant portion of our claims exposure
      from workers’ compensation, auto liability, general liability, and cargo and
      property damage, as well as employees’ health costs. We also are responsible for
      our legal expenses within our self-insured retentions for liability and workers’
compensation claims. We currently reserve for anticipated losses and expenses
      and regularly evaluate and adjust our claims reserves to reflect actual
      experience. However, ultimate results may differ from our estimates, which
      could
      result in losses above reserved amounts. Because of our substantial self-insured
      retention amounts, we have significant exposure to fluctuations in the number
      and severity of claims. Our operating results will be adversely affected if
      we
      experience an increase in the frequency and severity of claims for which we
      are
      self-insured, accruals of significant amounts within a given period, or claims
      proving to be more severe than originally assessed.




We
      maintain
      insurance above the amounts for which we self-insure with insurance carriers
      that we believe are financially sound. Although we believe the aggregate
      insurance limits should be sufficient to cover reasonably expected claims,
      it is
      possible that one or more claims could exceed our aggregate coverage limits.
      Insurance carriers periodically raise premiums for many businesses, including
      trucking companies. As a result, our insurance and claims expense could
      increase, or we could find it necessary to again raise our self-insured
      retention or decrease our aggregate coverage limits when our policies are
      renewed or replaced. Our operating results and financial condition may be
      adversely affected if these expenses increase, if we experience a claim in
      excess of our coverage limits, or if we experience a claim for which we do
      not
      have coverage.




**Our
      revenue
      growth may not continue at historical rates, which could adversely affect our
      stock price.**




We
      have achieved
      significant revenue growth since becoming a public company in 1994. There is
      no
      assurance that our revenue growth rate will continue or that we can effectively
      adapt our management, administrative, and operating systems to respond to any
      future growth. Our operating margins could be adversely affected by future
      changes in and expansion of our business or by changes in economic conditions.
      Slower or less profitable growth could adversely affect our stock price.




9
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**Increases
      in driver compensation or difficulty in attracting and retaining drivers could
      affect our profitability and ability to grow.**




Like
      nearly all
      trucking companies, we experience substantial difficulty in attracting and
      retaining sufficient numbers of qualified drivers, including independent
      contractors. In addition, due in part to current economic conditions, including
      the higher cost of fuel, insurance, and tractors, the available pool of
      independent contractor drivers has been declining. Because of the shortage
      of
      qualified drivers, the availability of alternative jobs due to the current
      economic expansion, and intense competition for drivers from other trucking
      companies, we expect to continue to face difficulty increasing the number of
      our
      drivers, including independent contractor drivers, who are one of our principal
      sources of planned growth. In addition, our industry suffers from high turnover
      rates of drivers. This turnover rate requires us to continually recruit a
      substantial number of drivers in order to operate existing equipment. If we
      are
      unable to continue to attract a sufficient number of drivers and independent
      contractors, we could be required to adjust our compensation packages, let
      trucks sit idle, or operate with fewer trucks and face difficulty meeting
      shipper demands, all of which would adversely affect our growth and
      profitability. In addition, the compensation we offer our drivers and
      independent contractors is subject to market forces, and we may find it
      necessary to continue to increase their compensation in future periods. Any
      increase in our operating costs or in the number of tractors without drivers
      would adversely affect our growth and profitability.




**Fluctuations
      in the price or availability of fuel may increase our cost of operation, which
      could materially and adversely affect our profitability.**




We
      require large
      amounts of diesel fuel to operate our tractors, and diesel fuel is one of our
      largest operating expenses. Diesel fuel prices fluctuate greatly, and prices
      and
      availability of all petroleum products are subject to economic, political,
      and
      other market factors beyond our control. Substantially all of our customer
      contracts contain fuel surcharge provisions to mitigate the effect of price
      increases over base amounts set in the contract. However, these arrangements
      do
      not fully protect us from fuel price increases and also may result in our not
      receiving the full benefit of any fuel price decreases. Our fuel surcharges
      to
      customers do not fully recover all fuel increases because engine idle time,
      out-of-route miles, and non-revenue miles are not generally billable to the
      customer. We currently do not have any fuel hedging contracts in
      place.




**If
      we are
      unable to retain our senior officers, our business, financial condition, and
      results of operations could be harmed.**




We
      are highly
      dependent upon the services of the following senior officers: Patrick E. Quinn,
      our Co-Chairman of the Board, President, and Treasurer; Max L. Fuller, our
      Co-Chairman of the Board, Chief Executive Officer, and Secretary; Ray M. Harlin,
      Executive Vice President — Finance and Chief Financial Officer; and Jeffrey
      S. Wardeberg, Executive Vice President and Chief Operating Officer. We do
      not have employment agreements with any of these persons, except for salary
      continuation agreements with Messrs. Quinn and Fuller. The loss of any of
      their services could have a materially adverse effect on our operations and
      future profitability. We must continue to develop and retain a core group of
      managers if we are to realize our goal of expanding our operations and
      continuing our growth, and we may be unable to do so.




**Increased
      prices, reduced productivity, and restricted availability of new revenue
      equipment may adversely affect our earnings and cash flows.**




We
      have experienced
      higher prices for new tractors over the past few years, in addition to higher
      commodity prices and better pricing power among equipment manufacturers. 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.
      As
      we start to purchase the 2007 engines that are required to meet heightened
      emissions standards, we expect the new engines will cost more, reduce equipment
      productivity and lower fuel mileage and, therefore, increase our operating
      expenses.




We
      have agreements
      covering the terms of trade-in and/or repurchase commitments from our primary
      equipment vendors for disposal of a substantial portion of our tractors. The
      prices we expect to receive under these arrangements may be higher than the
      prices we would receive in the open market. We may suffer a financial loss
      upon
      disposition of our equipment if these vendors refuse or are unable to meet
      their
      financial obligations under these agreements, if we fail to enter into similar
      arrangements in the future, or if we do not purchase the required number of
      replacement units from the vendors.




10
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**Our
      Xpress
      Global Systems segment faces certain additional risks particular to its
      operations, any one of which could impact the ability of that segment to attain
      profitability and adversely affect consolidated revenues and operating
      results.**




Our
      Xpress Global
      Systems segment faces several additional risks particular to its business and
      operations. We have high customer and industry concentration in the segment,
      with Home Depot representing approximately 38% of Xpress Global Systems' revenue
      and substantially all of the revenue coming from the floorcovering industry.
      The
      reduction in or termination of business from one of Xpress Global Systems'
      major
      customers or a decrease in demand for Xpress Global systems’ services could
      adversely affect the earnings and profitability of the segment, which in turn
      may adversely affect consolidated operating results.




**Our
      substantial indebtedness and operating lease obligations could adversely affect
      our ability to respond to changes in our industry or business.**




As
      a result of our
      level of debt, operating lease obligations, and encumbered assets:




·
            Our
                vulnerability to adverse economic conditions and competitive pressures
                is
                heightened;·
            We
                will
                continue to be required to dedicate a substantial portion of our
                cash
                flows from operations to operating lease payments and repayment of
                debt,
                limiting the availability of cash for other purposes;·
            Our
                flexibility in planning for, or reacting to, changes in our business
                and
                industry will be limited;·
            Our
                profitability is sensitive to fluctuations in interest rates because
                some
                of our debt obligations are subject to variable interest rates, and
                future
                borrowings and lease financing arrangements will be affected by any
                such
                fluctuations; and·
            Our
                ability
                to obtain additional financing in the future for working capital,
                capital
                expenditures, acquisitions or other purposes may be
                limited.




Our
      operating
      leases and debt obligations could materially and adversely affect our ability
      to
      finance our future operations or capital needs or to engage in other business
      activities. There is no assurance that additional financing will be available
      when required or, if available, will be on terms satisfactory to us.




**Service
      instability in the railroad industry could increase our operating costs and
      reduce our ability to offer expedited intermodal rail services, which could
      adversely affect our revenues and operating results.**




We
      depend on the
      major U.S. railroads for our expedited intermodal rail services. In most
      markets, rail service is limited to a few railroads or even a single railroad.
      Any reduction in service by the railroads with whom we have relationships is
      likely to increase the cost of the rail-based services we provide and reduce
      the
      reliability, timeliness, and overall attractiveness of our rail-based services.
      For example, on several occasions there have been service disruptions in the
      railroad industry that have impacted expedited rail service throughout the
      United States. Although the disruptions have been primarily with railroads other
      than our major providers, it is possible that future service disruptions that
      affect our operations may occur, which would decrease demand for, or the
      profitability of, our expedited intermodal rail business. In addition, because
      most of the railroads’ workforce is subject to collective bargaining agreements,
      our business could be adversely affected by labor disputes between the railroads
      and their union employees. Further, railroads are relatively free to adjust
      shipping rates up or down as market conditions permit. Price increases could
      result in higher costs to our customers and our ability to offer expedited
      intermodal rail services.




**We
      operate
      in a highly regulated industry and increased costs of compliance with, or
      liability for violation of, existing or future regulations could have a
      materially adverse effect on our business.**




In
      general, the
      increasing burden of regulation raises our costs and lowers our efficiency.
      Future laws and regulations may be more stringent and require changes in our
      operating practices, influence the demand for transportation services, or
      require us to incur significant additional costs. Higher costs incurred by
      us or
      by our suppliers who pass the costs onto us through higher prices would
      adversely affect our results of operations.




In
      the aftermath of
      the September 11, 2001 terrorist attacks, federal, state, and municipal
      authorities have implemented and continue to implement various security
      measures, including checkpoints and travel restrictions on large trucks. These
      regulations also could complicate the matching of available equipment with
      hazardous material shipments, thereby increasing our response time on customer
      orders and our non-revenue miles. As a result, it is possible we may fail to
      meet the needs of our customers or may incur increased expenses to do so. These
      security measures could negatively impact our operating results.




11
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**We
      may not
      make acquisitions in the future, or if we do, we may not be successful in
      integrating the acquired businesses.**




Acquisitions
      have
      provided a substantial portion of our growth, as we have made several
      acquisitions since becoming a public company in 1994. There is no assurance
      that
      we will be successful in identifying, negotiating, or consummating any future
      acquisitions. If we fail to make any future acquisitions, our growth rate could
      be materially and adversely affected.




Any
      acquisitions we
      undertake could involve the dilutive issuance of equity securities and/or
      incurring indebtedness. In addition, acquisitions involve numerous risks,
      including difficulties in assimilating the acquired company’s operations, the
      diversion of our management’s attention from other business concerns, risks of
      entering into markets in which we have had 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 acquisitions in the future, there is no assurance
      that we will be able to negotiate favorable terms or successfully integrate
      the
      acquired companies or assets into our business. If we fail to do so, or we
      experience other risks associated with acquisitions, our financial condition
      and
      results of operations could be materially and adversely affected.




**Our
      operations are subject to various environmental laws and regulations, the
      violation of which could result in substantial fines or
      penalties.**




Our
      operations are
      subject to environmental laws and regulations, including laws and regulations
      dealing with above-ground fuel storage tanks, the transportation of hazardous
      material, engine idling, emissions standards, and other environmental matters.
      Our truck terminals are often located in industrial areas where groundwater
      or
      other forms of environmental contamination could occur. Our operations involve
      the risks of fuel spillage or seepage, environmental damage, and hazardous
      waste
      disposal, among others. We maintain above-ground tanks for lubricating oil
      at
      our terminals and facilities and fueling islands at several of our facilities.
      Although we have instituted programs to monitor and control environmental risks
      and promote compliance with applicable environmental laws and regulations,
      if we
      fail to comply with the applicable regulations, we could be subject to
      substantial fines or penalties and to civil and criminal liability. Some of
      the
      freight we transport consists of low-grade hazardous substances, which subject
      us to a wide array of regulations. If we are involved in a fuel spill or
      accident involving hazardous substances where there are releases of such
      substances, or if we are found to be in violation of applicable laws or
      regulations, we could be subject to liabilities that may harm 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.




Regulations
      limiting exhaust emissions became effective in 2002 and become progressively
      more restrictive in 2007 and 2010. Engines manufactured after October 2002
      generally cost more, produce lower fuel mileage, and require additional
      maintenance compared with earlier models. Substantially all of our tractors
      are
      equipped with these engines. We expect additional cost increases and degradation
      in fuel mileage from the 2007 engines. These adverse effects, combined with
      the
      uncertainty as to the reliability of the newly designed diesel engines and
      the
      residual values of these vehicles, could increase our costs or otherwise
      adversely affect our business or operations.




**Our
      Co-Chairmen, Patrick E. Quinn and Max L. Fuller, control a large portion of
      our
      stock and have substantial control over us, which could limit your ability
      to
      influence the outcome of key transactions, including changes of control.**




Patrick
      E. Quinn,
      Co-Chairman, President, and Treasurer, and Max L. Fuller, Co-Chairman, Chief
      Executive Officer, and Secretary, control a large portion of our stock and
      hold
      voting power of over 50% of the outstanding votes. On all matters with
      respect to which our stockholders have a right to vote, including the election
      of directors, 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. All
      outstanding shares of Class B common stock are owned by Messrs. Quinn
      and Fuller and are convertible to Class A common stock on a share-for-share
      basis at the election of Messrs. Quinn or Fuller or upon the occurrence of
      certain triggering events. Accordingly, together Messrs. Quinn and Fuller
      will continue to effectively control decisions requiring stockholder approval,
      including the election of our entire board of directors, the adoption or
      extension of anti-takeover provisions, mergers, and other business combinations.
      This concentration of ownership could limit the price that some investors might
      be willing to pay for our Class A common stock, and could allow
      Messrs. Quinn and Fuller, together, to prevent or delay a change of
      control, which other stockholders may favor. The interests of Messrs. Quinn
      and Fuller may conflict with the interests of other holders of Class A
      common stock, and they may take actions affecting us with which the Class A
      common stockholders disagree.






**ITEM
      1B.****UNRESOLVED
      STAFF COMMENTS**




None.




12
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          of Contents*


**ITEM
      2.****PROPERTIES**




The
      following table
      provides information regarding our main facilities at December 31,
      2006:




**Company
                Location**
            **Facility
                Functions**
            **Owned
                or Leased*****Truckload
                Division***
            ***(U.S.
                Xpress, Arnold, Total)***Austell,
                Georgia
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            OwnedCamp
                Hill,
                Pennsylvania
            Office,
                Terminal, Maintenance, Customer Service, Fleet Services, Driver Training,
                Driver Recruiting
            OwnedChattanooga,
                Tennessee
            Corporate
                Office
            OwnedColton,
                California
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver
                Training
            OwnedGrand
                Prairie, Texas
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            OwnedIrving,
                Texas
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            LeasedJacksonville,
                Florida
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            OwnedLexington,
                North Carolina
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            OwnedLincoln,
                Nebraska
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training,
                Independent Contractor Recruiting
            OwnedLoudon,
                Tennessee
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            OwnedMedway,
                Ohio
            Terminal,
                Maintenance, Customer Service, Driver Recruiting, Fleet
                Services
            LeasedMemphis,
                Tennessee
            Terminal,
                Maintenance, Driver Recruiting
            LeasedOklahoma
                City, Oklahoma
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            LeasedRichland,
                Mississippi
            Office,
                Terminal, Maintenance, Customer Service, Fleet Services, Driver Training,
                Driver Recruiting
            OwnedTunnel
                Hill,
                Georgia
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            LeasedTupelo,
                Mississippi
            Terminal,
                Maintenance, Customer Service, Fleet Services, Driver Training, Driver
                Recruiting
            OwnedThe
                truckload
                division also has drop yards and various operating facilities throughout
                the United States.***Xpress
                Global Systems:***La
                Mirada,
                California
            Distribution
                Center
            LeasedTunnel
                Hill,
                Georgia
            Corporate
                Office, Distribution Center
            Leased




Xpress
      Global
      Systems also has drop yards and distribution centers throughout the United
      States. See
Footnote
      5 for notes payable on owned properties
      above.




Our
      corporate and
      truckload headquarters are located in Chattanooga, Tennessee. The facilities
      encompass nearly 150,000 square feet of office space and include
      state-of-the-art information management and communications systems. We maintain
      fifteen operations locations offering full terminal, maintenance, and other
      services, and a smaller presence of numerous additional offices and drop yard
      facilities throughout the continental United States which are instrumental
      in
      the management of our truckload business. In our opinion, our facilities are
      suitable and adequate for our needs.




Xpress
      Global
      Systems’ corporate headquarters are based in Tunnel Hill, Georgia, approximately
      25 miles from the Chattanooga location. The Tunnel Hill facility includes a
      101-door loading dock facility in which floorcovering shipments from multiple
      manufacturers are consolidated into truckloads for delivery to 42 Company-owned
      and agent-operated distribution service centers. Substantially all Xpress Global
      Systems’ facilities operate as distribution centers performing consolidation,
      warehousing and local distribution.







**ITEM
      3.****LEGAL
      PROCEEDINGS**




We
      are a party to
      ordinary, routine litigation and administrative proceedings incidental to our
      business. These proceedings primarily involve claims for personal injury or
      property damage incurred in the transportation of freight and for personnel
      matters. We maintain insurance to cover liabilities arising from the
      transportation of freight in amounts in excess of self-insurance retentions.
      See Item
      1 .
“Business
      -
      Operations.”






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




We
      did not submit
      any matter to a vote of our security holders during the fourth quarter of
      2006.







13
 *Table
          of Contents*


**PART
      II**




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






**COMMON
      STOCK AND STOCKHOLDER DATA**




Our
      Class A common
      stock is traded on the NASDAQ National Market System under the symbol XPRSA.
      No
      market exists for our Class B common stock. At March 12, 2007, there were
      1,019 registered stockholders and an estimated 2,750 beneficial owners of our
      Class A common stock and two beneficial owners of our Class B common
      stock. At March 12, 2007, there were 12,181,572 shares of Class A common
      stock outstanding and 3,040,262 shares of Class B common stock outstanding.
      On March 12, 2007, the closing price for the Class A common stock was
      $19.11. Listed below are the high and low closing prices with respect to shares
      of Class A common stock, as reported on the Nasdaq National Market System,
      for the periods indicated:




**High**
            
            **Low****Year
                Ended December 31, 2006**Fourth
                Quarter
            
            $
            26.71
            
            $
            16.10Third
                Quarter
            
            $
            27.95
            
            $
            19.25Second
                Quarter
            
            $
            27.17
            
            $
            17.94First
                Quarter
            
            $
            19.47
            
            $
            15.23**Year
                Ended December 31, 2005**Fourth
                Quarter
            
            $
            17.75
            
            $
            9.98Third
                Quarter
            
            $
            14.17
            
            $
            11.43Second
                Quarter
            
            $
            16.90
            
            $
            10.59First
                Quarter
            
            $
            33.70
            
            $
            16.14





The
      high and low
      bid prices set forth in the table may not necessarily represent actual
      transactions.







**DIVIDENDS**




We
      have never paid
      a cash dividend on our Class A or Class B common stock. We currently
      intend to continue to retain earnings to finance the growth of our business
      and
      reduce our indebtedness rather than to pay dividends. Our ability to pay cash
      dividends is currently limited by restrictions contained in our revolving credit
      facility. Future payments of cash dividends will depend on our financial
      condition, results of operations, capital commitments, restrictions under
      then-existing agreements, and other factors our board of directors deems
      relevant. (See Item
      7 .,
“Management’s
      Discussion and Analysis of Financial Condition and Results of Operations -
      Liquidity and Capital Resources - Debt,” and Note
      5 ,
“Long-Term
      Debt,”
of the accompanying financial statements included under Item
      8 of this Form
      10-K.)




14
 *Table
          of Contents*







15
 *Table
          of Contents*


**ITEM
      6.****SELECTED
      FINANCIAL DATA**





The
      selected
      consolidated financial data presented below as of the end of, and for, each
      of
      the years in the five-year period ended December 31, 2006, are derived from
      our Consolidated Financial Statements. The information set forth below should
      be
      read in conjunction with “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations,” and the Consolidated Financial Statements
      and Notes thereto included in Item
      7 of this Form 10-K.




**YEAR
                ENDED DECEMBER 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002**(In
                thousands, except per share and operating data)**Statement
                of Operations Data**Operating
                revenue:Truckload,
                net of fuel surcharge(1)
            
            **$**
            **1,178,655**
            
            $
            933,153
            
            $
            905,485
            
            $
            793,884
            
            $
            762,322Fuel
                surcharge revenue(1)
            
            
            **204,837**
            
            
            125,478
            
            
            60,957
            
            
            33,976
            
            
            15,565Xpress
                Global
                Systems(1)
            
            
            **93,533**
            
            
            125,389
            
            
            158,566
            
            
            137,842
            
            
            114,806Intercompany(1)
            
            
            **(5,261**
            **)**
            
            (19,788
            )
            
            (19,352
            )
            
            (35,193
            )
            
            (30,345
            )Consolidated
            
            **$**
            **1,471,764**
            
            $
            1,164,232
            
            $
            1,105,656
            
            $
            930,509
            
            $
            862,348Income
                from
                operations(2)
            
            **$**
            **56,908**
            
            $
            23,970
            
            $
            40,267
            
            $
            24,540
            
            $
            19,381Income
                before
                taxes(2)
            
            **$**
            **36,811**
            
            $
            18,148
            
            $
            30,331
            
            $
            14,543
            
            $
            3,741Net
                income(2)
            
            **$**
            **20,104**
            
            $
            9,432
            
            $
            16,426
            
            $
            7,643
            
            $
            1,099Earnings
                per
                share - basic(2)
            
            **$**
            **1.31**
            
            $
            0.59
            
            $
            1.16
            
            $
            0.55
            
            $
            0.08Weighted
                average number of shares outstanding - basic
            
            
            **15,316**
            
            
            15,930
            
            
            14,159
            
            
            13,966
            
            
            13,888Earnings
                per
                share - diluted(2)
            
            **$**
            **1.29**
            
            $
            0.59
            
            $
            1.14
            
            $
            0.54
            
            $
            0.08Weighted
                average number of shares outstanding - diluted
            
            
            **15,568**
            
            
            16,083
            
            
            14,399
            
            
            14,067
            
            
            14,043**Truckload
                Operating Data**Average
                revenue per loaded mile(3)
            
            **$**
            **1.62**
            
            $
            1.59
            
            $
            1.48
            
            $
            1.30
            
            $
            1.26Average
                revenue miles per tractor per period(4)
            
            
            **95,096**
            
            
            98,008
            
            
            100,862
            
            
            111,564
            
            
            112,804Average
                revenue per tractor, per week(3)(4)
            
            **$**
            **3,026**
            
            $
            3,117
            
            $
            2,958
            
            $
            2,777
            
            $
            2,718Average
                length of haul in miles
            
            
            **594**
            
            
            679
            
            
            721
            
            
            783
            
            
            823Non-revenue
                miles percentage
            
            
            **12.1**
            **%**
            
            11.1
            %
            
            11.0
            %
            
            10.2
            %
            
            9.9
            %Average
                tractors during period(5)
            
            
            **6,836**
            
            
            5,070
            
            
            5,369
            
            
            5,433
            
            
            5,331Tractors
                at
                end of period(5)
            
            
            **7,456**
            
            
            5,052
            
            
            5,034
            
            
            5,338
            
            
            5,530Trailers
                at
                end of period(5)
            
            
            **20,548**
            
            
            16,619
            
            
            16,437
            
            
            14,053
            
            
            12,958**Balance
                Sheet Data**Working
                capital(1)
            
            **$**
            **17,158**
            
            $
            38,124
            
            $
            50,915
            
            $
            44,243
            
            $
            31,550Total
                assets(1)
            
            **$**
            **903,367**
            
            $
            607,384
            
            $
            550,710
            
            $
            430,613
            
            $
            429,881Long-term
                debt, including current maturities and securitization(1)
            
            **$**
            **340,534**
            
            $
            177,155
            
            $
            149,566
            
            $
            146,579
            
            $
            167,863Stockholders’
                equity
            
            **$**
            **252,499**
            
            $
            232,412
            
            $
            233,384
            
            $
            167,239
            
            $
            158,432




*
            No
                cash
                dividends were paid on our Class A or Class B common
                stock.(1)
            Includes:
                (a)
                in 2005 we exited the unprofitable airport-to-airport business causing
                a
                reduction in Xpress Global System and intercompany revenues (b) in
                2006 we
                acquired 80% of Arnold and Total resulting in a consolidation of
                their
                operating results for reporting purposes. This accounts for the majority
                of the increase in revenues, expenses, assets, and liabilities as
                of
                December 31, 2006 when compared to previous periods.(2)
            Includes:
                (a)
                in 2002, pre-tax charges of $1.7 million related to the settlement
                of a
                litigation matter; (b) in 2005, a $2.8 million charge for the sale
                and
                exit from the airport-to-airport business.(3)
            Excludes
                fuel
                surcharge revenue.(4)
            Excludes
                revenue and miles from expedited intermodal rail
                services.(5)
            Includes
                owned, leased, and independent contractor-provided tractors and owned
                and
                leased trailers.


16
 *Table
          of Contents*


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





*This
      Annual
      Report contains certain statements that may be considered forward-looking
      statements within the meaning of Section 27A of the Securities Act of 1933,
      as
      amended and Section 21E of the Securities Exchange Act of 1934, as amended.
      All
      statements, other than statements of historical fact, are statements that could
      be deemed forward-looking statements, including without limitation: any
      projections of earnings, revenues, or other financial items; any statement
      of
      plans, strategies, and objectives of management for future operations; any
      statements concerning proposed new services or developments; any statements
      regarding future economic conditions or performance; and any statements of
      belief and any statement of assumptions underlying any of the foregoing. Such
      statements may be identified by their use of terms or phrases such as "expects,"
      "estimates," "projects," "believes," "anticipates," "intends," and similar
      terms
      and phrases. Forward-looking statements are inherently subject to risks and
      uncertainties, some of which cannot be predicted or quantified, which could
      cause future events and actual results to differ materially from those set
      forth
      in, contemplated by, or underlying the forward-looking statements. Readers
      should review and consider the factors discussed in "* *Risk
      Factors* *"
      of this
      Annual Report on Form 10-K, along with various disclosures in our press
      releases, stockholder reports, and other filings with the Securities and
      Exchange Commission.*





*All
      such
      forward-looking statements speak only as of the date of this Form 10-K. You
      are
      cautioned not to place undue reliance on such forward-looking statements. The
      Company expressly disclaims any obligation or undertaking to release publicly
      any updates or revisions to any forward-looking statements contained herein
      to
      reflect any change in the Company's expectations with regard thereto or any
      change in the events, conditions, or circumstances on which any such statement
      is based.*





**BUSINESS
      OVERVIEW**





We
      are the fifth
      largest publicly traded truckload carrier in the United States, measured by
      revenue. Our primary business is offering a broad range of truckload services
      to
      customers throughout the United States and in portions of Canada and Mexico.
      We
      also offer transportation, warehousing, and distribution services to the
      floorcovering industry. Since becoming a public company, we have increased
      our
      operating revenue to $1.5 billion in 2006 from $215.4 million in 1994, a
      compounded annual growth rate of 17.4%. Our growth has come through expansion
      of
      business with new and existing customers, complementary acquisitions, and
      through the development and expansion of additional strategic business
      units.




***Recent
      Results of Operations and Year-End Financial
      Condition***


During
      2006, our
      growth in revenues is primarily the result of the consolidation of Arnold and
      Total’s operating results as of March 1, 2006. These acquisitions combined with
      substantial improvement in results in our base truckload business and Xpress
      Global Systems segment allowed for us to produce earnings per share of $1.29
      for
      2006, our highest annual earnings per share since 1998. We were able to achieve
      these results despite a softer than anticipated seasonal freight demand in
      the
      second half of the year.




For
      the year ended
      December 31, 2006, our key truckload operating statistics versus 2005 were
      as follows:




●
            Our
                average
                revenue per loaded mile, before fuel surcharge, increased to $1.62
                from
                $1.59;●
            Our
                average
                revenue per tractor per week, before fuel surcharge, decreased to
                $3,026
                from $3,117;●
            Our
                tractors
                at end of the period increased to 7,456 from 5,052;●
            Our
                empty
                mile percentage in 2006 increased to 12.14% from 11.10% as a result
                of our
                average length of haul being reduced to 594 from
                679.




The
      operating
      statistics for 2006 include those of Arnold and Total from February 28, 2006
      the
      date we increased our ownership to 80%. These statistics have impacted our
      consolidated operating statistics as their consolidated operations tend to
      have
      a shorter length of haul, higher revenue per loaded mile, and higher empty
      mile
      percentage.




Our
      operating ratio
      was 95.5% in 2006 and 97.7% in 2005. Our operating strategy is to allocate
      our
      truckload assets to business units with greater profitability and improve the
      profitability of each business unit. Our primary area of focus initially has
      been on improving our business units’ yield management and asset productivity.
      We seek to do this by raising freight rates where justified and also replacing
      less profitable freight. In this process, we evaluate rates, non-revenue miles,
      miles per tractor, the total time our assets are committed to the freight
      movement, the efficiency of our equipment positioning before and after the
      movement, total costs associated with the movement, drivers’ domiciles and
      preferences, the overall customer relationship, and other factors. Based on
      our
      criteria, our sales  and
      operations
      personnel work together to select more profitable freight.




At
      December 31,
      2006, our balance sheet reflected $252.5 million in stockholders’ equity and
      $340.5 million in aggregate borrowings, including current maturities and the
      securitization facility.


17
 *Table
          of Contents*


***Segment
      Reporting***


Our
      truckload
      operations contributed approximately 94% of our total operating revenue in
      2006.
      Our Xpress Global Systems operations contributed approximately 6% of our revenue
      in 2006.




Please
      refer to
      Note 18 to our financial statements included under Item 8 of this Form 10-K
      for
      financial information regarding segments.




**REVENUE
      AND
      EXPENSES**




The
      primary measure
      we use to evaluate our profitability is operating ratio (operating expenses,
      net
      of fuel surcharge, as a percentage of revenue, before fuel surcharge). Our
      operating ratio was 95.5% in 2006, compared to 97.7% in 2005.




***Our
      Truckload Segment***


Our
      truckload
      segment primarily generates revenue by transporting freight for our customers.
      Generally, we are paid a predetermined rate per mile for our truckload services.
      We enhance our truckload revenue by charging for tractor and trailer detention,
      loading and unloading activities, and other specialized services, as well as
      through the collection of fuel surcharges to mitigate the impact of increases
      in
      the cost of fuel. The main factors that affect our truckload revenue are the
      revenue per mile we receive from our customers, the percentage of miles for
      which we are compensated, and the number of shipments and miles we generate.
      These factors relate, among other things, to the general level of economic
      activity in the United States, inventory levels, specific customer demand,
      the
      level of capacity in the trucking industry, and driver availability. Our primary
      measures of revenue generation for our truckload business are average revenue
      per loaded mile and average revenue per tractor per week, in each case excluding
      fuel surcharge revenue. Average revenue per loaded mile, before fuel surcharge
      revenue, increased to $1.62 in 2006 from $1.59 in 2005. Average revenue per
      tractor per week, before fuel surcharge revenue, decreased to $3,026 in 2006
      from $3,117 in 2005 (excluding rail revenue).




The
      main factors
      that impact our profitability in terms of expenses 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
      purchased transportation expenses, which include compensating independent
      contractors and providers of expedited intermodal rail services. 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 include rentals and
      depreciation of long-term assets, such as revenue equipment and terminal
      facilities, and the compensation of non-driver personnel.




***Our
      Xpress Global Segment***


Our
      Xpress Global
      segment primarily generates revenue by transporting less-than-truckload freight
      for our customers. Generally, we are paid a predetermined rate per square yard
      for carpet and per pound for all other commodities. The rates vary based on
      miles, type of service, and type of freight we are hauling. We enhance our
      less-than-truckload revenue by charging for storage, warehousing, and other
      specialized services, as well as through the collection of fuel surcharges
      to
      mitigate the impact of increases in the cost of fuel. The main factors that
      affect our less-than-truckload revenue are the revenue per pound we receive
      from
      our customers, the average weight per shipment we haul, and the number of
      shipments we generate. These factors relate, among other things, to the general
      level of economic activity in the United States, especially in the housing
      industry, inventory levels, specific customer demand, the level of capacity
      in
      the trucking industry, and driver availability. Our primary measures of revenue
      generation for our less-than-truckload business are average revenue per pound
      (excluding fuel surcharge revenue), total tonnage, and number of loads hauled
      per day.




The
      main factors
      that impact our profitability in terms of expenses are the variable costs of
      transporting the freight for our customers. These costs include purchased
      transportation, fuel expense, and the cost paid to our agents to deliver the
      freight. Expenses that have both fixed and variable components include driver
      and dock related expenses, such as wages, benefits, training, and recruitment,
      maintenance and tire expense, and our total cost of insurance and claims. These
      expenses generally vary with the miles we travel and the tonnage of freight
      we
      handle, but also have a controllable component based on load factor, safety,
      fleet age, efficiency and other factors. Our main fixed costs include rentals
      and depreciation of long-term assets, such as revenue equipment and terminal
      facilities and the compensation of non-driver and non-dock worker
      personnel.




***Revenue
      Equipment***


At
      December 31,
      2006, we had a truckload fleet of 7,456 tractors including the tractors at
      Arnold and Total and 858 owner-operator tractors. We also operated 20,548
      trailers in our truckload fleet and approximately 295 tractors dedicated to
      local and drayage services. At Xpress Global Systems, we operated 199 pickup
      and
      delivery tractors and 445 trailers.




18
 *Table
          of Contents*


**CONSOLIDATED
      RESULTS OF OPERATIONS**




The
      following table
      sets forth the percentage relationships of expense items to total revenue,
      excluding fuel surcharge, for each of the fiscal years indicated below. Fuel
      surcharge revenue is offset against fuel and fuel taxes. We believe that
      eliminating the impact of this source of revenue provides a more consistent
      basis for comparing results of operations from period to period.






**(Total
                revenue)**
            
            **(Revenue,
                before fuel surcharge)****Twelve
                Months Ended**
            
            **Twelve
                Months Ended****December
                31,**
            
            **December
                31,****2006**
            
            **2005**
            
            **2004**
            
            **2006**
            
            **2005**
            
            **2004****Operating
                Revenue**
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %**Operating
                Expenses:**Salaries,
                wages and benefits
            
            
            33.4
            
            
            34.3
            
            
            33.2
            
            
            38.8
            
            
            38.5
            
            
            35.2Fuel
                and fuel
                taxes
            
            
            22.2
            
            
            19.3
            
            
            15.2
            
            
            9.6
            
            
            9.6
            
            
            10.3Vehicle
                rents
            
            
            5.2
            
            
            6.0
            
            
            6.4
            
            
            6.1
            
            
            6.7
            
            
            6.8Depreciation
                and amortization, net of gain on sale
            
            
            4.3
            
            
            4.0
            
            
            4.1
            
            
            5.0
            
            
            4.4
            
            
            4.3Purchased
                transportation
            
            
            15.6
            
            
            17.0
            
            
            19.2
            
            
            18.1
            
            
            19.0
            
            
            20.3Operating
                expense and supplies
            
            
            6.3
            
            
            6.5
            
            
            6.6
            
            
            7.4
            
            
            7.2
            
            
            7.0Insurance
                premiums and claims
            
            
            4.1
            
            
            4.7
            
            
            5.4
            
            
            4.7
            
            
            5.3
            
            
            5.7Operating
                taxes and licenses
            
            
            1.2
            
            
            1.2
            
            
            1.3
            
            
            1.3
            
            
            1.4
            
            
            1.3Communications
                and utilities
            
            
            0.9
            
            
            0.9
            
            
            1.0
            
            
            1.0
            
            
            1.0
            
            
            1.1General
                and
                other operating
            
            
            2.9
            
            
            3.8
            
            
            4.0
            
            
            3.5
            
            
            4.3
            
            
            4.2Loss
                on sale
                and exit of business
            
            
            0.0
            
            
            0.2
            
            
            0.0
            
            
            0.0
            
            
            0.3
            
            
            0.0Total
                operating expenses
            
            
            96.1
            
            
            97.9
            
            
            96.4
            
            
            95.5
            
            
            97.7
            
            
            96.2**Income
                from Operations**
            
            
            3.9
            
            
            2.1
            
            
            3.6
            
            
            4.5
            
            
            2.3
            
            
            3.8Interest
                expense, net
            
            
            1.3
            
            
            0.7
            
            
            0.8
            
            
            1.5
            
            
            0.8
            
            
            0.9Early
                extinguishment of debt
            
            
            0.0
            
            
            0.0
            
            
            0.0
            
            
            0.0
            
            
            0.0
            
            
            0.0Equity
                in
                income of affiliated companies
            
            
            0.0
            
            
            (0.2
            )
            
            0.0
            
            
            0.0
            
            
            (0.2
            )
            
            0.0Minority
                interest
            
            
            0.1
            
            
            0.0
            
            
            0.0
            
            
            0.1
            
            
            0.0
            
            
            0.01.4
            
            
            0.5
            
            
            0.8
            
            
            1.6
            
            
            0.6
            
            
            0.9Income
                before
                income tax provision
            
            
            2.5
            
            
            1.6
            
            
            2.8
            
            
            2.9
            
            
            1.7
            
            
            2.9Income
                tax
                provision
            
            
            1.1
            
            
            0.7
            
            
            1.3
            
            
            1.3
            
            
            0.8
            
            
            1.3**Net
                Income**
            
            
            1.4
            %
            
            0.9
            %
            
            1.5
            %
            
            1.6
            %
            
            0.9
            %
            
            1.6
            %




19
 *Table
          of Contents*


**Comparison
      of the Year Ended December 31, 2006 to the Year Ended December 31,
      2005**




**Total
      operating revenue** increased 26.4% to
      $1.5 billion from $1.2 billion for 2005. Total revenue included $204.8 million
      of fuel surcharge revenue in 2006 and $125.5 million of fuel surcharge revenue
      in 2005. In discussing our results of operations we use revenue, before fuel
      surcharge, (and fuel expense, net of surcharge), because we believe that
      eliminating the impact of this sometimes volatile source of revenue affords
      a
      more consistent basis for comparing our results of operations from period to
      period. We also discuss the changes in our expenses as a percentage of revenue,
      before fuel surcharge, in addition to absolute dollar changes, because we
      believe the high variable cost nature of our business makes a comparison of
      changes in expenses as a percentage of revenue more meaningful at times than
      absolute dollar changes.




**Revenue,
      before fuel surcharge,** increased 22.0% to
      $1.3 billion in 2006 compared to $1.0 billion in 2005. Truckload revenue, before
      fuel surcharge, increased 26.3% to $1.2 billion in 2006 compared to $933.2
      million in 2005, due to the addition of Arnold and Total. U.S. Xpress truckload
      revenue decreased $10.2 million due to a slight decrease in revenue miles,
      a
      0.6% decrease in average revenue per loaded mile and a 2.0% decrease in average
      seated trucks. Xpress Global Systems’ revenue decreased 25.4% to $93.5 million
      in 2006 compared to $125.4 million in 2005 and intersegment revenues decreased
      73.4% to $5.3 million in 2006 compared to $19.8 million in 2005 due primarily to
      the sale and exit from the unprofitable airport-to-airport business in the
      second quarter of 2005.




**Salaries,
      wages and benefits** increased
      23.1% to
      $492.2 million in 2006 compared to $399.9 million in 2005. The increase is
      primarily due to the inclusion of wages for Arnold and Total in the amount
      of
      $89.0 million. U.S. Xpress wages increased $11.1 million due in part to a 3.3%
      increase in company driver miles, expense associated with the issuance of
      restricted stock, and increases in maintenance and office wages. Xpress Global
      Systems wages decreased $8.1 million due to the sale and exit of the
      airport-to-airport business. As a percentage of revenue, before fuel surcharge,
      salaries, wages and benefits remained essentially constant at 38.8% in 2006,
      compared to 38.5% in 2005.




**Fuel
      and
      fuel taxes** ,
      net of fuel
      surcharge, increased 22.2% to $121.8 million in 2006 compared to $99.7 million
      in 2005. The increase is due primarily to the inclusion of net fuel and fuel
      tax
      expense for Arnold and Total in the amount of $25.1 million. Within U.S. Xpress,
      fuel and fuel taxes decreased by $2.7 million, although average fuel prices
      per
      gallon increased by approximately 14.0%, the increase was offset by increases
      in
      fuel surcharge recoveries. As a percentage of revenue, before fuel surcharge,
      fuel and fuel taxes, net of fuel surcharge remained relatively constant at
      9.6%
      for 2006 and 2005. We maintain a fuel surcharge program to assist us in recovery
      of increased fuel costs. Customer fuel surcharges in our truckload operations
      amounted to $204.8 million and $125.5 million for 2006 and 2005
      respectively.




**Vehicle
      rents** increased 10.5% to
      $77.0 million in 2006 compared to $69.7 million in 2005. The increase is
      primarily due to the inclusion of vehicle rents for Arnold and Total in the
      amount of $12.3 million. This increase is partially offset by the decrease
      in
      the average number of tractors financed under operating leases to 3,124 compared
      to 3,356 during 2006 and 2005, respectively and a decrease in the average number
      of trailers financed under operating leases to 8,084 in 2006 compared to 8,567
      during 2005 in our U.S. Xpress truckload operations. As a percentage of revenue,
      before fuel surcharge, vehicle rents were 6.1% in 2006 compared to 6.7% in
      2005.




**Depreciation
      and amortization** increased 37.0% to
      $63.0 million in 2006 compared to $46.0 million in 2005. Gains realized on
      the
      sale of revenue equipment are included in depreciation and amortization for
      reporting purposes. Depreciation and amortization, excluding gains increased
      to
      $65.6 million in 2006 compared to $49.6 million in 2005. The increase was
      primarily due to the inclusion of depreciation and amortization for Arnold
      and
      Total in the amount of $15.7 million, increased costs of the new EPA-compliant
      engines, and increased depreciation and amortization related to computer
      hardware and software. The increase was partially offset by a decrease in the
      average number of owned trailers to 6,679 from 7,589, during 2006 and 2005
      in
      U.S. Xpress truckload operations. As a percentage of revenue, before fuel
      surcharge, depreciation and amortization increased to 5.0% in 2006 compared
      to
      4.4% in 2005.




**Purchased
      transportation** increased 16.0% to
      $229.3 million in 2006 compared to $197.6 million in 2005 primarily due to
      the
      inclusion of purchase transportation amounts for Arnold and Total in the amount
      of $54.2 million. The effect was more than offset by the decline in U.S. Xpress
      average owner-operator trucks to 439 from 532 for the prior year and lower
      purchased transportation at Xpress Global Systems due to the sale and exit
      of
      the airport-to-airport business. Purchased transportation decreased as a
      percentage of revenue, before fuel surcharge, to 18.1% in 2006 from 19.0% in
      2005 primarily as a result of the sale and exit of the airport-to-airport
      business.




**Operating
      expense and supplies** increased
      24.1% to
      $93.2 million in 2006 compared to $75.1 million in 2005, primarily due to the
      inclusion of operating expense and supplies amounts for Arnold and Total in
      the
      amount of $18.8 million. As a percentage of revenue, before fuel surcharge,
      operating expense and supplies were 7.4% in 2006 compared to 7.2% in 2005.




**Insurance
      premiums and claims,** consisting
      primarily of premium and deductible amounts for liability (personal injury
      and
      property damage), physical damage and cargo damage insurance and claims,
      increased 8.7% to $60.0 million in 2006 compared to $55.2 million in 2005 due
      to
      the inclusion of insurance premiums and claims for Arnold and Total in the
      amount of $12.6 million. As a percentage of revenue, before fuel surcharge,
      insurance and premiums and claims expense decreased to 4.7% in 2006 compared
      to
      5.3% in 2005, primarily due to the U.S. Xpress decrease in provision for self
      insured liability claims. We are self-insured up to certain limits for cargo
      loss, physical damage and liability. We have adopted an insurance program with
      higher deductible exposure to offset the industry-wide increase in insurance
      premium rates. As of December 31, 2006, the retention level for cargo loss
      was
      $250 thousand and the retention level for liability was $3.0 million per
      occurrence. We maintain insurance with licensed insurance companies above
      amounts for which we are self insured for cargo and liability. We accrue for
      the
      uninsured portion of pending claims, plus any incurred but not reported claims.
      The accruals are estimated based on our evaluation of the type and severity
      of
      individual claims and future development based on historical trends. Insurance
      premiums and claims expense will fluctuate based on claims experience, premium
      rates and self-insurance retention levels.




20
 *Table
          of Contents*


**Operating
      taxes and licenses** increased 19.9% to
      $16.9 million in 2006 from $14.1 million in 2005. This increase is primarily
      due
      to the inclusion of operating taxes and licenses amounts from Arnold and Total
      in the amount of $3.6 million. As a percentage of revenue, operating taxes
      and
      license decreased slightly to 1.3% in 2006 from 1.4% in 2005.




**Communications
      and utilities** increased 17.8% to
      $12.6 million in 2006 from $10.7 million in 2005. This increase is primarily
      due
      to the inclusion of communications and utilities from Arnold and Total in the
      amount of $3.0 million. As a percentage of revenue, communications and utilities
      remained constant at 1.0% for both 2006 and 2005.




**General
      and
      other operating** decreased 1.7% to
      $43.1 million in 2006 from $43.8 million in 2005. This is primarily the result
      of the elimination of certain general and other operating expenses related
      to
      the airport-to-airport business partially offset by the inclusion of Arnold
      and
      Total in the amount of $5.8 million. As a percentage of revenue, before fuel
      surcharge, general and other operating decreased to 3.5% in 2006 from 4.3%
      in
      2005.




**The
      loss on
      sale and exit of business** was $2.8 million
      in 2005. During 2006, we increased our provisions for this exit in the amount
      of
      $800 thousand associated with uncollectible receivables and future lease
      commitments. Refer to Footnote
      10 ,
“ Loss
      on Sale and
      Exit of Business ”
in
      the
      accompanying consolidated financial statements for further
      information.




**Equity
      in
      loss/income of affiliated companies** was a loss of $327
      thousand in 2006, compared to income of $2.8 million in 2005. The decline is
      the
      result of the consolidation of Arnold and Total beginning March 1, 2006. Refer
      to Footnote
      12 ,
“ Equity
      and Cost
      Investments ”
in
      the
      accompanying consolidated financial statements for further
      information.




**Interest
      expense** increased $10.2
      million, or 122.9%, to $18.5 million in 2006 compared to $8.3 million in 2005.
      The increase is due primarily to the inclusion of interest expense for Arnold
      and Total, increased debt, and higher interest rates. Interest expense is
      expected to increase in future periods because of the consolidation of the
      borrowings of Arnold and Total as of March 2006. As of December 31, 2006, we
      increased our debt by $163.4 million as compared to December 31, 2005. This
      increase is primarily due to the inclusion of Arnold and Total debt. See Footnote
      5 ,
“ Long-Term
      Debt ”
and Footnote
      7 ,
“ Accounts
      Receivable Securitization ”,
      in the
      accompanying financial statements for further details.




**Minority
      interest** of $1.3 million is
      representative of the 20.0% minority shareholders’ interest in the net income of
      Arnold and Total.




**The
      effective tax rate** was 45.4% for the
      2006 fiscal year. The rate is higher than the statutory rate of 35.0%, primarily
      as a result of per diems paid to drivers which are not fully deductible for
      federal income tax purposes.




**Comparison
      of the Year Ended December 31, 2005 to the Year Ended December 31,
      2004**




**Total
      operating revenue** increased 5.3% to
      $1.2 billion from $1.1 billion for 2004. Total revenue included $125.5 million
      of fuel surcharge revenue in 2005 and $61.0 million of fuel surcharge revenue
      in
      2004. In discussing our results of operations we use revenue, before fuel
      surcharge, (and fuel expense, net of surcharge), because we believe that
      eliminating the impact of this sometimes volatile source of revenue affords
      a
      more consistent basis for comparing our results of operations from period to
      period. We also discuss the changes in our expenses as a percentage of revenue,
      before fuel surcharge, in addition to absolute dollar changes, because we
      believe the high variable cost nature of our business makes a comparison of
      changes in expenses as a percentage of revenue more meaningful at times than
      absolute dollar changes.




**Revenue,
      before fuel surcharge,** remained
      essentially constant at $1.0 billion in 2005 and 2004. U.S. Xpress revenue,
      before fuel surcharge, increased 3.1% to $933.2 million in 2005 compared to
      $905.5 million in 2004, due primarily to an increase of 7.4% in average revenue
      per loaded mile to $1.595 from $1.485. The increase in average revenue per
      loaded mile was primarily due to increased rates and from growth in dedicated
      operations, which generally provide for a shorter length of haul and higher
      rate
      per mile, the shortage of truck capacity in many geographic markets creating
      a
      stronger truck demand, and increases in tractor and trailer detention revenues.
      These gains were partially offset by a 5.6% decline in average tractors and
      a
      2.8% reduction in revenue miles per tractor. Xpress Global Systems’ revenue
      decreased 20.9% to $125.4 million in 2005 compared to $158.6 million in 2004
      due
      primarily to the sale and exit from the airport-to-airport business in the
      second quarter of 2005. Within Xpress Global Systems, floorcovering revenue
      decreased 2.4% to $99.3 million due primarily to a decreased volume of freight.
      Intersegment revenue increased 2.3% to $19.8 million in 2005 compared to $19.4
      million in 2004.




**Salaries,
      wages and benefits** increased
      8.9% to
      $399.9 million in 2005 compared to $367.3 million in 2004. As a percentage
      of
      revenue, before fuel surcharge, salaries, wages and benefits increased to 38.5%
      in 2005, compared to 35.2% in 2004. The increase was primarily due to a driver
      wage increase implemented in the fourth quarter of 2004, an increase in the
      number of local drivers necessary to support our expedited intermodal rail
      program, and an increase in health insurance costs and workers’ compensation
      claims, offset by decreases in non-driver personnel related to the sale and
      exit
      of the airport-to-airport business.




21
 *Table
          of Contents*


**Fuel
      and
      fuel taxes** ,
      net of fuel
      surcharge, decreased 7.3% to $99.7 million in 2005 compared to $107.6 million
      in
      2004. The decrease is primarily due to increased fuel surcharges paid to
      railroads and owner operators reflected in purchased transportation combined
      with a 2.8% decrease in company miles. Including the effect of fuel surcharge
      paid to rail roads and owner operators, fuel and fuel taxes, net of fuel
      surcharge, increased to $122.1 million in 2005 compared to $116.6 million in
      2004. Our cost per company mile increased approximately 5.7%. This increase
      was
      primarily due to the increase in the average fuel price per gallon of
      approximately 32% combined with the lower efficiency of the new EPA-compliant
      engines, offset by an increase in customer fuel surcharges.




**Vehicle
      rents** decreased 2.0% to
      $69.7 million in 2005 compared to $71.1 million in 2004. The decrease is
      primarily due to a decrease in the average number of tractors financed under
      operating leases to 3,356 compared to 3,504 during 2005 and 2004, respectively.
      The decrease was partially offset by an increase in the average number of
      trailers financed under operating leases to 8,567 compared to 8,240 during
      2005
      and 2004, respectively, due to the expansion of our trailer fleet necessary
      to
      support the expedited intermodal rail program. As a percentage of revenue,
      before fuel surcharge, vehicle rents were 6.7% in 2005 compared to 6.8% in
      2004.




**Depreciation
      and amortization** increased 3.1% to
      $46.0 million in 2005 compared to $44.6 million in 2004. Gains realized on
      the
      sale of revenue equipment are included in depreciation and amortization for
      reporting purposes. Depreciation and amortization, excluding gains increased
      to
      $49.6 million in 2005 compared to $46.2 million in 2004. The increase was
      primarily due to an increase in the average number of owned tractors to 2,076
      compared to 1,849 during 2005 and 2004, respectively, increased costs of the
      new
      EPA-compliant engines, and increased depreciation and amortization related
      to
      computer hardware and software. The increase was partially offset by a decrease
      in the average numbers of owned trailers to 7,589 from 8,385, during 2005 and
      2004. As a percentage of revenue, before fuel surcharge, depreciation and
      amortization increased to 4.4% in 2005 compared to 4.3% in 2004.




**Purchased
      transportation** decreased 6.9% to
      $197.6 million in 2005 compared to $212.2 million in 2004 primarily due to
      the
      sale and exit of the airport-to-airport business, and a decrease in the average
      number of owner-operators in the truckload segment in 2005 to 532, or 10.5%
      of
      the total fleet, compared to 783, or 14.6% of the total fleet, in 2004. This
      decrease was offset by the increased use in expedited intermodal rail in the
      truckload segment for certain medium-to-long haul truckload freight. As a result
      of the foregoing, purchased transportation decreased as a percentage of revenue,
      before fuel surcharge, to 19.0% in 2005 from 20.3% in 2004.




**Operating
      expense and supplies** increased
      3.3% to
      $75.1 million in 2005 compared to $72.7 million in 2004, primarily due to an
      increase in tractor maintenance costs. As a percentage of revenue, before fuel
      surcharge, operating expense and supplies were 7.2% in 2005 compared to 7.0%
      in
      2004. This is partially offset by certain expenses being eliminated with the
      sale and exit of the airport-to-airport business.




**Insurance
      premiums and claims,** consisting
      primarily of premium and deductible amounts for liability (personal injury
      and
      property damage), physical damage and cargo damage insurance and claims,
      decreased 7.5% to $55.2 million in 2005 compared to $59.7 million in 2004.
      As a
      percentage of revenue, before fuel surcharge, insurance and premiums and claims
      expense decreased to 5.3% in 2005 compared to 5.7% in 2004, primarily due to
      the
      decrease in liability and physical damage premiums and claims expense offset
      by
      the increase in cargo claims expense. We are self-insured up to certain limits
      for cargo loss, physical damage and liability. We have adopted an insurance
      program with higher deductible exposure to offset the industry-wide increase
      in
      insurance premium rates. As of December 31, 2005, the retention level for cargo
      loss was $250 thousand and the retention level for liability was $2.0 million
      per occurrence. We maintain insurance with licensed insurance companies above
      amounts for which we are self-insured for cargo and liability. We accrue for
      the
      uninsured portion of pending claims, plus any incurred but not reported claims.
      The accruals are estimated based on our evaluation of the type and severity
      of
      individual claims and future development based on historical trends. Insurance
      premiums and claims expense will fluctuate based on claims experience, premium
      rates and self-insurance retention levels.




**The
      loss on
      sale and exit of business** was $2.8 million
      in the second quarter of 2005. Refer to Footnote
      10 ,
“ Loss
      on Sale and
      Exit of Business ”
in
      the
      accompanying consolidated financial statements for further
      information.




**Equity
      in
      income of affiliated companies** was $2.8 million
      in 2005 compared to $203 thousand in 2004. This is the result of the Company
      recording equity in the earnings of Arnold Transportation Services, Inc., which
      was acquired in December 2004, and Total Transportation of Mississippi, which
      was acquired in April 2005, during 2005. Refer to Footnote
      12 ,
“ Equity
      and Cost
      Investments ”
in
      the
      accompanying consolidated financial statements for further
      information.




**Interest
      expense** decreased $1.4
      million, or 14.4%, to $8.3 million in 2005 compared to $9.7 million in 2004.
      The
      decrease is primarily attributable to a decline in average borrowings to $156.2
      million in 2005 from $180.4 million in 2004. See Footnote
      5 ,
“ Long-Term
      Debt ”
and Footnote
      7 ,
“ Accounts
      Receivable Securitization ”,
      of our 2005
      Consolidated Financial Statements for further details.




**The
      effective tax rate** was 48% for the
      2005 fiscal year. The rate is higher than the statutory rate of 36.5%, primarily
      as a result of per diems paid to drivers which are not fully deductible for
      federal income tax purposes.




22
 *Table
          of Contents*


**LIQUID****ITY
      AND
      CAPITAL RESOURCES**




Our
      business
      requires significant capital investments. Our primary sources of liquidity
      at
      December 31, 2006 were funds provided by operations, borrowings under our
      revolving credit facility, proceeds from our accounts receivable securitization
      facility, and long-term equipment debt and operating leases of revenue
      equipment. Our revolving credit facility has maximum available borrowings of
      $130.0 million and our accounts receivable securitization facility has maximum
      available borrowings of $140.0 million. We believe that funds provided by
      operations, borrowings under our revolving credit facility and securitization
      facility, equipment installment loans and long-term equipment debt and operating
      lease financing will be sufficient to fund our cash needs and anticipated
      capital expenditures for the next twelve months and the foreseeable
      future.




***Cash
      Flows***




**Year
                Ended December 31,*****(in
                thousands)***
            
            
            **2006**
            
            
            2005
            
            
            2004Net
                cash
                provided by operating activities
            
            **$**
            **114,125**
            
            $
            66,253
            
            $
            44,450Net
                cash used
                in investing activities
            
            
            **(173,353**
            **)**
            
            (73,378
            )
            
            (88,050
            )Net
                cash
                provided by financing activities
            
            
            **50,653**
            
            
            16,547
            
            
            43,498





Cash
      generated from
      operations increased $47.9 million during 2006 as compared to 2005. The increase
      was due primarily to increased earnings, depreciation, and the deferred tax
      liability in 2006 as compared to 2005.




Cash
      used in
      investing activities was $173.4 million during 2006 compared to $73.4 million
      in
      2005.  The increase in cash used in investing activities is primarily the
      result of $81.7 million more in net additions to property and equipment,
      combined with the acquisitions of Arnold and Total, and investment in Abilene
      during 2006 as compared to 2005. During 2005, the Company received $12.8 million
      in proceeds from the sale and exit of the unprofitable airport-to-airport
      business.




Net
      cash provided
      by financing activities was $50.7 million in 2006 compared to $16.5 million
      in
      2005. The increase in cash provided by financing activities is the result of
      increased borrowings related to the purchase of revenue equipment and fewer
      shares of stock being repurchased during 2006 compared to 2005.




***Debt***


On
      October 14,
      2004, we entered into a $100,000 senior secured revolving credit facility and
      letter of credit sub-facility with a group of banks, which replaced the prior
      $100,000 credit facility that was set to mature in March 2007. The credit
      facility is secured by revenue equipment and certain other assets and bears
      interest at the base rate, as defined, plus an applicable margin of 0.00% to
      0.25%, or LIBOR plus an applicable margin of 0.88% to 2.00%, based on our
      lease-adjusted leverage ratio.




On
      March 31, 2006,
      we amended the revolving credit facility and letter of credit sub-facility
      with
      a group of banks increasing the $100,000 senior secured revolving credit
      facility to $130,000. The amendment did not change the applicable margin for
      base rate loans or LIBOR loans, nor did it modify the fees for letter of credit
      transactions or quarterly commitment fees on the unused portion of the loan
      commitment. The amendment extended the maturity date of the credit facility
      from
      October 2009 to March 2011.




On
      October 27,
      2006, the Company amended the revolving credit facility. This amendment
      consisted of a $10 million increase in the aggregate dollar value of
      miscellaneous investments that the Company may make, an increase in the
      Company’s ability to redeem its own stock by increasing the dollar value of
      permitted redemptions from $15 million to $30 million, and the adjustment of
      certain financial covenant ratios.




At
      December 31,
      2006, the applicable margin was 0.00% for base rate loans and 1.50% for LIBOR
      loans. The credit facility also prescribes additional fees for letter of credit
      transactions and a quarterly commitment fee on the unused portion of the loan
      commitment (1.50% and 0.25%, respectively, at December 31, 2006). At December
      31, 2006, $95.9 million in letters of credit were outstanding under the credit
      facility with $32.4 million available to borrow. The facility is secured by
      substantially all assets of the Company, other than real estate and assets
      securing other debt of the Company




The
      credit facility
      requires, among other things, maintenance by the Company of prescribed minimum
      amounts of consolidated tangible net worth, fixed charge and asset coverage
      ratios, and a leverage ratio. Subject to certain defined exceptions, it also
      restricts the ability of the Company and its subsidiaries, without the approval
      of the lenders, to engage in sale-leaseback transactions, transactions with
      affiliates, investment transactions, acquisitions of the Company’s own capital
      stock or the payment of dividends on such stock, future asset dispositions
      (except in the ordinary course of business), or other business combination
      transactions, and to incur liens and future indebtedness. As of December 31,
      2006, the Company was in compliance with the credit facility covenants.




We
      are also party
      to a $140.0 million accounts receivable securitization. Under the accounts
      receivable securitization facility (the “Securitization Facility”), we sell
      accounts receivable as part of a two-step process that provides funding similar
      to a revolving credit facility. To facilitate this transaction, Xpress
      Receivables, LLC (“Xpress Receivables”) was formed as a wholly-owned subsidiary.
      Xpress Receivables is a bankruptcy remote, special purpose entity, which
      purchases accounts receivable from U.S. Xpress, Inc. and Xpress Global Systems,
      Inc. Xpress Receivables funds these purchases with money borrowed under a credit
      facility with Three Pillars Funding, LLC. On March 31, 2006, we amended the
      Securitization Facility, increasing the previous $100.0 million maximum
      thereunder to $140.0 million. Pursuant to the Securitization Facility amendment,
      Arnold and Total joined as additional originators, permitting Xpress Receivables
      to purchase accounts receivable from them in addition to U.S. Xpress and Xpress
      Global Systems.




23
 *Table
          of Contents*


The
      borrowings are
      secured by, and paid down through collections on, the accounts receivable.
      We
      can borrow up to $140.0 million under the Securitization Facility, subject
      to
      eligible receivables, and pay interest on borrowings based on commercial paper
      interest rates, plus an applicable margin, and a commitment fee on the daily,
      unused portion of the Securitization Facility. The Securitization Facility
      is
      reflected as a current liability because its term, subject to annual renewals,
      expires October 11, 2007.




The
      Securitization
      Facility requires that certain performance ratios be maintained with respect
      to
      accounts receivable and that Xpress Receivables preserve its bankruptcy remote
      nature. As of December 31, 2006, we were in compliance with the Securitization
      Facility covenants.




At
      December 31,
      2006 we had $340.5 million of borrowings, of which $252.3 million was long-term,
      and $88.2 million was current maturities, of which $37.0 million was the
      Securitization Facility. We also had approximately $95.9 million in undrawn
      letters of credit. At December 31, 2006, we had an aggregate of approximately
      $128.6 million of available borrowing remaining under our revolving credit
      facility and securitization. Current maturities include $6.7 million in balloon
      payments related to maturing revenue equipment installment notes. The balloon
      payments are generally expected to be funded with proceeds from the sale of
      the
      related revenue equipment, which is generally covered by repurchase and/or
      trade
      agreements in principle between the equipment manufacturer and us.




***Equity***


In
      January 2007,
      the Board of Directors authorized us to repurchase up to $15.0 million of our
      Class A common stock. The stock may be repurchased on the open market or in
      privately negotiated transactions at any time until January 26, 2008 under
      the
      Board’s extension, at which time, or prior thereto, the Board may elect to
      extend the repurchase program. The repurchased shares may be used for issuances
      under our incentive stock plan or for other general corporate purposes, as
      the
      Board may determine. During 2006, we repurchased 140,000 shares for
      approximately $2.5 million under the previous Board authorization granted in
      July 2005.




***Business
      Acquisitions***


In
      the fourth
      quarter of 2004, we acquired 49% of the outstanding stock of ATS Acquisition
      Holding Co. ("ATS"), the parent company of Arnold. In the second quarter of
      2005, we acquired 49% of the outstanding stock of Transportation Investments
      Inc. ("TII"), the parent company of Total, and certain affiliated companies
      (together with TII, the "Total Companies"). Certain members of Arnold’s current
      management team controlled the remaining 51% interest as well as a majority
      of
      the board of directors of ATS, and certain members of the Total management
      team
      controlled the remaining 51% interest and a majority of the boards of directors
      of the Total Companies. We did not guarantee any of ATS' or the Total Companies'
      debt and did not have any obligation to provide funding, services, or assets.
      We
      accounted for ATS' and the Total Companies' operating results using the equity
      method of accounting.




On
      February 28,
      2006, we increased our ownership interest in both ATS and the Total Companies
      to
      80% for approximately $7.9 million in cash, through the purchase of stock owned
      by the current management teams of Arnold and Total. The Arnold and Total
      management teams continue to hold 20% of the outstanding stock of ATS and the
      Total Companies, respectively. The Arnold management team, led by President
      and
      Chief Executive Officer Mike Walters, and the Total management team, led by
      Co-Chief Executive Officers Rick Kale and John Stomps, continue to manage their
      respective operations and utilize their existing facilities. In connection
      with
      these transactions, ATS and the Total Companies became parties to and guarantors
      of our revolving credit facility. We have guaranteed approximately
      $20 million of ATS' and the Total Companies' debt under their respective
      credit facilities in order to obtain required consents from their lenders to
      permit ATS and the Total Companies to guarantee our revolving credit facility.




In
      the
      transactions, we also obtained the right to elect a majority of the members
      of
      the board of directors of ATS. We retain options to purchase the remaining
      20%
      of each of ATS and the Total Companies through December 8, 2007 and October
      1,
      2008, respectively. If we fail to exercise such options prior to such dates,
      the
      members of the current Arnold and Total management teams will have similar
      options to repurchase our interests in ATS and the Total Companies.




***Equity
      Investment***


In
      August 2006, we
      acquired a 49% interest in Abilene Motor Express, Inc. (“Abilene”) for
      approximately $3.0 million. Certain members of the Abilene management team
      control the remaining 51% interest and a majority of the board of directors.
      We
      have not guaranteed any of Abilene’s debt and have no obligation to provide
      funding, services or assets. Under the agreement with the Abilene management
      team, we have a four-year option to acquire 100% of Abilene by purchasing
      management’s interest at a specified price plus an agreed upon annual return,
      and the Abilene management team has the right to acquire the Abilene stock
      held
      by us in the subsequent four years following the expiration of our four-year
      option. We have accounted for Abilene’s operating results using the equity
      method of accounting.




24
 *Table
          of Contents*


***Off
      Balance Sheet Arrangements***


We
      use
      non-cancelable operating leases as a source of financing for revenue and service
      equipment, office and terminal facilities, automobiles and airplanes. In making
      the decision to finance through long-term debt or by entering into
      non-cancelable lease agreements, we consider interest rates, capital
      requirements and the tax advantages of leasing versus owning. At December 31,
      2006 a substantial portion of our off-balance sheet arrangements related to
      non-cancelable leases for revenue equipment and office and terminal facilities
      with termination dates ranging from January 2007 to July 2013. Lease payments
      on
      office and terminal facilities, automobiles and airplanes are included in
      general and other operating expenses, lease payments on service equipment are
      included in operating expense and supplies, and lease payments on revenue
      equipment are included in vehicle rents in the consolidated statements of
      operations, respectively. Rental expense related to our off-balance sheet
      arrangements
      was $82.4 million for the twelve months ended December 31, 2006. The remaining
      lease obligation as of December 31, 2006 was $300.0 million, with $94.6 million
      due in the next twelve months.




Certain
      equipment
      leases provide for guarantees by us of a portion of the residual amount under
      certain circumstances at the end of the lease term. The maximum potential amount
      of future payments (undiscounted) under these guarantees are approximately
      $31.4
      million at December 31, 2006. The residual value of a substantial portion of
      the
      leased revenue equipment is covered by repurchase or trade agreements in
      principle between the equipment manufacturer and us. Management estimates the
      fair value of the guaranteed residual values for leased revenue equipment to
      be
      immaterial. Accordingly, we have no guaranteed liabilities accrued in the
      accompanying consolidated balance sheets.




***Cash
      Requirements***




The
      following table
      represents our outstanding contractual obligations at December 31, 2006,
      excluding letters of credit of $95.9 million. The letters of credit are
      maintained primarily to support our insurance program and are renewed on an
      annual basis.




**Payments
                Due by Period**
              **(Dollars
                in Thousands)****Contractual
                Obligations**
            
            **Total**
            
            **Less
                than 1 year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than 5 years**Securitization
                Facility
            
            $
            37,000
            
            $
            37,000
            
            $
            -
            
            $
            -
            
            $
            -Long-Term
                Debt, Including Interest(1)
            
            
            373,501
            
            
            66,896
            
            
            132,615
            
            
            108,879
            
            
            65,111Capital
                Leases, Including Interest(1)
            
            
            1,567
            
            
            1,191
            
            
            376
            
            
            -
            
            
            -Operating
                Leases - Revenue Equipment(2)
            
            
            279,099
            
            
            84,947
            
            
            129,066
            
            
            50,678
            
            
            14,408Operating
                Leases - Other(3)
            
            
            20,907
            
            
            9,656
            
            
            10,054
            
            
            1,182
            
            
            15Purchase
                Obligations(4)
            
            
            182,266
            
            
            181,866
            
            
            400
            
            
            -
            
            
            -**Total
                Contractual Cash Obligations**
            
            **$**
            **894,340**
            
            **$**
            **381,556**
            
            **$**
            **272,511**
            
            **$**
            **160,739**
            
            **$**
            **79,534**





(1)Represents
                principal and interest payments owed on revenue equipment installment
                notes, mortgage notes payable and capital lease obligations at December
                31, 2006. The credit facility does not require scheduled principal
                payments. Approximately 14% of our debt is financed with variable
                interest
                rates. In determining future contractual interest obligations for
                variable
                rate debt, the interest rate in place at December 31, 2006 was utilized.
                The table assumes long-term debt is held to maturity. Refer toFootnote
                5,
“Long-Term
                Debt”, in the accompanying consolidated financial statements for further
                information.(2)Represents
                future obligations under operating leases for over-the-road tractors,
                day-cabs and trailers. The amounts included are consistent with
                disclosures required under SFAS No. 13, “*Accounting
                for Leases*”.
                Substantially all lease agreements for revenue equipment have fixed
                payment terms based on the passage of time. The tractor lease agreements
                generally stipulate maximum miles and provide for mileage penalties
                for
                excess miles. Lease terms for tractors and trailers range from 36
                to 60
                months and 60 to 84 months, respectively. Refer toItem
                7,
                “Management’s Discussion and Analysis of Financial Condition and Results
                of Operations - Off-Balance Sheet Arrangements” andFootnote
                9,
“Leases”
in
                the accompanying consolidated financial statements for further
                information.(3)Represents
                future obligations under operating leases for buildings, forklifts,
                automobiles, computer equipment and airplanes. The amounts included
                are
                consistent with disclosures required under SFAS No. 13. Substantially
                all
                lease agreements, with the exception of building leases, have fixed
                payment terms based on the passage of time. Lease terms do not exceed
                10
                years.(4)Represents
                purchase obligations for revenue equipment (tractors and trailers),
                and
                development and improvement of facilities. The revenue equipment
                purchase
                obligations are cancelable, subject to certain adjustments in the
                underlying obligations and benefits. The purchase obligations with
                respect
                to improvement of facilities and computer software are non-cancelable.
                Refer toFootnote
                14,
                “Commitments and Contingencies”, in the accompanying consolidated
                financial statements for disclosure of our purchase commitments.




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




In
      the ordinary
      course of business, we have made a number of estimates and assumptions relating
      to the reporting of results of operations and financial position in the
      preparation of our financial statements in conformity with generally accepted
      accounting principles. Actual results could differ significantly from those
      estimates under different assumptions and conditions. We believe that the
      following discussion addresses our most critical accounting policies, which
      are
      those that are most important to the portrayal of our financial condition and
      results of operations and require management’s most difficult, subjective and
      complex judgments, often as a result of the need to make estimates about the
      effect of matters that are inherently uncertain.




***Recognition
      of Revenue***


We
      generally
      recognize revenue and direct costs when shipments are completed. Certain revenue
      of Xpress Global Systems, representing approximately 6.0% of consolidated
      revenues at December 31, 2006, is recognized upon manifest, that is, the time
      when the trailer of the independent carrier is loaded, sealed and ready to
      leave
      the dock. Estimated direct expenses are recorded simultaneous with the
      recognition of revenue. Had revenue been recognized using another method, such
      as completed shipment, the impact would have been insignificant to our
      consolidated financial statements.




***Income
      Taxes***


Significant
      management judgment is required in determining our provision for income taxes
      and in determining whether deferred tax assets will be realized in full or
      in
      part. Deferred tax assets and liabilities are measured using enacted tax rates
      that are expected to apply to taxable income in years in which the temporary
      differences are expected to be reversed. When it is more likely than not that
      all or some portion of specific deferred tax assets, such as state tax credit
      carry-forwards or state net operating loss carry-forwards will not be realized,
      a valuation allowance must be established for the amount of the deferred tax
      assets that are determined to be not realizable. A valuation allowance for
      deferred tax assets of $178 has been deemed necessary due to the net operating
      loss carry-forward periods and the estimated taxable income of three of our
      separate companies over those periods in certain states.




The
      determination
      of the combined tax rate used to calculate our provision for income taxes for
      both current and deferred income taxes also requires significant judgment by
      management. Statement of Financial Accounting Standards (“SFAS”) No. 109,
“ *Accounting
      for
      Income Taxes,”* requires
      that the
      net deferred tax asset or liability be valued using enacted tax rates that
      we
      believe will be in effect when these temporary differences reverse. We use
      the
      combined tax rates at the time the financial statements are prepared since
      no
      better information is available. If changes in the federal statutory rate or
      significant changes in the statutory state and local tax rates occur prior
      to or
      during the reversal of these items or if our filing obligations were to change
      materially, this could change the combined rate and, by extension, our provision
      for income taxes.




***Depreciation***


Property
      and
      equipment are carried at cost. Depreciation of property and equipment is
      computed using the straight-line method over the estimated useful lives of
      the
      related assets (net of estimated salvage value or trade-in value). We generally
      use estimated useful lives of 4-5 years and 7-10 years for tractors and
      trailers, respectively, with estimated salvage values ranging from 25% - 50%
      of
      the capitalized cost. The depreciable lives of our revenue equipment represent
      the estimated usage period of the equipment, which is generally substantially
      less than the economic lives. The residual value of a substantial portion of
      our
      equipment is covered by re-purchase or trade agreements between us and the
      equipment manufacturer.




Periodically,
      we
      evaluate the useful lives and salvage values of our revenue equipment and other
      long-lived assets based upon, but not limited to, its experience with similar
      assets including gains or losses upon dispositions of such assets, conditions
      in
      the used equipment market and prevailing industry practices. Changes in useful
      lives or salvage value estimates, or fluctuations in market values that are
      not
      reflected in our estimates, could have a material impact on financial results.
      Further, if our equipment manufacturer does not perform under the terms of
      the
      agreements for guaranteed trade-in values, such non-performance could have
      a
      materially negative impact on financial results.




***Goodwill***


The
      excess of the
      consideration paid us over the estimated fair value of identifiable net assets
      acquired has been recorded as goodwill.




Effective
      January
      1, 2002, we adopted the provision of SFAS No. 142, *“Goodwill
      and
      Other Intangible Assets”,* (“SFAS 142”). As
      required by the provisions of SFAS 142, we test goodwill for impairment using
      a
      two-step process, based on the reporting unit fair value. The first step is
      a
      screen for potential impairment, while the second step measures impairment,
      if
      any. We completed the required impairment tests of goodwill and noted no
      impairment of goodwill in 2006, 2005 and 2004.




25
 *Table
          of Contents*


Goodwill
      impairment
      tests are highly subjective. Such tests include estimating the fair value of
      our
      reporting units. As required by SFAS No. 142, we compared the estimated fair
      value of the reporting units with their respective carrying amounts including
      goodwill. We define a reporting unit as an operating segment. Under SFAS No.
      142, fair value refers to the amount for which the entire reporting unit could
      be bought or sold. Our methods for estimating reporting unit values include
      asset and liability fair values and other valuation techniques, such as
      discounted cash flows and multiples of earnings, or other financial measures.
      Each of these methods involve significant estimates and assumptions, including
      estimates of future financial performance and the selection of appropriate
      discount rates and valuation multiples.




***Claims
      Reserves and Estimates***


Claims
      reserves
      consist of estimates of cargo loss, physical damage, liability (personal injury
      and property damage), employee medical expenses and workers’ compensation claims
      within our established retention levels. Claims in excess of retention levels
      are generally covered by insurance in amounts we consider adequate. Claims
      accruals represent the uninsured portion of pending claims including estimates
      of adverse development of known claims, plus an estimated liability for incurred
      but not reported claims. Accruals for cargo loss, physical damage, liability
      and
      workers’ compensation claims are estimated based on our evaluation of the type
      and severity of individual claims and historical information, primarily our
      own
      claims experience, along with assumptions about future events combined with the
      assistance of independent actuaries in the case of workers’ compensation and
      liability. Changes in assumptions as well as changes in actual experience could
      cause these estimates to change in the near future.




Workers’
      compensation and liability claims are particularly subject to a significant
      degree of uncertainty due to the potential for growth and development of the
      claims over time. Claims and insurance reserves related to workers’ compensation
      and liability are estimated by an independent third-party actuary and we refer
      to these estimates in establishing the reserve. Liability reserves are estimated
      based on historical experience and trends, the type and severity of individual
      claims and assumptions about future costs. Further, in establishing the workers’
compensation and liability reserves, we must take into account and estimate
      various factors, including, but not limited to, assumptions concerning the
      nature and severity of the claim, the effect of the jurisdiction on any award
      or
      settlement, the length of time until ultimate resolution, inflation rates in
      health care and in general, interest rates, legal expenses and other factors.
      Our actual experience may be different than our estimates, sometimes
      significantly. Additionally, changes in assumptions made in actuarial studies
      could potentially have a material effect on the provision for workers’
compensation and liability claims.




We
      have experienced
      significant increases in insurance premiums and claims expense since September
      2001 primarily related to workers’ compensation and liability insurance. The
      increases have resulted from a significant increase in excess insurance
      premiums, adverse development in prior year losses, unfavorable accident
      experience and an increase in retention levels related to liability and workers’
compensation claims. The retention level for liability insurance was $3 thousand
      prior to September 2001 and has increased to ranges of $250 thousand to $3.0
      million in subsequent periods. Prior to November 2000, we had no retention
      for
      workers’ compensation insurance, which has increased to ranges of $250 thousand
      to $1.0 million in subsequent periods. Our insurance and claims expense varies
      based on the frequency and severity of claims, the premium expense and the
      level
      of self-insured retention. The increase in self-insurance retention levels
      since
      November 2000 and September 2001 has caused insurance and claims expense to
      be
      higher and more volatile than in historical periods.




***Accounting
      for Business Combinations***


Our
      consolidated
      financial statements are inclusive of our accounts and the accounts of
      majority-owned subsidiaries. We consolidate all of majority-owned subsidiaries
      and record a minority interest representing the remaining shares held by the
      minority shareholders. All transactions and balances with and related to our
      majority owned subsidiaries have been eliminated.




In
      accordance with
      business combination accounting, we allocate the purchase price of acquired
      companies to the tangible and intangible assets acquired, and liabilities
      assumed based on their estimated fair values. We engaged a third-party appraisal
      firm to assist management in determining the fair values of certain assets
      acquired. Such a valuation requires management to make significant estimates
      and
      assumptions, especially with respect to intangible assets.




Management
      makes
      estimates of fair value based upon assumptions believed to be reasonable. These
      estimates are based on historical experience and information obtained from
      the
      management of the acquired companies and are inherently uncertain. Unanticipated
      events and circumstances may occur which may affect the accuracy or validity
      of
      such assumptions, estimates, or actual results.




For
      business
      combinations, we must record deferred taxes relating to the book versus tax
      basis of acquired assets and liabilities. Generally, such business combinations
      result in deferred tax liabilities as the book values are reflected at fair
      values where as the tax basis is carried over from the acquired company. Such
      deferred taxes are initially estimated based on preliminary information and
      are
      subject to change as valuations and tax returns are finalized.




**RECENT
      ACCOUNTING PRONOUNCEMENTS**




In
      June 2006, the
      FASB issued Financial Accounting Standards Board Interpretation No. 48, *“Accounting
      for
      Uncertainty in Income Taxes”* (“FIN 48”), an
      interpretation of FASB Statement of Financial Accounting Standards No. 109, *“Accounting
      for
      Income Taxes”* (“SFAS No. 109”).
      FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an
      enterprise’s financial statements in accordance with SFAS No. 109. The
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax provision taken
      or
      expected to be taken in a tax return. Also, the interpretation provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. The adoption of FIN 48 will be effective
      for fiscal periods beginning after December 15, 2006. The Company does not
      expect that the adoption of FIN 48 will have a material impact on the financial
      statements of the Company.




In
      September 2006,
      the 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. The Company is currently evaluating the impact, if
      any, of SFAS 157 on its consolidated financial statements.




26
 *Table
          of Contents*


**ITEM
      7A.****QUANTITIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**







**INTEREST
      RATE RISK**




Our
      market risk is
      affected by changes in interest rates. Historically, we have used a combination
      of fixed rate and variable rate obligations to manage our interest rate
      exposure. Fixed rate obligations expose us to the risk that interest rates
      might
      fall. Variable rate obligations expose us to the risk that interest rates might
      rise. We did not have any interest rate swaps at December 31, 2006, although
      we
      may enter into such swaps in the future.




We
      are exposed to
      variable interest rate risk principally from our securitization facility and
      revolving credit facility. We are exposed to fixed interest rate risk
      principally from equipment notes and mortgages. At December 31, 2006 we had
      borrowings totaling $340.5 million comprised of $48.2 million of variable rate
      borrowings and $292.3 million of fixed rate borrowings. Holding other variables
      constant (such as borrowing levels), the earnings impact of a one-percentage
      point increase/decrease in interest rates would not have a significant impact
      on
      our consolidated financial statements.




**COMMODITY
      PRICE RISK**




Fuel
      is one of our
      largest expenditures. The price and availability of diesel fuel fluctuates
      due
      to changes in production, seasonality and other market factors generally outside
      our control. Many of our customer contracts contain fuel surcharge provisions
      to
      mitigate increases in the cost of fuel. Fuel surcharges to customers do not
      fully recover all of fuel increases due to engine idle time and out-of-route
      and
      empty miles not billable to the customer.




27
 *Table
          of Contents*


**ITEM
      8****.****FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**






**Report
      of
      Independent Registered**




**Public
      Accounting Firm**






To
      the Board of
      Directors and Stockholders




U.S.
      Xpress
      Enterprises, Inc.




We
      have audited the
      accompanying consolidated balance sheets of U.S. Xpress Enterprises, Inc. and
      subsidiaries as of December 31, 2006 and 2005, and the related consolidated
      statements of operations, stockholders’ equity and cash flows for each of the
      three years in the period ended December 31, 2006. These financial statements
      are the responsibility of the Company’s management. Our responsibility is to
      express an opinion on these financial statements based on our audits. The
      combined consolidated financial statements of Total Transportation (two
      corporations in which the Company had a 49% interest), as of and for the year
      ended December 31, 2005, have been audited by other auditors whose report has
      been furnished to us, and our opinion on the consolidated financial statements,
      insofar as it relates to the amounts included for Total Transportation, is
      based
      solely on the report of the other auditors. In the consolidated financial
      statements, the Company’s investment in Total Transportation is stated at $4.6
      million at December 31, 2005, and the Company’s equity in the net income of
      Total Transportation is stated at $690,000 for the year then ended.




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 and the report
      of
      other auditors provide a reasonable basis for our opinion.




In
      our opinion,
      based on our audits and the report of other auditors, the financial statements
      referred to above present fairly, in all material respects, the consolidated
      financial position of U.S. Xpress Enterprises, Inc. and subsidiaries as of
      December 31, 2006 and 2005, and the consolidated results of their operations
      and
      their cash flows for each of the three years in the period ended December 31,
      2006, in conformity with U.S. generally accepted accounting
      principles.




As
      discussed in
      Note 2 to the Consolidated Financial Statements, in 2006 the Company changed
      its
      method of accounting for share-based compensation using the modified-prospective
      method.




We
      also have
      audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of U.S. Xpress Enterprises,
      Inc. and subsidiaries internal control over financial reporting as of December
      31, 2006, based on criteria established by the Internal Control-Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission and our report dated March 9, 2007 expressed an unqualified opinion
      thereon.





**/s/
      ERNST
& YOUNG LLP**






Chattanooga,
      Tennessee




March
      9,
      2007




28
 *Table
          of Contents*


**U.S.
      XPRESS
      ENTERPRISES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(In
      thousands,
      except per share amounts)






**Year
                Ended December 31,****2006**
            
            2005
            
            2004**Operating
                Revenue:**Revenue,
                before fuel surcharge
            
            $
            1,266,927
            
            $
            1,038,754
            
            $
            1,044,699Fuel
                surcharge
            
            
            **204,837**
            
            
            125,478
            
            
            60,957Total
                operating revenue
            
            
            **1,471,764**
            
            
            1,164,232
            
            
            1,105,656**Operating
                Expenses:**Salaries,
                wages and benefits
            
            
            **492,225**
            
            
            399,894
            
            
            367,317Fuel
                and fuel
                taxes
            
            
            **326,622**
            
            
            225,213
            
            
            168,570Vehicle
                rents
            
            
            **77,023**
            
            
            69,707
            
            
            71,068Depreciation
                and amortization
            
            
            **63,038**
            
            
            46,007
            
            
            44,635Purchased
                transportation
            
            
            **229,342**
            
            
            197,648
            
            
            212,153Operating
                expenses and supplies
            
            
            **93,252**
            
            
            75,100
            
            
            72,689Insurance
                premiums and claims
            
            
            **59,993**
            
            
            55,197
            
            
            59,651Operating
                taxes and licenses
            
            
            **16,868**
            
            
            14,144
            
            
            13,924Communications
                and utilities
            
            
            **12,590**
            
            
            10,718
            
            
            11,435General
                and
                other operating expenses
            
            
            **43,098**
            
            
            43,847
            
            
            43,947Loss
                on sale
                and exit of business
            
            
            **805**
            
            
            2,787
            
            
            -Total
                operating expenses
            
            
            **1,414,856**
            
            
            1,140,262
            
            
            1,065,389**Income
                from Operations**
            
            
            **56,908**
            
            
            23,970
            
            
            40,267Interest
                expense, net
            
            
            **18,469**
            
            
            8,320
            
            
            9,685Early
                extinguishment of debt
            
            
            **-**
            
            
            294
            
            
            454Equity
                in
                loss (income) of affiliated companies
            
            
            **327**
            
            
            (2,792
            )
            
            (203
            )Minority
                interest expense
            
            
            **1,301**
            
            
            -
            
            
            -**20,097**
            
            
            5,822
            
            
            9,936Income
                before
                income tax provision
            
            
            **36,811**
            
            
            18,148
            
            
            30,331Income
                tax
                provision
            
            
            **16,707**
            
            
            8,716
            
            
            13,905**Net
                Income**
            
            $
            20,104
            
            $
            9,432
            
            $
            16,426**Earnings
                Per Share - basic**
            
            $
            1.31
            
            $
            0.59
            
            $
            1.16**Earnings
                Per Share - diluted**
            
            $
            1.29
            
            $
            0.59
            
            $
            1.14Weighted
                average shares - basic
            
            
            **15,316**
            
            
            15,930
            
            
            14,159Weighted
                average shares - diluted
            
            
            **15,568**
            
            
            16,083
            
            
            14,399




*The
      accompanying notes are an integral part of these consolidated
      statements*




29
 *Table
          of Contents*




**U.S.
      XPRESS
      ENTERPRISES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


(In
      thousands,
      except share amounts)






**DECEMBER
                31,****ASSETS**
            
            **2006**
            
            **2005***Current
                Assets*Cash
                and cash
                equivalents
            
            **$**
            **913**
            
            $
            9,488Customer
                receivables, net of allowance of $4,857 and $6,129 in 2006 and 2005,
                respectively
            
            
            **168,079**
            
            
            140,263Other
                receivables
            
            
            **15,398**
            
            
            14,552Prepaid
                insurance and licenses
            
            
            **25,777**
            
            
            14,701Operating
                and
                installation supplies
            
            
            **7,767**
            
            
            3,693Deferred
                income taxes
            
            
            **25,545**
            
            
            9,046Other
                current
                assets
            
            
            **10,665**
            
            
            11,227Total
                current
                assets
            
            
            **254,144**
            
            
            202,970***Property
                and Equipment, at cost***
            
            
            **709,810**
            
            
            460,096Less
                accumulated depreciation and amortization
            
            
            **(180,813**
            **)**
            
            (153,275
            )Net
                property
                and equipment
            
            
            **528,997**
            
            
            306,821***Other
                Assets***Goodwill,
                net
            
            
            **94,307**
            
            
            72,143Other
            
            
            **25,919**
            
            
            25,450Total
                other
                assets
            
            
            **120,226**
            
            
            97,593**Total
                Assets**
            
            **$**
            **903,367**
            
            $
            607,384**LIABILITIES
                AND STOCKHOLDERS’ EQUITY***Current
                Liabilities*Accounts
                payable
            
            **$**
            **47,770**
            
            $
            28,172Book
                overdraft
            
            
            **19,368**
            
            
            11,789Accrued
                wages
                and benefits
            
            
            **22,562**
            
            
            14,328Claims
                and
                insurance accruals , current
            
            
            **49,928**
            
            
            36,071Other
                accrued
                liabilities
            
            
            **9,137**
            
            
            12,375Securitization
                facility
            
            
            **37,000**
            
            
            45,000Current
                maturities of long-term debt
            
            
            **51,221**
            
            
            17,111Total
                current
                liabilities
            
            
            **236,986**
            
            
            164,846***Long-Term
                Debt, net of current maturities***
            
            
            **252,313**
            
            
            115,044***Deferred
                Income Taxes***
            
            
            **114,679**
            
            
            54,618***Other
                Long-Term Liabilities***
            
            
            **3,186**
            
            
            2,499***Claims
                and insurance accruals, long-term***
            
            
            **40,125**
            
            
            37,965***Minority
                Interest***
            
            
            **3,579**
            
            
            -***Commitments
                and Contingencies******Stockholders’
                Equity***Preferred
                Stock, $.01 par value, 2,000,000 shares authorized, no shares
                issued
            
            
            **-**
            
            
            -Common
                Stock
                Class A, $.01 par value, 30,000,000 shares authorized,
                15,958,837
              and
                15,870,006 shares issued at December 31, 2006 and 2005,
                respectively
            
            
            **160**
            
            
            159Common
                Stock
                Class B, $.01 par value, 7,500,000 shares authorized, 3,040,262 shares
                issued and outstanding at December 31, 2006 and 2005
            
            
            **30**
            
            
            30Additional
                paid-in capital
            
            
            **162,001**
            
            
            159,547Retained
                earnings
            
            
            **130,373**
            
            
            110,269Treasury
                Stock, Class A, at cost (3,683,075 and 3,543,075 shares at December
                31,
                2006
              and
                2005,
                respectively)
            
            
            **(40,048**
            **)**
            
            (37,576
            )Notes
                receivable from stockholders
            
            
            **(17**
            **)**
            
            (17
            )Total
                stockholders’ equity
            
            
            **252,499**
            
            
            232,412**Total
                Liabilities and Stockholders’ Equity**
            
            **$**
            **903,367**
            
            $
            607,384




*The
      accompanying notes are an integral part of these consolidated balance
      sheets*


30
 *Table
          of Contents*


**U.S.
      XPRESS
      ENTERPRISES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(In
      thousands)





**Year
                Ended December 31,****2006**
            
            2005
            
            2004**Cash
                Flows from Operating Activities:**Net
                income
            
            **$**
            **20,104**
            
            $
            9,432
            
            $
            16,426Adjustments
                to reconcile net income to net cash provided by operating
                activities:Loss
                on early
                extinguishment of debt
            
            
            **-**
            
            
            294
            
            
            454Equity
                in
                loss (income) of affiliated companies
            
            
            **327**
            
            
            (2,792
            )
            
            (203
            )Deferred
                income tax provision (benefit)
            
            
            **16,111**
            
            
            (9,247
            )
            
            8,887Provision
                for
                losses on receivables
            
            
            **2,767**
            
            
            4,633
            
            
            1,796Depreciation
                and amortization
            
            
            **65,616**
            
            
            49,574
            
            
            46,257Stock-based
                compensation expense
            
            
            **1,183**
            
            
            39
            
            
            16Tax
                benefit
                realized from stock option plans
            
            
            **(161**
            **)**
            
            730
            
            
            799Gain
                on sale
                of equipment
            
            
            **(2,578**
            **)**
            
            (3,567
            )
            
            (1,622
            )Loss
                on sale
                and exit of airport-to-airport business
            
            
            **805**
            
            
            2,787
            
            
            -Minority
                interest expense
            
            
            **1,301**
            
            
            -
            
            
            -Changes
                in
                operating assets and liabilities, net of acquisitions:Receivables
            
            
            **4,498**
            
            
            (6,463
            )
            
            (49,809
            )Prepaid
                insurance and licenses
            
            
            **(8,375**
            **)**
            
            (1,021
            )
            
            (8,910
            )Operating
                and
                installation supplies
            
            
            **(2,539**
            **)**
            
            1,645
            
            
            (281
            )Other
                assets
            
            
            **2,949**
            
            
            (6,995
            )
            
            985Accounts
                payable and other accrued liabilities
            
            
            **8,409**
            
            
            26,443
            
            
            29,522Accrued
                wages
                and benefits
            
            
            **3,708**
            
            
            761
            
            
            133Net
                cash
                provided by operating activities
            
            
            **114,125**
            
            
            66,253
            
            
            44,450**Cash
                Flows from Investing Activities:**Proceeds
                from
                sale and exit of airport-to-airport business
            
            
            **-**
            
            
            12,750
            
            
            -Payments
                for
                purchases of property and equipment
            
            
            **(239,219**
            **)**
            
            (152,455
            )
            
            (107,580
            )Proceeds
                from
                sales of property and equipment
            
            
            **75,637**
            
            
            70,599
            
            
            26,439Repayment
                of
                notes receivable from stockholders
            
            
            **-**
            
            
            30
            
            
            35Investment
                in
                affiliated companies
            
            
            **(2,965**
            **)**
            
            (3,975
            )
            
            (6,219
            )Acquisition
                of businesses, net of cash acquired
            
            
            **(6,806**
            **)**
            
            (327
            )
            
            (725
            )Net
                cash used
                in investing activities
            
            
            **(173,353**
            **)**
            
            (73,378
            )
            
            (88,050
            )**Cash
                Flows from Financing Activities:**Net
                (payments) borrowings under lines of credit
            
            
            **(200**
            **)**
            
            1,900
            
            
            -Net
                (payments) borrowings under securitization facility
            
            
            **(8,000**
            **)**
            
            10,000
            
            
            35,000Borrowings
                under long-term debt
            
            
            **110,554**
            
            
            69,903
            
            
            81,278Payments
                of
                long-term debt
            
            
            **(57,365**
            **)**
            
            (54,214
            )
            
            (128,678
            )Additions
                to
                deferred financing costs
            
            
            **(686**
            **)**
            
            (155
            )
            
            (908
            )Prepayment
                penalties on debt refinancing
            
            
            **-**
            
            
            (201
            )
            
            (275
            )Book
                overdraft
            
            
            **7,579**
            
            
            543
            
            
            8,236Purchase
                of
                Class A Common Stock
            
            
            **(2,472**
            **)**
            
            (12,439
            )
            
            (654
            )Proceeds
                from
                exercise of stock options
            
            
            **718**
            
            
            1,154
            
            
            1,627Tax
                benefit
                from stock options
            
            
            **161**
            
            
            -
            
            
            -Proceeds
                from
                issuance of common stock, net
            
            
            **364**
            
            
            56
            
            
            47,872Net
                cash
                provided by financing activities
            
            
            **50,653**
            
            
            16,547
            
            
            43,498**Net
                Change in Cash and Cash Equivalents**
            
            
            **(8,575**
            **)**
            
            9,422
            
            
            (102
            )**Cash
                and Cash Equivalents, beginning of year**
            
            
            **9,488**
            
            
            66
            
            
            168**Cash
                and Cash Equivalents, end of year**
            
            **$**
            **913**
            
            $
            9,488
            
            $
            66**Supplemental
                Disclosure of Cash Flow Information:**Cash
                paid
                during the year for interest, net of capitalized interest
            
            **$**
            **17,945**
            
            $
            7,651
            
            $
            9,258Cash
                paid
                during the year for income taxes
            
            **$**
            **12,845**
            
            $
            10,456
            
            $
            829Conversion
                of
                operating leases to equipment installment notes
            
            **$**
            **-**
            
            $
            -
            
            $
            15,387








*The
      accompanying notes are an integral part of these consolidated statements.*


31
 *Table
          of Contents*


**U.S.
      XPRESS
      ENTERPRISES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


(In
      thousands,
      except share amounts)




**Common
                Stock**
              **Class
                A Class B**
            
            **Additional
                Paid-in Capital**
            
            **Retained
                Earnings**
            
            **Treasury
                Stock**
            
            **Notes**
              **Receivable
                from Stockholders**
            
            **Unamortized
                Compensation on Restricted Stock**
            
            **Total****Balance,
                December 31, 2003**
            
            **$**
            **135**
            
            **$**
            **30**
            
            **$**
            **107,252**
            
            **$**
            **84,411**
            
            **$**
            (24,483
            )
            **$**
            (82
            )
            **$**
            (24
            )
            **$**
            **167,239**Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            16,426
            
            
            -
            
            
            -
            
            
            -
            
            
            16,426Issuance
                of
                1,611 shares of Class A Common Stock for non-employee director
                compensation
            
            
            -
            
            
            -
            
            
            24
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            24Issuance
                of
                2,000,000 shares of Class A Common Stock, net
            
            
            20
            
            
            -
            
            
            47,691
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            47,711Proceeds
                from
                exercise of 168,294 options
            
            
            2
            
            
            -
            
            
            1,625
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,627Issuance
                of
                15,984 shares of Class A Common Stock for employee stock purchase
                plan
            
            
            -
            
            
            -
            
            
            161
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            161Tax
                benefit
                realized from stock option plans
            
            
            -
            
            
            -
            
            
            799
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            799Repayment
                of
                notes receivable from stockholders
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            35
            
            
            -
            
            
            35Amortization
                of restricted stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            16
            
            
            16Repurchase
                of
                50,000 shares of Class A Common Stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (654
            )
            
            -
            
            
            -
            
            
            (654
            )**Balance,
                December 31, 2004**
            
            **$**
            **157**
            
            **$**
            **30**
            
            **$**
            **157,552**
            
            **$**
            **100,837**
            
            **$**
            (25,137
            )
            **$**
            (47
            )
            **$**
            (8
            )
            **$**
            **233,384**Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            9,432
            
            
            -
            
            
            -
            
            
            -
            
            
            9,432Issuance
                of
                2,069 shares of Class A Common Stock for non-employee director
                compensation
            
            
            -
            
            
            -
            
            
            26
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            26Offering
                costs related to the issuance of 2,000,000 shares of Class A Common
                Stock
            
            
            -
            
            
            -
            
            
            (111
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (111
            )Proceeds
                from
                exercise of 110,172 options
            
            
            1
            
            
            -
            
            
            1,153
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,154Issuance
                of
                14,953 shares of Class A Common Stock for employee stock purchase
                plan
            
            
            1
            
            
            -
            
            
            166
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            167Tax
                benefit
                realized from stock option plans
            
            
            -
            
            
            -
            
            
            730
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            730Issuance
                of
                10,000 shares of restricted stock
            
            
            -
            
            
            -
            
            
            111
            
            
            -
            
            
            -
            
            
            -
            
            
            (111
            )
            
            -Repayment
                of
                notes receivable from stockholders
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            30
            
            
            -
            
            
            30Amortization
                of restricted stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            39
            
            
            39Repurchase
                of
                948,686 shares of Class A Common Stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,439
            )
            
            -
            
            
            -
            
            
            (12,439
            )**Balance,
                December 31, 2005**
            
            **$**
            **159**
            
            **$**
            **30**
            
            **$**
            **159,627**
            
            **$**
            **110,269**
            
            **$**
            (37,576
            )
            **$**
            (17
            )
            **$**
            (80
            )
            **$**
            **232,412**Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            20,104
            
            
            -
            
            
            -
            
            
            -
            
            
            20,104Issuance
                of
                1,478 shares of Class A Common Stock for non-employee director
                compensation
            
            
            -
            
            
            -
            
            
            29
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            29Reclass
                due
                to adoption of 123R
            
            
            -
            
            
            -
            
            
            (80
            )
            
            -
            
            
            -
            
            
            -
            
            
            80
            
            
            -Proceeds
                from
                exercise of 59,111 options
            
            
            1
            
            
            -
            
            
            717
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            718Issuance
                of
                28,242 shares of Class A Common Stock for employee stock purchase
                plan
            
            
            -
            
            
            -
            
            
            364
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            364Tax
                benefit
                realized from stock option plans
            
            
            -
            
            
            -
            
            
            161
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            161Stock-based
                compensation expense
            
            
            -
            
            
            -
            
            
            458
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            458Amortization
                of restricted stock
            
            
            -
            
            
            -
            
            
            725
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            725Repurchase
                of
                140,000 shares of Class A Common Stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,472
            )
            
            -
            
            
            -
            
            
            (2,472
            )**Balance,
                December 31, 2006**
            
            **$**
            **160**
            
            **$**
            **30**
            
            **$**
            **162,001**
            
            **$**
            **130,373**
            
            **$**
            (40,048
            )
            **$**
            (17
            )
            **$**
            **0**
            
            **$**
            **252,499**





*The
      accompanying notes are an integral part of these consolidated
      statements.*


32
 *Table
          of Contents*


**U.S.
      XPRESS
      ENTERPRISES, INC. AND SUBSIDIARIES**


**NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS**


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






**1.**  **Organization
      and Operations, Segments**




U.S.
      Xpress
      Enterprises, Inc. (the “Company”) provides transportation services through two
      business segments: (i) U.S. Xpress, Inc. (“U.S. Xpress”), Arnold Transportation,
      Inc. (“Arnold”), and Total Transportation of Mississippi LLC (“Total”), comprise
      our truckload segment, (“Truckload”); and (ii) Xpress Global Systems, Inc.
      (“Xpress Global Systems”). U.S. Xpress, Arnold, and Total are truckload carriers
      serving the continental United States and parts of Canada and Mexico. Xpress
      Global Systems provides transportation, warehousing, and distribution services
      to the floorcovering industry, and prior to the sale and exit of its
      unprofitable airport-to-airport division in 2005, also provided deferred
      airfreight services.




Financial
      Accounting Standard 131, “ *Disclosures
      about Segments of an Enterprise and Related Information”,* permits
      for the
      aggregation of separate operating segments into one reporting segment if they
      have similar economic characteristics and if the segments are similar in each
      of
      the following areas: a) the nature and products of the services, b) the nature
      of the production process, c) the type or class of customer for their products
      and services, d) the methods used to distribute their products or provide their
      services, and e) if applicable, the nature of the regulatory environment. The
      Company notes U.S. Xpress, Arnold, and Total have these similarities and are
      consolidated into one reporting segment “Truckload” while Xpress Global Systems
      is reported separately.




**2.**  **Summary
      of
      Significant Accounting Policies**




***Principles
      of Consolidation*** **


The
      consolidated
      financial statements include the accounts of the Company and its wholly-owned
      and majority-owned subsidiaries. All significant intercompany transactions
      and
      accounts have been eliminated.




***Use
      of
      Estimates in the Preparation of Financial Statements*** **


The
      preparation of
      financial statements in conformity with U.S. generally accepted accounting
      principles requires management to make estimates and assumptions that affect
      the
      reported amounts of assets and liabilities and disclosure of contingent assets
      and liabilities at the date of the financial statements and the reported amounts
      of revenues and expenses during the reporting period. Actual results could
      differ from those estimates, and such differences could be material. Significant
      estimates include useful lives of property and equipment and related salvage
      value, claims reserves for liability and workers’ compensation claims, valuation
      allowance for deferred tax assets, and purchase accounting fair value
      allocations, including valuation of goodwill.




***Cash
      and Cash Equivalents*** **


Cash
      and cash
      equivalents include all highly liquid investment instruments with an original
      maturity of three months or less.




***Recognition
      of Revenue***


The
      Company
      generally recognizes revenue and direct costs when shipments are completed.
      The
      majority of Xpress Global Systems’ revenue, representing 6% of consolidated
      revenues, is recognized upon manifest. Manifest refers to the time when the
      trailer of the independent carrier is loaded, sealed and ready to leave the
      dock. Estimated direct expenses are recorded simultaneous to the recognition
      of
      revenue. The recognition of revenue based on manifest as compared to completed
      shipment has not had a material impact on the Company’s consolidated results of
      operations.




***Concentration
      of Credit Risk***


Concentrations
      of
      credit risk with respect to customer receivables are limited due to the large
      number of entities comprising the Company’s customer base and their dispersion
      across many different industries. The Company performs ongoing credit
      evaluations and generally does not require collateral.




***Operating
      and Installation Supplies***


Operating
      supplies
      consist primarily of parts, materials and supplies for servicing the Company’s
      revenue and service equipment. Installation supplies consist of various
      accessories used in the installation of floor coverings and are held for sale
      at
      various Xpress Global Systems distribution centers. Operating and installation
      supplies are recorded at the lower of cost (on a first-in, first-out basis)
      or
      market. Tires and tubes purchased as part of revenue and service equipment
      are
      capitalized as part of the cost of the equipment. Replacement tires and tubes
      are charged to expense when placed in service.




***Property
      and Equipment***


Property
      and
      equipment are carried at cost. Depreciation of property and equipment is
      computed using the straight-line method for financial reporting purposes and
      accelerated methods for tax purposes over the estimated useful lives of the
      related assets (net of salvage values ranging from 25.0% to 50.0% of revenue
      equipment). The cost and lives at December 31, 2006 and 2005 are as
      follows:




**Cost****Lives**
            
            **2006**
            
            **2005**Land
                and
                buildings
            
            
            10-40
                years
            
            **$**
            **67,358**
            
            $
            53,128Revenue
                and
                service equipment
            
            
            3-10
                years
            
            
            **537,570**
            
            
            319,118Furniture
                and
                equipment
            
            
            3-7
                years
            
            
            **35,441**
            
            
            31,006Leasehold
                improvements
            
            
            1-15
                years
            
            
            **29,857**
            
            
            25,224Computer
                software
            
            
            1-5
                years
            
            
            **39,584**
            
            
            31,620**$**
            **709,810**
            
            $
            460,096







33
 *Table
          of Contents*


The
      Company
      recognized $60,447, $45,765 and $43,051 in depreciation expense in 2006, 2005
      and 2004, respectively. Gains on the sale of equipment of $2,578, $3,567 and
      $1,622 for 2006, 2005 and 2004, respectively, are included in depreciation
      and
      amortization expense in the consolidated statements of operations. Amortization
      of capital leases is included in depreciation expense.




Upon
      the retirement
      of property and equipment, the related asset cost and accumulated depreciation
      are removed from the accounts and any gain or loss is reflected in the Company’s
      statements of operations. Expenditures for normal maintenance and repairs are
      expensed. Renewals or betterments that affect the nature of an asset or increase
      its useful life are capitalized.




***Goodwill*** **


The
      excess of the
      consideration paid by the Company over the estimated fair value of identifiable
      net assets acquired has been recorded as goodwill. In June 2001, the Financial
      Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
      Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets (“SFAS 142”)”,
      which the Company adopted effective January 1, 2002. As required by the
      provisions of SFAS 142, the Company tested goodwill for impairment using a
      two-step process, based on the reporting unit fair value. The first step is
      a
      screen for potential impairment, while the second step measures impairment,
      if
      any. The Company completed the required impairment tests of goodwill and noted
      no impairment of goodwill in 2006, 2005 or 2004.




***Purchase
      Costs and Other Identifiable Intangible Assets***


Customer
      relationships and trade names are valued as part of acquisition-related
      transactions using the income appraisal methodology. The income appraisal
      methodology includes a determination of the present value of future monetary
      benefits to be derived from the anticipated income, or ownership, of the subject
      asset. The value of customer relationships includes the value expected to be
      realized from existing contracts as well as from expected renewals of such
      contracts and is calculated using unweighted and weighted total undiscounted
      cash flows as part of the income appraisal methodology. Customer relationships
      are amortized over seven years. The value of trade names is based on various
      factors including the projected revenue stream associated with the intangible
      asset. We evaluate these assets annually for potential impairment in accordance
      with SFAS No. 142.




***Deferred
      Financing Costs***


Deferred
      financing
      costs are included in other assets in the accompanying consolidated balance
      sheets and include fees and costs incurred to obtain long-term financing and
      are
      being amortized over the terms of the respective obligation. Amortization
      expense was $467, $654 and $462 in 2006, 2005 and 2004, respectively.
      Accumulated amortization was $1,540 and $1,073 as of December 31, 2006 and
      2005,
      respectively.




***Computer
      Software***


The
      Company
      accounts for computer software in accordance with the AICPA’s Statement of
      Position (“SOP”) 98-1, “ *Accounting
      for* the *Costs
      of
      Computer Software Developed or Obtained for Internal Use* .”
Computer
      software is included in property and equipment and is being amortized on a
      straight-line basis over 12 months to 5 years. The Company recognized $4,685,
      $3,690 and $3,132 of amortization expense in 2006, 2005 and 2004, respectively.
      Accumulated amortization was $23,069 and $18,460 at December 31, 2006 and 2005,
      respectively.




***Book
      Overdraft***


Book
      overdraft
      represents outstanding checks in excess of current cash levels. The Company
      funds its book overdraft from its line of credit and operating cash
      flows.




***Investment
      in Affiliated Companies***


Financial
        Accounting Standards Board (“FASB”) Interpretation No. 46, “ *Consolidation
        of Variable Interest Entities — an interpretation of Accounting Research
        Bulletin No. 51* ”,
        (“ARB 51”),
“ *Consolidated
        Financial Statements* ,”
(“FIN 46”),
        applies to variable interest entities (“VIE”), which was issued in January 2003
        and revised in December 2003 (“FIN 46R”), defines the criteria necessary to
        be considered a VIE. FIN 46R defines a VIE as businesses that do not have
        sufficient equity to absorb the entities’ expected losses or where the equity
        investors do not have the characteristics of a controlling financial interest.
        The Company has determined that it does not have any VIE.


As
      required by
      Statement of Financial Accounting Standards No. 94, “ *Consolidation
      of All Majority-Owned Subsidiaries”* ,
      the Company
      consolidates operating companies in which it has a controlling financial
      interest. The usual condition for a controlling financial interest is ownership
      of a majority of the voting interest. Operating companies in which the Company
      is able to exercise significant influence but does not control are accounted
      for
      under the equity method. Significant influence generally is deemed to exist
      when
      the Company owns 20% to 50% of the voting equity of an operating entity.
      Entities consolidated are based on equity ownership of the entity by the Company
      and its affiliates. All intercompany accounts have been eliminated.




The
      Company uses
      the cost method to account for investment in companies that the Company does
      not
      control nor have the ability to exercise significant influence over operating
      and financial policies. In accordance with the cost method, these investments
      are recorded at cost or fair value, as appropriate.




***Claims
      and Insurance Accruals***


Claims
      and
      insurance accruals consist of cargo loss, physical damage, group health,
      liability (personal injury and property damage) and workers’ compensation claims
      within the Company’s established retention levels. Claims in excess of retention
      levels are generally covered by insurance in amounts the Company considers
      adequate. Claims accruals represent the uninsured portion of pending claims
      at
      December 31, 2006 and 2005, plus an estimated liability for incurred but not
      reported claims. Accruals for cargo loss, physical damage, group health,
      liability and workers’ compensation claims are estimated based on the Company’s
      evaluation of the type and severity of individual claims and future development
      based on historical trends. At December 31, 2006, the amounts recorded for
      both
      workers’ compensation and liability were based in part upon actuarial studies
      performed by a third-party actuary.




34
 *Table
          of Contents*


***Earnings
      Per Share***


The
      difference
      between basic and diluted earnings per share is due to the assumed conversion
      of
      outstanding options and unvested restricted stock. The computation of basic
      and
      diluted earnings per share is as follows:




**Year
                Ended December 31,****2006**
            
            
            2005
            
            
            2004Net
                Income
            
            **$**
            **20,104**
            
            $
            9,432
            
            $
            16,426Denominator:Weighted
                average common shares outstanding
            
            
            **15,316**
            
            
            15,930
            
            
            14,159Equivalent
                shares issuable upon exercise of stock options and
              vesting
                of
                restricted stock
            
            
            **252**
            
            
            153
            
            
            240Diluted
                shares
            
            
            **15,568**
            
            
            16,083
            
            
            14,399Earnings
                per
                share:Basic
            
            **$**
            **1.31**
            
            $
            .59
            
            $
            1.16Diluted
            
            **$**
            **1.29**
            
            $
            .59
            
            $
            1.14





***Stock-Based
      Compensation***


In
      December, 2004,
      the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
      Accounting Standards ("SFAS") No. 123R, *Share-Based
      Payment* ("SFAS 123R"), a
      revision of SFAS No. 123, “ *Accounting
      for
      Stock-Based Compensation”* ("SFAS
      123") *,* which supersedes
      APB Opinion No. 25,
“ *Accounting
      for
      Stock Issued to Employees”* ,
      and amends SFAS
      No. 95, “ *Statement
      of
      Cash Flows”* .
      Generally, the
      approach in SFAS 123R is similar to the approach described in SFAS 123. However,
      SFAS 123R *requires* all share-based
      payments to employees, including grants of employee stock options, to be
      recognized in the income statement based on their fair values. Pro forma
      disclosure is no longer an alternative. In accordance with SFAS 123R this cost
      will be recognized over the period for which an employee is required to provide
      service in exchange for the award. Effective January 1, 2006, the Company
      adopted SFAS 123R utilizing the modified prospective method, and, therefore,
      did
      not restate prior period results. Refer to Note
      16 “Stockholders
      Equity” for additional information regarding the Company’s stock
      plans.




Prior
      to January 1,
      2006, the Company applied the intrinsic value based method of Accounting
      Principles Board Opinion No. 25, “ *Accounting
      for
      Stock Issued to Employees”* ,
      and related
      interpretations in accounting for its stock option plans. No stock-based
      compensation cost was reflected in net income, as all options granted under
      the
      plans had a grant price equal to the fair market value of the underlying common
      stock on the date of grant.




Had
      compensation
      expense for stock option grants been determined based on fair value at the
      grant
      dates consistent with the method prescribed by SFAS 123R, ** the
      Company's net
      income and earnings per share would have been adjusted to the pro forma amounts
      for the years ended December 31, 2005 and 2004, as indicated below:




**Year
                Ended**
              **December
                31,****2005**
            
            **2004**Net
                Income,
                as reported
            
            $
            9,432
            
            $
            16,426Less:
                Total
                stock-based employee compensation expense determined under fair value
                based method for all awards, net of related tax effects
            
            
            (1,269
            )
            
            (589
            )Net
                Income,
                pro forma
            
            $
            8,163
            
            $
            15,837Earnings
                per
                share:Basic
                - as
                reported
            
            $
            0.59
            
            $
            1.16Basic
                - pro
                forma
            
            $
            0.51
            
            $
            1.12Diluted
                - as
                reported
            
            $
            0.59
            
            $
            1.14Diluted
                - pro
                forma
            
            $
            0.51
            
            $
            1.10





The
      fair value of
      each option grant was estimated using the Black-Scholes option pricing model
      as
      of the date of grant using the following assumptions:




**Year
                  Ended December 31,****2005**
              
              **2004**Risk-free
                  interest rate
              
              
              3.25
              %
              
              3.25
              %Expected
                  dividend yield
              
              
              -
              %
              
              -
              %Expected
                  volatility
              
              
              58.5
              %
              
              58.5
              %Expected
                  term
                  (in years)
              
              
              5.0
              
              
              5.0






35
 *Table
          of Contents*


***Recent
      Accounting Pronouncements***


In
      June 2006, the
      FASB issued Financial Accounting Standards Board Interpretation No. 48, *“Accounting
      for
      Uncertainty in Income Taxes”* (“FIN 48”), an
      interpretation of FASB Statement of Financial Accounting Standards No. 109, *“Accounting
      for
      Income Taxes”* (“SFAS No. 109”).
      FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an
      enterprise’s financial statements in accordance with SFAS No. 109. The
      interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax provision taken
      or
      expected to be taken in a tax return. Also, the interpretation provides guidance
      on de-recognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. The adoption of FIN 48 will be effective
      for fiscal periods beginning after December 15, 2006. The Company does not
      expect that the adoption of FIN 48 will have a material impact on the financial
      statements of the Company.




In
      September 2006,
      the 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. The Company is currently evaluating the impact, if
      any, of SFAS 157 on its consolidated financial statements.




***Reclassifications***


Certain
      prior year
      amounts have been reclassified to conform to the current year’s
      presentation.




**3.**  **Business
      Acquisitions**




On
      July 8, 2004,
      the Company acquired certain assets and assumed certain liabilities of a
      less-than-truckload airport-to-airport carrier for a purchase price of $725
      in
      cash plus assumption of approximately $233 in liabilities. The tangible assets
      acquired of approximately $275 related primarily to revenue equipment and
      furniture and equipment. The excess of the purchase price over the fair value
      of
      the assets acquired was recorded as an intangible asset separable from goodwill,
      as it pertained to certain customer relationships, and met the separability
      criteria of SFAS No. 141, “ *Business
      Combinations* ”
(“SFAS
      141”). The
      Company expensed this amount in the second quarter of 2005 in conjunction with
      the sale and exit of the airport-to-airport business.




In
      the fourth
      quarter of 2004, the Company acquired 49% of the outstanding stock of ATS
      Acquisition Holding Co. ("ATS"), the parent company of Arnold. In the second
      quarter of 2005, the Company acquired 49% of the outstanding stock of
      Transportation Investments Inc. ("TII"), the parent company of Total, and
      certain affiliated companies (together with TII, the "Total Companies"). Certain
      members of Arnold’s current management team controlled the remaining 51%
      interest as well as a majority of the board of directors of ATS, and certain
      members of the Total management team controlled the remaining 51% interest
      and a
      majority of the boards of directors of each of the Total Companies. The Company
      did not guarantee any of ATS' or the Total Companies' debt and did not have
      any
      obligation to provide funding, services, or assets. The Company accounted for
      ATS' and the Total Companies' operating results using the equity method of
      accounting.




On
      February 28,
      2006, the Company increased its ownership interest in both ATS and the Total
      Companies for approximately $7.9 million in cash. In the transactions, the
      Company increased its holdings to 80% of the outstanding stock of ATS and the
      Total Companies through the
      purchase of
      stock owned by the current management teams of Arnold and Total. The Arnold
      and
      Total management teams continue to hold 20% of the outstanding stock of ATS
      and
      the Total Companies, respectively. In connection with these transactions, ATS
      and the Total Companies became parties to, and guarantors of, the Company's
      revolving credit facility.




In
      connection with
      increasing its investments in ATS and the Total Companies, the Company issued
      an
      aggregate of 40,466 shares of restricted stock to key employees of those
      companies under its 2002 Stock Incentive Plan.  The restricted shares vest
      over periods up to four years contingent upon continued employment.  The
      Company recorded compensation expense in accordance with SFAS 123R in relation
      to these shares.




The
      acquisitions are accounted for under the rules of SFAS 141 .
      The Company’s
      investment to date in the above mentioned companies totals $21.1 million. The
      allocation of the purchase cost consisted of $181.8 million in assets, of which
      $119.7 million is property and equipment, and $182.8 million in liabilities,
      of
      which $118.5 million is current and long-term debt. Currently, $22.1 million
      of
      this investment has been allocated to goodwill. $1.1 million of cash was
      acquired as of the date of the increased investment. The allocation of the
      investment is preliminary as the Company is still reviewing the valuations
      of
      certain assets.




The
      primary reasons
      for the acquisitions and the principal factors that contributed to the
      recognition of goodwill are as follows: 1) ATS and the Total Companies
      compliment the Company’s current presence in the United States by creating a
      denser capacity of revenue equipment and drivers and 2) Cost savings are
      expected through the sharing of best practices within the three companies in
      addition to increased purchasing power.




Commencing
      March 1, 2006, the Company has accounted for its investments in ATS and the
      Total Companies on a consolidated basis.




36
 *Table
          of Contents*


The
      following
      unaudited pro forma financial information presents a summary of the Company’s
      consolidated results of operations for the years ended December 31, 2006 and
      2005 had the acquisitions taken place as of January 1, 2005 and
      2006.





**Year
                Ended**
              **December
                31,****2006**
            
            2005Revenue,
                net
                of fuel surcharge
            
            **$**
            **1,313,425**
            
            $
            1,355,779Net
                Income
            
            
            **20,194**
            
            
            11,957Earnings
                per
                share - Basic
            
            
            **1.32**
            
            
            .75Earnings
                per
                share - Diluted
            
            
            **1.30**
            
            
            .74





In
      the transactions
      that increased the Company’s ownership to 80%, the Company also obtained the
      right to elect a majority of the members of the board of directors of ATS.
      The
      Company retains options to purchase the remaining 20% of each of ATS and the
      Total Companies through December 8, 2007 and October 1, 2008, respectively.
      If
      the Company fails to exercise such options prior to such dates, the members
      of
      the current Arnold and Total management teams will have similar options to
      repurchase the Company’s interests in ATS and the Total Companies,
      respectively.





**4.**  **Income
      Taxes**




The
      income tax
      provision for 2006, 2005 and 2004 consisted of the following:




**December
                31,****2006**
            
            2005
            
            2004**Current:**Federal
            
            **$**
            **206**
            
            $
            17,142
            
            $
            4,494State
            
            
            **390**
            
            
            821
            
            
            524**596**
            
            
            17,963
            
            
            5,018Deferred
            
            
            **16,111**
            
            
            (9,247
            )
            
            8,887Income
                tax
                provision
            
            **$**
            **16,707**
            
            $
            8,716
            
            $
            13,905





A
      reconciliation of
      the income tax provision as reported in the consolidated statements of
      operations to the amounts computed by applying federal statutory rates is as
      follows:





**December
                31,****2006**
            
            2005
            
            2004Federal
                income tax at statutory rate
            
            **$**
            **12,884**
            
            $
            6,352
            
            $
            10,616State
                income
                taxes, net of federal income tax benefit
            
            
            **855**
            
            
            272
            
            
            455Non-deductible
                per diem paid to drivers
            
            
            **2,784**
            
            
            1,980
            
            
            1,948Federal
                and
                state income tax credits
            
            
            **(504**
            **)**
            
            (131
            )
            
            (740
            )Other,
                net
            
            
            **688**
            
            
            243
            
            
            1,626Income
                tax
                provision
            
            **$**
            **16,707**
            
            $
            8,716
            
            $
            13,905


37
 *Table
          of Contents*


The
      tax effect of
      temporary differences that give rise to significant portions of deferred tax
      assets and liabilities at December 31, 2006 and 2005 consisted of the
      following:





**December
                31,****2006**
            
            2005**Deferred
                tax assets:**Allowance
                for
                doubtful accounts
            
            **$**
            **926**
            
            $
            1,913Insurance
                and
                claims reserves
            
            
            **28,498**
            
            
            24,870Net
                operating
                loss and credit carry forwards
            
            
            **12,495**
            
            
            3,535Valuation
                allowance for state NOLs
            
            
            **(178**
            **)**
            
            -Other
            
            
            **2,589**
            
            
            -Total
                deferred tax assets
            
            **$**
            **44,330**
            
            $
            30,318







**December
                31,****2006**
            
            2005**Deferred
                tax liabilities:**Book
                over tax
                basis of property and equipment
            
            **$**
            **113,888**
            
            $
            61,842Deductible
                goodwill amortization
            
            
            **12,440**
            
            
            8,514Prepaid
                license fees
            
            
            **6,149**
            
            
            4,639Other
            
            
            **987**
            
            
            895Total
                deferred tax liabilities
            
            **$**
            **133,464**
            
            $
            75,890




At
      December 31,
      2006, the Company had approximately $21,495 of federal operating loss carry
      forwards, $60,351 of state operating loss carry forwards and $2,802 of state
      tax
      credit carry forwards. The federal loss carry forwards may be carried back
      2
      years and/or forward 20 years. The state loss carry forwards may be carried
      forward between 5 and 20 years, depending on the state, and may be used to
      offset otherwise taxable income. Some state tax credit carry forwards expire
      after 10 years while others will never expire, depending on the state. These
      credit carry forwards may be used in future years to offset the Company’s
      regular state tax liability.




The
      Company has
      created a valuation allowance of $178 to offset the tax benefit of certain
      state
      operating loss carry forwards. This is necessary since the Company believes
      that
      state operating losses of certain legal entities will not be utilized before
      their expiration under applicable state law.






38
 *Table
          of Contents*


**5.****Long-Term
      Debt**




Long-term
      debt at
      December 31, 2006 and 2005 consisted of the following:





**December
                31,****2006**
            
            2005Obligation
                under line of credit with a group of banks, maturing March
                2011
            
            **$**
            **1,700**
            
            $
            1,900Revenue
                equipment installment notes with finance companies, weighted average
                interest rate of 5.99% and 5.52% at December 31, 2006 and 2005,
                respectively, due in monthly installments with final maturities at
                various
                dates through August 2013, secured by related revenue equipment with
                a net
                book value of $265.8 million in 2005 and $99.0 million in
                2005
            
            
            **263,953**
            
            
            100,904Mortgage
                note
                payable, interest rate of 6.73% at December 31, 2006 and 2005, due
                in
                monthly installments through October 2010, with final payment of
                $6.3
                million, secured by real estate with a net book value of $12.9 million
                in
                2006 and $13.2 million in 2005
            
            
            **7,782**
            
            
            8,112Mortgage
                note
                payable, interest rate of 6.26% at December 31, 2006 and 2005, due
                in
                monthly installments through December 2030, secured by real estate
                with a
                net book value of $15.9 million in 2006 and $16.4 million in
                2005
            
            
            **16,709**
            
            
            17,000Mortgage
                note
                payable, interest rate of 6.98% at December 31, 2006, maturingAugust,
                2031,
                secured by real estate with a net book value of $13.7
                million
            
            
            **10,416**
            
            
            -Mortgage
                notes payable, interest rate ranging from 5.0% to 7.25% maturing
                atvarious
                dates
                through January 2009, secured by real estate with a net book value
                of$2.4
                million
            
            
            **1,204**
            
            
            -Capital
                lease
                obligations maturing through September 2008
            
            
            **1,510**
            
            
            2,661Note
                payable
                maturing July, 2006
            
            
            **-**
            
            
            1,475Other
            
            
            **260**
            
            
            103**303,534**
            
            
            132,155Less:
                current
                maturities of long-term debt
            
            
            **(51,221**
            **)**
            
            (17,111
            )**$**
            **252,313**
            
            $
            **115,044**





***Line
      of
      Credit***


On
      October 14,
      2004, the Company entered into a $100,000 senior secured revolving credit
      facility and letter of credit sub-facility with a group of banks, which replaced
      the prior $100,000 credit facility that was set to mature in March 2007. The
      credit facility is secured by revenue equipment and certain other assets and
      bears interest at the base rate, as defined, plus an applicable margin of 0.00%
      to 0.25%, or LIBOR plus an applicable margin of 0.88% to 2.00%, based on the
      Company's lease-adjusted leverage ratio.




On
      March 31, 2006,
      the Company amended the revolving credit facility and letter of credit
      sub-facility with a group of banks increasing the $100,000 senior secured
      revolving credit facility to $130,000. The amendment did not change the
      applicable margin for base rate loans or LIBOR loans, nor did it modify the
      fees
      for letter of credit transactions or quarterly commitment fees on the unused
      portion of the loan commitment. The amendment extended the maturity date of
      the
      credit facility from October 2009 to March 2011.




On
      October 27,
      2006, the Company amended the revolving credit facility. This amendment
      consisted of a $10 million increase in the aggregate dollar value of
      miscellaneous investments that the Company may make, an increase in the
      Company’s ability to redeem its own stock by increasing the dollar value of
      permitted redemptions from $15 million to $30 million, and the adjustment of
      certain financial covenant ratios.




At
      December 31,
      2006, the applicable margin was 0.00% for base rate loans and 1.50% for LIBOR
      loans. The credit facility also prescribes additional fees for letter of credit
      transactions and a quarterly commitment fee on the unused portion of the loan
      commitment (1.50% and 0.25%, respectively, at December 31, 2006). At December
      31, 2006, $95.9 million in letters of credit were outstanding under the credit
      facility with $32.4 million available to borrow. The facility is secured by
      substantially all assets of the Company, other than real estate and assets
      securing other debt of the Company.




***Covenants
      and Restrictions***


The
      credit facility
      requires, among other things, maintenance by the Company of prescribed minimum
      amounts of consolidated tangible net worth, fixed charge and asset coverage
      ratios, and a leverage ratio. Subject to certain defined exceptions, it also
      restricts the ability of the Company and its subsidiaries, without the approval
      of the lenders, to engage in sale-leaseback transactions, transactions with
      affiliates, investment transactions, acquisitions of the Company’s own capital
      stock or the payment of dividends on such stock, future asset dispositions
      (except in the ordinary course of business), or other business combination
      transactions, and to incur liens and future indebtedness. As of December 31,
      2006, the Company was in compliance with the credit facility covenants.




39
 *Table
          of Contents*


***Debt
      Maturities***


As
      of December 31, 2006, the scheduled principal payments of long-term debt are
      as
      follows:




2007
            
            $
            51,2212008
            
            
            57,1372009
            
            
            51,6772010
            
            
            71,1622011
            
            
            27,058Thereafter
            
            
            45,279$
            303,534







**6.**  **Loss
      on
      Extinguishment of Debt**




The
      losses on
      extinguishment of debt resulted from prepayment penalties and the write-off
      of
      unamortized deferred financing costs when lines of credit were retired before
      their scheduled maturity dates follow:





**Year
                Ended December 31,****2006**
            
            2005
            
            2004Prepayment
                penalties
            
            **$**
            **-**
            
            $
            201
            
            $
            275Unamortized
                deferred financing costs
            
            
            **-**
            
            
            93
            
            
            179**$**
            **-**
            
            $
            294
            
            $
            454





**7.****Accounts
      Receivable Securitization**




In
      October 2004,
      the Company entered into a $100,000 accounts receivable securitization facility
      (the “Securitization Facility”). On a revolving basis, the Company sells
      accounts receivable as part of a two-step securitization transaction that
      provides the Company with funding similar to a revolving credit facility. To
      facilitate this transaction, Xpress Receivables, LLC (“Xpress Receivables”) was
      formed as a wholly-owned subsidiary of the Company. Xpress Receivables is a
      bankruptcy remote, special purpose entity, which purchases accounts receivable
      from U.S. Xpress and Xpress Global Systems. Xpress Receivables funds these
      purchases with money borrowed under the Securitization Facility with Three
      Pillars Funding, LLC.




On
      March 31, 2006,
      the Company amended the Securitization Facility, increasing the existing
      $100,000 maximum thereunder to $140,000. Pursuant to the Securitization Facility
      amendment, Arnold and Total joined as additional originators, permitting Xpress
      Receivables to purchase accounts receivable from them in addition to U.S. Xpress
      and Xpress Global Systems.




The
      borrowings are
      secured by the accounts receivable and paid down through collections on the
      accounts receivable. The Company can borrow up to $140,000 under the
      Securitization Facility, subject to eligible receivables, and pays interest
      on
      borrowings based on commercial paper interest rates, plus an applicable margin,
      and a commitment fee on the daily, unused portion of the facility. The
      Securitization Facility is reflected as a current liability in the consolidated
      financial statements because the term, subject to annual renewals, is 364 days.
      As of December 31, 2006, the Company’s borrowings under the Securitization
      Facility were $37,000 with $96,245 available to borrow.




The
      Securitization
      Facility requires certain performance ratios be maintained with respect to
      accounts receivable and that Xpress Receivables preserve its bankruptcy remote
      nature. As of December 31, 2006, the Company was in compliance with the
      Securitization Facility covenants.




The
      transaction
      does not meet the criteria for sale treatment under the provisions of SFAS
      140,
“ *Accounting
      for
      Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* ”,
      a replacement of
      FASB Statement 125, and is reflected as a secured borrowing in the consolidated
      financial statements.




**8.
      Comprehensive Income**




Comprehensive
      income was the same as net income in 2006, 2005, and 2004.




40
 *Table
          of Contents*


**9.****Leases**




The
      Company leases
      certain revenue and service equipment and office and terminal facilities under
      long-term non-cancelable operating lease agreements expiring at various dates
      through July 2013. Rental expense under non-cancelable operating leases was
      approximately $82,431, $78,062 and $81,258 for 2006, 2005 and 2004,
      respectively. Revenue equipment lease terms are generally 3 to 4 years for
      tractors and 5 to 7 years for trailers. The lease terms represent the estimated
      usage period of the equipment, which is generally substantially less than the
      economic lives. Substantially all revenue equipment leases provide for
      guarantees by the Company of a portion of the specified residual value at the
      end of the lease term. The maximum potential amount of future payments
      (undiscounted) under these guarantees is approximately $31,409 at December
      31,
      2006. The residual value of a substantial portion of the leased revenue
      equipment is covered by repurchase or trade agreements between the Company
      and
      the equipment manufacturer.




Approximate
      aggregate minimum future rentals payable under these operating leases for each
      of the next five years and thereafter are as follows:







**Revenue
                Equipment**
            
            **Other**
            
            **Total**2007
            
            $
            84,947
            
            $
            9,656
            
            $
            94,6032008
            
            
            71,185
            
            
            6,400
            
            
            77,5852009
            
            
            57,881
            
            
            3,654
            
            
            61,5352010
            
            
            37,916
            
            
            920
            
            
            38,8362011
            
            
            12,762
            
            
            262
            
            
            13,024Thereafter
            
            
            14,408
            
            
            15
            
            
            14,423$
            279,099
            
            $
            20,907
            
            $
            300,006





**10.**  **Loss
      on
      Sale and Exit of Business**




On
      May 31, 2005,
      Xpress Global Systems exited the airport-to-airport business and conveyed its
      customer list and a non-compete agreement to a company in exchange for $12,750
      in cash. Following the transaction, Xpress Global Systems continues to provide
      transportation, warehousing and distribution services to the floorcovering
      industry. In connection with the sale and exit of the airport-to-airport
      business, Xpress Global Systems incurred costs related to the shutdown of
      certain facilities, including employee severance, the write-off of certain
      intangible assets, and losses related to the disposal and liquidation of certain
      assets of the airport-to-airport business.




The
      Company
      incurred a (pre-tax) charge, net of proceeds from this transaction, in the
      amount of $2,787, the components of which are summarized as
      follows:






Proceeds
                from
                sale
            
            $
            12,750Less:Severance
                expense
            
            
            400Provision
                for
                loss on future lease commitments
            
            
            5,287Write-off
                of
                goodwill and other intangibles
            
            
            5,033Loss
                on
                disposal of fixed assets
            
            
            1,830Provision
                for
                estimated loss on liquidation of receivables
            
            
            2,025Other
                expenses
            
            
            962Loss
                on sale
                and exit of business
            
            $
            (2,787
            )








See
      the following
      summary of components related to the sale and exit from the airport-to-airport
      business. Of the accruals below, $989 is included in other long term liabilities
      on the Company’s consolidated balance sheet, with the remainder in other accrued
      liabilities as of December 31, 2006:





**Severance**
              
              **Future
                  Lease Commitments**
              
              **Other
                  Related Exit Costs**
              
              **Minimum
                  Contractual Amounts**
              
              **Total**May
                  31, 2005
                  Reserve
              
              $
              400
              
              $
              5,287
              
              $
              962
              
              $
              5,033
              
              $
              11,6822005
                  Reserve
                  Additions
              
              
              15
              
              
              (15
              )
              
              -
              
              
              73
              
              
              732005
                  Payments
              
              
              (415
              )
              
              (3,780
              )
              
              (797
              )
              
              (3,268
              )
              
              (8,260
              )December
                  31,
                  2005 Reserve
              
              
              -
              
              
              1,492
              
              
              165
              
              
              1,838
              
              
              3,4952006
                  Reserve
                  Additions
              
              
              -
              
              
              305
              (1)
              
              -
              
              
              148
              
              
              4532006
                  Payments
              
              
              -
              
              
              (795
              )
              
              (30
              )
              
              (476
              )
              
              (1,301
              )December
                  31,
                  2006 Reserve
              
              $
              -
              
              $
              1,002
              
              $
              135
              
              $
              1,510
              
              $
              2,647





(1) The
      component of
      the minimum contractual amounts liability represents interest accretion in
      the
      amount of $155 and increased provision of $150 as of December 31,
      2006.





During
      2006, the
      Company increased its provision for the estimated loss on liquidation of
      receivables from $2,025 to $2,680. Loss on sale and exit of business was $805
      during the year ended December 31, 2006.




41
 *Table
          of Contents*


**11.****Other
      Assets**




Other
      assets
      consisted of the following:




**December
                31,****2006**
            
            **2005**Deferred
                financing costs, net
            
            $
            1,180
            
            $
            1,002Investments
                in unconsolidated affiliates
            
            
            9,065
            
            
            19,451Cash
                surrender value
            
            
            2,837
            
            
            2,512Trade
                name
                and customer intangible
            
            
            9,572
            
            
            421Other
                miscellaneous amounts
            
            
            3,265
            
            
            2,064Total
                other
                assets
            
            $
            25,919
            
            $
            25,450




**12.****Equity
      and
      Cost Investments**




On
      July 1, 2000,
      the Company and five other large transportation companies contributed their
      non-asset based logistics business units into a commonly owned, Internet-based
      transportation logistics company, Transplace. The Company’s approximately 12%
      interest is $5,900 and carried on a cost basis. The Company earned revenues
      of
      approximately $9,600, $15,000, and $16,000 from Transplace in 2006, 2005 and
      2004, respectively, for providing transportation services. As of December 31,
      2006 and 2005, amounts due to the Company in trade receivables from Transplace
      were approximately $2,500 and $5,400, respectively. As of December 31, 2006
      and
      2005, approximately $2,650 and $2,900, respectively, is due to the Company
      related to a loan issued during 2005. There have been no triggering events
      to
      indicate that this investment has been impaired. We have accounted for
      Transplace using the cost method of accounting.




In
      August 2006, the
      Company acquired a 49% interest in Abilene Motor Express, Inc. (“Abilene”) for
      approximately $3.0 million. Certain members of the Abilene management team
      control the remaining 51% interest and a majority of the board of directors.
      We
      have not guaranteed any of Abilene’s debt and have no obligation to provide
      funding, services or assets. Under the agreement with the Abilene management
      team, the Company has a four-year option to acquire 100% of Abilene by
      purchasing management’s interest at a specified price plus an agreed upon annual
      return, and the Abilene management team has the right to acquire the Abilene
      stock held by the Company in the subsequent four years following the expiration
      of the four-year Company option. We have accounted for Abilene’s operating
      results using the equity method of accounting.




**13.**  **Related
      Party Transactions**




U.S.
      Xpress and
      Xpress Global Systems lease certain office and terminal facilities from entities
      owned by the two principal stockholders of the Company. The lease agreements
      are
      for five-year terms and provide the Company with the option to renew the lease
      agreements for four three-year terms. Rent expense of approximately $976, $932
      and $886 was recognized in connection with these leases during 2006, 2005 and
      2004, respectively.




The
      two principal
      stockholders of the Company own 100% of the outstanding common stock of
      Innovative Processing Solutions (“IPS”), formerly Transcommunications. The
      Company utilizes IPS charge cards for over-the-road fuel purchases, driver
      advances and driver payroll. The Company paid IPS $333, $203 and $219 in fees
      for these services in 2006, 2005 and 2004, respectively.




IPS
      also provides
      communications services to the Company and its drivers. Total payments by the
      Company to IPS for these services were approximately $190, $208 and $802 in
      2006, 2005 and 2004, respectively. As of December 31, 2006 and 2005, the Company
      owed IPS approximately $1 and $3, respectively, for the aforementioned
      services.




IPS
      owns 30% of the
      outstanding stock of a provider of onboard computers for the trucking industry.
      During 2006, the Company paid this provider $6.7 million primarily for
      communications hardware. This product is designed specifically for in-cab use
      on
      a Windows platform to enhance communications with the driver.




**14.**  **Commitments
      and Contingencies**




The
      Company is
      party to certain legal proceedings incidental to its business. The ultimate
      disposition of these matters, in the opinion of management, based in part on
      the
      advice of legal counsel, is not expected to have a materially adverse effect
      on
      the Company’s financial position or results of operations.




The
      Company has
      letters of credit of $95,861 outstanding as of December 31, 2006. The letters
      of
      credit are maintained primarily to support the Company’s insurance
      program.




The
      Company had
      commitments outstanding at December 31, 2006 to acquire revenue equipment for
      approximately $177,358 in 2007. These revenue equipment commitments are
      cancelable, subject to certain adjustments in the underlying obligations and
      benefits. These purchase commitments are expected to be financed by operating
      leases, long-term debt, proceeds from sales of existing equipment and cash
      flows
      from operations. The Company also had commitments outstanding at December 31,
      2006 to acquire communication units for approximately $2,417 in 2007, develop
      and improve facilities for $1,691 in 2007, and make payments related to software
      licensing contracts for $400 in 2007 and 2008.




42
 *Table
          of Contents*


**15.**  **Employee
      Benefit Plan**




The
      Company has a
      401(k) retirement plan covering substantially all employees of the Company,
      whereby participants may contribute a percentage of their compensation, as
      allowed under applicable laws. The plan provides for a matching contribution
      by
      the Company. Participants are 100% vested in participant contributions. The
      Company recognized $2,445, $1,856 and $1,667 in expense under this employee
      benefit plan for 2006, 2005 and 2004, respectively, which has been included
      in
      salaries, wages and benefits in the accompanying consolidated statements of
      operations.




**16.****Stockholders’
      Equity**




***Common
      Stock***


Holders
      of Class A
      Common Stock are entitled to one vote per share. Holders of Class B Common
      Stock
      are entitled to two votes per share. Once the Class B Common Stock is no longer
      held by the two principal stockholders of the Company or their families, as
      defined, the stock is automatically converted into Class A Common Stock on
      a
      share for  share
      basis.




In
      December 2004,
      the Company completed an offering of 4,600,000 shares of its Class A Common
      Stock at $25.25 per share. Of these shares, the Company sold 2,000,000 shares.
      The offering generated net proceeds to the Company of approximately $47,700.
      The
      proceeds were used to repay outstanding borrowings under the Company’s
      Securitization Facility and to retire debt on certain mortgage notes and revenue
      equipment installment notes.




Under
        prior Board
        authorizations, the Company repurchased 140,000, 948,686, and 50,000 shares
        of
        Class A Common Stock for $2,500, $12,400 and $654 in 2006, 2005 and 2004,
        respectively. In January 2007, the Board of Directors approved the Company
        to
        repurchase up to $15,000 of its Class A Common Stock. The stock may be purchased
        on the open market or in privately negotiated transactions at any time until
        January 26, 2008, at which time the Board may elect to extend the repurchase
        program.


***Preferred
      Stock*** **


Effective
      December
      31, 1993, the Board of Directors approved the designation of 2,000,000 shares
      of
      preferred stock with a par value of $.01 per share. The Board of Directors
      has
      the authority to issue these shares and to determine the rights, terms and
      conditions of the preferred stock as needed.




***Incentive
      Stock Plans***


The
      Company
      maintains the U.S. Xpress Enterprises, Inc. 2002 Stock Incentive Plan (the
“2002
      Plan”). There may be issued under the 2002 Plan an aggregate of not more than
      1,000,000 shares of Class A Common Stock. Participants of the 2002 Plan may
      include key employees as selected by the compensation committee of the Board
      of
      Directors. Under the terms of the 2002 Plan, the Company may issue restricted
      shares of common stock, grant options or issue performance grants to
      participants in amounts and for such prices as determined by the compensation
      committee. All options will vest immediately in the event of a change in control
      of the Company, or upon the death, disability or retirement of the employee.
      In
      May 2003, the Company registered the 1,000,000 shares of Class A Common Stock
      under the 2002 Plan.




In
      May 2006,
      stockholders approved the 2006 Omnibus Plan (“2006 Plan”) that provides various
      equity-based alternatives to compensate the Company’s employees, directors, and
      consultants.  The 2006 Plan authorizes the grant of stock options, stock
      appreciation rights, stock awards, restricted stock unit awards, performance
      units, performance awards, and any other form of award that is consistent with
      the 2006 Plan's purpose, or any combination of the foregoing.  A total of
      1,000,000 shares of Class A common stock were reserved for grant of awards
      under
      the 2006 Plan.  In addition, any shares of Class A common stock related to
      awards under the 2006 Plan that terminate by expiration, forfeiture,
      cancellation, or otherwise without the issuance of such shares, are settled
      in
      cash in lieu of shares of Class A common stock, or are exchanged for awards
      not
      involving shares of Class A common stock, will become available again under
      the
      2006 Plan.  Grants with respect to 12,600 shares of Class A common stock
      were outstanding under the 2006 Plan as of December 31, 2006.




On
      October 25,
      2005, the Board of Directors of the Company approved the accelerated vesting
      of
      certain outstanding stock options previously granted under the 2002 Plan. The
      decision accelerates the vesting of all unvested options granted under the
      2002
      Plan before October 25, 2005, except options held by non-employee directors
      of
      the Company and certain recently hired employees. The closing price of the
      Company's stock on October 25, 2005 was $11.60. The decision to accelerate
      the
      vesting of the affected options was based upon a recommendation of the
      Compensation Committee of the Company’s Board of Directors, which committee
      consists entirely of independent, non-employee directors.




43
 *Table
          of Contents*


As
      a result of the
      acceleration, unvested options to purchase 231,440 shares of the Company's
      Class
      A Common Stock, which otherwise would have vested from time to time through
      2007, became fully vested and immediately exercisable. The affected stock
      options have exercise prices ranging from $11.50 to $13.90 per share, and a
      weighted average exercise price of $13.04. The affected options include options
      to purchase 124,802 shares of the Company's Class A Common Stock held by the
      Company's executive officers, having a weighted average exercise price of
      $13.23. The Company would have recognized compensation expense in the amounts
      of
      $850 and $166 in 2006 and 2007, respectively. This acceleration was effective
      as
      of October 25, 2005.




The
      Company’s
      decision to accelerate the vesting of affected employee stock options was
      primarily to eliminate or reduce the compensation expense relating to such
      options that the Company would otherwise be expected to record in its statements
      of operations for future periods upon the adoption of Financial Accounting
      Standards Board Statement of Financial Accounting Standards No. 123 (Revised
      2004), "Share-Based Payment" ("SFAS No. 123R"). SFAS No. 123R was effective
      for
      the Company beginning in the first quarter of 2006, and requires that
      compensation expense associated with stock options be recognized in the
      statements of operations, rather than as a footnote disclosure in consolidated
      financial statements.




On
      October 20,
      2006, the Board of Directors extended the expiration date of all outstanding
      option grants to expire in 2007. The expiration date was extended five years
      from the original date expiration date. The Company recorded a one-time charge
      of approximately $307 in the fourth quarter in connection with the extension,
      in
      accordance with SFAS 123R.




Stock
      option grants
      generally vest over periods ranging from three to six years and expire ten
      years
      from the date of grant. A summary of the Company’s stock option activity for
      2006, 2005 and 2004 follows:








**Stock
                Options**
            
            **Shares**
            
            **Option
                Price**
            
            **Weighted
                Average Exercise Price**Outstanding
                at December 31, 2003
            
            
            688,109
            
            $
            6.50
                — 20.88
            
            $
            14.93Granted
            
            
            232,600
            
            
            13.03
                — 13.90
            
            
            13.89Exercised
            
            
            (168,294
            )
            
            6.50
                — 15.00
            
            
            9.65Canceled
                or
                expired
            
            
            (27,225
            )
            
            6.50
                — 11.50
            
            
            10.47Outstanding
                at December 31, 2004
            
            
            725,190
            
            
            6.50
                — 20.88
            
            
            12.04Granted
            
            
            28,600
            
            
            11.15
                — 15.00
            
            
            11.90Exercised
            
            
            (110,172
            )
            
            6.50
                — 19.13
            
            
            10.50Canceled
                or
                expired
            
            
            (20,872
            )
            
            11.50
                — 13.90
            
            
            12.49Outstanding
                at December 31, 2005
            
            
            622,746
            
            
            6.50
                — 20.88
            
            
            12.32Granted
            
            
            3,600
            
            
            19.92
            
            
            19.92Exercised
            
            
            (59,111
            )
            
            6.50
                — 13.90
            
            
            12.15Canceled
                or
                expired
            
            
            (12,750
            )
            
            6.50
                — 6.875
            
            
            6.79Outstanding
                at December 31, 2006
            
            
            554,485
            
            
            6.50
                — 20.88
            
            
            12.51





The
      following is a
      summary of the stock options outstanding at December 31, 2006:





**Exercise
                Price Range**
            
            **Options
                Outstanding**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual
                Life in Years**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                of Options Outstanding**
            
            **Options
                Exercisable**
            
            **Weighted
                Average Exercise Price of Options Exercisable**
            
            **Weighted
                Average Remaining Contractual Life in Years of Options
                Exercisable**
            
            **Intrinsic
                Value of Options Exercisable**$6.50
—
                $8.06
            
            
            105,025
            
            
            3.4
            
            $
            7.31
            
            
            105,025
            
            $
            7.31
            
            
            3.4
            
            $
            962$11.06
—
                $13.90
            
            
            374,660
            
            
            6.2
            
            
            12.73
            
            
            355,060
            
            
            12.81
            
            
            6.1
            
            
            1,300$15.00
—
                $20.88
            
            
            74,800
            
            
            5.9
            
            
            17.71
            
            
            67,867
            
            
            18.78
            
            
            5.6
            
            
            -554,485
            
            
            5.7
            
            $
            12.51
            
            
            527,952
            
            $
            12.48
            
            
            5.5
            
            $
            2,106







44
 *Table
          of Contents*


The
      total intrinsic
      value of options exercised during the years ended December 31, 2006, 2005,
      and
      2004 was $2.2 million, $2.0 million and $.4 million, respectively. As of
      December 31, 2006, there was $.2 million in unrecognized compensation expense
      related to unvested stock options, which is expected to be recognized over
      a
      weighted average period of 3 years. As a result of the adoption of SFAS 123R
      in
      January 2006, the compensation expense related to stock options was $60 for
      the
      year ended December 31, 2006.




The
      weighted
      average fair value of stock options granted during the years ended December
      31,
      2006, 2005, and 2004 was $10.30, $6.23 and $7.036, respectively. The
      fair value of
      each option grant was estimated using the Black-Scholes option pricing model
      as
      of the date of grant using the following assumptions:




**Year
                Ended December 31,****2006**
            
            **2005**
            
            **2004**Risk-free
                interest rate
            
            
            5.0
            %
            
            3.25
            %
            
            3.25
            %Expected
                dividend yield
            
            
            -
            %
            
            -
            %
            
            -
            %Expected
                volatility
            
            
            46.5
            %
            
            58.5
            %
            
            58.5
            %Expected
                term
                (in years)
            
            
            6.5
            
            
            5.0
            
            
            5.0





The
      following is a
      summary of the Company’s restricted stock activity for 2006, 2005 and
      2004:





**Restricted
                Shares**
            
            **Number
                of Shares**
            
            **Weighted
                Average Grant Date Fair Value**Unvested
                at
                December 31, 2003
            
            
            4,000
            
            $
            8.06Granted
            
            
            -
            
            
            -Vested
            
            
            (2,000
            )
            
            8.06Forfeited
            
            
            -
            
            
            -Unvested
                at
                December 31, 2004
            
            
            2,000
            
            
            8.06Granted
            
            
            10,000
            
            
            11.15Vested
            
            
            (2,000
            )
            
            8.06Forfeited
            
            
            -
            
            
            -Unvested
                at
                December 31, 2005
            
            
            10,000
            
            
            11.15Granted
            
            
            190,195
            
            
            19.65Vested
            
            
            -
            
            
            -Forfeited
            
            
            (2,977
            )
            
            20.27Unvested
                at
                December 31, 2006
            
            
            197,218
            
            $
            19.21







The
      Company’s
      restricted stock awards have various vesting schedules ranging from three to
      five years. The Company recognized compensation expense of approximately $725,
      $39 and $18 during 2006, 2005 and 2004, respectively. At December 31, 2006
      the
      Company had $3.1 million in unrecognized compensation expense related to
      restricted stick, which is expected to be recognized over a weighted average
      period of approximately four years.




***Non-Employee
      Directors Stock Plan*** **


In
      May 2003, the
      Company adopted the 2003 Non-Employee Directors Stock Award and Option Plan
      (the
“2003 Directors Stock Plan”). The terms of the 2003 Directors Stock Plan are
      consistent with the Company’s prior non-employee directors’ stock plan,
      including 50,000 shares of Class A Common Stock available for option or issue.




The
      2003 Directors
      Stock Plan provides for the grant of 1,200 options to purchase the Company’s
      Class A Common Stock to each non-employee director upon the election or
      re-election of each such director to the Board. The exercise price of options
      issued under the 2003 Directors Stock Plan is set at the fair market value
      of
      the Company’s stock on the date granted. Options vest ratably on each of the
      first, second and third anniversaries of the date of grant.




If
      a Board member
      elects to receive Board-related compensation in the form of stock, the number
      of
      shares issued to each director in lieu of cash is determined based on the amount
      of earned compensation divided by the fair market value of the Company’s stock
      on the date compensation is earned.




***Employee
      Stock Purchase Plan (“ESPP”)***


In
      May 2003, the
      Company adopted the 2003 U.S. Xpress Enterprises, Inc. Employee Stock Purchase
      Plan (the “2003 Plan”), effective July 1, 2003, through which employees meeting
      certain eligibility criteria may purchase shares of the Company’s class A common
      stock at a 15.0% discount of the fair market value, as defined. Consistent
      with
      the previous ESPP plan, common stock is purchased for employees in June and
      December of each year, and employees may not purchase more than 1,250 shares
      in
      any six-month period or purchase stock having a fair market value of more than
      $25 per calendar year. The Company has reserved 500,000 shares of Class A Common
      Stock under the terms of the 2003 Plan. In January 2006, employees purchased
      9,057 shares of the Company’s Class A Common Stock at $10.12 per share. In June
      and December 2006, employees purchased 5,937 and 13,248 shares of the Company’s
      Class A Common Stock at $14.79 and $14.00 per share, respectively. As a result
      of the adoption of SFAS 123R, the Company recognized $91 in compensation expense
      related to the employee stock purchase plan for the year ended December 31,
      2006.




**17.**  **Fair
      Value
      of Financial Instruments**




The
      carrying values
      of cash and cash equivalents, customer and other receivables, accounts payable,
      accrued liabilities, and securitization facility are reasonable estimates of
      their fair values because of the short maturity of these financial instruments.
      Based on the borrowing rates available to the Company for long-term debt with
      similar terms and average maturities, the carrying amounts approximate the
      fair
      value of such financial instruments.




**18**.**Operating
      Segments**




The
      Company has two
      reportable segments based on the types of services it provides, to its
      customers: Truckload (U.S. Xpress, Arnold, and Total), which provides truckload
      operations throughout the continental United States and parts of Canada and
      Mexico, and Xpress Global Systems, which provides transportation services to
      the
      floorcovering industry.




The
      accounting
      policies of the segments are the same as those described in the summary of
      significant accounting policies. Substantially all intersegment sales prices
      are
      market based. The Company evaluates performance based on operating income of
      the
      respective business units.





**Truckload**
            
            **Xpress
                Global Systems**
            
            **Consolidated****Year
                Ended December 31, 2006****Revenues
                - external customers**
            
            **$**
            **1,378,231**
            
            **$**
            **93,533**
            
            **$**
            **1,471,764****Intersegment
                revenues**
            
            
            **5,261**
            
            
            -
            
            
            **5,261****Operating
                income (loss)**
            
            
            **52,334**
            
            
            **4,574**
            **(1)**
            
            **56,908****Depreciation
                and amortization**
            
            
            **61,603**
            
            
            **1,435**
            
            
            **63,038****Goodwill
                at carrying value**
            
            
            **89,492**
            
            
            **4,815**
            
            
            **94,307****Total
                assets**
            
            
            **883,875**
            
            
            **19,492**
            
            
            **903,367****Capital
                expenditures**
            
            
            **238,855**
            
            
            **364**
            
            
            **239,219****Year
                Ended December 31, 2005**Revenues
                -
                external customers
            
            $
            1,038,843
            
            $
            125,389
            
            $
            1,164,232Intersegment
                revenues
            
            
            19,788
            
            
            -
            
            
            19,788Operating
                income (loss)
            
            
            37,468
            
            
            (13,498
            )
              (1)
            
            23,970Depreciation
                and amortization
            
            
            43,671
            
            
            2,336
            
            
            46,007Goodwill
                at
                carrying value
            
            
            67,328
            
            
            4,815
            
            
            72,143Total
                assets
            
            
            583,320
            
            
            24,064
            
            
            607,384Capital
                expenditures
            
            
            150,788
            
            
            1,667
            
            
            152,455**Year
                Ended December 31, 2004**Revenues
                -
                external customers
            
            $
            947,090
            
            $
            158,566
            
            
            1,105,656Intersegment
                revenues
            
            
            19,352
            
            
            -
            
            
            19,352Operating
                income
            
            
            45,315
            
            
            (5,048
            )
            
            40,267Depreciation
                and amortization
            
            
            42,082
            
            
            2,553
            
            
            44,635Goodwill
                at
                carrying value
            
            
            67,328
            
            
            6,868
            
            
            74,196Total
                assets
            
            
            502,758
            
            
            47,952
            
            
            550,710Capital
                expenditures
            
            
            104,499
            
            
            3,081
            
            
            107,580





(1) Includes the
      pre-tax charge of $.8 million and $2.8 million in 2006 and 2005, respectively,
      related to the loss on sale and exit of the airport-to-airport business. See Footnote
      10 ,
“Loss
      on Sale and
      Exit of Business”.




45
 *Table
          of Contents*


The
      Company does
      not separately track domestic and foreign revenues from external customers
      or
      domestic and foreign long-lived assets. Providing such information would be
      impracticable, and the Company believes its foreign operations are immaterial
      to
      the Company’s financial condition.




The
      difference in
      consolidated operating income as shown above and consolidated income before
      income tax provision on the consolidated statements of operations is net
      interest expense of $18,469, $8,320 and $9,685 in 2006, 2005 and 2004,
      respectively, equity in (income) loss of affiliated companies of $327, $(2,792)
      and $(203), minority interest of $1,301, $0, and $0, and the early
      extinguishment of debt of $0, $294, and $454 in 2006, 2005 and 2004,
      respectively, which are considered corporate expenses.




**19.**  **Subsequent
      Events**




Subsequent
      to
      December 31, 2006, and in accordance with the January 2007 Board-approved stock
      repurchase authorization of up to $15.0 million, the Company repurchased 100,000
      shares of its Class A common stock. The stock may be purchased on the open
      market or in privately negotiated transactions at any time until January 26,
      2008, at which time the board may elect to extend the repurchase program. Any
      purchases would be at management’s discretion based upon prevailing prices,
      liquidity and other factors. The repurchased shares will be held as treasury
      stock and may be used for issuances under the Company’s employee stock option
      plan or for other general corporate purposes as the board may be
      determine.




**20.**  **Quarterly
      Financial Data (Unaudited)**




**Quarter
                Ended****March
                31**
            
            **June
                30**
            
            **September
                30**
            
            **December
                31**
            
            **Total****Year
                Ended December 31, 2006**Operating
                revenue
            
            $
            299,710
            
            $
            389,462
            
            $
            396,583
            
            $
            386,009
            
            $
            1,471,764Income
                from
                operations
            
            
            4,757
            
            
            15,530
            
            
            19,234
            
            
            17,387
            
            
            56,908Income
                before
                income taxes
            
            
            1,303
            
            
            10,134
            
            
            13,881
            
            
            11,493
            
            
            36,811Net
                income
            
            
            734
            
            
            5,724
            
            
            7,272
            
            
            6,374
            
            
            20,104Earnings
                per
                share - basic
            
            $
            0.05
            
            $
            0.37
            
            $
            0.48
            
            $
            0.42
            
            $
            1.31Earnings
                per
                share - diluted
            
            $
            0.05
            
            $
            0.37
            
            $
            0.47
            
            $
            0.41
            
            $
            1.29**Year
                Ended December 31, 2005**Operating
                revenue
            
            $
            269,144
            
            $
            279,884
            
            $
            297,240
            
            $
            317,964
            
            $
            1,164,232Income
                from
                operations
            
            
            (1,955
            )
            
            1,526
            
            
            9,489
            
            
            14,910
            
            
            23,970Income
                before
                income taxes
            
            
            (3,867
            )
            
            703
            
            
            7,975
            
            
            13,337
            
            
            18,148Net
                income
            
            
            (2,127
            )
            
            482
            
            
            3,999
            
            
            7,078
            
            
            9,432Earnings
                (Loss) per share - basic
            
            $
            (0.13
            )
            $
            0.03
            
            $
            0.25
            
            $
            0.46
            
            $
            0.59Earnings
                (Loss) per share - diluted(1)
            
            $
            (0.13
            )
            $
            0.03
            
            $
            0.25
            
            $
            0.46
            
            $
            0.59







*(1)* *The
      sum of
      quarterly earnings per share differs from annual earnings per share because
      of
      differences in the weighted average number of common shares used in the
      quarterly and annual computations* *.*





46
 *Table
          of Contents*


**Report
      of
      Independent Registered Public Accounting Firm**







To
      the Board of
      Directors and Stockholders




U.S.
      Xpress
      Enterprises, Inc.




We
      have audited
      management’s assessment, included in the accompanying Management’s Report on
      Internal Control over Financial Reporting, that U.S. Xpress Enterprises, Inc.
      and subsidiaries maintained effective internal control over financial reporting
      as of December 31, 2006, based on criteria established in Internal Control
      -
      Integrated Framework issued by the Committee of Sponsoring Organizations of
      the
      Treadway Commission (the COSO criteria). U.S. Xpress Enterprises, Inc.’s
      management is responsible for maintaining effective internal control over
      financial reporting and for its assessment of the effectiveness of internal
      control over financial reporting. Our responsibility is to express an opinion
      on
      management’s assessment and an opinion on the effectiveness of the Company’s
      internal control over financial reporting based on our audit.




We
      conducted our
      audit 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 effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.




A
      company’s
      internal control over financial reporting is a process designed to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.




Because
      of its
      inherent limitations, internal control over financial reporting may not prevent
      or detect misstatements. Also, projections of any evaluation of effectiveness
      to
      future periods are subject to the risk that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with the
      policies or procedures may deteriorate.




In
      our opinion,
      management’s assessment that U.S. Xpress Enterprises, Inc. and subsidiaries
      maintained effective internal control over financial reporting as of December
      31, 2006, is fairly stated, in all material respects, based on the COSO
      criteria. Also, in our opinion, U.S. Xpress Enterprises, Inc. and subsidiaries
      maintained, in all material respects, effective internal control over financial
      reporting as of December 31, 2006, based on the COSO criteria.




We
      also have
      audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of U.S. Xpress
      Enterprises, Inc. and subsidiaries as of December 31, 2006 and 2005, and the
      related consolidated statements of operations, stockholders’ equity, and cash
      flows for each of the three years in the period ended December 31, 2006, and
      our
      report dated March 9, 2007, expressed an unqualified opinion
      thereon.







**/s/
      ERNST
& YOUNG LLP**






Chattanooga,
      Tennessee


March
      9,
      2007




47
 *Table
          of Contents*


**ITEM
      9.****CHANGES
      IN
      AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING**


**AND
      FINANCIAL DISCLOSURE**







Not
      applicable.






**ITEM
      9A.****CONTROLS
      AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




We
      have established
      disclosure controls and procedures to ensure that material information relating
      to us and our consolidated subsidiaries is made known to the officers who
      certify our financial reports and to other members of senior management and
      the
      Board of Directors.




Based
      on their
      evaluation as of December 31, 2006, our principal executive officer and
      principal financial officer have concluded that our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act) are effective to ensure that the information required to be disclosed
      by us
      in the reports that we file or submit under the Exchange Act is recorded,
      processed, summarized, and reported within the time periods specified in SEC
      rules and forms.




**Management’s
      Report on Internal Control over Financial Reporting**




Management
      is
      responsible for establishing and maintaining adequate internal control over
      financial reporting. Internal control over financial reporting is defined in
      Rule 13a-15(f) or 15d-(f) promulgated under the Exchange Act as a process
      designed by, or under the supervision of, the principal executive and principal
      financial officers and effected by the board of directors, management and other
      personnel, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting principles and
      includes those policies and procedures that:






·
            pertain
                to
                the maintenance of records that in reasonable detail accurately and
                fairly
                reflect the transactions and dispositions of our
                assets;·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that our receipts and expenditures are
                being
                made only in accordance with authorizations of our management and
                directors; and·
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on our financial
                statements.






The
      design,
      monitoring and revision of the system of internal accounting controls involves,
      among other things, management’s judgments with respect to the relative cost and
      expected benefits of specific control measures.




Because
      of its
      inherent limitations, internal control over financial reporting may not prevent
      or detect all instances of fraud, error, or misstatements. Moreover,
      effectiveness of internal controls may vary over time because of changes in
      conditions or the degree of compliance with the policies or
      procedures.




Management
      assessed
      the effectiveness of our internal control over financial reporting as of
      December 31, 2006. In making this assessment, our management used the criteria
      set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO) in Internal Control-Integrated Framework.




Based
      on its
      assessment, management believes that, as of December 31, 2006, our internal
      control over financial reporting is effective based on those
      criteria.




Our
      independent
      registered public accounting firm, Ernst & Young LLP, have issued an audit
      report on our assessment of our internal control over financial reporting,
      in
      which they expressed an unqualified opinion. This report is included
      herein.




48
 *Table
          of Contents*


**Changes
      in
      Internal Control over Financial Reporting**


There
      were no
      changes in our internal control over financial reporting during the quarter
      ended December 31, 2006, that have materially affected, or are reasonably likely
      to materially affect, our internal control over financial
      reporting.







**ITEM
      9B.****OTHER
      INFORMATION**




Not
      applicable.




**ITEM
      10.****DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE**




We
      incorporate by
      reference the information contained under the headings "Proposal No. 1 -
      Election of Directors," "Continuing Directors," "Corporate Governance - Our
      Executive Officers and Certain Significant Employees," "Corporate Governance
      -
      The Board of Directors and Its Committees - Committees of the Board of Directors
      - the Audit Committee," "Corporate Governance - Compliance with Section 16(a)
      of
      the Exchange Act," and "Corporate Governance - Code of Ethics," from our Proxy
      Statement to be delivered to our stockholders in connection with the 2007 Annual
      Meeting of Stockholders to be held May 11, 2007, (the “2007 Proxy
      Statement”).




**ITEM
      11.****EXECUTIVE
      COMPENSATION**




We
      incorporate by
      reference the information contained under the headings "Executive Compensation,"
      "Corporate Governance - The Board of Directors and Its Committees - Committees
      of the Board of Directors - The Compensation Committee - Compensation Committee
      Interlocks and Insider Participation," and "Corporate Governance - The Board
      of
      Directors and Its Committees - Committees of the Board of Directors - The
      Compensation Committee - Compensation Committee Report" from the 2007 Proxy
      Statement




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




The
      information set
      forth under the section entitled “Security Ownership of Certain Beneficial
      Owners and Management” of the 2007 Proxy Statement is incorporated herein by
      reference.




**Securities
      Authorized For Issuance Under Equity Compensation Plans**




The
      following table
      provides certain information, as of December 31, 2006, with respect to our
      compensation plans and other arrangements under which shares of our common
      stock
      are authorized for issuance.




**EQUITY
      COMPENSATION PLAN INFORMATION**




The
      following table
      sets forth information as to our equity compensation plans as of the end of
      the
      fiscal year ended December 31, 2006, under which shares of our Class A common
      stock are authorized for issuance.




**Plan
                category**
            
            **Number
                of securities**
              **to
                be
                issued upon**
              **exercise
                of the**
              **outstanding
                options,**
              **warrants,
                and rights**
            
            **Weighted-average**
              **exercise
                price of**
              **outstanding**
              **options,
                warrants,**
              **and
                rights**
            
            **Number
                of securities**
              **remaining
                available for future issuance under equity
                compensation**
              **plans
                (excluding**
              **securities
                reflected in column (a))**(a)
            
            (b)
            
            (c)Equity
                Compensation Plans approved by security holders
              (1993
                and
                2002 Incentive Stock Plans, 1995 and 2003 Non-Employee Directors
                Stock
                Award and Option Plans, and 2006 Omnibus Plan)
            
            
            554,485
            
            $
            12.51
            
            
            990,400Equity
                Compensation Plans not approved by security holders(1)Total
            
            
            554,485
            
            $
            12.51
            
            
            990,400





(1)   We
      do not have any
      equity compensation plans not approved by our stockholders.




We
      incorporate by
      reference the information contained under the heading "Security Ownership of
      Certain Beneficial Owners and Management" from the 2007 Proxy
      Statement.




49
 *Table
          of Contents*


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




We
      incorporate by
      reference the information contained under the headings "Certain Relationships
      and Related Transactions," and "The Board of Directors and Its Committees -
      Committees of Board of Directors - Independent Directors" from the 2007 Proxy
      Statement.




**ITEM
      14.****PRINCIPAL
      ACCOUNTING FEES AND SERVICES**




The
      information set
      forth under the section entitled "Relationships with Independent Registered
      Public Accounting Firm - Principal Accounting Fees and Services" of the 2007
      Proxy Statement is incorporated herein by reference.






**PART
      IV**







**ITEM
      15.****EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES**




**(a)**  **1.**  **Financial
      Statements:**




The
      financial
      statements are set forth in Part II, Item 8.




**2.**  **Financial
      Statement Schedules:**




The
      financial
      statement schedule required to be filed by Item 8 and Item 15(c) of this Form
      10-K is set forth under paragraph (c) below.




**3.**  **Exhibits:**




The
      exhibits
      required to be filed by Item 601 of Regulation S-K are listed under paragraph
      (b) below, and at the Exhibit Index appearing at the end of this report.
      Management contracts and compensatory plans or arrangements are indicated by
      an
      asterisk.




**(b)**  **Exhibits**




The
      following
      exhibits are filed with this Form 10-K or incorporated by reference to the
      document set forth next to the exhibit listed below.






**Exhibit
      No.
      Description**


(1)
            3.1
            Restated
                Articles of Incorporation of the Company.(7)
            3.2
            Restated
                Bylaws of the Company.(1)
            4.1
            Restated
                Articles of Incorporation of the Company.(7)
            4.2
            Restated
                Bylaws of the Company.(1)
            4.3
            Agreement
                of
                Right of First Refusal with regard to Class B Shares of the Company
                dated
                May 11, 1994, by and between Max L. Fuller and Patrick E. Quinn.
                *(1)
            10.1
            1993
                Incentive Stock Plan.*(1)
            10.2
            Form
                of Stock
                Option Agreement under 1993 Incentive Stock Plan.*(1)
            10.3
            Form
                of Stock
                Rights and Restrictions Agreement for Restricted Stock Award under
                1993
                Incentive Stock Plan*.(7)
            10.4
            1995
                Non-Employee Directors Stock Award and Option Plan. *(2)
            10.5
            2002
                Incentive Stock Plan.*(7)
            10.6
            Form
                of Stock
                Option Agreement under 2002 Stock Incentive Plan. *(15)
            10.7
            Form
                of
                Restricted Stock Award Notice under 2002 Stock Incentive
                Plan.*(3)
            10.8
            2003
                Employee
                Stock Purchase Plan*.(4)
            10.9
            2003
                Non-Employee Directors Stock Award and Option Plan. *(7)
            10.10
            Form
                of Stock
                Option Agreement under 2003 Non-Employee Directors Stock Award and
                Option
                Plan. *(16)
            10.11
            2006
                Omnibus
                Incentive Plan.*(17)
            10.12
            Form
                of
                Non-Employee Director Award Notice under 2006 Omnibus Incentive Plan.
                *(5)
            10.13
            Initial
                Subscription Agreement of Transplace.com, LLC dated April 19, 2000,
                by and
                among Transplace.com, LLC and the Company, Covenant Transport, Inc.,
                J.B.
                Hunt Transport Services, Inc., M.S. Carriers, Inc., Swift Transportation
                Co., Inc., and Werner Enterprises, Inc.(5)
            10.14
            Operating
                Agreement of Transplace.com, LLC dated April 19, 2000, by and among
                Transplace.com, LLC and the Company, Covenant Transport, Inc., J.B.
                Hunt
                Transport Services, Inc., M.S. Carriers, Inc., Swift Transportation
                Co.,
                Inc., and Werner Enterprises, Inc.(1)
            10.15
            Salary
                Continuation Agreement dated June 10, 1993, by and between the Company
                and
                Max L. Fuller.*(1)
            10.16
            Salary
                Continuation Agreement dated June 10, 1993, by and between the Company
                and
                Patrick E. Quinn.*(7)
            10.17
            Lease
                dated
                January 28, 1994, by and between Patrick E. Quinn and Max L. Fuller,
                as
                lessors, and the Company, as lessee, for certain real property situated
                in
                the County of Whitfield, State of Georgia.(7)
            10.18
            Assignment
                of
                Lease and Estoppel Agreement dated August 31, 1995, by and among
                Patrick
                E. Quinn, Max L. Fuller, Q & F Realty, LLC, and the Company, for
                certain real property situated in the County of Whitfield, State
                of
                Georgia.(7)
            10.19
            Amendment
                to
                Lease dated December 1, 1995, by and between Q & F Realty, LLC and the
                Company, for certain real property situated in the County of Whitfield,
                State of Georgia.(7)
            10.20
            Lease
                dated
                January 28, 1994, by and between Patrick E. Quinn and Max L. Fuller,
                as
                lessors, and the Company, as lessee, for certain real property situated
                in
                the County of Canadian, State of Oklahoma.
                *


50
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**Exhibit
      No.
      Description**


(7)
            10.21
            Assignment
                of
                Lease and Estoppel Agreement dated August 31, 1995, by and among
                Patrick
                E. Quinn, Max L. Fuller, Q & F Realty, LLC, and the Company, for
                certain real property situated in the County of Canadian, State of
                Oklahoma.(7)
            10.22
            Lease
                dated
                March 1, 1994, by and between Patrick E. Quinn and Max L. Fuller,
                as
                lessors, and Crown Transport Systems, Inc., as lessee, for certain real
                property situated in the County of Whitfield, State of Georgia.(7)
            10.23
            Assignment
                of
                Lease and Estoppel Agreement dated August 31, 1995, by and among
                Patrick
                E. Quinn, Max L. Fuller, Q & F Realty, LLC, and Crown Transport
                Systems, Inc., for certain real property situated in the County of
                Whitfield, State of Georgia.(6)
            10.24
            Revolving
                Credit and Letter of Credit Loan Agreement dated October 14, 2004,
                by and
                among the Company, SunTrust Bank, as administrative agent, Fleet
                National
                Bank, as syndication agent, LaSalle Bank National Association, as
                documentation agent, SunTrust Capital Markets, Inc., as lead arranger
                and
                book manager, and the lenders from time to time party
                thereto.(6)
            10.25
            Loan
                Agreement dated October 14, 2004, by and among Xpress Receivables,
                LLC, as
                borrower, U.S. Xpress, Inc. and Xpress Global Systems, Inc., as initial
                servicers, Three Pillars Funding LLC, as lender, and SunTrust Capital
                Markets, Inc., as administrator.(6)
            10.26
            Receivables
                Sale Agreement dated October 14, 2004, by and among U.S. Xpress,
                Inc. and
                Xpress Global Systems, Inc., as originators, and Xpress Receivables,
                LLC,
                as buyer.(12)
            10.27
            Purchase
                and
                Merger Agreement dated October 21, 2004, by and among Arnold Holdings,
                LLC, Arnold Transportation Holdings, Inc., Arnold Transportation
                Services,
                Inc., ATS Acquisition Holding Co., ATS Merger Co., and all of the
                members
                of Arnold Holdings, LLC.(8)
            10.28
            First
                Amendment to Purchase and Merger Agreement dated December 7, 2004,
                by and
                among Arnold Holdings, LLC, Arnold Transportation Holdings, Inc.,
                Arnold
                Transportation Services, Inc., ATS Acquisition Holding Co., ATS Merger
                Co., and all of the members of the Arnold Holdings,
                LLC.(8)
            10.29
            Stock
                Purchase, Contribution, and Exchange Agreement dated October 21,
                2004, by
                and among ATS Acquisition Holding Co., Xpress Holdings, Inc., and
                certain
                members of Arnold Holdings, LLC.(8)
            10.30
            First
                Amendment to Stock Purchase, Contribution, and Exchange Agreement
                dated
                December 7, 2004, by and among ATS Acquisition Holding Co., Xpress
                Holdings, Inc., and certain members of Arnold Holdings,
                LLC.(8)
            10.31
            Stockholders'
                Agreement dated October 21, 2004, by and among ATS Acquisition Holding
                Co., Xpress Holdings, Inc., and all other stockholders of ATS Acquisition
                Holding Co.(8)
            10.32
            First
                Amendment to Stockholders' Agreement dated December 7, 2004, by and
                among
                ATS Acquisition Holding Co., Xpress Holdings, Inc., and all other
                stockholders of ATS Acquisition Holding Co.(9)
            10.33
            Asset
                purchase agreement dated May 27, 2005 by and among Forward Air, Inc.,
                Xpress Global Systems, Inc., U.S. Xpress Enterprises, Inc., and certain
                persons set forth therein.(9)
            10.34
            First
                Amendment to Revolving Credit and Letter of Credit Loan Agreement
                by and
                between the Company and Fleet National Bank, LaSalle Bank, National
                Association, Bank Banking and Trust Company, National City Bank and
                Regions Financial Corporation as Lenders, and SunTrust Bank as Lender
                and
                Administrative Agent for the Lenders.(9)
            10.35
            Waiver
                and
                Consent by and between the Company and SunTrust Bank, as Administrative
                Agent for the Lenders.(9)
            10.36
            Omnibus
                Amendment No. 1 to Receivables Sale Agreement dated October 14, 2004,
                among Xpress Receivables, LLC as Borrower, U.S. Xpress, Inc. and
                Xpress
                Global Systems, Inc. as Servicers, Three Pillars Funding LLC as Lender
                and
                SunTrust Capital Markets, Inc. as agent and administrator for
                Lender.(10)
            10.37
            Second
                Amendment to Revolving Credit and Letter of Credit Loan Agreement
                by and
                between the Company and SunTrust Bank, Bank of America, N.A., LaSalle
                Bank, National Association, Branch Banking and Trust Company, National
                City Bank and Regions Financial Corporation as Lenders, and SunTrust
                Bank
                as Lender and Administrative Agent for the Lenders.(11)
            10.38
            Stock
                Purchase Agreement, dated as of February 28, 2006, by and among the
                Company, Xpress Holdings, Inc., Transportation Investments Inc.,
                Transportation Assets Leasing Inc., Total Logistics Inc., and certain
                shareholders of Transportation Investments Inc., Transportation Assets
                Leasing Inc., and Total Logistics Inc.(11)
            10.39
            Third
                Amendment to Revolving Credit and Letter of Credit Loan Agreement
                by and
                between the Company, SunTrust Bank, as administrative agent, and
                SunTrust
                Bank, Bank of America, N.A., LaSalle Bank, National Association,
                Branch
                Banking and Trust Company, National City Bank, and Regions Financial
                Corporation, as lenders.


51
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          of Contents*





(12)
            10.40
            Second
                Amendment to Loan Agreement dated October 14, 2004, by and among
                Xpress
                Receivables, LLC, as borrower, U.S. Xpress, Inc. and Xpress Global
                Systems, Inc., as initial servicers, Three Pillars Funding LLC, as
                lender,
                and SunTrust Capital Markets, Inc., as administrator.(13)
            10.41
            Stock
                Purchase Agreement, dated as of February 28, 2006, by and among the
                Company, Xpress Holdings, Inc., ATS Acquisition Holding Co., and
                certain
                shareholders of ATS Acquisition Holding Co.(14)
            10.42
            Fourth
                Amendment to Revolving Credit and Letter of Credit Loan Agreement
                by and
                among the Company, SunTrust Bank, as administrative agent, and SunTrust
                Bank, Bank of America, N.A., LaSalle Bank, National Association,
                Branch
                Banking and Trust Company, National City Bank, and Regions Financial
                Corporation, as lenders.(14)
            10.43
            Third
                Amendment to Loan Agreementdated
                October
                14, 2004,
                by and
                among Xpress Receivables, LLC, as borrower, U.S. Xpress, Inc., Xpress
                Global Systems, Inc., Arnold Transportation Services, Inc., Total
                Transportation of Mississippi LLC, and Total Logistics Inc., as servicers,
                Three Pillars Funding LLC, as lender, and SunTrust Capital Markets,
                Inc.,
                as administrator.(14)
            10.44
            Omnibus
                Amendment No. 2 to Receivables Sale Agreement dated October 14,
                2004,by and among
                Xpress Receivables, LLC, as buyer, and U.S. Xpress, Inc., Xpress
                Global
                Systems, Inc., Arnold Transportation Services, Inc., Total Transportation
                of Mississippi LLC, and Total Logistics Inc., as
                originators.(18)
            10.45
            Fifth
                Amendment to Revolving Credit and Letter of Credit Loan Agreement
                by and
                among the Company, SunTrust Bank, Bank of America, N.A., LaSalle
                Bank
                National Association, Branch Banking and Trust Company, National
                City
                Bank, and Regions Financial Corporation.#
            10.46
            Form
                of
                Restricted Stock Award Notice under 2006 Omnibus Incentive
                Plan.#
            21
            Subsidiaries
                of the registrant.#
            23
            Consent
                of
                Ernst & Young LLP#
            31.1
            Certification
                pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted
                pursuant
                to Section 302(a) of the Sarbanes-Oxley Act of 2002.#
            31.2
            Certification
                pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted
                pursuant
                to Section 302(a) of the Sarbanes-Oxley Act of 2002.#
            32.1
            Certification
                pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.#
            32.2
            Certification
                pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.#
            99
            Total
                Transportation Report of Independent Registered Public Accounting
                Firm.*
            Indicates
                management contract or compensatory plan or
                arrangement.#
            Filed
                herewith.(1)
            Filed
                in
                Registration Statement, Form S-1, on May 20, 1994 (SEC File No.
                33-79208).(2)
            Filed
                as
                Annex A to the 2002 Proxy Statement on April 15, 2002 (SEC Commission
                File
                No. 0-24806).(3)
            Filed
                as
                Annex A to the 2003 Proxy Statement on April 10, 2003 (SEC Commission
                File
                No. 0-24806).(4)
            Filed
                as
                Annex B to the 2003 Proxy Statement on April 10, 2003 (SEC Commission
                File
                No. 0-24806).(5)
            Filed
                in Form
                10-Q on August 14, 2000 (SEC Commission File No.
                0-24806).(6)
            Filed
                in Form
                8-K on October 20, 2004 (SEC Commission File No.
                0-24806).(7)
            Filed
                in Form
                10-Q on November 9, 2004 (SEC Commission File No.
                0-24806).(8)
            Filed
                in Form
                10-K on March 15, 2005 (SEC Commission File No.
                0-24806).(9)
            Filed
                in Form
                10-Q on August 10, 2005 (SEC Commission File No.
                0-24806).(10)
            Filed
                in Form
                10-Q on November 9, 2005 (SEC Commission File No.
                0-24806).(11)
            Filed
                in Form
                8-K on March 6, 2006 (SEC Commission File No. 0-24806).(12)
            Filed
                in Form
                10-K on March 16, 2006 (SEC Commission File No.
                0-24806).(13)
            Filed
                in Form
                8-K/A on March 23, 2006 (SEC Commission File No.
                0-24806).(14)
            Filed
                in Form
                8-K on April 5, 2006 (SEC Commission File No. 0-24806).(15)
            Filed
                in Form
                8-K on April 12, 2006 (SEC Commission File No.
                0-24806).(16)
            Filed
                in
                Exhibit A to the Definitive Proxy Statement on April 5, 2006(SEC
                Commission File No. 0-24806).(17)
            Filed
                in Form
                10-Q on August 9, 2006 (SEC Commission File No.
                0-24806).(18)
            Filed
                in Form
                8-K on October 31, 2006 (SEC Commission File No.
                0-24806).





52
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          of Contents*


**(c)**  **Financial
      Statement Schedule**







**SCHEDULE
      II**




**VALUATION
      AND QUALIFYING ACCOUNTS**


**FOR
      THE
      YEARS ENDED**


**DECEMBER
      31, 2006, 2005 AND 2004**


(In
      Thousands)






**Description**
            
            **Balance
                at Beginning of Period**
            
            **Charged
                to Cost/Expenses****(1)**
            
            **Charged
                to**
              **Other(2)**
            
            **Deductions****(3)**
            
            **Balance
                at**
              **End
                of Period****FOR
                THE YEAR ENDED 12/31/06****Reserve
                for doubtful accounts**
            
            **$**
            **6,129**
            
            **$**
            **3,422**
            
            **$**
            **1,011**
            
            **$**
            **5,705**
            
            **$**
            **4,857**FOR
                THE YEAR
                ENDED 12/31/05Reserve
                for
                doubtful accounts
            
            
            3,357
            
            
            6,658
            
            
            121
            
            
            4,007
            
            
            6,129FOR
                THE YEAR
                ENDED 12/31/04Reserve
                for
                doubtful accounts
            
            
            2,782
            
            
            1,796
            
            
            72
            
            
            1,293
            
            
            3,357









(1)For
                    the year
                    ended December 31, 2006Charged
                      to
                      cost/expense
                  
                  
                  
                  
                  $
                  2,767Provision
                      for
                      liquidation of receivables associated with the sale and exit
                      of the
                      Company’s unprofitable airport-to-airport business
                  
                  
                  
                  
                  
                  655$
                  3,422For
                      the year
                      ended December 31, 2005Charged
                      to
                      cost/expense
                  
                  
                  
                  
                  $
                  4,633Provision
                      for
                      liquidation of receivables associated with the sale and exit
                      of the
                      Company’s unprofitable airport-to-airport business
                  
                  
                  
                  
                  
                  2,025$
                  6,658(2)For
                      the year
                      ended December 31, 2006Recoveries
                      on
                      accounts written off
                  
                  
                  
                  
                  $
                  5Balances
                      acquired through consolidation of Arnold and Total
                  
                  
                  
                  
                  
                  1,006$
                  1,011(3)Accounts
                      written off


53
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          of Contents*


**SIGNATURES**







Pursuant
      to the
      requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized, on the 16th day of March
      2007.






Date:
                March
                16, 2007
            
            **U.S.
                XPRESS ENTERPRISES, INC.**By:
            /s/Ray
                M.
                HarlinRay
                M.
                HarlinChief
                Financial Officer







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







**Signature**
            **Title**
            **Date**/s/Patrick
                E.
                Quinn
            Co-Chairman
                of the Board of Directors,
            March
                16,
                2007Patrick
                E.
                Quinn
            President
                and
                Treasurer/s/Max
                L.
                Fuller
            Co-Chairman
                of the Board of Directors,
            March
                16,
                2007Max
                L.
                Fuller
            Chief
                Executive Officer and Secretary/s/Ray
                M.
                Harlin
            Executive
                Vice President of Finance and Chief
            March
                16,
                2007Ray
                M.
                Harlin
            Financial
                Officer (principal financial andaccounting
                officer)/s/James
                E.
                Hall
            Director
            March
                16,
                2007James
                E.
                Hall/s/John
                W.
                Murrey, III
            Director
            March
                16,
                2007John
                W.
                Murrey, III/s/Robert
                J.
                Sudderth, Jr.
            Director
            March
                16,
                2007Robert
                J.
                Sudderth, Jr.





54
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          of Contents*


**Exhibit
      21**








**Subsidiaries
                ofU.S. Xpress Enterprises,
                Inc.****For
                Year Ended December 31, 2006**U.S.
                Xpress,
                Inc., a Nevada corporationU.S.
                Xpress
                Leasing, Inc., a Tennessee corporationXpress
                Global
                Systems, Inc., a Georgia corporationXpress
                Company Store, Inc., a Tennessee corporationXpress
                Air,
                Inc., a Tennessee corporationXpress
                Holdings, Inc., a Nevada corporationXpress
                Colorado, Inc., a Georgia corporationXpress
                Nebraska, Inc., a Nebraska corporationColton
                Xpress, LLC, a California corporationXpress
                Receivables, LLC, a Nevada corporationCargo
                Movement Corp., a Nevada corporationXpress
                Waiting, Inc., a Nevada corporationAssociated
                Developments, LLC, a Tennessee corporationTotal
                Transportation Holdings, Inc., a Mississippi
                corporationTotal
                Logistics, Inc., a Mississippi corporationTransportation
                Investments, Inc., a Mississippi corporationTotal
                Transportation of Mississippi LLC, a Mississippi
                corporationTransportation
                Assets Leasing, Inc., a Mississippi corporationTAL
                Real
                Estate, LLC, a Mississippi corporationTAL
                Power
                Equipment #1, LLC, a Mississippi corporationTAL
                Van #1,
                LLC, a Mississippi corporationTAL
                Furniture
                and Equipment, LLC, a Mississippi corporationTAL
                Marine,
                Inc., a Delaware corporationTAL
                Aviation,
                LLC, a Mississippi corporationTAL
                Power
                Equipment #2, LLC, a Mississippi corporationATS
                Acquisition Holding Co., a Delaware corporationArnold
                Transportation Services, Inc., a Pennsylvania
                corporation





55
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          of Contents*


**Exhibit
      23**





**CONSENTOF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**





We
      consent to the
      incorporation by reference in the Registration Statements on Form S-8 (File
      No. 33-91238 ,
      File No. 33-94878 ,
      File No. 33-99730 ,
      File No. 333-105226 ,
      File No.
      333-105227 and File No. 333-105232 )
      and Form S-3
      (File No. 333-120549 )
      of U.S. Xpress
      Enterprises, Inc. and subsidiaries of our reports dated March 9, 2007, with
      respect to the consolidated financial statements of U.S. Xpress Enterprises,
      Inc. and subsidiaries, U.S. Xpress Enterprises, Inc. management’s assessment of
      the effectiveness of internal control over financial reporting and the
      effectiveness of internal control over financial reporting of U.S. Xpress
      Enterprises, Inc., included in this Annual Report (Form 10-K) for the year
      ended
      December 31, 2006.





Our
      audit also
      included financial statement Schedule II of U.S. Xpress Enterprises, Inc. and
      subsidiaries listed in Item 15(a). This schedule is the responsibility of the
      Company’s management. Our responsibility is to express an opinion based on our
      audits. In our opinion, the financial statement schedule referred to above,
      when
      considered in relation to the basic financial statements taken as a whole,
      presents fairly in all material respects the information set forth
      therein.







**/s/
      ERNST
& YOUNG LLP**





Chattanooga,
      Tennessee


March
      9,
      2007