|UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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|                                                                       
|FORM 10-K                                                              
|                                                                       

| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
| | ----------------------------------------------------------------------------------------
| | FOR THE YEAR ENDED DECEMBER 31, 2004                                                    
| |                                                                                         
| | OR                                                                                      
| |                                                                                         
| | 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)
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|                                                      

|Nevada                                                         |  | 62-1378182                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|4080 Jenkins Road                                              |  |                                     
|Chattanooga, Tennessee                                         |  | 37421                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

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|Registrants telephone number, including area code: (423) 510-3000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: Class A Common Stock, $0.01 Par Value
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  No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments
to this Form 10-K. .
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). Yes  No
The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30,
2004, the last business day of the registrants most recently completed fiscal second quarter
was $93,943,493 (based upon the $15.73 closing price on that date as reported by NASDAQ). In making
this calculation the registrant has assumed, without admitting for any purpose, that all executive
officers, directors, and holders of more than 10% of a class of outstanding common stock, and no
other persons, are affiliates.
As of March 7, 2005,the registrant had 13,329,082 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
2005 annual meeting of stockholders to be held on May 5, 2005.

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|



|U.S. XPRESS ENTERPRISES, INC.
TABLE OF CONTENTS
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|                                               

|ITEM NO. |  |                                                                                                                   | PAGE NO.
|-------- |  | ----------------------------------------------------------------------------------------------------------------- | --------
|         |  | PART I                                                                                                            |         
|         |  |                                                                                                                   |         
|Item 1   |  | Business                                                                                                          | 3       
|Item 2   |  | Properties                                                                                                        | 9       
|Item 3   |  | Legal Proceedings                                                                                                 | 11      
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                                               | 11      
|         |  |                                                                                                                   |         
|         |  | PART II                                                                                                           |         
|         |  |                                                                                                                   |         
|Item 5   |  | Market for Registrants Common Equity, Related Stockholder 
    Matters and Issuer Purchases of Equity Securities | 12      
|Item 6   |  | Selected Financial Data                                                                                           | 13      
|Item 7   |  | Managements Discussion and Analysis of Financial 
    Condition and Results of Operations                        | 14      
|Item 7A  |  | Quantitative and Qualitative Disclosures About Market Risk                                                        | 30      
|Item 8   |  | Financial Statements and Supplementary Data                                                                       | 31      
|Item 9   |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure                          | 52      
|Item 9A  |  | Controls and Procedures                                                                                           | 52      
|Item 9B  |  | Other Information                                                                                                 | 53      
|         |  |                                                                                                                   |         
|         |  | PART III                                                                                                          |         
|         |  |                                                                                                                   |         
|Item 10  |  | Directors and Executive Officers of the Registrant                                                                | 53      
|Item 11  |  | Executive Compensation                                                                                            | 53      
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management                                                    | 53      
|Item 13  |  | Certain Relationships and Related Transactions                                                                    | 54      
|Item 14  |  | Principal Accounting Fees and Services                                                                            | 54      
|         |  |                                                                                                                   |         
|         |  | PART IV                                                                                                           |         
|         |  |                                                                                                                   |         
|Item 15  |  | Exhibits, Financial Statement Schedules                                                                           | 55      
|         |  |                                                                                                                   |         
|         |  | Signatures                                                                                                        | 59      
|         |  |                                                                                                                   |         
|         |  | Exhibits                                                                                                          |         

|
|



|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. 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 Managements
Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect
Future Results 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. We
disclaim any obligation to update or revise any forward-looking statements to reflect actual results
or changes in the factors affecting the forward-looking information.
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 Associations, 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 and airport-to-airport transportation services to the airfreight and airfreight forwarding
industries. Our diversified customer base includes many Fortune 500 companies such as Best Buy, Clorox,
DuPont, FedEx, and Wal-Mart. We operated a truckload fleet of 5,034 tractors and 16,437 trailers
as of December 31, 2004. Additionally, we operated approximately 400 tractors dedicated to local
and drayage services.
Since becoming a public company, we have increased our operating revenue to $1.1 billion in 2004
from $215.4 million in 1994, a compounded annual growth rate of 17.8%. Our growth has come through
expansion of business with new and existing customers, complementary acquisitions, and more recently,
through the development and expansion of additional strategic business units. We believe our emphasis
on developing strategic business units focused on an expanded array of truckload services has accelerated
our growth in recent periods.
In recent periods, our income has grown faster than our operating revenue as a result of our strategic
and margin improvement initiatives, as well as a favorable freight market. Our operating income has
grown from $13.5 million in 2001 to $39.6 million in 2004. The fourth quarter of 2004 was
our twelfth consecutive quarter of year-over-year earnings improvement and reflected our highest
earnings per share since our initial public offering in 1994. We believe there are significant opportunities
for us to further improve our profitability as we continue to implement our strategic initiatives.
Our truckload segment, U.S. Xpress, offers a broad range of truckload services through five strategic
business units. Together, these business units comprised approximately 86.0% of total operating revenue
in fiscal 2004. The following is a description of each of our truckload strategic business units.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |  | Dedicated.Under our one-to-three year dedicated service agreements, we provide equipment, drivers, and frequently
  on-site personnel exclusively committed to specific customers. We believe customers seek dedicated
  contracts to obtain committed capacity, to assure themselves of certain service levels, and to outsource
  transportation functions previously performed in-house. We believe the benefits of this service include
  better equipment utilization, greater business volume from key customers, and more predictable resource
  planning. Our drivers generally enjoy more predictable schedules and regular routes. Our dedicated
  unit operated approximately 1,350 tractors at December 31, 2004.                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Regional.Regional fleets have grown in recent years because of changes in customers distribution patterns.
  According to a Reebie Associates survey, over 75.0% of the freight transported in the United States
  moves over distances of less than 500 miles, and we believe the average length of haul of shipments
  is shrinking as manufacturers and distributors increasingly bring the various elements of their supply
  and distribution chains into closer geographical proximity. We believe we are well-positioned to
  take advantage of this trend through our established regional presence in the Western, Midwestern, and Southeastern markets. In addition, regional movements offer more driver-friendly routes.
  Our regional unit operated approximately 850 tractors at December 31, 2004.

|3
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| |  | Expedited intermodal rail.  Our expedited intermodal rail service uses our existing over-the-road trailers carried on high-speed
  trains, which affords us a significant service advantage over standard intermodal rail service using
  private or rail-owned containers. We use this service in targeted medium-to-long haul markets to
  better utilize existing equipment and reduce operating costs, while still providing high levels of
  service to our customers. As a result, expansion of our expedited intermodal rail service is a significant
  component of our strategy to improve asset utilization and profitability.                                                                                                                                                           
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Expedited team.We are among the industry leaders in providing expedited long-haul freight transportation using two-person
  driver teams. The use of two-person driver teams allows expedited handling of medium-to-long haul
  loads because the drivers can alternate driving and sleeping and thereby keep freight moving virtually
  24 hours a day, while operating within federal safety rules. Our driver teams allow us to offer significantly
  faster, more predictable service than slower rail or solo driver service over longer lengths of haul
  at a much lower cost than airfreight. We believe the benefits of this premium service include both
  higher asset utilization and higher rates. Our expedited team unit operated approximately 750 tractors
  at December 31, 2004.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Medium-to-long haul solo.Since our inception, we have used our significant capacity in this unit to provide customers with medium-to-long
  haul service throughout the United States and in parts of Canada and Mexico. We expect our medium-to-long
  haul solo business to continue to decline as a percentage of our revenue as we continue to execute
  our business plan. Our medium-to-long haul solo unit operated approximately 2,100 tractors at December
  31, 2004.                                                                                                                                                                                                                                                                                                                    

|                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Our smaller operating segment, Xpress Global Systems, comprised approximately 14.0% of our total operating
revenue in 2004. This segment provides two main services:
|                                                                                                                                                                    

| |  | Floorcovering logistics.We offer transportation, warehousing, and distribution services to the floorcovering industry. These
  services include picking up floorcovering products from manufacturers, consolidating shipments into
  truckloads bound for specific destinations, arranging for line-haul transportation between our locations,
  and delivering the products to distributors, retailers, and large-scale end users. Xpress Global
  Systems also offers warehousing and other specialized services, such as custom carpet cutting, inventory
  stocking, and the sale of floorcovering supplies. Floorcovering logistics accounted for approximately
  63.0% of Xpress Global Systems revenue for the year ended December 31, 2004.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Airport-to-airport.  We offer nationwide, scheduled ground transportation of air cargo to customers in the airfreight
  and airfreight forwarding industries as a cost effective and reliable alternative to traditional
  air transportation. Xpress Global Systems offers service to major markets through its network of
  81 locations in the United States and Canada.                                                                                                                                                                                                                                                                                                                                                                         

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|We believe the floorcovering logistics and airport-to-airport services offered by Xpress Global Systems
are complementary because they allow us to increase the revenue over the same network of distribution
centers and the peak volumes are at opposite times of the day. We have invested significant resources
toward building out our network over the past three years and do not anticipate adding significant
new locations in the next year.
Please refer to Note 17 to our financial statements included under Item 8 of this Form 10-K for financial
information regarding our operating segments.
Investment in Arnold Transportation Services, Inc.
On December 8, 2004, we acquired a 49% interest in Arnold Transportation Services, Inc. (Arnold)
and its affiliated companies for $6.2 million in cash. Arnold is a truckload carrier that provides
primarily short-haul regional and dedicated dry van service in the Southwest, Southeast, and Northeast.
Arnolds regional operations are expected to complement the areas where we provide regional
service with little geographic overlap. Arnolds current management team controls the remaining
51% interest as well as a majority of the board of directors. Arnold will be separately managed by
its management team. We have not guaranteed any of Arnolds debt and do not have any obligation
to provide funding, services, or assets. Under our agreement with Arnolds management, we have
a three-year option to acquire 100% of Arnold by purchasing managements interest at a specified
price plus an agreed upon annual return. We have accounted for Arnolds operating results using
the equity method of accounting.

|4
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|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 increase asset productivity and provide higher financial returns. Over the past several years,
we have undertaken an intense evaluation of the freight markets and our customers and made the following
changes to our operations:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |  | We identified dedicated, regional, and expedited intermodal rail service as areas with greater long-term
growth and profitability potential than our traditional medium-to-long haul solo-driver business
unit.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                
| |  | We established focused management teams responsible for the strategic and tactical growth initiatives
of their respective business units.                                                                      
| |   |                                                                                                                                                                                                                
| |  | We created marketing initiatives and cross-selling strategies to contribute to the growth and development
of our business units.                                                                               
| |   |                                                                                                                                                                                                                
| |  | We began to re-allocate assets from our medium-to-long haul solo-driver unit to more profitable business
units.                                                                                                

|                                                                         
|-------------------------------------------------------------------------
|The following demonstrates the reallocations we have achieved since 2002:
|                                                                         

|Truckload Revenue Before Fuel Surcharge and
      Other Miscellaneous Revenue
      for the Year Ended December 31,
    (Dollars in thousands) | 
|---------------------------------------------------------------------------------------------------------------------------------------------- | 
|
|
|
|
|
|Type of Service                                                                                                                                | 
|                                                                                                                                               | 
|Dedicated                                                                                                                                      | 
|Regional                                                                                                                                       | 
|Expedited intermodal rail                                                                                                                      | 
|Expedited team                                                                                                                                 | 
|Medium-to-long haul solo                                                                                                                       | 
|                                                                                                                                               | 
|Total                                                                                                                                          | 
|                                                                                                                                               | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|In conjunction with reallocating our assets, we charged each business unit with improving its operating
results. 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.
We believe the ongoing implementation of our business strategy and improvements in our business units
have contributed to the following improvements in our operating results between 2002 and 2004.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |  | Our average revenue per loaded mile, before fuel surcharge, increased to $1.48 from $1.26.       
| | - | -------------------------------------------------------------------------------------------------
| |   |                                                                                                  
| |  | Our average revenue per tractor per week, before fuel surcharge, increased to $3,186 from $2,718.
| |   |                                                                                                  
| |  | Our average length of haul declined to 721 miles from 823 miles.                                 
| |   |                                                                                                  
| |  | Our diluted earnings per share increased to $1.14 from $0.08.                                    

|                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|We expect to continue to deploy assets in our more profitable business units as an ongoing part of
our business strategy and to focus on yield management and cost controls in all areas of our truckload
operations. As a result, we believe we have significant opportunities to improve our operating margin.

|5
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|Operations
Our corporate and truckload operations are headquartered in Chattanooga, Tennessee. We maintain seven
operations 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 nation-wide network of 107 company and agent facilities
providing floorcovering logistics and airport-to-airport services.
Our seven operations 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-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. We also use the system to monitor engine idling time, speed, performance, and
other factors that affect operating efficiency.
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 Eaton Vorad collision avoidance systems. In addition,
we recently participated with the National Highway Transportation Safety Administration in a three-year
study that is expected to result in improved braking standards. The Eaton Vorad system is designed
to provide drivers with additional response time to prevent accidents by giving visible and audible
warnings when other vehicles are beside the truck and when vehicles ahead are traveling at lower
speeds than the truck. 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 2004 we were self-insured for
personal injury and property damage liability up to a maximum limit of $2.0 million per occurrence;
we were self-insured for workers compensation up to a maximum limit of $500,000 per occurrence;
and we were self-insured for cargo claims up to $250,000 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.
We are in the process of equipping our trailers with Geologic satellite-based tracking technology.
At December 31, 2004, approximately 20% of our trailer fleet was equipped with these units, and we
expect to equip the remainder of the fleet over the next three to five years. We believe trailer
tracking will assist us in better managing our trailer fleet, controlling our ratio of trailers to
tractors, providing shipment tracking data to our customers, and counteracting potential cargo theft.
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. In the current freight
environment, we believe this affords us a marketing advantage as customers search for capacity. Of
our top 25 customers, 21 use the services of at least two of our strategic business units.
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|Our primary customers include retailers and manufacturers, as well as other transportation companies
such as less-than-truckload carriers, airfreight companies, 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 two first place finishes and one third place finish in the Quest
for Quality transportation award by Logistics Management magazine over the past four years. We have a diversified customer base, with no single customer accounting
for more than five percent of our revenue in 2004. Our ten largest customers measured by revenue
for the year ended December 31, 2004, were Best Buy, Clorox, Con-Way, Dollar General, Dollar Tree,
FedEx, Landstar Logistics, Meijer, Mohawk Industries, and Wal-Mart.
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 historical policy has been to operate our tractors while under warranty to minimize repair and
maintenance cost 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, 2004, our company tractors had an average age of 27 months and our trailers had
an average age of 52 months.
We purchase or lease Freightliner or Volvo tractors for substantially all of the additions and replacements
to our over-the-road fleet. Tractors are generally replaced every 36 to 60 months, generally well
in advance of the need for major engine overhauls. Substantially all of our over-the-road tractors
are equipped with Eaton Vorad anti-collision systems, 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 four-year agreement with our primary tractor manufacturer and a five-year agreement with
our primary trailer manufacturer concerning purchases of equipment. Our tractor arrangements also
cover the disposal of a substantial portion of our tractors at a defined trade-in value, as long
as we purchase replacement tractors from those vendors. We expect our tradeback 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 91% of our trailers were Duraplates at December 31, 2004.
Employees and Independent Contractors
At December 31, 2004, we employed 8,478 full-time associates, of whom 5,894 were drivers, 258 were
mechanics and other maintenance personnel, and 2,326 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. As a result, in February and
November 2004, we implemented driver and independent contractor pay increases that we expect
will improve recruiting and retention. We believe that our current driver pay scales are competitive with the top
in the industry. Our fleet of late-model Freightliner and Volvo tractors is designed for driver comfort
and safety. Standard equipment includes automatic transmissions, air ride suspensions, double sleeper
bunks, air conditioning, power steering, electronic engine brakes, and Eaton Vorad collision avoidance systems.
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 regional
and dedicated operations provides us
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|7
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|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. We maintain an aggressive independent
contractor recruiting program, with approximately 800 independent contractors under active contract
in both of our operating segments at December 31, 2004.
Industry
According to the ATA, the trucking industry generated approximately $610.1 billion in revenue
in 2003 and accounted for approximately 87% 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 generated revenues of approximately $270 billion
in 2003. We also compete in the private fleet market, which consists of trucks owned and operated
by shippers that move their own goods and accounted for an estimated $279 billion in revenue
in 2003. 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
accounted for approximately $12 billion, or approximately 5%, of annual for-hire truckload revenue
in 2003. We compete to some extent with railroads and rail-truck expedited service but differentiate
ourselves from railroad and rail-truck expedited 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.
Our industry is currently benefiting from improved pricing, which we attribute to a strong freight
environment and significant industry-wide limitations on trucking capacity. Over the past year, our
rate increases have more than offset higher operating costs, particularly in the areas of diesel
fuel, compensation to attract and retain qualified drivers, insurance and self-insured claims, and
revenue equipment costs. We believe that freight demand will continue to grow faster than trucking
capacity for at least the next year, primarily because of a shortage of qualified drivers and increased
costs of entering the truckload market.
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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8
|-



|ITEM 2.                   PROPERTIES
The following table provides information regarding our facilities at December 31, 2004:
|----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                            

|Company
      Location               |  | Facility
      Functions                                                                                          |  | Owned or Leased
|------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------- |  | ---------------
|                                     |  |                                                                                                                   |  |                
|U.S. Xpress:                         |  |                                                                                                                   |  |                
|Apison, Tennessee                    |  | Terminal                                                                                                          |  | Leased         
|Austell, Georgia                     |  | Drop Yard                                                                                                         |  | Leased         
|Boise, Idaho                         |  | Drop Yard                                                                                                         |  | Leased         
|Calexico, California                 |  | Drop Yard                                                                                                         |  | Leased         
|Chattanooga, Tennessee               |  | Corporate Office                                                                                                  |  | Owned          
|Chattanooga, Tennessee               |  | Office (Hangar)                                                                                                   |  | Leased         
|Chicago, Illinois                    |  | Drop Yard                                                                                                         |  | Leased         
|Colton, California                   |  | Terminal, Maintenance, Customer Service, Fleet Services, Driver Training                                          |  | Owned          
|Cumming, Georgia                     |  | Recruiting Office                                                                                                 |  | Leased         
|Dallas, Texas                        |  | Drop Yard                                                                                                         |  | Leased         
|Dalton, Georgia                      |  | Terminal, Fleet Services                                                                                          |  | Leased         
|El Paso, Texas                       |  | Drop Yard                                                                                                         |  | Leased         
|Houston, Texas                       |  | Drop Yard                                                                                                         |  | Leased         
|Indianapolis, Indiana                |  | Drop Yard                                                                                                         |  | Leased         
|Jacksonville, Florida                |  | Drop Yard                                                                                                         |  | Leased         
|Jersey City, NJ                      |  | Drop Yard                                                                                                         |  | Leased         
|Kent, Washington                     |  | Drop Yard                                                                                                         |  | Leased         
|Laredo, Texas                        |  | Drop Yard                                                                                                         |  | Leased         
|Lincoln, Nebraska                    |  | Terminal, Maintenance, Customer Service, Fleet Services, Driver Training,
      Independent Contractor Recruiting |  | Owned          
|Long Beach, California               |  | Drop Yard                                                                                                         |  | Leased         
|Mechanicsburg, PA                    |  | Drop Yard                                                                                                         |  | Leased         
|Medway, Ohio                         |  | Terminal, Maintenance, Customer Service, Driver Recruiting, Terminal Services,
      Driver School                |  | Leased         
|Memphis, Tennessee                   |  | Terminal, Maintenance, Driver Recruiting                                                                          |  | Leased         
|Newport, Minnesota                   |  | Drop Yard                                                                                                         |  | Leased         
|Oklahoma City, Oklahoma              |  | Terminal, Maintenance, Customer Service, Fleet Services, Driver Training,
      Driver Recruiting                 |  | Leased         
|Ooltewah, TN                         |  | Warehouse                                                                                                         |  | Leased         
|Otay Mesa, California                |  | Drop Yard                                                                                                         |  | Leased         
|Sacramento, California               |  | Terminal, Fleet Services                                                                                          |  | Leased         
|Salt Lake City, Utah                 |  | Terminal, Maintenance, Customer Service, Fleet Services, Driver Training                                          |  | Owned          
|Tunnel Hill, Georgia                 |  | Terminal, Maintenance, Fleet Services, Driver Training                                                            |  | Leased         
|                                     |  |                                                                                                                   |  |                
|Xpress Global Systems:               |  |                                                                                                                   |  |                
|Albany, New York                     |  | Distribution Center                                                                                               |  | Leased         
|Bensenville, Illinois                |  | Distribution Center                                                                                               |  | Leased         
|Charlotte, North Carolina            |  | Distribution Center                                                                                               |  | Leased         
|Cleveland, Ohio                      |  | Distribution Center                                                                                               |  | Leased         
|Columbus, Ohio                       |  | Distribution Center                                                                                               |  | Leased         
|Denver, Colorado                     |  | Distribution Center                                                                                               |  | Leased         
|Elizabeth, New Jersey                |  | Distribution Center                                                                                               |  | Leased         
|Everett (East Boston), Massachusetts |  | Distribution Center                                                                                               |  | Leased         

|9
|-



|Company Location              |  | Facility Functions                    |  | Owned or
      Leased
|----------------------------- |  | ------------------------------------- |  | ---------------------
|                              |  |                                       |  |                      
|Fresno, California            |  | Distribution Center                   |  | Leased               
|Grapevine, Texas              |  | Distribution Center                   |  | Leased               
|Hanover, MD                   |  | Distribution Center                   |  | Leased               
|Hapeville ( Atlanta), Georgia |  | Distribution Center                   |  | Leased               
|Hawthorne, California         |  | Distribution Center                   |  | Leased               
|Hayward, California           |  | Distribution Center                   |  | Leased               
|Houston, Texas                |  | Distribution Center                   |  | Leased               
|La Mirada, California         |  | Distribution Center                   |  | Leased               
|Las Vegas, Nevada             |  | Distribution Center                   |  | Leased               
|Mendota Heights, Minnesota    |  | Distribution Center                   |  | Leased               
|Oklahoma City, Oklahoma       |  | Distribution Center                   |  | Leased               
|Orlando, Florida              |  | Distribution Center                   |  | Leased               
|Phoenix, Arizona              |  | Distribution Center                   |  | Leased               
|Pittsburgh, Pennsylvania      |  | Distribution Center                   |  | Leased               
|Rancho Cordova, California    |  | Distribution Center                   |  | Leased               
|Rochester, New York           |  | Distribution Center                   |  | Leased               
|Romeoville, Illinois          |  | Distribution Center                   |  | Leased               
|Romulus, Michigan             |  | Distribution Center                   |  | Leased               
|Salt Lake City, Utah          |  | Distribution Center                   |  | Leased               
|San Antonio, Texas            |  | Distribution Center                   |  | Leased               
|San Diego, California         |  | Distribution Center                   |  | Leased               
|San Francisco, California     |  | Distribution Center                   |  | Leased               
|Spokane, Washington           |  | Distribution Center                   |  | Leased               
|St. Louis, Missouri           |  | Distribution Center                   |  | Leased               
|Tampa, Florida                |  | Distribution Center                   |  | Leased               
|Tulsa, Oklahoma               |  | Distribution Center                   |  | Leased               
|Tunnel Hill, Georgia          |  | Corporate Office, Distribution Center |  | Leased               
|Valley Stream, NY             |  | Distribution Center                   |  | Leased               

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Our corporate and truckload headquarters are located in Chattanooga, Tennessee. The facility encompasses
nearly 100,000 square feet of office space and includes state-of-the-art information management and
communications systems.
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 Company-owned and agent-operated distribution service centers. Substantially all
Xpress Global Systems facilities operate as distribution centers performing consolidation,
warehousing and local distribution.
In our opinion, our facilities are suitable and adequate for our needs.

|10
|--



|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 2004.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11
|--



|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 7, 2005, there were 227 registered stockholders
and an estimated 3,800 beneficial owners of our Class A common stock and two beneficial owners
of our Class B common stock. At March 7, 2005, there were 13,329,082 shares of Class A
common stock outstanding and 3,040,262 shares of Class B common stock outstanding. On March
7, 2005, the closing price for the Class A common stock was $27.51. Listed below are the high
and low bid 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, 2004 |      |       |     |  
| | Fourth Quarter               | $    | 30.23 |     | $
| | Third Quarter                | $    | 19.73 |     | $
| | Second Quarter               | $    | 17.26 |     | $
| | First Quarter                | $    | 14.96 |     | $
| | Year ended December 31, 2003
| | Fourth Quarter               | $    | 13.75 |     | $
| | Third Quarter                | $    | 13.22 |     | $
| | Second Quarter               | $    | 12.66 |     | $
| | First Quarter                | $    | 10.44 |     | $
| | Year ended December 31, 2002 |      |       |     |  
| | Fourth Quarter               | $    | 9.72  |     | $
| | Third Quarter                | $    | 13.45 |     | $
| | Second Quarter               | $    | 14.39 |     | $
| | First Quarter                | $    | 12.24 |     | $

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 - Revolving Credit Agreement,
and Note 5, Long-Term Debt, of our 2004 Consolidated Financial Statements included under
Item 8 of this Form 10-K.)
For information on our equity compensation plans, please refer to Item 12, Security Ownership
of Certain Beneficial Owners and Management in Part III of this Annual Report.

|12
|--



|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, 2004, 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, below, and the Consolidated
Financial Statements and Notes thereto included in Item 8 of this Form 10-K.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                                 | Year Ended December 31, |          
|------------------------------------------------ | ----------------------- | ---------
|
|
|
|                                                 |                         |          
|Statement of Operations Data                     |                         |          
|Operating revenue:                              
|U.S. Xpress, net of fuel surcharge               | $                       | 905,485  
|Fuel surcharge revenue                           |                         | 60,957   
|Xpress Global Systems                            |                         | 158,566  
|Intercompany                                     |                         | (19,352  
|                                                 |                         |          
|Consolidated                                     | $                       | 1,105,656
|                                                 |                         |          
|Income from operations (1)                       | $                       | 39,554   
|Income (Loss) before taxes (1)                   | $                       | 30,331   
|Net income (Loss) (1)                            | $                       | 16,426   
|Earnings (Loss) per share - basic (1)            | $                       | 1.16     
|Weighted average number of shares               
|outstanding - basic                              |                         | 14,159   
|Earnings (Loss) per share - diluted (1)          | $                       | 1.14     
|Weighted average number of shares               
|outstanding - diluted                            |                         | 14,399   
|                                                
|Truckload Operating Data                         |                         |          
|Average revenue per loaded mile(2) (3)           | $                       | 1.48     
|Average revenue miles per tractor per period (3) |                         | 112,355  
|Average revenue per tractor, per week(2) (3)     | $                       | 3,186    
|Average length of haul in miles(3)               |                         | 721      
|Non-revenue miles percentage                     |                         | 11.0     
|Average tractors during period(4)                |                         | 5,369    
|Tractors at end of period(4)                     |                         | 5,034    
|Trailers at end of period(4)                     |                         | 16,437   
|                                                
|Balance Sheet Data                              
|Working capital                                  | $                       | 34,462   
|Total assets                                     | $                       | 560,167  
|Long-term debt, including current maturities     | $                       | 114,566  
|Stockholders equity                             | $                       | 233,384  
|                                                 |                         |          
|                                                 |                         |          

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes: (a) in 2000, a pre-tax charge of $2.0 million due to the write-off of outstanding receivables of a long-term customer and related expenses and pre-tax goodwill amortization of $2.0 million; (b) in 2001, pre-tax goodwill amortization of $1.8 million; (c) in 2002, pretax charges of $1.7 million related to the settlement of a litigation matter and $1.8 million related to the early extinguishment of debt; and (d) in 2004, pre-tax charges of $454,000 related to the early extinguishment of debt. Effective January 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS), No. 142, Goodwill and Other Intangible Assets, which requires that goodwill no longer be amortized and instead be tested for impairment at least annually.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(2) | Excludes fuel surcharge revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(3) | Includes revenue and miles from expedited intermodal rail services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(4) | Includes owned, leased, and independent contractor-provided tractors and owned and leased trailers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|13
|--



|ITEM 7. | MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 and airport-to-airport transportation services
to the airfreight and airfreight forwarding industries. Since becoming a public company, we have
increased our operating revenue to $1.1 billion in 2004 from $215.4 million in 1994, a
compounded annual growth rate of 17.8%. Our growth has come through expansion of business with new
and existing customers, complementary acquisitions, and more recently, through the development and
expansion of additional strategic business units. We believe our emphasis on developing strategic
business units focused on an expanded array of truckload services has accelerated our growth and
profitability in recent periods.
Recent Results of Operations and Year-End Financial Condition
For the year ended December 31, 2004, our results of operations improved as follows versus the 2003
fiscal year:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |  | Revenue, before fuel surcharge, increased 16.5% to $1.0 billion from $896.5 million;
| | - | ------------------------------------------------------------------------------------
| |   |                                                                                     
| |  | Net income increased 115%, to $16.4 million from $7.6 million; and                  
| |   |                                                                                     
| |  | Net income per diluted share increased to $1.14 from $0.54.                         

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|We believe the improvements in our profitability were attributable primarily to the continued execution
of our operating strategy, which involves allocating our truckload assets to business units with
greater profitability and improving 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.
Our efforts were aided by stronger freight demand and a better rate environment in 2004 primarily due
to continued growth in the U.S. economy and a favorable relationship between demand and trucking
capacity. These factors contributed to higher average revenue per tractor per week (excluding fuel
surcharge), which increased 14.7% to $3,186 in 2004 from $2,777 in 2003, and a 13.8% increase in
average revenue per loaded mile (excluding fuel surcharge) to $1.48 from $1.30. These factors more
than offset a significant increase in costs, primarily attributable to increases in driver compensation,
costs of revenue equipment, insurance and claims, and fuel.
At December 31, 2004, our balance sheet reflected stockholders equity of $233.4 million and $149.6
million in aggregate borrowings, including current maturities and the securitization facility. During
December 2004, we completed a public offering of 2.0 million of our Class A common shares that generated
approximately $47.7 million in net proceeds to us. We used our net proceeds to repay debt. Our future
earnings per share will reflect the dilution from the additional shares outstanding from this offering.
Our Truckload Segment
Our truckload segment, U.S. Xpress, which comprised approximately 86% of our total operating revenue
in 2004, includes the following five strategic business units, each of which is significant in its
market.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |  | Dedicated.Our approximately 1,350 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.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                           
| |  | Regional. Our approximately 850 tractor regional unit offers our customers concentrated capacity and a high
  level of service in dense freight markets of the Southeast, Midwest, and West, while affording a
  lifestyle favored by many drivers.                                       

|14
|--



| |  | 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.                     
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                              
| |  | 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.
| |   |                                                                                                                                                                                                                                                                              
| |  | Medium-to-long haul solo.  Our approximately 2,100 tractor solo-driver unit offers our customers significant capacity and
  nationwide coverage.                                                                                                                             

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Over the past few years we have been reallocating our truckload assets to our more profitable business
units. This has resulted in significant growth in the percentage of our revenue contributed by dedicated,
regional, and expedited intermodal rail services and a decrease in the percentage of our revenue
contributed by medium-to-long haul solo service and, to a lesser extent, by expedited team service.
We believe the execution of this strategy has been a primary contributor to the improvements in our
profitability since we initiated the process in 2002. In addition, the asset reallocation has affected
the comparability of certain operating measures. For example, we are generating higher average revenue
per loaded mile, excluding fuel surcharge, offset by an increase in non-revenue miles and a decrease
in miles per tractor. In general, shorter regional and dedicated hauls pay higher rates per mile
but generate fewer miles per unit and involve a greater percentage of non-revenue miles for re-positioning
the tractor for the next load. Also, our purchased transportation expense has increased significantly
due to the growth of our expedited intermodal rail service, which involves the pass-through of a
portion of our freight revenue to the rail service provider. Our operating measures may continue
to change as we continue to execute our strategy.
Our Xpress Global Systems Segment
Our Xpress Global Systems segment, which comprised 14% of our total operating revenue in 2004, offers
transportation, warehousing, and distribution services to the floorcovering industry, as well as
nationwide, scheduled ground transportation of air cargo to customers in the airfreight and airfreight
forwarding industries as a cost-effective and reliable alternative to traditional air transportation.
During 2004, our Xpress Global Systems segment experienced an operating loss of $5.0 million, primarily
because of lower than anticipated revenue, growth in fixed expenses, and higher transportation costs
due to fuel prices and tight capacity within the truckload sector.
Revenue and Expenses
We primarily generate revenue by transporting freight for our customers. Generally, we are paid a predetermined
rate per mile for our services. We enhance our 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 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 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 $1.48 in 2004, from $1.30 in 2003, and $1.26 in 2002.
Average revenue per tractor per week improved to $3,186 in 2004, from $2,777 in 2003, and $2,718 in 2002.
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 are the
acquisition and financing costs, including depreciation, of long-term assets, such as revenue equipment
and terminal facilities and the compensation of non-driver personnel.
Effectively controlling our expenses is an important element of assuring our profitability. 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 improved to 96.2%
in 2004, from 97.3% in 2003, and 98.0% in 2002.

|15
|--



|Revenue Equipment
At December
31, 2004, we had a truckload fleet of 5,034 tractors, which included 574
owner-operator tractors. We also operated 16,437 trailers in our truckload fleet and approximately
400 tractors dedicated to local and drayage services.
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.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                     | Year Ended December 31, |      
|------------------------------------ | ----------------------- | -----
|
|                                     |                         |      
|                                     |                         |      
|Operating Revenue                    |                         | 100.0
|                                     |                         |      
|                                    
|Operating Expenses:                 
|Salaries, wages and benefits         |                         | 35.2 
|Fuel and fuel taxes                  |                         | 10.3 
|Vehicle rents                        |                         | 6.8  
|Depreciation and amortization        |                         | 4.3  
|Purchased transportation             |                         | 20.3 
|Operating expense and supplies       |                         | 7.0  
|Insurance premiums and claims        |                         | 5.7  
|Operating taxes and licenses         |                         | 1.3  
|Communications and utilities         |                         | 1.1  
|General and other operating expenses |                         | 4.2  
|Early extinguishment of debt         |                         | 0.0  
|                                     |                         |      
|Total operating expenses             |                         | 96.2 
|                                     |                         |      
|                                     |                         |      
|Income from Operations               |                         | 3.8  
|                                     |                         |      
|Interest expense, net                |                         | 0.9  
|                                     |                         |      
|                                     |                         |      
|Income before income tax provision   |                         | 2.9  
|                                     |                         |      
|Income tax provision                 |                         | 1.3  
|                                     |                         |      
|                                     |                         |      
|Net Income                           |                         | 1.6  
|                                     |                         |      

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|Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003
Total revenue  increased 18.8% to $1.1 billion from $930.5 million for 2003. Total revenue included $61.0 million
of fuel surcharge revenue in 2004 and $34.0 million of fuel surcharge revenue in 2003. 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 16.5% to $1.0 billion in 2004 compared to $896.5 million in 2003. U.S. Xpress revenue,
before fuel surcharge, increased 14.1% to $905.5 million in 2004 compared to $793.9 million in 2003,
due primarily to an increase of 14.3% in average revenue per loaded mile to $1.483 from $1.298. The
increase in average revenue per loaded mile was primarily due to increased rates and from growth
in regional and dedicated operations, which generally provide for a shorter length of haul and higher
rate per mile. Xpress Global Systems revenue increased 15.1% to $158.6 million in 2004 compared
to $137.8 million in 2003. Within Xpress Global Systems, floorcovering revenue increased 13.8% to
$99.8 million, due primarily to an increase in revenue per pound of 6.4%, and airport-to-airport revenue increased 17.1% to $58.8 million, due primarily to revenue
generated from acquisitions of airport-to-airport operations in July 2004 and October 2003. Intersegment
revenue decreased to $19.4 million in 2004 compared to $35.2 million in 2003, due to Xpress Global
Systems increased use of third party carriers for truckload services combined with the introduction
of owner-operators to Xpress Global Systems airport-to-airport operations.
Salaries, wages and benefitsincreased 12.7% to $367.3 million in 2004 compared to $325.8 million in 2003. The increase was primarily
due to driver pay increases of approximately 8.0% and 10.0% in the first and fourth quarters of 2004,
respectively, an increase in the number of local drivers necessary to support our expedited intermodal
rail program, and growth in non-driver personnel as a result of the increased volume of business
in both of our business segments. As a percentage of revenue, before fuel surcharge, salaries, wages
and benefits decreased to 35.2% in 2004, compared to 36.3% in 2003 primarily due to the increase
in average revenue per loaded mile which more than offset increases in driver and non-driver compensation.
Effective September 1, 2004, we increased our workers compensation retention level to
$500,000 per occurrence compared to $250,000 per occurrence in the prior period, which could result
in greater fluctuations in these expenses in future periods. Workers compensation premiums
and claims expense are included in salaries, wages and benefits in the accompanying consolidated
statements of operations.
Fuel and fuel taxes,net of fuel surcharge, increased 5.6% to $107.6 million in 2004 compared to $101.9 million in 2003.
The increase was due primarily to an approximate 23.0% increase in the average fuel price per gallon,
combined with the lower fuel efficiency of the new EPA-compliant engines. These factors were partially
offset by collection of fuel surcharges and a decline in company miles. Our exposure to increases
in fuel prices is predominately mitigated by fuel surcharges to its customers, which amounted to
$61.0 million and $34.0 million in 2004 and 2003, respectively. As a percentage of revenue, before
fuel surcharge, fuel and fuel taxes, net of fuel surcharge, declined to 10.3% in 2004 compared to
11.4% in 2003 primarily because of the increase in average revenue per loaded mile, combined with
an increase in the use of expedited intermodal rail for certain medium-to-long haul truckload freight.
Vehicle rents  decreased 5.8% to $71.1 million in 2004 compared to $75.5 million in 2003. The decrease is primarily
due to a decrease in the average number of tractors financed under operating leases to 3,504 compared
to 4,009 during 2004 and 2003, respectively. The decrease was partially offset by an increase in
the average number of trailers financed under operating leases to 8,240 compared to 7,221 during
2004 and 2003, 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 6.8%
in 2004 compared to 8.4% in 2003 primarily due to a larger portion of the fleet being financed through
debt instead of operating leases, combined with an increase in average revenue per tractor, which
more effectively covered this fixed cost.
Depreciation and amortization  increased 20.9% to $45.1 million in 2004 compared to $37.3 million in 2003. The increase was
primarily due to an increase in the average number of owned tractors and trailers to 1,849 and 8,385,
respectively, in 2004 compared to 1,242 and 6,498, respectively, in 2003, as well as increased cost
of the new EPA-compliant engines and lower residual values. The increased depreciation and amortization
reflects our decision to finance our fleet additions with debt versus operating leases, combined
with the expansion of our trailer fleet necessary to support the expedited intermodal rail program.
As a percentage of revenue, before fuel surcharge, depreciation and amortization remained relatively
consistent at 4.3% in 2004 compared to 4.2% in
2003 despite the increase in tractors and trailers financed through debt instead of operating leases primarily due to the increase in average revenue per tractor, which more effectively covered this fixed cost.
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|Purchased transportation  increased 35.0% to $212.2 million in 2004 compared to $157.2 million in 2003 primarily due to
the increased use of expedited intermodal rail in the truckload segment for certain medium-to-long
haul truckload freight and an owner-operator pay increase of approximately 4.0% initiated in February
2004. This increase was partially offset by a decrease in the average number of owner-operators in
the truckload segment in 2004 to 783, or 14.6% of the total fleet, compared to 951, or 17.5% of the
total fleet, in 2003. Xpress Global Systems purchased transportation increased approximately
22.6% due to higher line-haul costs, resulting from higher fuel costs and tight capacity in the truckload
industry and the introduction of owner-operators to Xpress Global Systems airport-to-airport
operations. Xpress Global Systems number of owner-operators was approximately 148 at December 31,
2004 compared to none in 2003. As a percentage of revenue, before fuel surcharge, purchased transportation
increased to 20.3% in 2004 compared to 17.5% in 2003 primarily due to the growth in the expedited
intermodal rail program and increased line-haul costs at Xpress Global Systems, which more than offset
a decline in the percentage of our tractor fleet being provided by owner-operators and the increase
in average revenue per loaded mile.
Operating expense and suppliesincreased 13.6% to $72.7 million in 2004 compared to $64.0 million in 2003, primarily due to an increase
in driver recruiting and retention costs. As a percentage of revenue, before fuel surcharge, operating
expense and supplies were 7.0% in 2004 compared to 7.1% in 2003 as increases in average revenue per
loaded mile and per tractor more than offset these increased costs.
Insurance premiums and claims,  consisting primarily of premiums and deductible amounts for liability (personal injury and property
damage), physical damage and cargo damage insurance and claims, increased 22.7% to $59.7 million
in 2004 compared to $48.6 million in 2003. The increase was primarily due to higher insurance premiums
and a $17.7 million increase in liability expense, primarily due to an approximate $6.0 million increase
in the provision for current year claims combined with an increase in adverse development related to prior-year claims due in part to the settlement of certain large claims. The increase in liability claims was partially
offset by a decrease in physical damage and cargo claims. As a percentage of revenue, before fuel
surcharge, insurance and premiums and claims expense was 5.7% in 2004 compared to 5.4% in 2003. At
December 31, 2004, the retention level for cargo loss was $250,000 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 Additionally,
the results of a third party actuarial study were also utilized in establishing the December 31,
2004 liability reserve. Insurance premiums and claims expense will fluctuate based on claims experience,
premium rates and self-insurance retention levels.
Interest expense  decreased $650,000, or 7.1%, to $9.2 million in 2004 compared to $9.9 million in 2003. The decrease
is primarily attributable to a decline in average borrowings, combined with a decrease in the weighted
average interest rate to 4.8% in 2004 compared to 5.4% in 2003. See Footnote 5, Long-Term Debt
and Footnote 7, Accounts Receivable Securitization, of our 2004 Consolidated Financial
Statements for further details.
The effective tax rate  was 45.8% for the 2004 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.
We initiated the per diem driver pay plan in February 2002. See Footnote 4, Income Taxes,
of our 2004 Consolidated Financial Statements for further details.
Comparison of the Year Ended December 31, 2003 to the Year Ended  December 31, 2002
Total revenue  increased 7.9% to $930.5 million for 2003 from $862.3 million for 2002. Total revenue included
$34.0 million of fuel surcharge revenue in 2003 and $15.6 million of fuel surcharge revenue in 2002.
Revenue, before fuel surcharge, increased 5.9% to $896.5 million in 2003 compared to $846.8 million in 2002. U.S. Xpress revenue,
before fuel surcharge, increased 4.1% to $793.9 million in 2003 compared to $762.3 million in 2002,
due primarily to an increase of 3.3% in average revenue per mile to $1.298 from $1.257. The increase
in average revenue per mile is due to increased rates in over-the-road and team expedited operations
and improved freight selection. The effect of the increase in average revenue per mile was offset
by a slight decrease in average revenue miles per tractor per period. Xpress Global Systems
revenue increased 20.0% to $137.8 million in 2003 compared to $114.8 million in 2002. Within Xpress
Global Systems, floorcovering revenue increased 19.0% to $87.6 million, due to new and additional
business with large floorcovering retailers and manufacturers combined with increased rates and an
increase in airport-to-airport revenue of 22.0% to $50.2 million, due to continued penetration in
the marketplace.
Salaries, wages and benefits  increased 5.0% to $325.8 in 2003 compared to $310.4 million in 2002. The increase is primarily
due to an increase in workers compensation claims combined with a growth in headcount to support
the expansion of facilities and additional
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|volume of business at Xpress Global Systems. As a percentage of revenue, salaries, wages and benefits
remained relatively consistent at 36.3% in 2003 compared to 36.7% in 2002 primarily due to the increase
in average revenue per mile.
Fuel and fuel taxesnet of fuel surcharge, decreased 1.5% to $101.9 million in 2003 compared to $103.5 million in 2002.
The decrease is due primarily to improvements in the level of fuel surcharges billed to customers
in 2003. Fuel surcharge revenue was $34.0 million in 2003 compared to $15.6 million in 2002. The
average fuel price per gallon increased approximately 12.0% in 2003 compared to 2002.
Vehicle rents  increased 9.6% to $75.5 million in 2003 compared to $68.9 million in 2002. The increase is primarily
due to an increase in the average number of tractors financed under operating leases to 4,009 compared
to 3,558 in 2003 and 2002, respectively. We also experienced a slight increase in the average number
of trailers leased in 2003 to 7,221 compared to 7,181 in 2002. As a percentage of revenue, before
fuel surcharge, vehicle rents were 8.4% in 2003 compared to 8.1% in 2002, primarily because a larger
portion of the fleet was financed through the use of operating leases.
Depreciation and amortization  decreased 0.5% to $37.3 million in 2003 compared to $37.5 million in 2002. The decrease is primarily
due to the increase in the ratio of leased to owned revenue equipment in 2003 compared to 2002. The
decrease was offset by an increase in trailer depreciation, which can be attributed to an increase
in the average number of owned trailers to 6,498 in 2003 compared to 5,661 in 2002. As a percentage
of revenue, before fuel surcharge, deprecation and amortization was 4.2% in 2003 compared to 4.4%
in 2002, reflecting the increase in the ratio of leased to owned revenue equipment.
Purchased transportation  increased 9.2% to $157.2 million in 2003 compared to $143.9 million in 2002 primarily due to
the increased use of expedited intermodal rail in the truckload segment for certain medium-to-long
haul truckload freight. The average number of owner-operators remained relatively consistent in 2003
and 2002 at 951 and 962, respectively. As a percentage of revenue, before fuel surcharge, purchased
transportation increased to 17.5% in 2003 compared to 17.0% in 2002 due to the use of the expedited
intermodal rail program.
Insurance premiums and claims,  consisting primarily of premiums and deductible amounts for liability (personal injury and property
damage), physical damage and cargo damage insurance and claims, increased 20.2% to $48.6 million
in 2003 compared to $40.5 million in 2002. The increase was primarily due to higher insurance premiums
and a $5.2 million increase in liability expense primarily due to growth in current year claims combined
with adverse development related to claims from prior years. As a percentage of revenue, before fuel
surcharge, insurance and premiums and claims expense was 5.4% in 2003 compared to 4.8% in 2002. At
December 31, 2003, the retention level for cargo loss was $250,000 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.
Operating taxes and licenses  increased 10.1% to $14.2 million in 2003 compared to $12.9 million in 2002. The increase is
principally the result of an increase in vehicle registration and license expense. Vehicle registration
and license expense fluctuates based on the trade activity of revenue equipment and the size of the
owner-operator and Company tractor fleet. The average number of tractors in our fleet (including
owner-operators) was 5,433 and 5,331, respectively, in 2003 and 2002. As a percentage of revenue,
before fuel surcharge, operating taxes and licenses remained relatively consistent at 1.6% in 2003
compared to 1.5% in 2002.
General and other operating expenses  decreased 6.1% to $36.5 million in 2003 compared to $38.9 million in 2002. The decrease is due
to the settlement of a litigation matter for $1.7 million in the fourth quarter of 2002 combined
with a lower percentage growth in general and administrative expenses as compared to the percentage
increase in revenues. As a percentage of revenue, before fuel surcharge, general and other operating
expenses decreased to 4.1% in 2003 compared to 4.7% in 2002. See Footnote 13, Commitments and
Contingencies, of our 2004 Consolidated Financial Statements for further details regarding
the settlement of the litigation matter.
Interest expense  decreased $3.5 million, or 26.1%, to $9.9 million, compared to $13.4 million in 2002. The decrease
is primarily attributable to a decline in average borrowings, combined with a decrease in the weighted
average interest rate to 5.4% in 2003 compared to 6.3% in 2002. See Footnote 5, Long-Term Debt, of our 2004 Consolidated Financial
Statements for further details.
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|The effective tax rate  was 47.4% for the 2003 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.
We initiated the per diem driver pay plan in February 2002. See Footnote 4, Income Taxes,
of our 2004 Consolidated Financial Statements for further details.
Liquidity and Capital Resources
Our business requires significant capital investments. We historically have financed our capital requirements
with borrowings under a revolving credit facility, cash flows from operations, and long-term equipment
debt and operating leases. Our primary sources of liquidity at December 31, 2004, were funds provided
by operations, borrowing under our revolving credit facility, proceeds of our accounts receivable
securitization facility, and long-term equipment debt and operating leases of revenue equipment.
Each of our revolving credit facility and our accounts receivable securitization facility has maximum
available borrowings of $100.0 million. We believe that funds provided by operations, borrowings under
our line of credit 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 through 2005. Our business will continue to require significant capital investments,
particularly for revenue equipment and facilities, over the long-term, which may require us to seek
additional borrowings or equity capital. The availability of additional capital will depend upon
prevailing market conditions and the market price of our Class A common stock, as well as our financial
condition and results of operations. Based on recent operating results, anticipated future cash flows
and sources of financing expected to be available, we do not expect any significant liquidity constraints
in the foreseeable future.
Cash Flows
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                                                    | Year Ended December 31, |        
|--------------------------------------------------- | ----------------------- | -------
|
|                                                    |                         |        
|Net cash provided by operating activities           | $                       | 44,450 
|Net cash used in investing activities               |                         | (88,050
|Net cash provided by (used in) financing activities |                         | 43,498 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cash generated from operations decreased $13.6 million during 2004 as compared to 2003. The change
was primarily due to an increase in accounts receivable resulting from an increase in operating revenue
of 18.8% combined with an increase in day sales outstanding. These increases were offset by increases
in accounts payable, higher earnings and deferred income taxes attributable to improved profitability,
and an increase in deprecation resulting from a higher percentage of equipment being owned instead
of held under operating leases. Cash generated from operations increased $15.5 million during 2003
as compared to 2002. The increase was primarily driven by an increase in earnings of $6.5 million,
combined with improvements in collection of accounts receivables in the truckload segment.
Cash used in investing activities increased $64.1 million during 2004 as compared to 2003. We invested
$81.1 million, net of sales proceeds, in capital expenditures during 2004 compared to $22.9 million
during 2003. The increase is due to the financing of tractors through long-term debt versus operating
leases, combined with the purchase of new trailers to support the expansion of our expedited intermodal
rail program. Cash used in investing activities decreased $5.9 million in 2003 compared to 2002.
We invested $22.9 million, net of sales proceeds, in capital expenditures during 2003 compared to
$27.9 million in 2002. The decrease was due to selling significantly more revenue equipment generating
cash proceeds, while a greater portion of the replacement of revenue equipment was funded through
the use of operating leases. We expect cash capital expenditures, primarily for the replacement of
revenue equipment (net of sales proceeds and trade-ins), to be approximately $70.0 to $80.0 million in 2005.
Cash provided by financing activities was $43.5 million in 2004 compared to cash used in financing
activities of $34.0 million in 2003. The increase is due primarily to our stock offering completed
in December 2004 of 2,000,000 shares of Class A common stock which generated net proceeds to us of
approximately $47.7 million. Cash used in financing activities increased $13.3 million during 2003
compared to 2002. The increase is due primarily to an increase in net repayments of long-term debt
of $31.4 million in 2003 compared to $27.4 million in 2002. The repayments of long-term debt during
2003 were funded from cash flows from operations.
Debt
On October 14, 2004, we entered into a $100.0 million senior secured revolving credit facility with
a group of banks, which replaced the existing $100.0 million credit facility that was scheduled to mature in March 2007. The new 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

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|applicable margin of 0.88% to 2.00% based on our lease adjusted leverage ratio. At December 31, 2004,
the applicable margin was 0.00% for base rate loans and 1.25% 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 (1.25% and 0.25%, respectively, at December 31, 2004).
The facility matures in October 2009.
The credit facility requires, among other things, that we maintain minimum consolidated tangible net
worth, fixed charge, and asset coverage ratios and a leverage ratio. It also restricts our ability
to engage in certain sale-leaseback transactions, transactions with affiliates, investment transactions,
acquisitions of our own capital stock, the payment of dividends, 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, 2004, we were in compliance with the revolving credit
facility covenants.
Effective October 14, 2004, we also entered into an accounts receivable securitization. Under the securitization,
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 of the Company. Xpress Receivables is a bankruptcy remote,
special purpose entity, which will purchase accounts receivable from U.S. Xpress, Inc. and Xpress
Global Systems, Inc. Xpress Receivables will fund these purchases with money borrowed under a new
credit facility with Three Pillars Funding, LLC. The borrowings are secured by the accounts receivable
and paid down through collections on the accounts receivable. We can borrow up to $100.0 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 facility. The securitization facility is reflected as a current liability
because the term, subject to annual renewals, is 364 days.
The securitization facility requires that certain performance ratios be maintained with respect to
accounts receivable and that Xpress Receivables preserve its bankruptcy remote nature.
At December 31, 2004, we had $149.6 million of borrowings, of which $101.1 million was long-term, $13.5
million was current maturities, and $35.0 million was the securitization facility. We also had approximately
$44.0 million in undrawn letters of credit. At December 31, 2004, we had an aggregate of approximately
$119.2 million of available borrowing remaining under our revolving credit facility and securitization.
Current maturities include $122 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 us and the equipment manufacturer.
Equity
At December 31, 2004, we had stockholders equity of $233.4 million and long-term debt, net of
current maturities, of $101.1 million, resulting in a debt to long-term capitalization ratio of 39.1%
compared to 46.7% at December 31, 2003.
In December 2004, we completed an offering of 4,600,000 shares our Class A Common Stock at $25.25 per
share. Of these shares, we sold 2,000,000 shares; Patrick E. Quinn, our Co-Chairman, President and
Treasurer and Max L. Fuller, our Co-Chairman and Chief Executive Officer, sold 950,000 and 1,450,000
shares, respectively; and related family partnerships sold 200,000 shares. The offering generated
net proceeds to us of approximately $47.7 million. The proceeds were used to repay outstanding borrowings
under our securitization facility and to retire debt on certain mortgage notes and revenue equipment
installment notes.
In May 2004, the board of directors authorized the repurchase of up to $10.0 million of our Class A
Common Stock. The repurchased shares will held as treasury stock and may be used for issuances under
our employee stock option plan or for general corporate purposes, as the board of directors may determine.
In June 2004, we repurchased 50,000 shares of Class A Common Stock for $654.
Equity Investment
In December 2004, we acquired a 49.0% interest in Arnold Transportation Services, Inc. (Arnold)
and its affiliated companies for $6.2 million in cash. Arnold is a truckload carrier that provides
primarily short-haul regional and dedicated dry van service in the Southwest, Southeast and Northeast.
Arnolds current management team controls the remaining 51.0% interest and a majority of the
board of directors. We have not guaranteed any of Arnolds debt and have no obligation to provide
funding, services or assets. Under the agreement with Arnolds management, we have a three-year
option to acquire 100% of Arnold by purchasing managements interest at a specified price plus
an agreed upon annual return.
Off Balance Sheet Arrangements
We lease certain revenue and service equipment and office and terminal facilities under long-term non-cancelable
operating leases. In making the decision to finance revenue equipment or facilities through long-term
debt or by entering into non-cancelable lease
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|agreements, we consider interest rates, capital requirements and the tax advantages of leasing versus
owning the equipment or facilities. At December 31, 2004, we leased approximately 3,430 tractors,
8,630 trailers and 51 office and terminal facilities under non-cancelable operating leases with termination
dates ranging from January 2005 to January 2014. Lease payments on revenue equipment and office and
terminal facilities are included in vehicle rents and general and other operating expenses, respectively,
in the consolidated statement of operations. Rental expense related to revenue equipment and facilities
was $77.9 million in 2004 compared to $81.5 million in 2003. The remaining obligation as of December
31, 2004, was $204.2 million, with $72.8 million due in the next twelve months.
Certain equipment leases provide for us to guarantee 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 is approximately $58.5 million at December 31, 2004. The residual value of
a substantial portion of the leased revenue equipment is covered by repurchase or trade agreements
in principle between us and the equipment manufacturer.
Cash Requirements
The following table represents our outstanding contractual obligations at December 31, 2004, excluding
letters of credit of $44.0 million. The letters of credit are maintained primarily to support our
insurance program and are renewed on an annual basis.
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                                                     | Payments
      Due By Period
      (Dollars in Thousands) |        
|---------------------------------------------------- | --------------------------------------------------------- | -------
|
|                                                     |                                                           |        
|Securitization
      Facility, Including Interest(1) | $                                                         | 35,840 
|Long-Term
      Debt, Including Interest (1)         |                                                           | 132,210
|                                                     |                                                           |        
|Capital Leases,
      Including Interest (1)         |                                                           | 4,576  
|                                                     |                                                           |        
|Operating
      Leases  Revenue Equipment (2)       |                                                           | 176,068
|Operating
      Leases  Other(3)                    |                                                           | 35,144 
|Purchase
      Obligations (4)                       |                                                           | 363,943
|                                                     |                                                           |        
|Total
      Contractual Cash Obligations             | $                                                         | 747,781
|                                                     |                                                           |        

|(1) | Represents principal and interest payments owed on revenue equipment installment notes, mortgage notes
  payable, capital lease obligations and the securitization facility at December 31, 2004. We had no amounts outstanding under our
  revolving line of credit facility as of December 31, 2004 other than letters of credit of $44.0 million.
  Approximately 32.0% of our borrowings are financed with variable interest rates. In determining future contractual
  interest obligations for variable rate debt, we used the rates in place at December 31, 2004. The
  table assumes long-term debt is held to maturity. Refer to Footnote 5, Long-Term Debt, and Footnote 7, Accounts Receivable Securitization,
  in our Consolidated Financial Statement.                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(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,
  and correspond to Footnote 7 in our 2004 Consolidated Financial Statements. 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 54 months and 60 to 84 months, respectively.
  Refer to Item 7. Managements Discussion and Analysis of Financial Condition and Results
  of Operations - Off-Balance Sheet Arrangements 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, Accounting for Leases, and correspond to Footnote 9 in our Consolidated Financial Statements.
  Substantially all lease agreements, with the exception of building leases, have fixed payment terms
  based on the passage of time. Lease terms range from 1 to 13 years.                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(4) | Represents purchase obligations for revenue equipment (tractors and trailers), development and improvement
  of facilities and computer software. Refer to Footnote 13 in our Consolidated Financial Statements
  included 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

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|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 10.0% of consolidated revenues at December 31, 2004, 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 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 has not been deemed necessary due to our profitable operations on both a
consolidated and separate legal entity basis. However, if the facts or financial results were to
change, thereby impacting the likelihood of the realization of the deferred tax assets, we would
use our judgment to determine the amount of the valuation allowance required at that time for that period.
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 in effect
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 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.
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other Intangible Assets, (SFAS 142), which we adopted effective January 1, 2002. As required by the provisions
of SFAS 142, we 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. We completed the required impairment tests of goodwill and noted no impairment of goodwill in 2004, 2003 and 2002.
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
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|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 $3,000 prior
to September 2001 and has increased to ranges of $250,000 to $2.0 million in subsequent periods.
Prior to November 2000, we had no retention for workers compensation insurance, which has increased
to ranges of $250,000 to $500,000 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.
Factors that May Affect Future Results
Our future results may be affected by a number of factors over which we have little or no control.
The following issues and uncertainties, 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, such as floorcovering and deferred airfreight
from our airport-to-airport operations, 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
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|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.
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.
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |  | We compete with many other truckload carriers of varying sizes and, to a lesser extent, with less-than-truckload
  carriers, railroads, airfreight forwarders, 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.                                                                                                                                                  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|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, regional, and expedited intermodal rail strategic business units, improving
the profitability of all of our strategic business units through yield management and cost control
efforts, and developing greater volume in Xpress Global Systems airport-to-airport services.
We may experience difficulties and higher than expected expenses in reallocating our assets and developing
new business. For example, in 2001, our subsidiary, Xpress Global Systems introduced airport-to-airport
transportation services for the airfreight and airfreight forwarding industries, which we intend
to expand. However, these airport-to-airport services have not been profitable since inception. If
we are unable to make our airport-to-airport business profitable, or continue to grow and improve
the profitability of our other 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. Our self-insured
retention limit for auto liability claims is $2.0 million per occurrence, $500,000 per occurrence
for workers compensation claims, and $250,000 per occurrence for cargo claims. 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 our aggregate insurance limits are sufficient to cover
reasonably expected claims, it is possible that one or more claims could exceed those limits. Insurance
carriers recently have been raising 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.

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|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. Over the past
several years, however, our revenue growth rate has slowed. There is no assurance that our revenue
growth rate will return to historical levels 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.
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, which 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  Operations 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 three years, partially as a result
of government regulations applicable to newly manufactured tractors and diesel engines. More restrictive
Environmental Protection Agency, or EPA, emissions standards for 2007 will require vendors to introduce
new engines, and some carriers may seek to purchase large numbers of tractors with pre-2007 engines,
possibly leading to shortages. Our business could be harmed if we are unable to continue to obtain
an adequate supply of new tractors and trailers for these or other reasons. 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. Furthermore, the new engines are expected to reduce equipment productivity
and lower fuel mileage and, therefore, increase our operating expenses.
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|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 revenue equipment. 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 definitive agreements
that reflect the terms we expect, 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.
Because a substantial portion of our Xpress Global Systems network costs are fixed, we will be adversely
affected by any decrease in the volume or revenue per pound of freight shipped through our network.
Moreover, if we are not able to increase the volume of freight shipped through our Xpress Global
Systems network, that segment may not reach profitability.
Our Xpress Global Systems operations, particularly our network of hubs and terminals, represent substantial
fixed costs. As a result, any decline in the volume or revenue per pound of freight we handle may
have an adverse effect on our operating margin and our results of operations. In addition, if we
fail to increase the volume of freight shipped through our Xpress Global Systems network, our airport-to-airport
business may not achieve profitability. Typically, we do not have long-term contracts with our airport-to-airport
customers, and there is no assurance that our current customers will continue to utilize our services
or that they will continue at the same levels. The actual shippers of the freight moved through our
network include various manufacturers and distributors. Adverse business conditions affecting these
shippers or adverse general economic conditions are likely to cause a decline in the volume of freight
shipped through our network. Recently, Xpress Global Systems has experienced lower than expected
revenue and higher costs. Our inability to bring this segment to profitability would adversely affect
our consolidated results of operations.
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:
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| |  | 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.                                                                                                  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|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, current service disruptions in the railroad industry 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.

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|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.
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. 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.
Beginning in 2004, motor carriers were required to comply with several changes to DOT hours-of-service
requirements that may have a positive or negative effect on driver hours (and miles) and our operations.
A citizens advocacy group successfully petitioned the courts that the new rules were developed
without driver health in mind. Pending further action by the courts or the effectiveness of new rules
addressing these issues, Congress has enacted a law that extends the effectiveness of the new rules
until September 30, 2005. We cannot predict whether there will be changes to the hours-of-service
rules, the extent of any changes, or whether there will be further court challenges. Given this uncertainty,
we are unable to determine the future effect of driver hour regulations on our operations. The DOT
is also considering implementing higher safety requirements on trucks. These regulatory changes may
have an adverse affect on our future profitability.
We may not make acquisitions in the future, or if we do, we may not be successful in integrating the
acquired businesses.
We have made eleven acquisitions since becoming a public company in 1994. Accordingly, acquisitions
have provided a substantial portion of our growth. 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.
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.
Recent Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board, (FASB), issued FIN 46-R, Consolidation of Variable Interest Entities, (FIN 46-R), which supersedes Interpretation No. 46, Consolidation of Variable Interest Entities, issued in January 2003. This Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities (VIE) when a company will absorb a majority of the VIEs expected losses, receives a majority of the VIEs expected residual returns, or both. FIN 46-R also requires consolidation of existing, non-controlled affiliates if the VIE is unable to finance its operations without
investor support, or where other investors do not have exposure to the significant risks and rewards of ownership. For enterprises that are not small business issuers,
 FIN 46-R is to be applied to all
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|variable interest entities by the end of the first reporting period ending after March 15, 2004. Our
adoption of FIN 46-R did not have an impact on our financial condition or results of operations.
On December 16, 2004, the FASB issued FASB Statement No. 123 (revised 2004),Share-Based Payment (SFAS 123R), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation,(SFAS 123), supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (Opinion 25) and amends FASB Statement 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.
SFAS 123R must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in

which financial statements have not yet been issued. We will adopt SFAS 123R on July 1, 2005.
As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using

Opinion 25s intrinsic value method and, as such, generally recognizes no compensation cost

for employee stock options. Accordingly, the adoption of SFAS 123Rs fair value method will

have a significant impact on our results of operations, although it will have no impact on our
overall
financial position. The impact of adoption of SFAS 123R cannot be predicted at this time
because
it will depend on levels of share-based payments granted in the future. However, had we
adopted SFAS
123R in prior periods, the impact of that standard would have approximated the impact
of SFAS 123
as described in the disclosure of pro forma net income and earnings per share in Note
2 to our Consolidated
Financial Statements. SFAS 123R also requires the benefits of tax deductions
in excess of recognized
compensation cost to be reported as a financing cash flow, rather than
as an operating cash flow
as required under current literature. This requirement will reduce net
operating cash flows and increase
net financing cash flows in periods after adoption. While the
Company cannot estimate what those
amounts will be in the future (because they depend on, among
other things, when employees exercise
stock options), the amount of operating cash flows recognized
in prior periods for such excess tax
deductions were not material to the Companys consolidated
financial position or results of operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|29
|--



|ITEM 7A.               QUANTITIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We experience various market risks, including changes in interest rates and fuel prices. We do not
enter into derivatives or other financial instruments for trading or speculative purposes, nor when
there are no underlying related exposures.
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 interest
rate obligations expose us to the risk that interest rates might fall. Variable interest rate
obligations expose us to the risk that interest rates might rise.
We are exposed to variable interest rate risk principally from our securitization facility and revolving
credit facility. At December 31, 2004, we had $47,466 in variable rate borrowings outstanding. We
are exposed to fixed interest rate risk principally from equipment notes and mortgages. At December
31, 2004, we had borrowings totaling $149,566 comprised of $47,466 of variable rate borrowings and
$102,100 of fixed rate borrowings. Holding other variables constant (such as borrowing levels), the
earnings and cash flow impact of a one-percentage point increase/decrease in interest rates would
have an unfavorable/favorable impact of approximately $300.
Commodity Price Risk. Shortages of fuel, increases in prices, or rationing of petroleum products can have a materially adverse
effect on our operations and profitability. Fuel is subject to economic, political and market factors
that are outside of our control. Historically, we have sought to recover a portion of short-term
increases in fuel prices from customers through the collection of fuel surcharges. However, fuel
surcharges do not always fully offset increases in fuel prices. In addition, from time-to-time we
may enter into derivative financial instruments to reduce our exposure to fuel price fluctuations.
In accordance with SFAS 133, we adjust any derivative instruments to fair value through earnings
on a monthly basis. As of December 31, 2004, we had no derivate financial instruments to reduce our
exposure to fuel price fluctuations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|30
|--



|ITEM 8.                  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent RegisteredPublic 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, 2004 and 2003, and the related consolidated statements of operations, stockholders
equity and cash flows for each of the three years in the period ended December 31, 2004. 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.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of U.S. Xpress Enterprises, Inc. and subsidiaries as of December 31, 2004
and 2003, and the consolidated results of their operations and their cash flows for each of the three
years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
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.s internal control over
financial reporting as of December 31, 2004, 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 3, 2005, expressed an unqualified opinion thereon.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                       | /s/ ERNST & YOUNG LLP
|---------------------- | ---------------------
|                       |                      
|Chattanooga, Tennessee |                      
|March 3, 2005          |                      

|31
|--



|U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)
|---------------------------------------------------------------------------------------------------------------------------
|                                                                                                                           

|                                     | Year Ended December 31, |          
|------------------------------------ | ----------------------- | ---------
|                                     |                         |          
|                                     | 2004                    |          
|                                     |                         |          
|Operating Revenue:                   |                         |          
|Revenue, before fuel surcharge       | $                       | 1,044,699
|Fuel surcharge                       |                         | 60,957   
|                                     |                         |          
|Total operating revenue              |                         | 1,105,656
|                                     |                         |          
|Operating Expenses:                  |                         |          
|Salaries, wages and benefits         |                         | 367,317  
|Fuel and fuel taxes                  |                         | 168,570  
|Vehicle rents                        |                         | 71,068   
|Depreciation and amortization        |                         | 45,097   
|Purchased transportation             |                         | 212,153  
|Operating expenses and supplies      |                         | 72,689   
|Insurance premiums and claims        |                         | 59,651   
|Operating taxes and licenses         |                         | 13,924   
|Communications and utilities         |                         | 11,435   
|General and other operating expenses |                         | 43,744   
|Early extinguishment of debt         |                         | 454      
|                                     |                         |          
|Total operating expenses             |                         | 1,066,102
|                                     |                         |          
|                                     |                         |          
|Income from Operations               |                         | 39,554   
|                                     |                         |          
|Interest Expense, net                |                         | 9,223    
|                                     |                         |          
|                                     |                         |          
|Income Before Income Tax Provision   |                         | 30,331   
|                                     |                         |          
|Income Tax Provision                 |                         | 13,905   
|                                     |                         |          
|                                     |                         |          
|Net Income                           | $                       | 16,426   
|                                     |                         |          
|                                     |                         |          
|Earnings Per Share - basic           | $                       | 1.16     
|Earnings Per Share - diluted         | $                       | 1.14     
|                                     |                         |          
|                                     |                         |          
|Weighted average shares  basic      |                         | 14,159   
|Weighted average shares - diluted    |                         | 14,399   

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

|32
|--



|U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)
|-------------------------------------------------------------------------------------------------------------
|                                                                                                             

|                                                                                                                                                          | December 31, |         
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | --------
|
|
|
|ASSETS                                                                                                                                                    |              |         
|Current Assets                                                                                                                                           
|Cash and cash equivalents                                                                                                                                 | $            | 66      
|                                                                                                                                                         
|Customer receivables, net of allowance of $3,357 and $2,782
  in 2004 and 2003, respectively                                                              |              | 143,282 
|Other receivables                                                                                                                                         |              | 9,451   
|Prepaid insurance and licenses                                                                                                                            |              | 13,680  
|Operating and installation supplies                                                                                                                       |              | 5,359   
|Deferred income taxes                                                                                                                                     |              | 14,146  
|Other current assets                                                                                                                                      |              | 4,408   
|                                                                                                                                                          |              |         
|Total current assets                                                                                                                                      |              | 190,392 
|                                                                                                                                                          |              |         
|Property and Equipment, at cost                                                                                                                           |              | 431,734 
|Less accumulated depreciation and amortization                                                                                                            |              | (156,121
|                                                                                                                                                          |              |         
|Net property and equipment                                                                                                                                |              | 275,613 
|                                                                                                                                                          |              |         
|Other Assets                                                                                                                                             
|Goodwill, net                                                                                                                                             |              | 74,196  
|Other                                                                                                                                                     |              | 19,966  
|                                                                                                                                                          |              |         
|Total other assets                                                                                                                                        |              | 94,162  
|                                                                                                                                                          |              |         
|Total Assets                                                                                                                                              | $            | 560,167 
|                                                                                                                                                          |              |         
|                                                                                                                                                          |              |         
|LIABILITIES AND STOCKHOLDERS  EQUITY                                                                                                                     |              |         
|Current Liabilities                                                                                                                                      
|Accounts payable                                                                                                                                          | $            | 25,636  
|Book overdraft                                                                                                                                            |              | 11,246  
|Accrued wages and benefits                                                                                                                                |              | 13,167  
|Claims and insurance accruals                                                                                                                             |              | 53,450  
|Other accrued liabilities                                                                                                                                 |              | 3,949   
|Securitization facility                                                                                                                                   |              | 35,000  
|Current maturities of long-term debt                                                                                                                      |              | 13,482  
|                                                                                                                                                          |              |         
|Total current liabilities                                                                                                                                 |              | 155,930 
|                                                                                                                                                          |              |         
|*Long-Term Debt, net of current maturities*                                                                                                               |              | 101,084 
|                                                                                                                                                          |              |         
|*Deferred Income Taxes*                                                                                                                                   |              | 68,965  
|                                                                                                                                                          |              |         
|*Other Long-Term Liabilities*                                                                                                                             |              | 804     
|                                                                                                                                                          |              |         
|                                                                                                                                                          |              |         
|*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, 15,742,812
  and 13,556,923 shares issued at December 31, 2004 and 2003, respectively |              | 157     
|Common Stock Class B, $.01 par value, 7,500,000 shares authorized, 3,040,262
  shares issued and outstanding at December 31, 2004 and 2003                |              | 30      
|Additional paid-in capital                                                                                                                                |              | 157,552 
|Retained earnings                                                                                                                                         |              | 100,837 
|Treasury Stock, Class A, at cost (2,594,389 and 2,544,389
  shares at December 31, 2004  and 2003, respectively                                           |              | (25,137 
|Notes receivable from stockholders                                                                                                                        |              | (47     
|Unamortized compensation on restricted stock                                                                                                              |              | (8      
|                                                                                                                                                          |              |         
|Total stockholders equity                                                                                                                                |              | 233,384 
|                                                                                                                                                          |              |         
|Total Liabilities and Stockholders Equity                                                                                                                | $            | 560,167 
|                                                                                                                                                          |              |         

|                                                                                 
|---------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated balance sheets.

|33
|--



|U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)
|-------------------------------------------------------------------------------------------------
|                                                                                                 

|                                                                                          | Year Ended 
      December 31, |         
|----------------------------------------------------------------------------------------- | ------------------------------ | --------
|                                                                                          |                                |         
|                                                                                          | 2004                           |         
|                                                                                          |                                |         
|Cash Flows from Operating Activities:                                                     |                                |         
|Net income                                                                                | $                              | 16,426  
|Adjustments to reconcile net income to net cash
        provided by operating activities: |                                |         
|Loss on early extinguishment of debt                                                      |                                | 454     
|Deferred income tax provision                                                             |                                | 8,887   
|Provision for losses on receivables                                                       |                                | 1,796   
|Depreciation and amortization                                                             |                                | 46,719  
|Amortization of restricted stock                                                          |                                | 16      
|Tax benefit realized from stock option plans                                              |                                | 799     
|(Gain) Loss on sale of equipment                                                          |                                | (1,622  
|(Gain) Loss on interest rate swaps                                                        |                                |        
|Changes in operating assets and liabilities, net of acquisitions:                         |                                |         
|Receivables                                                                               |                                | (49,809 
|Prepaid insurance and licenses                                                            |                                | (8,910  
|Operating and installation supplies                                                       |                                | (281    
|Other assets                                                                              |                                | 782     
|Accounts payable and other accrued liabilities                                            |                                | 29,060  
|Accrued wages and benefits                                                                |                                | 133     
|                                                                                          |                                |         
|Net cash provided by operating activities                                                 |                                | 44,450  
|                                                                                          |                                |         
|Cash Flows from Investing Activities:                                                     |                                |         
|Payments for purchases of property and equipment                                          |                                | (107,580
|Proceeds from sales of property and equipment                                             |                                | 26,439  
|Repayment of notes receivable from stockholders                                           |                                | 35      
|Investment in Arnold                                                                      |                                | (6,219  
|Acquisition of business                                                                   |                                | (725    
|                                                                                          |                                |         
|Net cash used in investing activities                                                     |                                | (88,050 
|                                                                                          |                                |         
|Cash Flows from Financing Activities:                                                     |                                |         
|Net payments under lines of credit                                                        |                                |        
|Net borrowings under securitization facility                                              |                                | 35,000  
|Borrowings under long-term debt                                                           |                                | 81,278  
|Payments of long-term debt                                                                |                                | (128,678
|Additions to deferred financing costs                                                     |                                | (908    
|Prepayment penalties on debt refinancing                                                  |                                | (275    
|Book overdraft                                                                            |                                | 8,236   
|Purchase of Class A Common Stock                                                          |                                | (654    
|Proceeds from exercise of stock options                                                   |                                | 1,627   
|Proceeds from issuance of common stock, net                                               |                                | 47,872  
|                                                                                          |                                |         
|Net cash provided by (used in) financing activities                                       |                                | 43,498  
|                                                                                          |                                |         
|Net Change in Cash and Cash Equivalents                                                   |                                | (102    
|Cash and Cash Equivalents, beginning of year                                              |                                | 168     
|                                                                                          |                                |         
|Cash and Cash Equivalents, end of year                                                    | $                              | 66      
|                                                                                          |                                |         
|Supplemental Disclosure of Cash Flow Information:                                         |                                |         
|Cash paid during the year for interest, net of capitalized interest                       | $                              | 9,258   
|Cash paid during the year for income taxes                                                |                                | 829     
|Conversion of operating leases to equipment installment notes                             |                                | 15,387  
|                                                                                          |                                |         

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

|34
|--



|U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(In thousands, except share amounts)
|---------------------------------------------------------------------------------------------------------------------------------

|                                                    | Common 
      Stock |     | Additional
      Paid-In
      Capital |   | Retained
      Earnings |  | Treasury
      Stock |         | Notes
      Receivable
      From
      Stockholders |   | Unamortized 
        Compensation 
        On 
        Restricted 
        Stock |  | Total |        
|--------------------------------------------------- | ------------------- | --- | -------------------------------------- | - | ----------------------- |  | -------------------- | ------- | ---------------------------------------------------- | - | -------------------------------------------------------------------------------- |  | ----- | -------
|                                                    | Class A             |     | Class B                                |   |                         |  |                      |         |                                                      |  
|                                                    |                     |    
|Balance, December 31, 2001                          | $                   | 133 |                                        | $ | 30                      |  | $                    | 105,586 |                                                      | $ | 74,891                                                                           |  | $     | (24,483
|Net income                                          |                     |    |                                        |   |                        |  |                      |        |                                                      |   | 1,099                                                                            |  |       |       
|Issuance of 2,788 shares of 
  Class A Common       |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Stock for non-employee
   director compensation     |                     |    |                                        |   |                        |  |                      | 30      |                                                      |   |                                                                                 |  |       |       
|Issuance of 124,323 shares of 
   Class A Common    |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Stock for employee
   stock purchase plan           |                     | 1   |                                        |   |                        |  |                      | 888     |                                                      |   |                                                                                 |  |       |       
|Proceeds from  exercise of
  10,750 options         |                     |    |                                        |   |                        |  |                      | 72      |                                                      |   |                                                                                 |  |       |       
|Other comprehensive income, net of tax              |                     |    |                                        |   |                        |  |                      |        |                                                      |   | 678                                                                              |  |       |       
|Repurchase of 30,000 shares of
   restricted stock  |                     |    |                                        |   |                        |  |                      | (242    | )                                                    |   |                                                                                 |  |       |       
|Amortization of restricted stock                    |                     |    |                                        |   |                        |  |                      |        |                                                      |   |                                                                                 |  |       |       
|                                                    |                     |    
|Balance, December 31, 2002                          | $                   | 134 |                                        | $ | 30                      |  | $                    | 106,334 |                                                      | $ | 76,668                                                                           |  | $     | (24,483
|Net income                                          |                     |    |                                        |   |                        |  |                      |        |                                                      |   | 7,643                                                                            |  |       |       
|Issuance of 2,184 shares of Class
  A Common        |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Stock for non-employee
  director compensation      |                     |    |                                        |   |                        |  |                      | 22      |                                                      |   |                                                                                 |  |       |       
|Proceeds from exercise of 146,412 options           |                     | 1   |                                        |   |                        |  |                      | 896     |                                                      |   |                                                                                 |  |       |       
|Other comprehensive income, net of tax              |                     |    |                                        |   |                        |  |                      |        |                                                      |   | 100                                                                              |  |       |       
|Repayment of notes
  receivable from stockholders   |                     |    |                                        |   |                        |  |                      |        |                                                      |   |                                                                                 |  |       |       
|Amortization of restricted stock                    |                     |    |                                        |   |                        |  |                      |        |                                                      |   |                                                                                 |  |       |       
|                                                    |                     |    
|Balance, December 31, 2003                          | $                   | 135 |                                        | $ | 30                      |  | $                    | 107,252 |                                                      | $ | 84,411                                                                           |  | $     | (24,483
|Net income                                          |                     |    |                                        |   |                        |  |                      |        |                                                      |   | 16,426                                                                           |  |       |       
|Issuance of 1,611 shares 
   of Class A Common      |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Stock for non-employee
   director compensation     |                     |    |                                        |   |                        |  |                      | 24      |                                                      |   |                                                                                 |  |       |       
|Issuance of 2,000,000 shares of Class A             |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Common Stock, net                                   |                     | 20  |                                        |   |                        |  |                      | 47,691  |                                                      |   |                                                                                 |  |       |       
|Proceeds from exercise of 168,294 options           |                     | 2   |                                        |   |                        |  |                      | 1,625   |                                                      |   |                                                                                 |  |       |       
|Issuance of 15,984 shares of Class A Common         |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Stock for employee stock purchase plan              |                     |    |                                        |   |                        |  |                      | 161     |                                                      |   |                                                                                 |  |       |       
|Tax benefit realized from stock option plans        |                     |    |                                        |   |                        |  |                      | 799     |                                                      |   |                                                                                 |  |       |       
|Repayment of notes receivable from 
   stockholders |                     |    |                                        |   |                        |  |                      |        |                                                      |   |                                                                                 |  |       |       
|Amortization of restricted stock                    |                     |    |                                        |   |                        |  |                      |        |                                                      |   |                                                                                 |  |       |       
|Repurchase of 50,000 shares of Class A              |                     |     |                                        |   |                         |  |                      |         |                                                      |   |                                                                                  |  |       |        
|Common Stock                                        |                     |    |                                        |   |                        |  |                      |        |                                                      |   |                                                                                 |  |       | (654   
|                                                    |                     |    
|Balance, December 31, 2004                          | $                   | 157 |                                        | $ | 30                      |  | $                    | 157,552 |                                                      | $ | 100,837                                                                          |  | $     | (25,137
|                                                    |                     |    

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

|35
|--



|U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIESNOTES 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
reportable business segments. U.S. Xpress, Inc. (U.S. Xpress) is a truckload carrier
serving the continental United States and parts of Canada and Mexico. Xpress Global Systems, Inc.
(Xpress Global Systems), formerly known as CSI/Crown, Inc., provides transportation services
primarily to the floorcovering industry and deferred airfreight services from airport to airport.
2.     Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 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.
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. Certain revenue
of Xpress Global Systems, representing less than 10.0% 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 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 tires, 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, 2004 and 2003 are as follows:

|36
|--



|                              |       |       | Cost |  
|----------------------------- | ----- | ----- | ---- | -
|                              |       |       |      |  
|                              | Lives |       | 2004 |  
|                              |       |       |      |  
|Land and buildings            | 10-30 | years |      | $
|Revenue and service equipment | 3-10  | years |      |  
|Furniture and equipment       | 3-7   | years |      |  
|Leasehold improvements        | 5-6   | years |      |  
|Computer software             | 1-5   | years |      |  
|                              |       |       |      |  
|                              |       |       |      | $
|                              |       |       |      |  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The Company recognized $42,998, $32,533 and $32,615 in depreciation expense in 2004, 2003 and 2002,
respectively. Gains and (losses) on the sale of equipment of $(1,622), $574 and $893 for 2004, 2003
and 2002, respectively, are included in depreciation and amortization expense in the consolidated
statements of operations.
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 with the exception of gains and losses on trade-ins, which are included in the basis
of the new asset. 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 us 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 2004, 2003 or 2002.
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 $462, $374 and $480 in 2004, 2003 and
2002, respectively. Accumulated amortization was $336 and $641 as of December 31, 2004 and 2003,
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 18 months to 5 years. The Company recognized $3,132, $3,792 and $3,473 of amortization
expense in 2004, 2003 and 2002, respectively. Accumulated amortization was $16,245 and $13,117 at
December 31, 2004 and 2003, 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
The Company uses the equity method to account for investments for which the Company has the ability
to exercise significant influence over operating and financial policies. Consolidated net income
includes the Companys share of the net earnings of these companies.
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, 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

|37
|--



|by insurance in amounts the Company considers adequate. Claims accruals represent the uninsured portion
of pending claims at December 31, 2004 and 2003, 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 the Companys evaluation of the type and severity of individual
claims and future development based on historical trends. At December 31, 2004, the amounts recorded
for both workers compensation and liability were based in part upon actuarial studies performed
by a third-party actuary.
Earnings Per Share
The difference between basic and diluted earnings per share is due to the assumed conversion of outstanding
options. The computation of basic and diluted earnings per share is as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|                                                          | Year Ended December 31, |       
|--------------------------------------------------------- | ----------------------- | ------
|                                                          |                         |       
|                                                          | 2004                    |       
|                                                          |                         |       
|Net Income                                                | $                       | 16,426
|                                                          |                         |       
|Denominator:                                              |                         |       
|Weighted average common shares outstanding                |                         | 14,159
|Equivalent shares issuable upon exercise of stock options |                         | 240   
|                                                          |                         |       
|Diluted shares                                            |                         | 14,399
|                                                          |                         |       
|Earnings per share:                                       |                         |       
|Basic                                                     | $                       | 1.16  
|Diluted                                                   | $                       | 1.14  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Stock-Based Compensation
The Company applies the intrinsic value based method of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock option plans. No stock-based employee compensation
cost is reflected in net income, as all options granted under the plan had an exercise price equal
to the 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 No. 123, the Companys net income and earnings
per share would have been adjusted to the pro forma amounts for the years ended December 31, 2004,
2003 and 2002, as indicated below:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                                              | Year Ended December 31, |       
|--------------------------------------------- | ----------------------- | ------
|                                              |                         |       
|                                              | 2004                    |       
|                                              |                         |       
|Net income, as reported                       | $                       | 16,426
|Stock-based employee compensation, net of tax |                         | (589  
|                                              |                         |       
|Pro forma net income                          | $                       | 15,837
|                                              |                         |       
|Net income per share, basic, as reported      | $                       | 1.16  
|Net income per share, basic, pro forma        | $                       | 1.12  
|Net income per share, diluted, as reported    | $                       | 1.14  
|Net income per share, diluted, pro forma      | $                       | 1.10  

|                                                                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The fair value of each employee stock option grant was estimated as of the date of grant using the
Black-Scholes option pricing model and the following weighted average assumptions:
|                                                                                                                                                                                     

|                        | Year Ended December 31, |  
|----------------------- | ----------------------- | -
|                        |                         |  
|                        | 2004                    |  
|                        |                         |  
|Risk free interest rate | 3.25                    | %
|Dividend Yield          | 0.00                    | %
|Expected volatility     | 58.50                   | %
|Expected life           | 5.0 years               |  

|                                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------
|The weighted average fair value of options granted during 2004, 2003 and 2002 was $13.89, $12.21 and
$6.22, respectively.

|38
|--



|Recent Accounting Pronouncements
    In December 2003, the Financial Accounting Standards Board, (FASB), issued FIN 46-R, Consolidation of Variable Interest Entities, (FIN 46-R), which supersedes Interpretation No. 46, Consolidation of Variable Interest Entities, issued in January 2003. This Interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities (VIE) when a company will absorb a majority of the VIEs expected losses, receives a majority of the VIEs expected residual returns, or both. FIN 46-R also requires consolidation of existing, non-controlled affiliates if the VIE is unable to finance its operations
without investor support, or where other investors do not have exposure to the significant risks and rewards of ownership. For enterprises that are not small business issuers, FIN 46-R is to be applied to all variable interest entities by the end of the first reporting period ending after March 15, 2004. Our adoption of FIN 46-R did not have an impact on our financial condition or results of operations.                                                                                                                                                                                                                                                                                                                                                              
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|On December 16, 2004, the FASB issued FASB Statement No. 123 (revised 2004),Share-Based Payment (SFAS 123R), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation,(SFAS 123), supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (Opinion 25) and amends FASB Statement 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|SFAS 123R must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We will adopt SFAS 123R on July 1, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using Opinion 25s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123Rs fair value method will have a significant impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net income and earnings per share in
Note 2 to our Consolidated Financial Statements. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While the Company cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions were not material to the Companys consolidated financial position or results of operations.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Reclassifications
      Certain prior year amounts have been reclassified to conform to the current years presentation.
      3.     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 is amortizing the intangible asset over the period of benefit, which has been determined to be five years.
The Company recognized amortization expense of $75 for the period ended December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|On October 17, 2003, the Company acquired certain assets and assumed certain liabilities of a less-than-truckload airport-to-airport carrier for a purchase price of $1,200 in cash plus assumption of approximately $1,500 in liabilities. The tangible assets acquired of $684 related to revenue equipment, accounts receivable and other long-term assets. The excess of the purchase price over the fair value of the assets acquired was recorded as goodwill in the consolidated balance sheets and totaled approximately $2,000. Under the terms of the acquisition, the Company is required to pay to the former shareholders a percentage of revenue, as defined in the agreement, over a five year period. The Company will record the contingent payment as an intangible asset separable from                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|39
|--



|goodwill, as it pertains to certain customer relationships, and meets the separability criteria of
SFAS 141. The Company will amortize the intangible asset over the period of benefit, which has been
determined to be five years.
On October 24, 2002, the Company acquired certain assets and assumed certain liabilities of a truckload
carrier for a purchase price of $2,000 in cash plus assumption of approximately $5,300 in liabilities.
The tangible assets acquired of approximately $4,200 primarily related to revenue equipment. The
excess of the purchase price over the fair value of the assets acquired was recorded as goodwill
in the consolidated balance sheets and totaled approximately $3,100. Under the terms of the acquisition,
additional consideration may be paid over a three-year period contingent upon revenue growth with
a customer of the acquired company. In December 2004, the Company paid consideration of $161 and
recorded the contingent payment as an intangible asset separable from goodwill, as it pertained to
a customer relationship, and met the separability criteria of SFAS 141. The Company is amortizing
the intangible asset over the period of benefit, which has been determined to be five years.
The acquisitions were accounted for under the provisions of SFAS 141 and the results of operations
have been included in the accompanying consolidated financial statements since their respective dates
of acquisition. Pro-forma disclosures of the acquisitions have not been included, as the overall
impact of each acquisition was not material to the Companys operating results.
4.     Income Taxes
The income tax provision for 2004, 2003 and 2002 consisted of the following:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                     | December 31, |       
|-------------------- | ------------ | ------
|                     |              |       
|                     | 2004         |       
|                     |              |       
|Current:             |              |       
|Federal              | $            | 4,494 
|State                |              | 524   
|                     |              |       
|                     |              | 5,018 
|Deferred             |              | 8,887 
|                     |              |       
|Income tax provision | $            | 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, |       
|----------------------------------------------------- | ------------ | ------
|                                                      |              |       
|                                                      | 2004         |       
|                                                      |              |       
|Federal income tax at statutory rate                  | $            | 10,616
|State income taxes, net of federal income tax benefit |              | 455   
|Non-deductible per diem paid to drivers               |              | 1,948 
|Federal and state income tax credits                  |              | (740  
|Other, net                                            |              | 1,626 
|                                                      |              |       
|Income tax provision                                  | $            | 13,905
|                                                      |              |       

|40
|--



|The tax effect of temporary differences that give rise to significant portions of deferred tax assets
and liabilities at December 31, 2004 and 2003 consisted of the following:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                               

|                                             |  | December 31, |       
|-------------------------------------------- |  | ------------ | ------
|                                             |  |              |       
|                                             |  | 2004         |       
|                                             |  |              |       
|Deferred tax assets:                         |  |              |       
|Allowance for doubtful accounts              |  | $            | 755   
|Insurance and claims reserves                |  |              | 17,713
|Net operating loss and credit carry forwards |  |              | 4,002 
|                                             |  |             
|Total deferred tax assets                    |  | $            | 22,470
|                                             |  |             

|                                              |  |              |       
|--------------------------------------------- |  | ------------ | ------
|                                              |  | December 31, |       
|                                              |  |              |       
|                                              |  | 2004         |       
|                                              |  |              |       
|Deferred tax liabilities:                     |  |              |       
|Book over tax basis of property and equipment |  | $            | 64,176
|Deductible goodwill amortization              |  |              | 8,117 
|Prepaid license fees                          |  |              | 4,076 
|Other                                         |  |              | 920   
|                                              |  |             
|Total deferred tax liabilities                |  | $            | 77,289
|                                              |  |             

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|At December 31, 2004, the Company had approximately $1,258 of federal net operating loss carry forwards,
$1,633 of state operating loss carry forwards and $2,706 of state tax credit carry forwards. The
federal loss carry forward may be carried forward up to 20 years and may be used to offset otherwise
taxable income. 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.
5.     Long-Term Debt
Long-term debt at December 31, 2004 and 2003 consisted of the following:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                                                                 | December 31, |      
|-------------------------------------------------------------------------------- | ------------ | -----
|
|
|
|Obligation under line of credit with a group of banks, maturing October 2009     |              | **$**
|Revenue equipment installment notes with finance companies, weighted             |             
|average interest rate of 5.29% and 5.30% at December 31, 2004 and 2003,          |             
|respectively, due in monthly installments with final maturities at various       |             
|dates ranging from February 2005 to July 2011, secured by                        |             
|related revenue equipment                                                        |              |      
|Mortgage note payable, interest rate of 6.73% at December 31, 2004 and 2003,     |              |      
|due in monthly installments through October 2010, with final                     |              |      
|payment of $6.3 million, secured by real estate                                  |              |      
|Mortgage note payable, variable interest rate of 5.88% and 4.92% at December 31, |             
|2004 and 2003, respectively, due in monthly installments through August 2007,    |             
|with final payment of $8.9 million, secured by real estate                       |              |      
|Capital lease obligations maturing February 2005 to November 2007                |              |      
|Other                                                                            |              |      
|
|                                                                                 |              |      
|Less: current maturities of long-term debt                                       |              |      
|
|                                                                                 |              | **$**
|

|41
|--



|Line of Credit
On March 29, 2002, the Company entered into a $100,000 senior secured revolving credit facility. Proceeds
from this facility were used to repay the then existing revolving credit facility. The revolving
credit facility bore interest based on a base rate (based on the domestic prime rate), plus an applicable
margin of 0.75% to 1.50% or LIBOR plus an applicable margin of 2.25% to 3.00%, based in each case
on the aggregate availability, as defined. At December 31, 2003, the applicable margin was 0.75%
for base rate loans and 2.25% for LIBOR loans. The facility was terminated in October 2004.
On October 14, 2004, the Company entered into a $100,000 senior secured revolving credit facility with
a group of banks, which replaced the prior $100,000 credit facility that was scheduled to mature
in March 2007. The new 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.
At December 31, 2004, the applicable margin was 0.00% for base rate loans and 1.25% 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 (1.25% and 0.25%, respectively, at December
31, 2004). The facility matures in October 2009. At December 31, 2004, $44,000 in letters of credit
were outstanding under the credit facility with $56,000 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 senior secured revolving 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. It also restricts the ability of the Company and its subsidiaries 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, 2004, the Company was in compliance with the revolving
credit facility covenants.
Debt Maturities
As of December 31, 2004, the scheduled principal payments of long-term debt are as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | 2005       |  | $ | 13,482  |  | 
| | ---------- |  | - | ------- |  | 
| | 2006       |  |   | 15,209  |  | 
| | 2007       |  |   | 24,575  |  | 
| | 2008       |  |   | 20,917  |  | 
| | 2009       |  |   | 11,443  |  | 
| | Thereafter |  |   | 28,940  |  | 
| |            |  |   |         | 
| | Total      |  | $ | 114,566 |  | 
| |            |  |   |         | 

|                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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, |    
|------------------------------------ | ----------------------- | ---
|                                     |                         |    
|                                     | 2004                    |    
|                                     |                         |    
|Prepayment penalties                 | $                       | 275
|Unamortized deferred financing costs |                         | 179
|                                     |                         |    
|                                     | $                       | 454
|                                     |                         |    

|42
|--



|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.
The borrowings are secured by the accounts receivable and paid down through collections on the accounts
receivable. The Company can borrow up to $100,000 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, 2004, the Companys borrowings under the
Securitization Facility were $35,000 with $63,200 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,
2004, the Company was in compliance with the Securitization Facility covenants.
8.      Comprehensive Income
Comprehensive income consisted of the following components (net of related tax effects) for the years
ended December 31, 2004, 2003 and 2002, respectively:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                            | Year Ended December 31, |       
|------------------------------------------- | ----------------------- | ------
|                                            |                         |       
|                                            | 2004                    |       
|                                            |                         |       
|Net income                                  | $                       | 16,426
|Net gain on current period cash flow hedges |                         |      
|Amortization of hedge de-designation        |                         |      
|                                            |                         |       
|Total                                       | $                       | 16,426
|                                            |                         |       

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 January 2012. Rental
expense under non-cancelable operating leases was approximately $81,258, $84,579 and $78,781 for
2004, 2003 and 2002, 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 $58,500
at December 31, 2004. 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  |  |  
| | ---------- | ----------------- | ------ | ----- | - | ------ |  | -
| |            |                  
| | 2005       | $                 | 63,652 |       | $ | 12,137 |  | $
| | 2006       |                   | 51,616 |       |   | 8,037  |  |  
| | 2007       |                   | 33,072 |       |   | 5,270  |  |  
| | 2008       |                   | 13,350 |       |   | 3,318  |  |  
| | 2009       |                   | 7,723  |       |   | 1,847  |  |  
| | Thereafter |                   | 6,655  |       |   | 4,535  |  |  

|43
|--



|10. Other Assets
Other assets consisted of the following:
|---------------------------------------------------------
|                                                         

| |                                         | December 31, |        |     
| | --------------------------------------- | ------------ | ------ | ----
| |                                         |              |        |     
| |                                         | 2004         |        | 2003
| |                                         |              |        |     
| | Deferred financing costs, net           | $            | 1,585  |     
| | Investment in unconsolidated affiliates |              | 12,666 |     
| | Notes receivable                        |              | 918    |     
| | Deposits                                |              | 1,332  |     
| | Commissions                             |              | 38     |     
| | Cash surrender value                    |              | 2,444  |     
| | Customer intangible                     |              | 983    |     
| |                                         |              |        |     
| | Total other assets                      | $            | 19,966 |     
| |                                         |              |        |     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11.      Equity and Cost Investments
In December 2004, the Company acquired a 49.0% interest in Arnold Transportation Services, Inc. (Arnold)
and its affiliated companies for $6,200 in cash. Arnold is a truckload carrier that provides primarily
short-haul regional and dedicated dry van service in the Southwest, Southeast and Northeast. Arnolds
current management team controls the remaining 51.0% interest and a majority of the board of directors.
The Company has not guaranteed any of Arnolds debt and has no obligation to provide funding,
services or assets. Under the agreement with Arnolds management, the Company has a three-year
option to acquire 100% of Arnold by purchasing managements interest at a specified price plus
an agreed upon annual return. The Company has accounted for Arnolds operating results using
the equity method of accounting. During 2004, the Company sold certain revenue equipment to Arnold
generating proceeds of approximately $5,500 and recognized a gain on the sale of equipment of $88.
The Company also sub-leased certain revenue equipment to Arnold and received rental income of $313
during fiscal 2004.
In January 2002, the Company acquired a 49% interest in C.W. Johnson Xpress, LLC, (CW Johnson),
for $49 in cash. The Company provides certain services to CW Johnson, including line-haul services,
owner-operator services, operational services such as leasing revenue equipment and providing maintenance
on revenue equipment and back-office support services. The Company earned revenues of approximately
$8,100, $5,500 and $1,900 from CWJ in 2004, 2003 and 2002, respectively, related to line-haul and
owner-operator services. As of December 31, 2004 and 2003, amounts due to the Company for these services
were approximately $2,300 and $1,200, respectively. The Company accounts for CW Johnsons operating
results using the equity method of accounting. At December 2004, 2003 and 2002, the Company recognized
equity in earnings of $203, $250 and $0, respectively, in its consolidated statements of operations.
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 carried on a cost basis. The Company
earned revenues of approximately $16,000, $26,000 and $28,300 from Transplace in 2004, 2003 and 2002,
respectively, for providing transportation services. As of December 31, 2004 and 2003, amounts due
to the Company from Transplace were approximately $4,400 and $3,200, respectively.
12.      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 $886, $878 and $927 was recognized in connection with these leases during
2004, 2003 and 2002, 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
$219, $245 and $252 in fees for these services in 2004, 2003 and 2002, respectively.
IPS also provides communications services to the Company and its drivers. Total payments by the Company
to IPS for these services were approximately $802, $1,019 and $683 in 2004, 2003 and 2002, respectively.
As of December 31, 2004 and 2003, the Company owed IPS approximately $27 and $63, respectively, for
the aforementioned services.

|44
|--



|13.      Commitments and Contingencies
Effective November 15, 2002, the Company entered into an agreement with Forward Air, Inc. (Forward
Air) to settle all claims in the action brought by Forward Air against the Company and certain
of its subsidiaries. Forward Air, a deferred airfreight service provider, had filed a lawsuit in
the United States District Court in Greeneville, Tennessee, in which Forward Air asserted a variety
of claims primarily for trademark infringement and unfair competition allegedly arising out of the
Companys use of the name Dedicated Xpress Services, Inc. As a result of the
settlement, the Company recorded a litigation charge of $1,700 in 2002, which includes fees and expenses
associated with the litigation. The charge has been included in general and other operating expenses
in the consolidated statements of operations.
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 $44,000 outstanding as of December 31, 2004. The letters of credit
are maintained primarily to support the Companys insurance program.
The Company had commitments outstanding at December 31, 2004 to acquire revenue equipment for approximately
$166,100 in 2005, $118,300 in 2006 and $78,100 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. In addition, the Company had commitments of $1,400 as of
December 31, 2004 under contracts related to the development and improvement of facilities, which
are non-cancelable.
14.          Derivative Financial Instruments
The Company uses derivative financial instruments to manage exposure to changes in interest rates.
The Company does not use them for trading or speculative purposes.
On March 29, 2002, the Company entered into a revolving credit agreement. Prior to that date, the Company
designated its interest rate swap agreements as cash flow hedges, in which changes in fair value
were recognized in other comprehensive income. In connection with entering into the revolving credit
agreement, the outstanding interest rate swap agreements ceased to qualify as cash flow hedge instruments
because they were not matched to the terms of the new debt. Accordingly, they were not designated
as hedging instruments, resulting in the amounts included in other comprehensive income being amortized
to interest expense over the remaining terms of the respective agreements with any future changes
in the market value also reflected as interest expense in the consolidated statements of operations.
For the years ended December 31, 2004, 2003 and 2002, the Company recognized $0, $(201),and $8, respectively,
to interest expense in conjunction with the de-designation of the interest rate swap agreements.
The Companys interest rate swap agreements expired during the period ended December 31, 2003.
Prior to the expiration, the Company received interest payments at rates equal to LIBOR, reset quarterly,
and paid interest at fixed amounts as indicated below:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|45
|--



| | Notional
      Amounts |        | Fixed Rate
      Component % |       | Variable Rate
      Component % |        | Effective
      Date |                   | Expiration
      Date |                   | 
| | ---------------------- | ------ | ---------------------------- | ----- | ------------------------------- | ------ | -------------------- | ----------------- | --------------------- | ----------------- | 
|
| | $                      | 10,000 |                              | 5.730 |                                 | 1.6338 |                      | February 6, 1998  |                       | February 6, 2003  | 
| |                        | 15,000 |                              | 5.705 |                                 | 1.6338 |                      | February 6, 1998  |                       | February 6, 2003  | 
| |                        | 10,000 |                              | 5.145 |                                 | 1.6338 |                      | August 6, 1999    |                       | February 6, 2003  | 
| |                        | 10,000 |                              | 5.565 |                                 | 1.8900 |                      | September 8, 1998 |                       | September 8, 2003 | 

|As of December 31, 2004, the Company had no outstanding interest rate swap agreements.
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 and become vested in employer matching contributions over a period of six years. The
Company recognized $1,667, $1,256 and $1,253 in expense under this employee benefit plan for 2004,
2003 and 2002, 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; Patrick E. Quinn, the Companys
Co-Chairman, President and Treasurer and Max L. Fuller, the Companys Co-Chairman and Chief
Executive Officer, sold 950,000 and 1,450,000 shares, respectively; and related family partnerships
sold 200,000 shares. The offering generated net proceeds to the Company of approximately $47.7 million.
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.
In May 2004, the board of directors authorized the Company to repurchase up to $10.0 million of its Class
A Common Stock. The repurchased shares will held as treasury stock and may be used for issuances
under the Companys employee stock option plan or for general corporate purposes, as the board
of directors may determine. In June 2004, the Company repurchased 50,000 shares of Class A Common
Stock for $654.
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. 1993 Incentive Stock Plan (the 1993 Plan)
and the U.S. Xpress Enterprises, Inc. 2002 Stock Incentive Plan (the 2002 Plan), (collectively,
the 1993 Plan and the 2002 Plan are referred to herein as the Plans). There may be issued
under the Plans an aggregate of not more than 1,038,138 shares of Class A Common Stock under the
1993 Plan and 1,000,000 shares of Class A Common Stock under the 2002 Plan. Participants of the Plans
may include key employees as selected by the compensation committee of the Board of Directors. Under
the terms of the Plans, 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.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|46
|--



|Under a 1993 sale of restricted stock to certain stockholder employees, notes receivable from stockholders
were issued. The notes bear interest at 6.0% and are due to the Company upon demand. As of December
31, 2004 and 2003, amounts outstanding under the notes were $47 and $82, respectively.
Non-Employee Directors Stock Plan
In August 1995, the Company adopted the 1995 Non-Employee Directors Stock Award and Option Plan (the
1995 Directors Stock Plan) providing for the issuance of stock options to non-employee
directors upon their election to the Companys Board of Directors. The Directors Stock Plan
also provides non-employee directors the option to receive certain board-related compensation in
the form of the Companys Class A Common Stock in lieu of cash. The number of shares of Class
A Common Stock available for option or issue under the Directors Stock Plan may not exceed 50,000 shares.
The 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 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.
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 1995
Directors Stock Plan, including 50,000 shares of Class A Common Stock available for option or issue.
Employee Stock Purchase Plan (ESPP)
In August 1997, the Company adopted an ESPP through which employees meeting certain eligibility criteria
may purchase shares of the Companys Class A common stock at a discount. Under the ESPP, eligible
employees may purchase shares of the Companys Class A common stock, subject to certain limitations,
at a 15.0% discount. Common stock is purchased for employees in January and July of each year. Employees
may not purchase more than 1,250 shares in any six-month period or purchase stock having a market
value of more than $25 per calendar year. The Company has reserved 300,000 shares for issuance under
the ESPP. In January and July 2002, employees purchased 50,796 and 73,527 shares of the Companys
Class A Common Stock at $5.76 and $8.12 per share, respectively. Under the terms of the ESPP, the
plan expired July 1, 2002.
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 January and July 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 Plan.
In January and July 2004, employees purchased 7,812 and 8,172 shares of the Companys Class
A Common Stock at $9.49 and $10.62 per share, respectively. In January 2005, employees purchased
5,438 shares of the Companys Class A Common Stock at $12.78 per share.
Stock Options
Stock options generally vest over periods ranging from three to six years and expire ten years from
the date of grant. As options were granted at fair value, no compensation expense has been recognized.
A summary of the Companys stock option activity for 2004, 2003 and 2002 follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|47
|--



|                                 | Shares   |   | Option Price  |  | Weighted Average
      Exercise Price |      
|-------------------------------- | -------- | - | ------------- |  | ------------------------------------- | -----
|                                 |          |  
|Outstanding at December 31, 2001 | 665,776  |   | $4.72 -$20.88 |  | $                                     | 9.11 
|Granted at market price          | 328,400  |   | 11.45  11.50 |  |                                       | 11.50
|Exercised                        | (10,750  | ) | 6.50    6.88 |  |                                       | 6.67 
|Canceled or expired              | (145,550 | ) | 6.50  12.25  |  |                                       | 9.73 
|                                 |          |   |               |  |                                       |      
|Outstanding at December 31, 2002 | 837,876  |   | 4.72  20.88  |  |                                       | 9.97 
|Granted at market price          | 13,600   |   | 11.06  12.63 |  |                                       | 12.21
|Exercised                        | (146,412 | ) | 4.72  11.50  |  |                                       | 6.13 
|Canceled or expired              | (16,955  | ) | 6.50  20.88  |  |                                       | 16.17
|                                 |          |   |               |  |                                       |      
|Outstanding at December 31, 2003 | 688,109  |   | 6.50  20.88  |  |                                       | 14.93
|                                 |          |   |               |  |                                       |      
|Granted at market price          | 222,600  |   | 13.03  13.90 |  |                                       | 13.89
|Exercised                        | (168,294 | ) | 6.50  15.00  |  |                                       | 9.65 
|Canceled or expired              | (27,225  | ) | 6.50  11.50  |  |                                       | 10.47
|                                 |          |   |               |  |                                       |      
|Outstanding at December 31, 2004 | 715,190  |   | 6.50  20.88  |  |                                       | 12.04
|                                 |          |   |               |  |                                       |      

|                                                                                 
|---------------------------------------------------------------------------------
|The following is a summary of the stock options outstanding at December 31, 2004:
|                                                                                 

|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 |  
|-------------------------- |  | ------------------- |  | ------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------- | ----- | ------------------------- | ------- | ------------------------------------------------------------------------------ | -
|                           | 
|$  6.50 - $  8.06          |  | 168,650             |  | 5.0                                                                             |  | $                                                                                | 7.07  |                           | 157,238 |                                                                                | $
|$  9.50 - $13.90           |  | 470,340             |  | 7.9                                                                             |  |                                                                                  | 12.71 |                           | 215,023 |                                                                                |  
|$18.75 - $20.88            |  | 76,200              |  | 2.6                                                                             |  |                                                                                  | 18.91 |                           | 76,200  |                                                                                |  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|As of December 31, 2004, 448,461 of the options outstanding were exercisable with a weighted average
exercise price of $11.63 per share. As of December 31, 2003, 449,033 of the options outstanding were
exercisable with a weighted average exercise price of $14.31 per share. As of December 31, 2002,
391,283 of the options outstanding were exercisable with a weighted average exercise price of $9.75
per share.
16.      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.
17.      Operating Segments
The Company has two reportable segments based on the types of services it provides to its customers:
U.S. Xpress, 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 and deferred airfreight services from airport to airport.
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.

|48
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|                              | U.S. Xpress |         | Xpress Global Systems |   | Consolidated |  
|----------------------------- | ----------- | ------- | --------------------- | - | ------------ | -
|                              |             |         |                       |   |              |  
|Year Ended December 31, 2004  |             |         |                       |   |              |  
|Revenues  external customers | $           | 947,090 |                       | $ | 158,566      |  
|Intersegment revenues         |             | 19,352  |                       |   |             |  
|Operating income              |             | 45,056  |                       |   | (5,048       | )
|Depreciation and amortization |             | 44,168  |                       |   | 2,551        |  
|Goodwill at carrying value    |             | 67,328  |                       |   | 6,868        |  
|Total assets                  |             | 512,215 |                       |   | 47,952       |  
|Capital expenditures          |             | 104,499 |                       |   | 3,081        |  
|                              |             |         |                       |   |              |  
|Year Ended December 31, 2003  |             |         |                       |   |              |  
|Revenues  external customers | $           | 792,667 |                       | $ | 137,842      |  
|Intersegment revenues         |             | 35,193  |                       |   |             |  
|Operating income              |             | 21,915  |                       |   | 2,501        |  
|Depreciation and amortization |             | 35,649  |                       |   | 1,624        |  
|Goodwill at carrying value    |             | 67,328  |                       |   | 6,853        |  
|Total assets                  |             | 391,310 |                       |   | 50,484       |  
|Capital expenditures          |             | 103,535 |                       |   | 2,992        |  
|                              |             |         |                       |   |              |  
|Year Ended December 31, 2002  |             |         |                       |   |              |  
|Revenues  external customers | $           | 747,542 |                       | $ | 114,806      |  
|Intersegment revenues         |             | 30,345  |                       |   |             |  
|Operating income              |             | 20,022  |                       |   | 573          |  
|Depreciation and amortization |             | 36,040  |                       |   | 1,421        |  
|Goodwill at carrying value    |             | 67,160  |                       |   | 4,816        |  
|Total assets                  |             | 406,472 |                       |   | 32,067       |  
|Capital expenditures          |             | 37,139  |                       |   | 1,793        |  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 $9,223, $9,873
and $13,384 in 2004, 2003 and 2002, respectively, and settlement of a litigation matter of $1,694
in 2002 and the early extinguishment of debt of $454 and $1,776 in 2004 and 2002, respectively, which
are considered corporate expenses.

|49
|--



|18.Quarterly Financial Data (Unaudited)
|---------------------------------------
|                                       

|                                        | Quarter
      Ended |        
|--------------------------------------- | ------------------- | -------
|                                        |                     |        
|                                        | March
      31      |        
|                                        |                     |        
|Year
      Ended December 31, 2004      |                     |        
|Operating
      revenue                 | $                   | 234,671
|Income
      from operations            |                     | 3,596  
|Income
      before income taxes        |                     | 1,481  
|Net
      income                        |                     | 800    
|Earnings
      per share  basic        | $                   | 0.06   
|Earnings
      per share  - diluted     | $                   | 0.06   
|                                        |                     |        
|Year
      Ended December 31, 2003      |                     |        
|Operating
      revenue                 | $                   | 220,666
|Income
      from operations            |                     | 3,170  
|Income
      before income taxes        |                     | 242    
|Net
      income                        |                     | 121    
|Earnings
      per share  basic        | $                   | 0.01   
|Earnings
      per share  - diluted (1) | $                   | 0.01   

|                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

|50
|--



|Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
To the Board of Directors and StockholdersU.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. maintained effective
internal control over financial reporting as of December 31, 2004, 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. 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. maintained effective
internal control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on the COSO criteria. Also, in our opinion, U.S. Xpress Enterprises, Inc. maintained,
in all material respects, effective internal control over financial reporting as of December 31,
2004, 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, 2004 and 2003, and the related consolidated statements of operations, stockholders equity, and cash flows
for each of the three years in the period ended December 31, 2004, and our report dated March 3,
2005, expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Chattanooga, TennesseeMarch 3, 2005
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|51
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|ITEM 9.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------
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|Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|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, 2004, 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, 2004. 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, 2004, 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.

|52
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|Changes in Internal Control over Financial Reporting
      There were no changes in our internal control over financial reporting during the quarter ended December 31, 2004, 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 AND EXECUTIVE OFFICERS OF THE REGISTRANT
      The information set forth under the sections entitled Election of Directors - Nominees for Directorships, Corporate Governance  Our Executive Officers, Corporate Governance  The Board of Directors and Its Committees  The Audit Committee, Corporate Governance  Compliance with Section 16(a) of the Exchange Act, and Corporate Governance  Code of Ethics in our definitive Proxy Statement for the annual meeting of stockholders to be held May 5, 2005 (the 2005 Proxy Statement) is incorporated herein by reference
      ITEM 11.           EXECUTIVE COMPENSATION
    The information set forth under the sections entitled Corporate Governance - Director Compensation and Executive Compensation of the 2005 Proxy Statement is incorporated herein by reference.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | --------------------------------------------------------------

# 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, 2004, under which shares of our Class A common
stock are authorized for issuance.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|                                                                                                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Plan
        category                                                                                                                                                                            
|                                                                                                                                                                                                 
|                                                                                                                                                                                                 
|                                                                                                                                                                                                 
|Equity
        Compensation Plans approved by security holders
      (1993
        and 2002 Incentive Stock Plans; and 1995 and 2003 Non-Employee Directors
        Stock Award and Option Plans)
|                                                                                                                                                                                                 
|Equity
        Compensation Plans not approved by security holders(1)                                                                                                                            
|                                                                                                                                                                                                 
|Total                                                                                                                                                                                            
|                                                                                                                                                                                                 

---

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



|53
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The information set forth under the sections entitled Security Ownership of Certain Beneficial Owners and Management of the 2005 Proxy Statement is incorporated herein by reference.
        ITEM 13.           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
        The information set forth under the sections entitled Executive Compensation  Compensation Committee Interlocks and Insider Participation and Certain Relationships and Related Transactions of the 2005 Proxy Statement is incorporated herein by reference.
        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 2005 Proxy Statement is incorporated herein by reference.

|PART IV 
|--------
|        
|ITEM 15.
|        
|(a)     
|        
|        
|        
|        
|        
|        
|        
|        
|(b)     
|        
|        

|Exhibit No. |      | Description
|----------- | ---- | -----------
|            | (1)  |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (2)  |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (3)  |            
|            |      |            
|            | (4)  |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (5)  |            
|            |      |            
|            | (5)  |            
|            |      |            
|            | (6)  |            

|54
|--



|Exhibit No. |      | Description
|----------- | ---- | -----------
|            | (6)  |            
|            |      |            
|            | (7)  |            
|            |      |            
|            | (8)  |            
|            |      |            
|            | (9)  |            
|            |      |            
|            | (10) |            
|            |      |            
|            | (10) |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (1)  |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (12) |            
|            |      |            
|            | (11) |            

|55
|--



|Exhibit No. |      | Description
|----------- | ---- | -----------
|            | (11) |            
|            |      |            
|            | (11) |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            |      |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            
|            |      |            
|            | #    |            

|
|-------------
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             
|             

|56
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|(c)Financial Statement Schedule
|-------------------------------

|                                                                                                                
|----------------------------------------------------------------------------------------------------------------
|SCHEDULE II
  VALUATION AND QUALIFYING ACCOUNTSFOR THE YEARS ENDEDDECEMBER 31, 2004, 2003 AND 2002(In Thousands)

|Description                   | Balance at
      Beginning of
      Period |       | Charged to
        Cost/Expenses |   | Charged to
      Other (1) |        | Deductions (2) |    | Balance at End
      of Period |  
|----------------------------- | ------------------------------------------ | ----- | -------------------------------- | - | -------------------------- | ------ | -------------- | -- | ------------------------------ | -
|                              |                                           
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|FOR THE YEAR ENDED 12/31/04   | $                                          | 2,782 |                                  | $ | 1,796                      |        | $              | 72 |                                | $
|Reserve for doubtful accounts |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|FOR THE YEAR ENDED 12/31/03   |                                            | 3,118 |                                  |   | 1,357                      |        |                | 95 |                                |  
|Reserve for doubtful accounts |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|FOR THE YEAR ENDED 12/31/02   |                                            |       |                                  |   |                            |        |                |    |                                |  
|Reserve for doubtful accounts |                                            | 3,419 |                                  |   | 1,389                      |        |                | 80 |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|(1)                           | For the year ended 12/31/04                |       |                                  |   |                            |        |                |    |                                |  
|                              | Recoveries on accounts written off         |       |                                  |   | **$**                      | **72** |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              | For the year ended 12/31/03                |       |                                  |   |                            |        |                |    |                                |  
|                              | Recoveries on accounts written off         |       |                                  |   | $                          | 95     |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              | For the year ended 12/31/02                |       |                                  |   |                            |        |                |    |                                |  
|                              | Recoveries on accounts written off         |       |                                  |   | $                          | 80     |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|                              |                                            |       |                                  |   |                            |        |                |    |                                |  
|(2)                           | Accounts written off                       |       |                                  |   |                            |        |                |    |                                |  

|57
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|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 15th day of March 2005.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                          

|                     | U.S. XPRESS ENTERPRISES, INC.
|-------------------- | -----------------------------
|                     |                              
|Date: March 15, 2005 | By:                          
|                     |                              
|                     |                              
|                     |                              

|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 15, 2005
|                            |  | President and Treasurer                          |  |               
|Patrick E. Quinn            |  |                                                  |  |               
|                            |  |                                                  |  |               
|/s/ MAX L. FULLER           |  | Co-Chairman of the Board of Directors,           |  | March 15, 2005
|                            |  | Chief Executive Officer and Secretary            |  |               
|Max L. Fuller               |  |                                                  |  |               
|                            |  |                                                  |  |               
|/s/ RAY M. HARLIN           |  | Executive Vice President of Finance and          |  | March 15, 2005
|                            |  | Chief Financial Officer (principal financial and |  |               
|Ray M. Harlin               |  | accounting officer)                              |  |               
|                            |  |                                                  |  |               
|/s/ JAMES E. HALL           |  | Director                                         |  | March 15, 2005
|James E. Hall               |  |                                                  |  |               
|                            |  |                                                  |  |               
|/s/ JOHN W. MURREY, III     |  | Director                                         |  | March 15, 2005
|John W. Murrey, III         |  |                                                  |  |               
|                            |  |                                                  |  |               
|/s/ ROBERT J. SUDDERTH, JR. |  | Director                                         |  | March 15, 2005
|Robert J. Sudderth, Jr.     |  |                                                  |  |               

|58
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