UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

      /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                   ACT OF 1934

                   For the fiscal year ended December 31, 2004

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

                        Commission file number 000-50485
                           Central Freight Lines, Inc.
             (Exact name of registrant as specified in its charter)

              Nevada                                    74-2914331

  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                     Identification No.)

                      5601 West Waco Drive, Waco, TX      76710
               (Address of principal executive offices) (Zip Code)

              (Registrant's telephone number, including area code)
                                 (254) 772-2120

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

     Title of each class             Name of each exchange on which registered
   Common stock $0.001 Par Value                    Nasdaq (R)

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  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. X 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 of information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K___.

Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12-b of the Act). X Yes No

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  was  approximately  $88.9 million as of July 2, 2004 (based upon the
$7.88 per share  closing  price on that date as reported  by Nasdaq).  In making
this calculation the registrant has assumed,  without admitting for any purpose,
that all executive officers,  director,  and holders of more than 10% of a class
of outstanding common stock, and no other persons, are affiliates.

The  number  of  shares  of  common  stock  outstanding  at  March  3,  2005 was
18,190,236.

                       DOCUMENTS INCORPORATED BY REFERENCE
<PAGE>

     Materials from the  registrant's  definitive  proxy  statement for the 2005
Annual Meeting of Stockholders to be held on May 3, 2005 have been  incorporated
by reference into Part III of this Form 10-K.


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

   Item                                                                                     Page
<S>                                                                                          <C>

Part I

1.       Business                                                                               1
2.       Properties                                                                             4
3.       Legal Proceedings                                                                      5
4.       Submission of Matters to a Vote of Security Holders                                    5

Part II

5.       Market for Registrant's Common Equity, Related Stockholder Matters
         and Issuer Purchases of Equity Securities                                              6
6.       Selected Financial Data                                                                7
7.       Management's Discussion and Analysis of Financial Condition and Results of
         Operations                                                                             9
7A.      Quantitative and Qualitative Disclosures about Market Risk                            31
8.       Financial Statements and Supplementary Data                                           32
9.       Changes in and Disagreements with Accountants on Accounting and Financial
         Disclosure                                                                            32
9A.      Controls and Procedures                                                               32
9B.      Other Information                                                                     33

Part III

10.      Directors and Executive Officers of the Registrant                                    34
11.      Executive Compensation                                                                34
12.      Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters                                                           34
13.      Certain Relationships and Related Transactions                                        34
14.      Principal Accountant Fees and Services                                                35

Part IV
15.      Exhibits, Financial Statement Schedules                                               35
</TABLE>


<PAGE>

                                     Part I

Item 1. Business

     Except for the historical  information  contained herein, the discussion in
this  annual  report  contains   "forward-looking   statements,"  which  include
information relating to future events, future financial performance, strategies,
expectations,   competitive   environment,   regulation,   and  availability  of
resources.   These  forward-looking   statements  include,  without  limitation,
statements regarding: expectations as to operational improvements;  expectations
as to cost savings,  revenue  growth,  and  earnings;  the time by which certain
objectives  will be achieved;  proposed new products and services;  expectations
that claims, lawsuits, commitments,  contingent liabilities, labor negotiations,
or agreements, or other matters will not have a materially adverse effect on our
consolidated financial position, results of operations, or liquidity; statements
concerning projections, predictions, expectations, estimates, or forecasts as to
our  business,   financial,   and   operational   results  and  future  economic
performance;  and statements of  management's  goals and  objectives,  and other
similar expressions concerning matters that are not historical facts. Words such
as  "may,"  "will,"  "should,"   "could,"  "would,"   "predicts,"   "potential,"
"continue," "expects,"  "anticipates," "future," "intends," "plans," "believes,"
"estimates,"  and similar  expressions,  as well as  statements in future tense,
identify forward-looking  statements.  These statements are made pursuant to the
safe harbor provisions of Section 27A of the Securities Act of 1933, as amended,
and  Section  21E  of  the   Securities   Exchange  Act  of  1934,  as  amended.
Forward-looking  statements  should  not  be  read  as  a  guarantee  of  future
performance or results,  and will not necessarily be accurate indications of the
times  at,  or  by  which,   such  performance  or  results  will  be  achieved.
Forward-looking information is based on information available at the time and/or
management's good faith belief with respect to future events,  and is subject to
risks and uncertainties that could cause actual performance or results to differ
materially  from those  expressed in the  statements.  Readers should review and
consider the factors discussed in "Factors that May Affect Future Results" along
with the various  disclosures by the Company in its press releases,  stockholder
reports, and filings with the Securities and Exchange Commission.

     References  in this Annual Report to "we," "us," "our," or the "Company" or
similar terms refer to Central Freight Lines, Inc. and its subsidiaries.

Overview

     We are a regional  less-than-truckload  ("LTL"),  trucking company that has
operations in the Southwest,  Northwest,  West Coast and Midwest  regions of the
United  States of  America.  We also offer  inter-regional  service  between our
operating  regions  and  maintain  alliances  with other  similar  companies  to
complete transportation of shipments outside of our operating territory. None of
our employees is represented by a union.

     The history of the name Central Freight Lines and its Texas franchise dates
back to 1925, when Central Freight Lines was founded in Waco, Texas. That entity
was a regional  LTL  carrier  that  served the  intrastate  Texas LTL market for
decades.

     Our company began its operations effective June 30, 1997, when our Chairman
of the Board,  Jerry  Moyes,  organized  our  company and  acquired  the Central
Freight Lines name, terminal network,  and physical assets from the Southwestern
Division of Viking Freight Lines. Roadway Express, Inc., which also owned Viking
Freight Lines, had previously purchased the company from its employees in 1993.

     Between 1997 and 2001, we concentrated  our efforts on growing our regional
LTL operations in Texas and surrounding states.  During this period, we acquired
LTL carriers Jaguar Fast Freight, Inc. and Vecta Transportation  Systems,  Inc.,
as well as a small truckload  carrier that we used for linehaul,  Aggie Express,
Inc.,  to  solidify  our  operations  and to expand our  presence in the western
United States.

     In December  2002, we expanded  service in a seven-state,  Midwest  region,
establishing all-points coverage in six of these states. Then, in March 2004, we
expanded into the Pacific  Northwest  through the purchase of selected  terminal
network and rolling  stock of Eastern  Oregon Fast  Freight,  Inc.  ("EOFF"),  a
non-union  LTL carrier that  operated in the states of Oregon,  Washington,  and
Idaho.

                                       1
<PAGE>

Our Operations

     We offer  regional LTL services to customers in our  eight-state  Southwest
region, our seven-state  Midwest region,  our three-state  Northwest region, and
two  additional  contiguous  states.  We currently  offer direct  service to all
twenty of these states.

     Our Southwest  region is the  eight-state  territory of California,  Texas,
Arizona, New Mexico,  Oklahoma,  Louisiana,  Arkansas,  and Nevada. 54 of our 75
terminals are strategically  located in our Southwest region. Our Midwest region
is the seven-state  territory of Kansas,  Missouri,  Illinois,  Iowa, Wisconsin,
Minnesota,  and Nebraska.  Our Northwest region is the three-state  territory of
Oregon, Washington, and Idaho.

     As an LTL carrier,  we typically  transport multiple shipments for multiple
customers in each trailer.  Our drivers pick up freight from customer  locations
during the day and relay critical  information to our planners.  Upon arrival at
the origin  terminal,  freight is unloaded,  and then  re-loaded onto a linehaul
inter-city  trailer that is bound for the destination  city. Upon arrival at the
destination  terminal,  freight is  unloaded,  sorted,  and  delivered  by local
delivery trucks.  We move freight on strict schedules  throughout our regions to
provide the next-day and second-day service required by our many  time-sensitive
customers. We also provide information to our customers to allow them to monitor
our service standards and to track their shipments.

     Throughout our operations,  we emphasize  direct loading of freight between
terminals to avoid  intermediate  sorting and  re-routing  which  increase labor
costs,  damage  claims,  and delays.  Within each region,  we focus on achieving
short transit times and efficient pick-up and delivery schedules.

Our Revenue Equipment

     At  December  31,  2004,  our  fleet  contained  1,993  tractors  and 8,624
trailers.  The table below reflects, as of December 31, 2004, the average age of
our tractors and trailers:

                                                     Number   Average Age
     Type of Equipment (categorized by primary use) of Units   in Years
     ---------------------------------------------- --------- -----------
     Linehaul tractors............................      779        4.9
     Pick-up and delivery tractors................    1,214        5.8
     Trailers.....................................    8,624       14.2

     In 2004,  the Company  purchased 299 new tractors and 261 new trailers,  in
addition to equipment purchased from EOFF. Throughout the year, excess and aging
equipment, including much of that purchased from EOFF, was sold.

Our Customers and Marketing

     Our  customers  represent  a broad  range of  industries,  with the largest
concentration coming from the retail sector. In 2004, our five largest customers
were Dell  Computer,  Wal-Mart,  Home Depot,  Tyco  International  and 3M. These
customers together generated  approximately 15.5% of our revenue. Dell Computer,
our largest  customer in 2004,  generated  approximately  5.2% of our  revenues.
Since our inception in 1997, no single customer has represented more than 10% of
our  operating  revenues in any year.  We believe the diversity of our customers
and their  industries  lessens the impact of business  cycles  affecting any one
company  or  industry.  However,  the  loss of one or more of our  five  largest
customers could  significantly and adversely affect our cash flow, market share,
and profits.

     We target shippers that have significant and growing  distribution needs in
our operating regions and have freight that enhances our overall  efficiency and
profitability.  We accomplish this by involving sales,  operations,  and finance
personnel in evaluating  and targeting  potential new accounts.  Our  operations
personnel identify areas in our regions where additional freight could help fill
partially full trailers,  fill trailers that return empty from scheduled  trips,
or  complement  existing  pick-up and delivery  schedules.  Our sales  personnel
solicit  business  from these  potential  customers  and our traffic and pricing
personnel  apply our  costing  model to  determine  whether  the  freight  would
contribute to our overall profitability.

                                       2
<PAGE>

     We have established  transportation alliances with regional LTL carriers in
the Northeast and Southeast regions of the United States. In these arrangements,
we exchange  shipments  for delivery in each  other's  service  territory.  This
practice can help each carrier in several  respects.  First, the freight inflows
from the other regions add tonnage to the delivering company's  operation.  This
improves  profitability by increasing  freight density over the terminal network
and linehaul  operation.  Second,  the  alliances  permit  regional  carriers to
provide  out-of-territory  service for their customers.  This maintains customer
relationships  and prevents  regional  carriers from losing  revenue to national
carriers  that could  deliver the freight from pick-up to delivery.  Third,  the
alliances  permit multiple  regional  carriers to bid for national  accounts and
bring the  advantages of non-union  regional  operations  to national  accounts.
Transportation alliances generated approximately 9.9% of our revenue in 2004.

Competition

     The LTL  industry is highly  competitive  on the basis of both  service and
price. Our primary  competitors are regional,  inter-regional,  and national LTL
carriers,  and, to a lesser extent,  truckload carriers,  railroads,  airfreight
companies,  and overnight package  companies.  Our major competitors  within the
regional LTL industry  include certain  regional  operating  subsidiaries of CNF
Inc., USF Corporation, and SCS Transportation,  Inc. Many of our competitors are
larger, operate more equipment, and have greater financial resources than we do.
We believe  that our  extensive  terminal  network  and  traffic  density  offer
competitive advantages within our region.

Employees

     As of December 31, 2004, we had 3,043 full-time employees and 550 part-time
employees in our operations.  These  individuals  were employed in the following
categories:
                                           Number of
                      Category             Employees
          ------------------------------  ----------
          Linehaul drivers..............       516
          Pickup and delivery drivers...     1,324
          Platform......................       733
          Mechanics.....................       107
          Sales.........................       106
          Salaried, clerical, and other.       807
                                            ------
            Total.......................     3,593
                                            ======

     None  of  our  employees  is  currently   represented  under  a  collective
bargaining agreement.

Fuel Availability and Cost

     We  depend  heavily  upon the  availability  of  diesel  fuel.  To  address
fluctuations in fuel prices,  we seek to impose fuel surcharges on our accounts.
Historically,  we have not engaged in hedging  transactions  to insulate us from
fluctuations  in fuel  prices,  and our  surcharge  arrangements  may not  fully
protect us from fuel price increases.  Further, from time to time, we experience
shortages in the availability of fuel at certain  locations and have been forced
to incur  additional  expense to ensure adequate  supply on a timely basis.  Our
management believes that our operations and financial results are susceptible to
the same fuel price  increases or fuel  shortages  as those of our  competitors.
Fuel costs,  excluding fuel taxes, averaged approximately 5.9% of our revenue in
2004.

Insurance

     We  carry  insurance  for our  primary  business  risks  with  third  party
insurance carriers. We currently carry $30.0 million of insurance coverage, with
a self-insured  retention of $1.0 million in the aggregate per  occurrence,  for
claims resulting from cargo theft or loss, personal injury, property damage, and
physical damage to our equipment.  We also self-insure for workers' compensation
up to $1.0 million per occurrence, and all health claims up to $300 thousand per
occurrence.

                                       3
<PAGE>

Regulation

     We operate in a highly regulated industry.  The primary regulatory agencies
affecting our business are the United States  Department of  Transportation,  or
DOT, and similar state and local  agencies  that exercise  broad powers over our
business,  generally  governing such  activities as  authorization  to engage in
motor  carrier  operations,  safety,  and  insurance  requirements.  Our company
drivers and independent contractors also must comply with the safety and fitness
regulations promulgated by the DOT, including those relating to drug and alcohol
testing, licensing requirements, and additional restrictions imposed by homeland
security  requirements  in January  2005.  Changes  in the laws and  regulations
governing  our industry  could affect the economics of the industry by requiring
changes in operating  practices or by influencing  the demand for, and the costs
of providing,  services to shippers.  New and more restrictive  hours of service
regulations for drivers became  effective on January 4, 2004.  After nine months
of operation under the revised hours-of-service regulations,  citizens' advocacy
groups successfully challenged the regulations in court, alleging that they were
developed without properly considering issues of driver health.  Pending further
action by the courts or the  effectiveness  of new rules  addressing  the issues
raised by the  appellate  court,  Congress  has  enacted a law that  extends the
effectiveness of the revised hours-of-service rules until September 30, 2005. We
expect that any new rule making  resulting from the  litigation  will be no more
favorable than existing  rules.  If driving hours are further  restricted by new
revisions  to the  hours-of-service  rules,  we could  experience a reduction in
driver miles that may adversely affect our business and results of operations.

     Our operations involve certain inherent  environmental  risks. As such, our
operations are subject to environmental laws and regulations, including laws and
regulations  dealing with underground fuel storage tanks, the  transportation of
hazardous  materials  and other  environmental  matters.  We maintain  bulk fuel
storage and fuel islands at several of our  facilities.  Our operations  involve
the risks of fuel spillage or seepage,  environmental damage and hazardous waste
disposal,  among others.  Operations  conducted in industrial areas, where truck
terminals  are  normally  located,  and  where  groundwater  or  other  forms of
environmental  contamination may have occurred,  potentially expose us to claims
that we  contributed  to the  environmental  contamination.  We have  instituted
programs to monitor and control  environmental risks and promote compliance with
applicable  environmental  laws and  regulations.  If we fail to comply with the
applicable  regulations,  then we  could  be  subject  to  substantial  fines or
penalties and to civil and criminal liability.

Item 2.           Properties

     Our corporate  offices are located at 5601 West Waco Drive in Waco,  Texas,
76702.  We share a 185,000 square foot facility with our Waco,  Texas  terminal.
The  property is located on  approximately  40 acres,  while the terminal has 71
dock doors. We rent this facility from Southwest Premier  Properties,  a related
party. The lease expires in February, 2013.

     At December 31, 2004,  we conducted  our LTL  operations  through six owned
terminal locations and 69 leased terminal  locations.  Our ten largest terminals
by number of loading doors are listed below:

                                                Total
                                              Number of
                     Location               Loading Doors
              --------------------------  -----------------
              Dallas, Texas.............           522
              Houston, Texas............           349
              Fort Worth, Texas.........           200
              San Antonio, Texas........           147
              Austin, Texas.............           132
              Phoenix, Arizona..........           121
              Beaumont, Texas...........           113
              Fontana, California.......           110
              Chicago, Illinois.........            80
              Tyler, Texas..............            76
              65 others.................         2,133
                                              --------
                Total...................         3,983
                                              ========

                                       4
<PAGE>

     We lease 29 of our  active  terminals  and  seven  dormant  terminals  from
related parties.  See "Related Party Terminal Leases" under Item 7 in Part II of
this Annual Report for additional information concerning these leases.

Item 3. Legal Proceedings

     We are involved in litigation incidental to our operations.  These lawsuits
primarily involve claims for workers' compensation, personal injury, or property
damage incurred in the transportation of freight. We are not aware of any claims
that could materially affect our consolidated  financial  position or results of
operations.

     In June and July 2004, three  stockholder  class actions were filed against
us and certain of our officers and  directors.  The class  actions were filed in
the United  States  District  Court - Western  District  of Texas and  generally
allege that false and  misleading  statements  were made in our  initial  public
offering  registration  statement and prospectus,  during the period surrounding
our initial pubic  offering and up to the press release dated June 16, 2004. The
class actions are in the initial phases.  We do not believe there is any factual
or legal basis for the  allegations  and we intend to vigorously  defend against
the suits.  We have  informed our insurance  carrier and have  retained  outside
counsel to assist in our defense.  Prior to December 12, 2004,  we  maintained a
$5.0  million  directors'  and  officers'   insurance  policy  with  a  $350,000
deductible.  On December 12, 2004,  we increased  our  directors'  and officers'
insurance coverage. We currently maintain a $15 million directors' and officers'
insurance  policy  with a $350,000  deductible.  In the 2004 third  quarter,  in
connection   with  this   litigation,   we  recorded  an  expense  of  $350,000,
representing  the full  deductible  amount  under  our  current  directors'  and
officers' insurance policy.

     On August 9 and 10,  2004,  two  purported  derivative  actions  were filed
against  us,  as  nominal  defendant,  and  against  certain  of  our  officers,
directors, and former directors.  These actions were filed in the District Court
of McLennan  County,  Texas and generally allege breach of fiduciary duty, abuse
of  control,  gross  mismanagement,   waste  of  corporate  assets,  and  unjust
enrichment  on the part of  certain  of our  present  and  former  officers  and
directors in the period between December 12, 2003 and August 2004. The purported
derivative actions seek declaratory, injunctive, and other relief.

     Although it is not possible at this time to predict the litigation  outcome
of these cases, we expect to prevail.  However,  an adverse  litigation  outcome
could  be  material  to  our  consolidated  financial  position  or  results  of
operations. As a result of the uncertainty regarding the outcome of this matter,
no provision has been made in the consolidated financial statements with respect
to this contingent liability.

Item 4. Submission of Matters to a Vote of Security Holders

     During the fourth  quarter of 2004, no matters were  submitted to a vote of
security holders.

                                       5
<PAGE>

                                     Part II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
     Issuer Purchases of Equity Securities

Price Range of Common Stock

     Our common stock is traded on the Nasdaq National Market,  under the symbol
"CENF." Our stock began trading on December 12, 2003,  in the fourth  quarter of
2003, following  completion of our initial public offering.  The following table
sets forth,  for the periods  indicated,  the high and low bid  information  per
share of our common stock as reported by Nasdaq.

                                              High          Low
     2003
     Fourth Quarter                          $19.00       $16.60

     2004
     First Quarter                           $19.32       $11.94
     Second Quarter                          $13.23        $7.14
     Third Quarter                            $8.20        $5.40
     Fourth Quarter                           $7.25        $5.32

     As of March 4,  2005,  our  common  stock  was held by 48  stockholders  of
record. However, we believe that many additional holders of our common stock are
unidentified  because  a  substantial  number  of  shares  are held of record by
brokers or dealers for their customers in street names.

Dividend Policy

     Since our initial public  offering,  we have not paid cash dividends on our
common  stock.  We  currently  intend to retain  all of our future  earnings  to
finance the growth and  development  of our business,  and we do not  anticipate
paying any cash  dividends on our common stock in the  foreseeable  future.  Any
future dividends will be determined at the discretion of our board of directors.
The board may consider our financial  condition and results of operations,  cash
flows  from  operations,   current  and  anticipated  capital  requirements  and
expansion  plans,  the income tax laws then in effect,  any legal or contractual
requirements, and other factors our board deems relevant.

Use of Proceeds from Registered Securities

     The effective date of the  registration  statement  relating to our initial
public  offering,  filed  on  Form  S-1  under  the  Securities  Act  (File  No.
333-109068),  was December  11, 2003. A total of 9,775,000 of our common  shares
were sold. The managing  underwriters for the offering were Bear,  Stearns & Co.
Inc., BB&T Capital Markets, a division of Scott & Stringfellow, Inc., Legg Mason
Wood Walker, Incorporated, Morgan Keegan & Company, Inc., and Stephens Inc.

     The offering commenced on December 11, 2003, and has been completed. Of the
8,500,000 shares of common stock  registered,  5,700,000 shares were offered and
sold by us and 2,800,000 shares were offered and sold by Jerry Moyes and certain
trusts for the benefit of Mr. Moyes and his family, as selling shareholders. The
aggregate offering price of shares sold by us was $85,500,000.  The underwriting
discount on those shares was $5,985,000. We incurred approximately $1,881,000 of
other expenses in connection with the offerings.  The net proceeds to us totaled
approximately $77,634,000.  We did not receive any of the proceeds from the sale
of shares by the selling stockholders.

     Approximately  $50 million of the net  proceeds  we  received  were used to
repay  debt,  including:   (a)  $30.5  million  under  our  accounts  receivable
securitization  facility;  (b) $17.1 million under collateralized  equipment and
terminal notes;  and (c) $2.0 million under  collateralized  capital leases.  In
addition,  we used  approximately  $10.0  million  of the net  proceeds  for the
acquisition of certain assets of Eastern Oregon Fast Freight, Inc. The remaining


                                       6
<PAGE>

net proceeds,  approximately $18.0 million, were used to purchase capital assets
and for general corporate purposes, including working capital.

Item 6. Selected Financial Data
<TABLE>
<CAPTION>

                                                                   Year Ended December 31,

                                                  2004         2003(1)       2002(1)         2001           2000
                                             ------------- ------------- -------------   -------------  -------------
<S>                                                <C>           <C>           <C>           <C>          <C>
                                                  (in thousands, except per share amounts and operating data)
Statements of Operations Data:
  Operating revenues......................   $   386,601   $   389,696   $   371,445     $   395,702    $   362,649
  Operating expenses:
    Salaries, wages, and benefits.........       222,230       205,393       209,302         233,571        212,802
    Purchased transportation..............        42,152        38,113        28,806          31,739         23,087
    Purchased transportation -- related
      Parties.............................        14,571        18,582        21,106          17,708         12,438
    Operating and general supplies and
    expenses..............................        82,702        66,144        59,270          67,193         63,837
    Operating and general supplies and
      expenses -- related parties..........          274            12           286              53            182
    Insurance and claims..................        25,186        16,057        14,576          14,607         10,273
    Building and equipment rentals........         4,297         3,181         3,241           3,493          2,757
    Building and equipment rentals --
      related parties.....................         1,795         1,903         1,779           1,600          1,342
    Depreciation and amortization.........        17,049        16,605        17,974          21,241         18,980
                                             -----------   -----------   -----------     -----------    -----------
      Total operating expenses............       410,256       365,990       356,340         391,205        345,698
                                             -----------   -----------   -----------     -----------    -----------
  Operating (loss) income.................       (23,655)       23,706        15,105           4,497         16,951
  Interest expense........................         1,469         3,547         4,916           5,620          5,078
  Interest expense -- related
    Parties(2)............................         6,197         6,130         6,359           5,888          6,990
                                             -----------   -----------   -----------     -----------    -----------
  (Loss) income from continuing
    operations before income taxes........       (31,321)       14,029         3,830          (7,011)         4,883
  Income tax benefit (expense)............         8,473        (1,759)        1,412             119           (402)
  Income tax (expense)-conversion to C
    Corporation...........................             -        (9,834)            -               -              -
                                             -----------   -----------   ------------    ------------   -----------
  (Loss) income from continuing
    Operations............................       (22,848)        2,436         5,242          (6,892)         4,481
Loss from discontinued operations                      -        (8,341)            -               -              -
                                             -----------   -----------   ------------    ------------   -----------
  Net (loss) income.......................   $   (22,848)  $    (5,905)  $     5,242     $    (6,892)   $     4,481
                                             ===========   ===========   ===========     ============   ===========

Pro Forma C Corporation Data:(3)
  Historical income (loss) from continuing
    operations before income taxes........   $         -   $    14,029   $     3,830     $    (7,011)   $     4,883
  Pro forma (provision) benefit for
    income taxes attributable to
    continuing operations.................             -        (5,666)       (2,781)          1,108         (3,243)
                                             -----------   -----------   -----------     -----------    -----------
  Pro forma income (loss) from
    continuing operations.................   $         -   $     8,363   $     1,049     $    (5,903)   $     1,640
Loss from discontinued operations                      -        (8,341)            -             --               -
                                             -----------   -----------   -----------     -----------    -----------
Pro forma net income (loss)...............   $         -   $        22   $     1,049     $    (5,903)   $     1,640
                                             ===========   ===========   ===========     ===========    ===========

                                       7
<PAGE>

Net loss per share
    Basic.................................   $     (1.27) $          -   $         -     $         -    $         -
    Diluted...............................         (1.27)            -             -               -              -
Weighted average shares outstanding:
    Basic.................................        17,971             -             -               -              -
    Diluted...............................        17,971             -             -               -              -
Pro forma income (loss) from
  continuing operations per share:
    Basic.................................   $         -   $      0.75   $      0.10     $     (0.54)   $      0.15
    Diluted...............................             -          0.69          0.09           (0.54)          0.14
Weighted average shares outstanding:
    Basic.................................             -        11,163        10,868          10,916         11,051
    Diluted...............................             -        12,103        11,548          10,916         11,469

Other Financial Data:
  EBITDA(4)...............................   $    (6,606)  $    40,311   $    33,079     $    25,738    $    35,931
  Capital expenditures(5).................        36,717         7,024         6,008          10,186         13,982

Operating Data:
  LTL revenue per
    hundredweight(6)......................   $     11.63   $     11.37   $     10.42     $     10.06 $         9.39
  Total tons hauled.......................     1,908,621     1,962,890     2,120,080       2,388,816      2,392,992
  Operating ratio(7)......................         106.1%         93.9%         95.9%           98.9%          95.3%
  Number of working days..................           253           253           253             253            253

Balance Sheet Data (at period end):
  Cash and cash equivalents...............   $     2,144   $    37,269   $     7,350     $       187    $       215
  Net property and equipment..............       135,274       114,693       126,751         139,954        143,445
  Total assets............................       237,254       223,149       196,401         195,877        198,065
  Long-term debt, capital leases,
    and related party financing,
    including current portion.............        55,694        49,517       103,054         111,270        112,727
  Stockholders' equity....................        87,558       108,438        30,374          23,302         35,577
</TABLE>

     (1) Our  financial  results for the fiscal year ended  December  31,  2002,
included a $2.9  million  reduction in  depreciation  expense  resulting  from a
January 2002 change in useful  lives and salvage  values of trailers and pick-up
and delivery tractors based on our historical experience, which might materially
affect  the  comparability  of  the  information   presented,   and  a  $725,000
restructuring charge representing the cost to close 21 terminals.  Our financial
results for the fiscal year ended  December  31, 2003,  included  the  following
items  that  might  materially  affect  the  comparability  of  the  information
presented:  (a) a $0.6 million reduction in depreciation expense (in addition to
the 2002 reduction)  resulting from a January 2003  additional  change in useful
lives and salvage  values of trailers and line tractors  based on our historical
experience;  (b) a $7.8 million gain  attributable to the amendment of a benefit
plan;  and (c) a $3.8  million  expense  related  to an  increase  in our claims
accruals relating to accident, workers' compensation,  and other claims in which
the underlying  events  occurred prior to 2003. See Item 7 of this Annual Report
for additional information.

     (2) Effective February 20, 2003, the payments for certain of the facilities
we lease from a related party were  increased to reflect fair market value.  The
lease is  reflected as a financing  arrangement  in our  consolidated  financial
statements.   Accordingly,   our  interest   expense-related   parties  includes
approximately  $3.3 million in annual non-cash  interest expense and contributed
capital in all periods  prior to February  20,  2003.  See Item 7 of this Annual
Report for additional information.

                                       8
<PAGE>

     (3) In 1998,  we  elected to be treated  as an S  corporation  for  federal
income tax purposes.  An S corporation  passes through  essentially  all taxable
earnings and losses to its stockholders and does not pay federal income taxes at
the corporate  level.  Historical  income taxes  consist  mainly of state income
taxes.  On November 1, 2003, we converted into a C corporation.  For comparative
purposes,  we have  included a pro forma  (provision)  benefit for income  taxes
assuming  we had  been  taxed  as a C  corporation  in all  periods  when  our S
corporation election was in effect. In June 2002, we reversed approximately $1.8
million of tax reserves which were  originally  recorded in 1998 when we elected
to be  treated  as an S  corporation.  The $1.8  million  tax  benefit  has been
excluded for purposes of presenting pro forma C corporation income taxes.

     (4) EBITDA  represents  earnings (loss) from continuing  operations  before
interest, taxes, depreciation, and amortization.  EBITDA is presented because we
believe it is useful in evaluating our operating performance compared to that of
other  companies in our industry,  as the  calculation of EBITDA  eliminates the
effects  of  financing,  income  taxes and the  accounting  effects  of  capital
spending,  which items may vary for different companies for reasons unrelated to
overall operating performance. In addition, management tracks EBITDA because our
amended revolving credit facility contained a minimum EBITDA  requirement.  When
analyzing our operating  performance,  however,  investors  should use EBITDA in
addition to, not as an alternative for, operating  earnings,  net earnings,  and
cash flows from  operating  activities,  as those items are defined  under GAAP.
Investors should also note that our presentation of EBITDA may not be comparable
to similarly  titled measures used by other  companies.  EBITDA is calculated in
the following manner for each of the periods presented:

<TABLE>
<CAPTION>


                                                                    Year ended December 31,
                                           ----------------------------------------------------------------------------
                                                2004            2003             2002             2001          2000
                                           -------------    ------------    --------------    ------------  -----------
<S>                                              <C>             <C>            <C>               <C>          <C>
                                                                            (in thousands)
  (Loss) earnings from continuing
    operations...........................  $   (22,848)     $    2,436      $    5,242        $   (6,892)   $   4,481
      Add interest expense................       7,666           9,677          11,275            11,508       12,068
      (Subtract) add income taxes
       (benefit)..........................      (8,473)         11,593          (1,412)             (119)         402
      Add depreciation and
       Amortization.......................      17,049          16,605          17,974            21,241       18,980
                                               -------        --------        --------          --------      -------
        EBITDA...........................  $    (6,606)     $   40,311      $   33,079        $   25,738    $  35,931
                                               =======        ========        ========          ========      =======
</TABLE>

     (5) Includes $0.8 million of capital  expenditures in 2002  attributable to
the operations of Central Refrigerated,  which we divested on December 31, 2002.
See Item 7 of this Annual Report for additional information.

     (6) Average revenue we receive for transporting 100 pounds of freight.

     (7) Operating expenses as a percentage of operating revenues.

     (8) In 2004,  the IRS  disallowed  certain  tax  deductions  taken by the S
corporation  shareholders  pursuant to a contested liability trust. As a result,
our tax basis was  increased,  resulting  in a  deferred  tax  benefit  of $1.75
million.  Also in 2004, we recorded a deferred tax asset valuation  allowance of
approximately $4.9 million.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
     of Operations

Business Overview

     We are one of the ten largest  regional LTL  carriers in the United  States
based on  revenues,  according  to Transport  Topics,  generating  approximately
$386.6 million in revenue during 2004. In our operations, we pick up and deliver
multiple shipments for multiple customers on each trailer.

     The history of the name Central  Freight Lines and its franchise dates back
to 1925,  when Central  Freight Lines was founded in Waco,  Texas and served the
intrastate  Texas LTL market  for  decades.  Our  company  began its  operations
effective June 30, 1997, when our Chairman of the Board, Jerry Moyes,  organized
our company and acquired the Central Freight Lines name,  terminal network,  and
physical assets from the  Southwestern  Division of Viking Freight Lines,  whose
corporate group acquired our predecessor in 1993.

                                       9
<PAGE>

     Prior to 2002,  we  conducted  our  operations  almost  exclusively  in our
eight-state  Southwest region, which is anchored by Texas and California.  Since
2002, a significant  portion of our business has continued to be concentrated in
our Southwest  region.  Through the following two expansions,  however,  we have
increased the geographic scope of our business:

     o    In  December  2002,  we  expanded  service in a  seven-state,  Midwest
          region,  establishing  all-points coverage in six of these states. Our
          expenses for the year ended  December  31, 2003,  reflect the costs of
          this   Midwest   expansion,    primarily   consisting   of   purchased
          transportation,   employee  training,   and  relocation  expenses.  We
          increased our use of purchased transportation in the Midwest region as
          a more efficient  method of transporting  freight in lanes where we do
          not yet have  sufficient  freight  volume to profitably  transport the
          freight in our own trucks. As we continue to develop our operations in
          the Midwest, we expect our purchased transportation costs to return to
          historical levels.

     o    In March 2004,  we expanded  into the  Pacific  Northwest  through the
          purchase of selected  terminal  network and rolling  stock of EOFF,  a
          non-union   LTL  carrier  that  operated  in  the  states  of  Oregon,
          Washington,  and Idaho. The selected assets of EOFF were purchased for
          approximately  $10.0  million,  with the purchase price paid from cash
          reserves.  The assets acquired included six owned terminal properties,
          fifteen leased terminal properties, 160 tractors, and 644 trailers.

Recent Results of Operations and Year-End Financial Condition

     In 2004, for reasons discussed below, we reported a loss from operations of
approximately $23.7 million,  and our operating ratio for the year was 106.1%. A
summary of our recent  performance  in each of the four  quarters  of 2004 is as
follows:

First Quarter 2004

     In the 2004 first  quarter,  we reported  marginally  positive  income from
operations,  and a net loss of $1.1 million,  on revenue of $97.0  million.  Our
operating ratio for the quarter was 100.0%. We attribute these results, in part,
to  additional  expenses  from  our  accelerated   Northwest  expansion.   These
additional expenses mainly related to additional employees, terminal leases, and
employee relocations.  The Northwest expansion also contributed to lower overall
productivity in our operations during the period.

Second Quarter 2004

     In the 2004  second  quarter,  we reported a loss from  operations  of $5.0
million,  and a net loss of $2.5  million,  on  revenue of $105.5  million.  Our
operating  ratio for the quarter was 104.8%.  This second  quarter loss resulted
mainly from  continuing  start up expenses in our Northwest  region,  additional
purchased  transportation expenses resulting from freight imbalances to and from
the Northwest and Midwest regions,  and delays in implementing planned operating
improvement initiatives.

Third Quarter 2004

     In the 2004 third  quarter,  we  reported a loss from  operations  of $10.8
million,  and a net loss of $7.9  million,  on  revenue  of $98.5  million.  Our
operating  ratio for the quarter was 110.9%.  The third  quarter loss was due in
large part to lower revenue,  compared to the 2004second quarter, as tonnage and
yield  declined.  Increases in expenses  relating to  insurance  and claims also
contributed  to the third  quarter  loss.  In an effort to align  expenses  with
business volumes, during the third quarter we consolidated the operations of ten
terminals into surrounding  facilities that had excess capacity and converted an
additional   seven   terminals  into   driver-only   locations.   This  terminal
consolidation resulted in reductions of employees by approximately 310 full-time
and 220 part-time  employees.  In addition,  we opened a new 121door terminal in
Phoenix,   Arizona  to  replace  an  outdated  and  inefficient  facility,   and
re-engineered  our linehaul system to gain  efficiencies and to reduce purchased
transportation expenses.


                                       10
<PAGE>

Fourth Quarter 2004

     In the 2004  fourth  quarter,  we reported a loss from  operations  of $7.9
million,  and a net loss of $11.3  million,  on  revenue of $85.5  million.  Our
operating ratio for the quarter was 109.2%.  Despite lower revenue in the fourth
quarter,  compared  to the  third  quarter  of 2004  (due in part to three  less
working days in the fourth quarter), we lowered our operating ratio by 170 basis
points.  Insurance  and claims and labor  expenses  improved as a percentage  of
revenue when compared to the 2004 third quarter,  due in part to the initiatives
taken in the third quarter described above.

     At  December  31,  2004,  our  balance  sheet  reflected  $2.1  million  in
unrestricted  cash,  $20.8 million in restricted  cash that served as collateral
for  letters  of credit  under our  prior  credit  facility,  $55.7  million  in
long-term debt and capital lease  obligations,  including  current portion,  and
$28.1 million in short term debt, of which $20.8  million  represented  the cash
collateral for letters of credit. Our stockholders'  equity was $87.6 million at
December 31, 2004.

Recent Development

     On January 31,  2005,  we entered  into a four-year  senior  collateralized
revolving  credit  facility and letter of credit  sub-facility  (the "New Credit
Facility") with Bank of America,  N.A., as Agent, and certain other lenders from
time to time party to the New Credit Facility.  The New Credit Facility replaces
both our amended and restated  revolving  credit  facility with  SunTrust  Bank,
originally  dated  July 28,  2004,  and our  $40.0  million  revolving  accounts
receivable  securitization  facility with SunTrust Bank,  originally dated April
30, 2002. Subject to the terms of the New Credit Facility, the maximum revolving
borrowing  limit  under  the New  Credit  Facility  is the  lesser  of (a) $70.0
million, or (b) 85% of Borrower's eligible accounts receivable,  plus 85% of the
net orderly  liquidation value of Borrower's  eligible rolling stock owned as of
January 31, 2005,  plus 85% of the cost of eligible  rolling  stock  acquired by
Borrower after January 31, 2005. Letters of Credit under the New Credit Facility
are subject to a sub-limit of $40.0 million.  The New Credit Facility terminates
on January 31, 2009.

     Borrowings under the New Credit Facility bear interest at the base rate, as
defined,  plus an  applicable  margin  of  0.00%  to  1.00%,  or  LIBOR  plus an
applicable margin of 1.50% to 2.75%, based on the average quarterly availability
under the New Credit  Facility.  Letters of credit under the New Credit Facility
are subject to an applicable letter of credit margin of 1.25% to 2.50%, based on
the average quarterly availability under the New Credit Facility. The New Credit
Facility also prescribes additional fees for letter of credit transactions,  and
an unused line fee of 0.25% to 0.375%,  based on aggregate amounts  outstanding.
The New Credit Facility is  collateralized  by substantially  all of our assets,
other than  certain  revenue  equipment  and real  estate that is (or may in the
future become) subject to other financing.

Operating Strategy for 2005

     Our  main  goals  for  2005 are to  achieve  quarter-by-quarter  sequential
improvement in our operating  performance and to return to  profitability by the
end of 2005.  We believe  the fourth  quarter of 2004 was the first step in that
direction,  as our  operating  ratio  improved  170 basis  points to 109.2% from
110.9% between the third and fourth quarters of 2004.

     We have  identified  five specific areas of focus in our efforts to improve
results:

     o    Improving revenue yield and total tonnage.

     o    Reducing our cost  structure to better align  controllable  costs with
          our expected revenue base.

     o    Streamlining freight movements to consolidate movements and reduce the
          use of third-party purchased transportation.

     o    Improving employee efficiency.

     o    Reducing insurance and claims expense.

                                       11
<PAGE>

     We are encouraged by the fact that  improvements were made in four of these
five areas in the fourth  quarter of 2004,  as compared to the third  quarter of
2004.  We believe  that much work  remains  to be done to return our  results to
acceptable  levels,  particularly  in the area of  revenue  yield  and  tonnage.
However,  we believe  the  results  for the fourth  quarter of 2004  demonstrate
measurable improvement. Achieving sequential improvement in the first quarter of
2005 will be difficult  because of the seasonal effects on revenue and cost, but
it remains our immediate goal.

Revenues

     Our revenues vary with the revenue per hundredweight we charge to customers
and the volume of freight we transport:

     o    Revenue per hundredweight measures the rates we receive from customers
          and varies with the type of goods being shipped and the distance these
          goods are  transported.  Our LTL revenue per  hundredweight  increased
          approximately  2.3% from $11.37 in 2003, to $11.63 in 2004, due mainly
          to  increases  in  fuel  surcharge   revenue.   Our  LTL  revenue  per
          hundredweight,  without fuel surcharge revenue,  declined to $11.01 in
          2004 from $11.08 in 2003.

     o    Volume  depends  on the  number of  customers  we have,  the amount of
          freight those customers  ship,  geographic  coverage,  and the general
          economy. Our total tonnage decreased by 2.8% from 2003 to 2004, with a
          more dramatic decrease occurring during the second half of 2004.

     Historically,  most of our revenue has been generated from transporting LTL
shipments from customers within our operating  regions.  In 2004,  approximately
9.9% of our revenue was derived from shipments that  originated or terminated in
regions outside our network, where a portion of the freight movement was handled
by  another  carrier.  We refer  to this as  "interline  freight."  Most of this
revenue  was  obtained  from  carriers  with  which we  maintain  transportation
alliances.  The revenue  from  interline  freight in 2004 was lower  compared to
2003, due in large part to our geographic  expansion.  Because of the geographic
expansion  of our  network,  our need to rely upon other  carriers  for  freight
movements  declined.  In  addition,  some  of our  relationships  with  carriers
handling interline freight were negatively affected by our geographic expansion.
We do not recognize  the portion of revenue (or the  associated  expenses)  that
relate to the portion of shipments hauled by our alliance partners.  In addition
to  transportation  revenue,  we also recognize  revenue from fuel surcharges we
receive from our customers when the national average diesel fuel price published
by the U.S.  Department  of Energy  exceeds  prices  listed in our contracts and
tariffs.

Operating Expenses

     Our major expense categories can be summarized as follows:

     Salaries,  wages, and benefits. This category includes compensation for our
employees, health insurance,  workers' compensation,  401(k) plan contributions,
and other fringe  benefits.  These  expenses  will vary  depending  upon several
factors,  including  our  efficiency,  our  experience  with health and workers'
compensation  claims, and increases in health care costs.  Salaries,  wages, and
benefits also include the non-cash expense associated with stock options granted
to several of our executives that had exercise prices that were determined to be
below fair  market  value.  This  non-cash  compensation  expense is expected to
amount to approximately $106,400 annually through June of 2007.

     Purchased transportation.  This category primarily consists of the payments
we make to third  parties to handle a portion of a freight  movement for us. The
largest  category is  outsourced  linehaul  movements,  where we  contract  with
truckload carriers to move our freight between origin and destination terminals.
Swift  Transportation,  a  related  party,  has been  our  largest  provider  of
outsourced linehaul service.  Purchased  transportation also includes outsourced
pick-up and delivery service when we use alternative  providers to service areas
where we lack the terminal density to provide economical service.

     Operating and general supplies and expenses.  This category  includes fuel,
repairs and maintenance,  tires, parts, general and administrative costs, office
supplies, operating taxes and licenses,  communications and utilities, and other
general expenses. Repairs and maintenance,  fuel, tires, and parts expenses vary
with the age of  equipment  and the  amount of usage.  We have a fuel  surcharge
program  that  enables  us to  recover  a  significant  portion  of  fuel  price
increases.

                                       12
<PAGE>

     Insurance and claims. This category includes the cost of insurance premiums
and the accruals we make for claims within our self-insured  retention  amounts,
primarily  for  personal  injury,   property  damage,  physical  damage  to  our
equipment,  and cargo claims.  These expenses will vary primarily based upon the
frequency and severity of our accident experience and the market for insurance.

     Building and equipment  rentals.  This category consists mainly of payments
to unrelated third parties under terminal leases and payments to related parties
for eight terminals leased under operating leases.

     Depreciation  and  amortization.  This  category  relates to owned  assets,
assets under  capitalized  leases,  and 26  properties  we lease from  Southwest
Premier Properties that are considered to be a financing arrangement.

Unusual Items Affecting 2003 Results

     During  2003,  we recorded an aggregate of $3.8 million in increases to our
insurance reserves for accident,  workers'  compensation,  and other liabilities
arising  prior to 2003 ($1.8  million of which  related  to two  accidents  that
occurred  in 2002).  This  compared  to an accrual of $0.5  million  relating to
claims that arose in prior periods in that we accrued in the year ended December
31, 2002. We recorded the increased accruals despite improvements in our rate of
both  accident  claims and workers'  compensation  claims  during 2003.  We also
amended a benefit  plan to reduce  our future  obligations.  As a result of this
amendment, we recorded a curtailment gain of approximately $7.8 million in 2003.
In  addition,  in January of 2002 and 2003,  we  increased  the useful lives and
decreased the salvage values of our tractors and trailers to reflect that we are
operating the tractors and trailers for longer periods than previously estimated
by our past  management.  These changes  decreased our  depreciation  expense by
approximately  $3.5  million  compared  with the expense we would have  recorded
under the prior method.  In the aggregate,  these items had a positive effect of
approximately  $7.5 million on our operating  income for the year ended December
31, 2003. We do not anticipate benefits similar to these in future periods.

Discontinued Operations of Central Refrigerated

     In 2002, Central Refrigerated, a refrigerated truckload carrier, was formed
to acquire  certain  assets from the bankruptcy  estate of Simon  Transportation
Services, Inc., a refrigerated truckload carrier controlled by Jerry Moyes prior
to the  bankruptcy.  The  goal  was  to  obtain  certain  efficiencies  for  the
refrigerated  business,  such  as  decreased  insurance  costs,  in  the  period
immediately   following  the  acquisition.   The  acquisition  closed,  and  the
operations of Central  Refrigerated began, on April 22, 2002. We determined that
it was  advisable to divest  Central  Refrigerated  in order to focus on our LTL
growth  strategy  and  devote  our  capital  resources  to our  LTL  operations.
Effective December 31, 2002,  ownership of Central  Refrigerated was transferred
to  Jerry  Moyes,  our  Chairman,  and  one  of  his  affiliates,   and  Central
Refrigerated ceased to be our subsidiary.

     Since December 31, 2002,  Central  Refrigerated has continued to provide us
with  transportation  services.  In the year ended  December 31,  2004,  Central
Refrigerated  provided  us with  approximately  $2.0  million of such  services,
representing  approximately  3.5% of the total amount paid by us for third-party
linehaul services in the period. Although Central Refrigerated is owned by Jerry
Moyes, we believe that amounts paid by us to Central Refrigerated are equivalent
to rates that could have been  obtained in an arm's length  transaction  with an
unrelated third party. We expect our arrangements with Central  Refrigerated for
transportation  services to  continue,  so long as its rates and service  remain
competitive with those offered by other carriers.  For additional information on
our  relationship  with Central  Refrigerated,  see  "Management -  Compensation
Committee  Interlocks and Participation" in the definitive Proxy Statement to be
delivered to our  stockholders  in  connection  with the 2005 Annual  Meeting of
Stockholders to be held on May 3, 2005.

Separation Payment to Central Refrigerated and Repayment of Moyes Loans

     As part of the  disposition  of  Central  Refrigerated,  we  agreed  to pay
approximately  $8.3  million  to  Central  Refrigerated  to  compensate  Central
Refrigerated and Jerry Moyes for facilitating the transaction.  This payment was
made on October 28, 2003,  and was reflected in our  financial  statements as an
expense in our fourth  fiscal  quarter in 2003.  Following  our  payment of $8.3


                                       13
<PAGE>

million to Central Refrigerated,  Mr. Moyes repaid approximately $8.6 million in
principal  and interest due to us under loans we made to him prior to July 2002,
which  were  separate  from  and  unrelated  to our  transactions  with  Central
Refrigerated.  The loans to Mr.  Moyes  had been  recorded  in our  consolidated
financial  statements as a reduction of  stockholders'  equity  because of their
related  party  nature  and this  reduction  of  equity  was  reversed  with the
repayment  of the loan.  Accordingly,  taken  together,  our  payment to Central
Refrigerated  and the loan  repayment  by Mr.  Moyes  had no  effect on our cash
position and stockholders' equity.

Related Party Terminal Leases

     We lease 29 active  terminals  and seven  dormant  terminals  from  related
parties.  The lease for most of these properties is accounted for as a financing
arrangement in our consolidated  financial statements,  with the rental payments
being  reflected as interest.  The aggregate paid rent for these  properties was
approximately  $6.8  million in 2004,  $7.0  million in 2003 and $4.7 million in
2002.  We believe  the rent on certain of these  properties  had been below fair
market value and agreed to increase the aggregate  rent. As a result of the rent
increase,  we have recognized  approximately  $3.3 million  annually in non-cash
interest  expense in all periods  prior to  February  20,  2003,  to reflect the
rental of the  affected  properties  at fair market  value.  Aggregate  rent and
non-cash interest expense combined was approximately  $8.0 million in 2004, $8.0
million in 2003 and $8.1 million in 2002 for all properties  leased from related
parties.  We are  actively  seeking to  sublease  or arrange for the sale of the
dormant  terminals.  For  additional  information  on our related party terminal
leases,  see  "Management  -  Compensation   Committee  Interlocks  and  Insider
Participation"  in  the  definitive  Proxy  Statement  to be  delivered  to  our
stockholders  in connection  with the 2005 Annual Meeting of  Stockholders to be
held on May 3, 2005.

S Corporation Status

     Prior to November 1, 2003,  we  operated  as an S  corporation  for federal
income tax purposes.  An S corporation  passes through  essentially  all taxable
income and losses to its  stockholders  and does not pay federal income taxes at
the corporate  level.  For  comparative  purposes,  we have included a pro forma
provision  for income taxes showing what those taxes would have been had we been
taxed as a C  corporation  in all  periods  our S  corporation  election  was in
effect.  The 2003  provision for income taxes  reflects the  approximately  $9.8
million  non-cash  charge for  recognition  of deferred  federal income taxes to
reflect our  conversion  from an S corporation to a C corporation on November 1,
2003.

Change in Fiscal Quarters

     Our fiscal year ends on December 31. From  inception  through  December 31,
2002, our first three fiscal quarters consisted of 12 weeks each, and our fourth
fiscal  quarter  consisted  of 16 weeks.  Commencing  January 1, 2003,  our year
consists of four quarters, each with 13 weeks. This change in accounting periods
will not affect the  comparability  of year-end  financial  results.  The change
will, however,  affect comparisons of periods less than a full year. Each of our
first three quarters in 2003 and beyond  includes one  additional  week, and our
fourth quarter in 2003 and beyond will include three fewer weeks, as compared to
previous years.



                                       14
<PAGE>

Results of Operations

     The table below sets forth the  percentage  relationship  of the  specified
items to operating revenues for the periods indicated.
<TABLE>
<CAPTION>

                                                                Year Ended December 31,

                                                             2004        2003        2002
                                                           ---------   ---------   ---------
                        <S>                                    <C>        <C>        <C>
         Operating revenues.....................             100.0%      100.0%      100.0%
         Operating expenses:
           Salaries, wages, and benefits........              57.5        52.7        56.3
           Purchased transportation.............              14.7        14.5        13.4
           Operating and general supplies and
              Expenses..........................              21.4        17.0        16.1
           Insurance and claims.................               6.5         4.1         3.9
           Building and equipment rentals.......               1.6         1.3         1.4
           Depreciation and amortization........               4.4         4.3         4.8
                                                             -----       -----       -----
              Total operating expenses(1).......             106.1        93.9        95.9
                                                             -----       -----       -----
         Operating (loss) earnings..............              (6.1)        6.1         4.1
         Interest expense.......................               2.0         2.5         3.1
                                                             -----       -----       -----
         (Loss) earnings from continuing operations
           before income taxes..................              (8.1)        3.6         1.0
                                                             -----       -----       -----
         Income tax (expense) benefit...........               2.2        (3.0)        0.4
                                                             -----       -----       -----
         (Loss) earnings from continuing operations           (5.9)        0.6         1.4
                                                             -----       -----       -----
         Loss from discontinued operations......                 -        (2.1)          -
                                                             -----       -----       -----
         Net (loss) earnings....................              (5.9)%      (1.5)%       1.4%
                                                             =====       =====       =====
         Pro Forma C Corporation Data:
         Historical earnings from continuing
           Operations...........................                 -%        3.6%        1.0%
         Pro forma (provision) benefit for income
           taxes attributable to continuing
           operations(2)........................                 -        (1.5)       (0.7)
                                                             -----       -----       ------
         Pro forma earnings from continuing
           operations(2)........................                 -%        2.1%        0.3%
                                                             =====       =====       =====
<FN>

----------

(1)  Total  operating  expenses  as  a  percentage  of  operating  revenues,  as
     presented in this table, is also referred to as operating ratio.

(2)  Provision for federal income taxes and net earnings  (loss) as if we were a
     C corporation for tax purposes for all periods.
</FN>
</TABLE>

Comparison of 2004 to 2003

     Operating  revenues.  Operating revenues  decreased $3.1 million,  or 0.8%,
from $389.7 million for 2003 to $386.6 million for 2004. Revenue per working day
decreased  from $1.54 million in 2003 to $1.53 million in 2004.  The decrease in
revenue per working day was  attributable  primarily  to a 3.9%  decrease in LTL
tonnage  offset in part by an increase in LTL  revenue  per  hundredweight  from
$11.37 in 2003 to $11.63 in 2004. This increase in LTL revenue per hundredweight
was due mainly to an increase in fuel surcharge  revenue per working day, as the
cost of fuel  increased  in 2004  compared  to 2003.  LTL bills per  working day
decreased 6.4% from 2003 to 2004. Total tonnage  decreased 54,274 tons, or 2.8%,
from 1,962,890 tons in 2003 to 1,908,621 tons in 2004.

     Salaries,  wages, and benefits.  Salaries,  wages,  and benefits  increased
$16.8 million, or 8.2%, from $205.4 million for 2003 to $222.2 million for 2004.
A  substantial  portion of this  increase was  attributable  to the $7.8 million
curtailment  gain  recognized  in  2003  that  related  to a  reduction  of  our
obligations under a benefit plan.  Further,  our group health expenses increased


                                       15
<PAGE>

by $4.0  million in 2004,  despite a 5.4%  decrease in the number of  employees,
while workers'  compensation  expenses increased by $2.5 million.  Mileage-based
payments to linehaul  drivers also  increased by $2.9 million from 2003 to 2004,
as our  length  of haul  increased  by 8.1% to 478  miles.  As a  percentage  of
operating revenues, salaries, wages, and benefits increased from 52.7% for 2003,
to 57.5% for 2004.

     Purchased  transportation.  Purchased  transportation  remained essentially
constant  at  approximately  $56.7  million  in both  2003  and  2004.  However,
purchased  transportation  paid to related  parties  decreased by $4.0  million,
which  was  offset  by  a  similar  increase  in  non-related   party  purchased
transportation. We used third party contractors for a significant portion of our
shipments.  As a percentage  of  operating  revenues,  purchased  transportation
increased from 14.5% for 2003 to 14.7% for 2004.

     Operating and general supplies and expenses. Operating and general supplies
and expenses  increased $16.8 million,  or 25.4%, from $66.2 million for 2003 to
$83.0  million for 2004.  The  increase in  operating  and general  supplies and
expenses  resulted  primarily from increases in the cost of fuel, offset in part
by an increase in fuel surcharge revenue. The average price per gallon of diesel
fuel was 21.4% higher during 2004 as compared to 2003. Also  contributing to the
increase in operating and general supplies and expenses were  professional  fees
relating  to our  audit of  internal  controls  under  the  Sarbanes-Oxley  Act,
increased property tax expense,  increased provisions for doubtful accounts, and
vehicle  repair  costs.  As a percentage  of operating  revenues,  operating and
general supplies and expenses increased from 17.0% for 2003 to 21.4% for 2004.

     Insurance and claims.  Insurance  and claims  increased  $9.1  million,  or
56.5%,  from $16.1 million for 2003 to $25.2  million for 2004.  The increase in
insurance and claims expense  resulted  primarily from an increase in the number
of cargo claims, an increase in insurance premiums and the approximate  $690,000
settlement,  in March of 2005,  for a  lawsuit  filed in 2003 - all of which was
expensed in 2004. The increase in insurance premiums was largely attributable to
the cost of additional directors' and officers' insurance coverage. The increase
in  insurance  and claims  expense  also  reflects  our  recording of a $350,000
expense in the third quarter in  connection  with the  stockholder  class action
complaints. The amount represents the entire deductible under our directors' and
officers' insurance policy. As a percentage of operating revenues, insurance and
claims increased from 4.1% for 2003 to 6.5% for 2004.

     Building and equipment  rentals.  Building and equipment  rentals increased
approximately $1.0 million, or 19.6%, from $5.1 million for 2003 to $6.1 million
for 2004. The increase in building and equipment rentals resulted primarily from
the addition of leased terminals in connection with our Northwest  expansion and
the  addition of a new  terminal in  California.  As a  percentage  of operating
revenues,  building and equipment  rentals  increased from 1.3% for 2003 to 1.6%
for 2004.

     Depreciation  and  amortization.   Depreciation  and  amortization  expense
increased  approximately  $0.4 million,  or 2.4%, from $16.6 million for 2003 to
$17.0 million for 2004.  This increase was primarily  attributable  to equipment
acquired  in  March  2004  in  our  Northwest  expansion  and  the  addition  of
approximately  400 other new and used tractors and 261 new trailers added during
the year. As a percentage of operating  revenues,  depreciation and amortization
increased from 4.3% for 2003 to 4.4% for 2004.

     Operating  ratio.  As a  result  of  the  foregoing,  our  operating  ratio
increased from 93.9% for 2003 to 106.1% for 2004.

     Interest expense.  Interest expense decreased $2.0 million,  or 20.6%, from
$9.7  million for 2003 to $7.7 million for 2004.  As a  percentage  of operating
revenues,  interest  expense  decreased from 2.5% for 2003 to 2.0% for 2004. Our
average debt balances  decreased  from $95.4 million in 2003 to $66.6 million in
2004 due in large part to our payment of approximately $50.0 million in December
2003 to reduce  outstanding  debt  utilizing  part of the net proceeds  from our
initial public offering.  During the second half of 2004, we cash collateralized
approximately $20.8 million in letters of credit. Interest expense on this $20.8
million  borrowing was generally offset by interest income on the invested cash.
Interest  expense in 2003  included  $0.5 million of non-cash  interest  expense
attributable  to a $3.3 million annual  increase in payments under related party
terminal leases  effective  February 20, 2003.  These payments were increased to
fair value,  and we recorded  non-cash  interest expense in all prior periods to
reflect  the  difference  between  the fair value  rental and the former  rental
amount. After February 20, 2003, the interest amounts reflect cash payments. The
amounts are recorded as interest because the leases are reflected as a financing
arrangement in our consolidated financial statements.

                                       16
<PAGE>

     Income  (loss) from  continuing  operations  before  income taxes was $14.0
million for 2003 and $(31.3) million for 2004.

     Pro forma income from continuing operations, assuming an effective tax rate
of  approximately  39% in 2003,  amounted to $8.4 million for 2003 compared to a
net loss of $22.8 million for 2004.

     Our income tax benefit  (expenses)  changed  from  ($1.8)  million for 2003
(excluding the $9.8 million expense for the  establishment  of federal  deferred
income  taxes) to $8.5  million  for 2004.  The 2004 net tax benefit is net of a
$4.9 million valuation allowance established against our net deferred tax assets
as of December 31, 2004.  Additionally,  income taxes for 2003 included  federal
income tax expense for the last two periods of the year.

Comparison of 2003 to 2002

     Operating  revenues.  Operating revenues increased $18.3 million,  or 4.9%,
from $371.4 million for 2002 to $389.7 million for 2003. Revenue per working day
increased  from $1.47 million in 2002 to $1.54 million in 2003.  The increase in
revenue per working day was  attributable  primarily  to a 9.1%  increase in LTL
revenue  per  hundredweight  from  $10.42  in 2002 to  $11.37  in 2003 and to an
increase in fuel  surcharge  revenue per working  day.  The overall  increase in
revenue per working day was partially offset by a 7.4% decrease in total tonnage
per working day. As a result of yield  improvement  efforts,  we eliminated less
profitable freight and, where possible,  replaced it with more profitable loads.
Total tonnage  decreased  157,190 tons, or 7.4%,  from 2,120,080 tons in 2002 to
1,962,890  tons in 2003. Our Midwest  expansion also  contributed to our overall
increase in revenues.

     Salaries, wages, and benefits. Salaries, wages, and benefits decreased $3.9
million,  or 1.9%,  from $209.3  million for 2002 to $205.4 million for 2003 due
mainly to a $7.8 million gain relating to a reduction of our obligations under a
benefit plan.  Without this reduction,  salaries,  wages and benefits would have
amounted to $213.2  million.  The  resultant  increase in salaries,  wages,  and
benefits  resulted  primarily from an increase in  compensation  for most of our
employees,  rising medical costs, the costs of additional  sales personnel,  and
the costs of additional employees and relocation expenses incurred in connection
with our Midwest expansion. In addition to these factors,  salaries,  wages, and
benefits  expense for 2003 also included a $0.9 million increase to our workers'
compensation  reserves for claims that arose prior to 2003, compared with a $0.5
million  increase to such  reserves  for prior period  claims  recorded in 2002.
These  factors  partially  offset a decrease  in the total  number of  employees
resulting  from  our  management  initiatives.  As  a  percentage  of  operating
revenues,  salaries, wages, and benefits decreased from 56.3% for 2002, to 52.7%
for 2003.

     Purchased transportation.  Purchased transportation increased $6.8 million,
or 13.6%, from $49.9 million for 2002 to $56.7 million for 2003. The increase in
purchased  transportation  resulted  primarily  from an  increase in our Midwest
expansion.  Because of the geographic  breadth and lane  characteristics of that
particular  expansion  effort, we used third party contractors for a significant
portion  of our  shipments.  Our use of  contractors  in the  Midwest  decreased
beginning in the third quarter of 2003.  As a percentage of operating  revenues,
purchased transportation increased from 13.4% for 2002 to 14.5% for 2003.

     Operating and general supplies and expenses. Operating and general supplies
and expenses  increased $6.6 million,  or 11.1%,  from $59.6 million for 2002 to
$66.2  million for 2003.  The  increase in  operating  and general  supplies and
expenses  resulted  primarily  from an  increase in the cost of fuel and vehicle
repairs. As a percentage of operating  revenues,  operating and general supplies
and expenses increased from 16.1% for 2002 to 17.0% for 2003,  primarily because
the  average  price per gallon of diesel  fuel was 13.3%  higher  during 2003 as
compared to 2002.

     Insurance and claims.  Insurance  and claims  increased  $1.5  million,  or
10.3%,  from $14.6 million for 2002 to $16.1  million for 2003.  The increase in
insurance and claims expense resulted  primarily from an increase in the accrual
of $3.8  million in  estimated  liabilities  for claims that arose prior to 2003
($1.8  million of which  related to two  accidents  in 2002),  compared  with no
increase in such reserves for prior period  claims  recorded in the 2002 period.
As a percentage of operating revenues,  insurance and claims increased from 3.9%
for 2002 to 4.1% for 2003.

     Building and equipment  rentals.  Building and equipment  rentals increased
approximately $0.1 million,  or 2.0%, from $5.0 million for 2002 to $5.1 million

                                       17
<PAGE>

for 2003. The increase in building and equipment rentals resulted primarily from
the addition of leased terminals in connection with our Midwest expansion.  As a
percentage  of operating  revenues,  building and  equipment  rentals  decreased
slightly from 1.4% for 2002 to 1.3% for 2003.

     Depreciation  and  amortization.   Depreciation  and  amortization  expense
decreased  approximately  $1.4 million,  or 7.8%, from $18.0 million for 2002 to
$16.6 million for 2003,  as a result of a change in the  estimated  useful lives
and sales of our revenue  equipment.  In January 2003, we increased useful lives
of trailers from twelve to fifteen years and reduced  salvage  values from 5% to
0%. We also increased  useful lives of line tractors from seven to ten years and
reduced  salvage values on pick-up and delivery and line tractors from 5% to 0%.
These  changes  were made to reflect  the fact that we are  currently  operating
these tractors for longer periods of time than previously  estimated by our past
management.  The changes  reduced  depreciation  expense by  approximately  $0.6
million  in 2003.  As a  percentage  of  operating  revenues,  depreciation  and
amortization decreased from 4.8% for 2002 to 4.3% for 2003.

     Operating ratio. As a result of the foregoing, our operating ratio improved
from 95.9% for 2002 to 93.9% for 2003.

     Interest expense.  Interest expense decreased $1.6 million,  or 14.2%, from
$11.3  million for 2002 to $9.7 million for 2003.  As a percentage  of operating
revenues,  interest  expense  decreased from 3.1% for 2002 to 2.5% for 2003. Our
average debt balances  decreased from $116.4 million in 2002 to $95.4 million in
2003 due in large part to our payment of approximately $50.0 million in December
2003 to reduce  outstanding  debt  utilizing  part of the net proceeds  from our
initial  public  offering,  and our average  non-related  party  interest  rates
decreased from 6.4% in the 2002 to 5.8% in 2003.  2002 includes $3.3 million and
2003 includes $0.5 million of non-cash  interest expense  attributable to a $3.3
million  annual  increase  in  payments  under  related  party  terminal  leases
effective February 20, 2003.

     Income from continuing  operations before income taxes was $3.8 million for
2002 and $14.0 million for 2003.

     Pro forma income from continuing operations, assuming an effective tax rate
of approximately 39% in each period, improved from $1.0 million for 2002 to $8.4
million for 2003.

     Our income taxes changed from a net tax benefit of $1.4 million for 2002 to
a net tax expense of $(1.8) million for 2003 (excluding the $9.8 million expense
for  establishment  of  federal  deferred  income  taxes)  primarily  due to the
reversal of a $1.8 million  reserve for the  contingent  expense that could have
resulted from any tax  assessments  related to our election of S corporation tax
status in 1998.  During the fiscal  quarter  ended June 15, 2002,  we determined
that this reserve was no longer necessary because the allowable period for a tax
assessment had ended.

Liquidity and Capital Resources

     Our  business  has  required  substantial,   ongoing  capital  investments,
particularly  to replace  revenue  equipment such as tractors and trailers.  Our
primary  sources  of  liquidity  have  historically  been cash from  operations,
secured borrowings, and proceeds of our initial public offering. During 2005 our
net capital  expenditure  requirements  are  expected to be only $4.0 million to
$7.0 million,  as our tractor and trailer fleets are at average ages that do not
require substantial replacements and we do not expect to purchase any terminals.
Our  net  capital  expenditure  expectations  include  roughly  $6  million  for
replacement of revenue equipment and selling our former Phoenix location.  If we
decide not to replace revenue equipment and are successful in selling the former
Phoenix facility, our net capital expenditures may be close to zero for 2005. We
do not believe a substantial  increase in net capital expenditures over the $4.0
million to $7.0 million level assumed for 2005 will be required in 2006.

     At December 31, 2004, we had  approximately  $87.6 million in stockholders'
equity and $55.7 in long-term debt, including current maturities.  Under our new
credit facility described under "Recent Development" above, we had an average of
approximately  $17.5  million of  availability  during the first  three weeks of
March 2005.

     In  addition to the  availability  under our new credit  facility,  we have
approximately  $20 million (cost basis) in active  terminals that we are able to
use in  one or  more  sale-leaseback  or  borrowing  transactions,  and we  have
approximately  $6 million  in  assets,  primarily  real  estate,  held for sale.
Management is presently  pursuing  financing  alternatives  involving the active
terminals and is attempting to sell the assets held for sale.

                                       18
<PAGE>

     Although  we cannot  assure you that our  efforts  will be  successful,  we
expect  to  gain  significant   additional  liquidity  from  these  assets.  Our
discussion above concerning net capital  expenditures does not take into account
any proceeds from a potential sale-leaseback of our terminals.

     Although  there can be no  assurance,  we  believe  cash  from  operations,
borrowing  available  under  our new  credit  facility,  and  other  sources  of
liquidity  will be sufficient to fund our operations at least through the end of
2006.  To the extent that  actual  results or events  differ  from  management's
financial projections or business plans, our liquidity may be adversely affected
and we may  be  unable  to  meet  our  financial  covenants.  Specifically,  our
liquidity  may be adversely  affected by one or more of the  following  factors:
weak freight demand or a loss in customer  relationships or volume,  our success
in executing  management's  turnaround  steps  described  above,  our ability to
improve the collection of our accounts receivable,  elevated fuel prices and the
ability to collect fuel surcharges,  costs associated with insurance and claims,
an inability to maintain  compliance  with,  or  negotiate  amendments  to, loan
covenants,  the ability to finance tractors and trailers, and the possibility of
shortened  payment terms by our suppliers and vendors  worried about our ability
to meet payment obligations.

     We are  currently  executing a turnaround  plan that is designed to reverse
recent negative cash flows.  During 2004 and into early 2005 we have experienced
a period of negative cash flow  attributable  primarily to operating  losses and
approximately $25.0 in acquisitions of revenue equipment during 2004. During the
third and fourth  quarters of 2004, our management  began  implementing  several
steps that are intended to improve our operating results and maintain compliance
with our financial covenants.  These steps include:  reducing our cost structure
to better align controllable costs with our expected revenue base,  streamlining
freight  movements to  consolidate  movements and reduce the use of  third-party
purchased transportation,  improving employee efficiency, reducing insurance and
claims  expense,  and  improving  revenue yield and total  tonnage.  These steps
contributed to a 250 basis-point  improvement in our operating ratio between the
third quarter of 2004 (when the steps were  implemented)  and the fourth quarter
of 2004. We expect  additional  improvement  in our operating  ratio between the
fourth  quarter of 2004 and the first quarter of 2005.  Although our  management
believes that these actions should generate the required improvements, there can
be no assurance that the improvements will occur as planned. Our ability to fund
our cash  requirements  in future  periods will depend on our ability to improve
operating  results  and cash  flow and our  ability  to  comply  with  covenants
contained  in our  financing  arrangements.  Our  ability  to  achieve  required
improvements will depend on general shipping demand by our customers,  insurance
and claims expense, and other factors.

     On January 31, 2005,  we entered into our New Credit  Facility with Bank of
America and others that replaced the Securitization Facility and the Amended and
Restated  Revolving  Facility.  See "Recent  Development"  above for  additional
information. The New Credit Facility contains certain restrictions and covenants
relating to, among other things, fixed charge coverage ratio, cash flow, capital
expenditures,   acquisitions  and  dispositions,   sale-leaseback  transactions,
additional   indebtedness,   additional  liens,   dividends  and  distributions,
investment  transactions,  and  transactions  with  affiliates.  The New  Credit
Facility  includes usual and customary  events of default for a facility of this
nature and provides that,  upon the occurrence and  continuation  of an event of
default,  payment of all amounts  payable  under the New Credit  Facility may be
accelerated, and the lenders' commitments may be terminated.

     Net cash (used in) provided by operating activities was approximately $(7.4
) million,  $15.1  million and $35.2  million for the years ended  December  31,
2004,  2003,  and 2002,  respectively.  The  decrease  in net cash,  provided by
operating  activities,  from 2003 to 2004 - $22.5 million,  resulted mainly from
$38.4 million in reduced cash as a result of a larger cash loss from  operations
offset by an $8.4 million increase in trade accounts  payable in 2004,  compared
to a $3.9 million decrease in trade accounts payable in 2003, and a $1.4 million
increase in accounts  receivable in 2004, compared to a $4.0 million increase in
2003.  The average  age of our  accounts  receivable  was 55.0 days for the year
ended  December 31, 2004,  52.2 days for the year ended  December 31, 2003,  and
46.9 days for the year ended December 31, 2002.

     Net cash used in investing activities was approximately $41.8 million, $5.3
million, and $8.8 million for the years ended December 31, 2004, 2003, and 2002,
respectively.  These  expenditures  were financed with  long-term  debt and cash
flows from operations. Our capital expenditures were approximately $36.7 million
in 2004 mainly for revenue  equipment  and two new  terminals,  $7.0  million in
2003,  and $6.0  million in 2002.  We also paid $9.3 million in 2004 for certain
assets  related  to  our  Northwest  expansion.   Our  budget  for  net  capital
expenditures,  giving effect to any offset from sales or trades of equipment, is
expected to range  between $4.0 and $7.0 million in 2005.  We expect our capital


                                       19
<PAGE>

expenditures  to  consist  primarily  of the  acquisition  of new  tractors  and
trailers.  We  expect  to  pay  for  the  projected  capital  expenditures  with
borrowings under our credit facilities, borrowings under capital leases and cash
flows from operations. Our capital expenditure budget excludes the effect of any
acquisitions.

     Net cash provided by (used in) financing activities was approximately $14.1
million,  $20.1  million and $(19.2)  million for the years ended  December  31,
2004,  2003, and 2002,  respectively.  In July 2004, as a condition for amending
our  credit  facility  we agreed to place  $20.8  million in a  restricted  cash
account.  This fund was established through a borrowing under our securitization
facility.  The restricted  cash fund was  established to cash  collateralize  an
equal amount of letters of credit.  Other funds provided by financing activities
in 2004 arose mainly from borrowings under our securitization  facility while in
2003 they were  mainly  derived  from the $77.6  million net  proceeds  from our
initial public offering in December, 2003.

     At  December  31,  2004,  we  had  outstanding   long-term  obligations  of
approximately  $55.7  million.  The  following  chart  reflects the  outstanding
amounts by category:

                  Capital lease obligations..     32.9 million
                                                 -------------
                    Total long-term debt.....     32.9 million
                  Related party financing....     22.8 million
                                                 -------------
                       Total.................    $55.7 million
                                                 =============

     On April 30,  2002,  we entered  into a $40.0  million  revolving  accounts
receivable securitization facility (the "Securitization  Facility") that was set
to expire on April 27, 2005. Under the  Securitization  Facility,  we sell, on a
revolving basis, our interests in accounts receivable to Central Receivables,  a
wholly-owned,  special purpose subsidiary. The assets and liabilities of Central
Receivables  are  included  in  our  consolidated   financial  statements.   The
Securitization  Facility  allowed us to receive up to $40.0 million of proceeds,
subject to  eligible  receivables  and pay a service  fee  recorded  as interest
expense,  as defined in the agreement.  We were required to pay commercial paper
interest rates plus an applicable margin on the proceeds received.  Interest was
generally  payable  monthly.   The  Securitization   Facility  included  certain
restrictions and financial  covenants.  We were required to pay a commitment fee
equal to 0.35%  per annum of 102% of the  facility  limit  minus  the  aggregate
principal balance,  as well as an administrative fee equal to 0.15% per annum of
the uncommitted  balance. As of December 31, 2004 there were borrowings of $27.3
million and at December 31, 2003, there were no borrowings outstanding under the
Securitization Facility.

     On July 28,  2004,  we entered  into a $30.0  million  amended and restated
revolving  credit  facility  with  SunTrust  Bank  (the  "Amended  and  Restated
Revolving Facility").  On November 5, 2004, we executed a first amendment to the
Amended and Restated Revolving Credit Facility. Under the first amendment to the
Amended and Restated Revolving Facility,  we could receive up to an aggregate of
$30.0  million of proceeds in the form of letters of credit,  only.  The Amended
and Restated  Revolving  Facility  accrued interest at a variable rate equal, at
our option,  to either (a) the bank's  prime  lending  rate minus an  applicable
margin, or (b) LIBOR plus an applicable  margin. The applicable margins for both
types of loans varied depending on our lease adjusted  leverage ratio.  Interest
was payable in periods from one to three  months at our option.  The Amended and
Restated Revolving Facility was collateralized by certain revenue equipment, and
letters of credit that were issued were  collateralized by cash collateral.  The
facility  contained,  among other things,  certain  financial and  non-financial
covenants,  and was set to mature on April 30, 2006.  We were  required to pay a
commitment fee equal to 0.50% per annum on the daily unused Amended and Restated
Revolving Facility as well as a letter of credit fee equal to 0.25% per annum on
the average daily amount of the letters of credit. We were also required to cash
collateralize  our outstanding  letters of credit.  At December 31, 2004, we had
restricted cash of $20.8 million, as reported on our consolidated  balance sheet
related to these  letters of credit.  At December  31,  2004,  we had letters of
credit of $19.8 million  outstanding  and $ 10.2 available under the Amended and
Restated Revolving Facility. On January 31, 2005, we entered into our New Credit
Facility  with Bank of  America  and others  that  replaced  the  Securitization
Facility and the Amended and Restated Revolving Facility.

     In March 2004, we acquired certain assets of EOFF for  approximately  $10.0
million. Under the terms of the agreement, we paid approximately $7.0 million of
the purchase price at closing,  $1.0 million in the second quarter of 2004, $1.0
million in the third  quarter of 2004 and $0.2 million in the fourth  quarter of
2004. The remaining $0.8 million is recorded on the  consolidated  balance sheet
as  short-term  notes payable at December 31, 2004 and is expected to be paid or
liquidated prior to the end of our 2005 first quarter.

                                       20
<PAGE>

     In 1998, we entered into an agreement  with  Southwest  Premier  Properties
L.L.C., for the sale and leaseback of the land, structures,  and improvements of
36 terminal  properties and one  additional  property in Waco,  Texas.  The sale
price for the properties was approximately  $27.8 million in 1998. For financial
accounting  purposes,  the lease for these  properties  is accounted  for in our
consolidated financial statements as a financing arrangement.  Consequently, the
related land,  structures,  and improvements remain on our consolidated  balance
sheet.  The annual lease  payments are  reflected as a cost of the financing and
recorded as  interest  expense.  In  February  2003,  the lease  covering  these
properties was extended to February 2013,  with further options through 2023. In
addition, the annual rental amount on active terminal properties was adjusted to
reflect agreed market  values.  The annual rental amount was increased from $2.9
million to $6.3 million. We have recognized  approximately $3.3 million annually
in  non-cash  interest  expense in all  periods  prior to  February  2003 in the
accompanying  financial  statements  to  reflect  the  rental  of  the  affected
properties at the increased values.  The rent will be adjusted upward after five
years to reflect any  increase  in  interest  rates  between  February  2003 and
February 2008.

     The following table summarizes our significant  contractual obligations and
commercial commitments as of December 31, 2004.

                                      Payments Due by Period (in thousands)
                                        Less than                      After 5
                                 Total    1 Year  1-3 Years 4-5 Years   Years
                                -------  -------- --------- ---------  ------
Contractual obligations
Long-term debt...............         -        -         -         -        -
Capital lease obligations....  $ 32,842  $10,958   $14,024  $  6,547  $ 1,313
Related party real estate
 financing...................    22,852        -         -         -   22,852
Operating lease obligations..    20,200    5,266     7,660     3,836    3,438
Securitization facility          27,300   27,300         -         -        -
                                -------  -------   -------  --------  -------
  Total......................  $103,194  $43,524   $21,684  $ 10,383  $27,603
                                =======  =======   =======  ========  =======

                                   Amount of Commitment Expiration per Period
                                             (in thousands)
                                        Less than                      After 5
                                 Total    1 Year  1-3 Years 4-5 Years   Years
                                -------  -------- --------- ---------  ------
Other commercial commitments
Standby letters of credit.....  $19,753  $19,753         -         -        -
                                =======  ======== ========= =========  ======
     We  finance  revenue  equipment  through   borrowing,   a  portion  of  the
indebtedness  is  categorized  as a  current  liability,  although  the  revenue
equipment is classified  as a long-term  asset.  Consequently,  each purchase of
financed revenue equipment  decreases working capital.  We had a working capital
surplus of $3.0 million at December 31, 2004, $53.5 million at December 31, 2003
and $4.2 million at December 31, 2002.

Off-Balance Sheet Arrangements

     Certain of our terminals are financed  off-balance  sheet through operating
leases.  As of December 31, 2004, 47 of our terminals,  including seven owned by
related parties, were subject to operating leases.

                                       21
<PAGE>

Quarterly Results of Operations

     The following table presents our unaudited  operating results for the eight
quarters  ended  December 31, 2004. In our opinion,  all  necessary  adjustments
(consisting  only of normal  recurring  adjustments)  have been  included in the
amounts  stated  below to present  fairly  the  quarterly  results  when read in
conjunction  with our  consolidated  financial  statements and notes,  which are
included  elsewhere  in  this  Annual  Report.  Results  of  operations  for any
particular quarter are not necessarily indicative of results of operations for a
full year or for future periods. Our fiscal year consists of four quarters, each
with 13 weeks.
<TABLE>
<CAPTION>

                                                                      Quarter Ended
                            -------------------------------------------------------------------------------------------
                            Apr. 5,     July 5,    Oct. 4,     Dec. 31,      Apr. 3,    July 3,     Oct. 2      Dec. 31,
                           2003(2)(7) 2003(3)(7)  2003(4)(5)  2003(5)(6)      2004       2004        2004         2004
                           ---------  ----------  ---------   ----------   ---------   ---------   --------    ---------
                                                                   (unaudited)
<S>                           <C>          <C>         <C>       <C>            <C>       <C>         <C>          <C>
                                                         (in thousands, except per share data)
Operating revenues....     $ 98,802   $ 100,150   $ 101,209   $   89,535   $  97,038   $ 105,513   $ 98,539    $ 85,511
Operating income
 (loss)..............         5,989       1,245      10,852        5,620          13      (5,035)   (10,759)     (7,874)
(Loss) income from
 continuing
 operations..........         3,314      (1,305)      8,037       (7,610)     (1,129)     (2,543)    (7,898)    (11,278)
Income (loss) from
 discontinued
 operations (6)......             -            -          -       (8,341)          -           -          -           -
Net (loss)
 Income(1)...........         3,314       (1,305)     8,037      (15,951)     (1,129)     (2,543)    (7,898)    (11,278)
 Net loss per share
  Basic.............                                                       $   (0.06)  $   (0.14)  $  (0.43)   $  (0.62)
                                                                           =========   =========   ========    ========
  Diluted...........                                                       $   (0.06)  $   (0.14)  $  (0.43)   $  (0.62)
                                                                           =========   =========   ========    ========
Pro forma data:(1)
 Pro forma income
  tax benefit
  (expense).........         (1,560)         531     (3,259)      (1,378)
 Pro forma net
  (loss) income.....          1,940         (831)     5,098       (6,185)
 Pro forma net
  Income (loss)
  per share:
  Basic.. ...........      $   0.18   $    (0.08) $    0.47   $    (0.51)
                           ========   ==========  =========   ==========
  Diluted...........       $   0.16   $    (0.08) $    0.43   $    (0.47)
                           ========   ==========  =========   ==========
<FN>

(1)  Prior to November 1, 2003, we  maintained S corporation  status under which
     federal income tax attributes flowed directly to stockholders. Accordingly,
     income tax expenses  recorded by us reflect state income  taxes.  Pro forma
     net (loss) income has been adjusted to reflect the  application  of federal
     income  taxes.  On  November  1, 2003 we elected C  corporation  status for
     federal income taxes and recorded $9.8 million federal  deferred taxes upon
     conversion.

(2)  In the first  quarter of 2003,  we recorded a $2.5 million gain as a result
     of amendments made to a benefit plan.

(3)  In the second  quarter of 2003, we recorded a $3.8 million  increase in our
     claims accrual related to accident, workers' compensation, and other claims
     (including  $1.8 million related to two accidents that occurred in 2002) in
     which the underlying events occurred prior to 2003.

(4)  In the third  quarter of 2003,  we recorded a $5.3 million gain as a result
     of further amendments made to the benefit plan referenced above.

(5)  In 2003, we recorded reduced depreciation expense as a result of additional
     changes in useful lives and salvage values of trailers and line tractors of
     $145,000 in each of the quarters. These changes in useful lives and salvage
     values were made based on our historical experience.

(6)  On November  1, 2003 we elected C  corporation  status for  federal  income
     taxes.  In the  fourth  quarter,  we  recognized  a loss from  discontinued

                                       22
<PAGE>

     operations  of $8.3 million  which along with the $9.8  million  income tax
     expense from converting to C corporation  status was primarily  responsible
     for the $7.6 million net loss from continuing operations for the quarter.

(7)  During  2004,  the IRS  disallowed  certain tax  deductions  taken by the S
     corporation  shareholders  pursuant to a contested  liability  trust.  As a
     result of the  disallowance of such  deductions,  the C  corporation's  tax
     basis was increased resulting in a deferred tax benefit of $1.75 million..

(8)  During  2004,  we analyzed  our  deferred  tax assets and  liabilities  and
     determined that , under current accounting treatment, a valuation allowance
     of $4.9 million was applicable to our net deferred tax assets.
</FN>
</TABLE>



Critical Accounting Policies

     We believe that the following critical  accounting policies affect our more
significant  judgments and estimates used in the preparation of our consolidated
financials statements.

     Revenue  Recognition.  Operating revenue is recognized upon delivery of the
related freight,  as is fuel surcharge revenue.  In 2004,  approximately 9.9% of
our revenue was derived from interline shipments.  Most of this revenue was with
carriers with which we maintain  transportation  alliances.  We do not recognize
revenue (or the associated expenses) that relates to the portion of the shipment
transported by our alliance partners.

     Insurance and Claims  Accruals.  We record  insurance  and claims  accruals
based upon our  estimate of the  ultimate  total cost of claims,  not covered by
insurance,  for  bodily  injury and  property  damage,  cargo  loss and  damage,
physical damage to our equipment,  workers' compensation,  long-term disability,
and group health, and post-retirement  health benefits.  Our estimates are based
on our  evaluation  of the nature and severity of the claims and our past claims
experience.  We include an estimate for incurred  but not reported  claims.  The
estimated  costs for bodily injury and property  damage,  cargo loss and damage,
and physical  damage to our equipment  are charged to insurance and claims.  The
other estimated costs are charged to employee benefits expense.

     From June 28, 2000 to June 28, 2001, our self-insured  retention for bodily
injury and property  damage,  cargo loss and damage,  and physical damage to our
equipment was an aggregate $0.5 million per occurrence. Effective June 28, 2001,
we increased  our  self-insured  retention to $1.0  million per  occurrence,  on
October  28,  2003  reduced  our  self-insured  retention  to $0.75  million per
occurrence and on January 1, 2004 increased our  self-insured  retention to $1.0
million.  Our  self-insured  retention for workers'  compensation  has been $1.0
million per  occurrence  since  October 28, 2002.  We also  self-insure  for all
health claims up to $0.3 million per  occurrence.  We expect our claims reserves
to increase in future periods as a result of our higher self-insured retention.

     In  October  2002,  we were  forced to seek  replacement  excess  insurance
coverage  after our  insurance  agent  failed to produce  proof of  insurance on
policies for which we had obtained binders as of July 15, 2002. We are not aware
of any claims during the period  between July and October 2002 that are expected
to exceed the  self-insured  retention  level we had at the time. For any claims
arising  during such period,  that would exceed that level,  we intend to pursue
our legal rights against the insurance agent and its errors and omissions policy
but we cannot assure you that such coverage will be available, in which case our
financial results could be materially and adversely affected.

     Allowance  for  Doubtful  Accounts  and  Revenue  Adjustments.  We maintain
allowances  for  doubtful  accounts  and revenue  adjustments.  Such  allowances
represent  our estimate of accounts  that will not  ultimately  be collected and
correspondingly  adjust our  operating  revenues  to reflect  the  estimates  of
noncollectible accounts.  Estimates used in determining this allowance are based
on our historical  collection  experience,  current trends, credit policy, and a
percentage  of our  accounts  receivable  by aging  category.  If the  financial
condition of our customers  were to  deteriorate,  resulting in an impairment of
their ability to make payments, additional allowances may be required.

     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. Under SFAS
No. 109 and  applicable  interpretations,  if all or some  portion  of  specific
deferred  tax  assets,  such as state  tax  credit  carry-forwards  or state net
operating loss carry-forwards,  are determined not to be realizable, a valuation


                                       23
<PAGE>

allowance  must be  established  for the amount of such deferred tax assets.  In
2004, based on our results of operations and existing accounting interpretations
that do not allow us to consider  future  expectations,  only past  results,  we
established a $4.9 million valuation allowance for deferred tax assets.  Despite
the requirement  for such allowance,  we believe that the remaining net deferred
tax assets will be realized through future taxable income.

     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.

     Goodwill.  Our business  acquisitions have resulted in goodwill,  which may
become  impaired in the future.  As of December 31, 2004,  our goodwill,  net of
accumulated  amortization,  was $4.3 million. We perform our goodwill impairment
tests annually and more  frequently if an event or  circumstance  indicates that
impairment may have occurred  occurred.  A drop in our market value could result
in an  impairment  charge  of all or a  portion  of our  goodwill.  Based on our
current market value, it is possible that a non-cash impairment charge of all or
a portion of our goodwill will occur in the first quarter of 2005.

Inflation

     Most of our expenses are affected by inflation,  which generally results in
increased  operating costs. In response to fluctuations in the cost of petroleum
products,  particularly diesel fuel, we have implemented a fuel surcharge in our
tariffs and contractual agreements. The fuel surcharge is designed to offset the
cost of fuel above a base price and  increases as fuel prices  escalate over the
base.  We do not expect the net effect of inflation on our results of operations
to be different from the effect on LTL carriers generally.

Seasonality

     We experience some seasonal  fluctuations in freight volume.  Historically,
our shipments decrease during winter months and our operating expenses have been
higher in the winter  months due to  decreased  fuel  efficiency  and  increased
maintenance costs for our tractors and trailers in colder weather.  Our southern
operating  region has  lessened the  seasonal  impact of colder  weather to some
extent.  Our expansion into the Midwest and planned expansion into the Northwest
may increase our exposure to seasonal fluctuations in operating expenses.

Recent Accounting Pronouncements

     In December 2004, the FASB revised SFAS No. 123, Share-Based Payment,  This
Statement is a revision of FASB Statement No. 123,  Accounting  for  Stock-Based
Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees,  and its related  implementation  guidance.  This Statement
establishes  standards for the  accounting for  transactions  in which an entity
exchanges  its  equity  instruments  for goods or  services.  It also  addresses
transactions  in which an entity  incurs  liabilities  in exchange  for goods or
services that are based on the fair value of the entity's equity  instruments or
that may be settled by the issuance of those equity instruments.  This Statement
focuses  primarily on accounting  for  transactions  in which an entity  obtains
employee services in share-based payment  transactions.  This Statement does not
change the accounting guidance for share-based payment transactions with parties
other than  employees  provided in Statement 123 as  originally  issued and EITF
Issue No. 96-18,  "Accounting  for Equity  Instruments  That Are Issued to Other
Than  Employees  for  Acquiring,  or  in  Conjunction  with  Selling,  Goods  or
Services."  This  Statement  does not address the  accounting for employee share
ownership  plans,  which  are  subject  to AICPA  Statement  of  Position  93-6,
Employers'  Accounting for Employee Stock Ownership  Plans.  The Company has not
yet  determined  the method of adoption or the effect of adopting SFAS No. 123R,
and the Company has not  determined  whether the adoption will result in amounts
that are similar to the current pro forma disclosures under SFAS No. 123.

                                       24
<PAGE>

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.

     We operate in a highly competitive and fragmented industry and our business
will suffer if we are unable to adequately  address  potential  downward pricing
pressures  and other  factors  that may  adversely  affect  our  operations  and
profitability.

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

     o    We compete with many other transportation service providers of varying
          sizes, some of which have more equipment,  a broader coverage network,
          a wider range of services, and greater capital resources than we do or
          have other competitive advantages.

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

     o    Some of our  competitors  have begun  offering  customers a money back
          guarantee if certain shipments are delivered late, and we have not yet
          evaluated the effect of such product  offerings on the  marketplace or
          the possible effects on our financial condition.

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

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

     o    The trend towards consolidation in the ground transportation  industry
          may create other large carriers with greater financial  resources than
          us and other competitive advantages relating to their size.

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

     o    Competition  from  non-asset-based  logistics  and  freight  brokerage
          companies may adversely affect our customer relationships and prices.

     o    Competitors  that,  in the  past,  have used us to  deliver  interline
          shipments  for them in our  regions may not  continue to do so,  which
          would reduce our revenue.

     We  have  a  limited  operating  history  as  an  independent  company  and
experienced net losses during 2001, 2003 and 2004.

     We began our operations on June 30, 1997, after acquiring the name "Central
Freight Lines" and substantially all of the operating assets of the Southwestern
Division of Viking  Freight  System.  Thus,  our operating  history is brief and
provides a limited basis for evaluating our performance. Further, we experienced
a net loss of  approximately  $6.9  million  in 2001 and $5.9  million  in 2003.
Although we generated income from continuing  operations of  approximately  $5.2
million and $2.4 million in 2002 and 2003,  respectively,  we experienced a loss
from continuing  operations of approximately  $22.8 million in 2004. Although we
have identified certain steps

                                       25
<PAGE>

designed to return the Company to  profitability  by the end of 2005,  we cannot
assure you that our efforts  will be  successful  or that we will again  achieve
profitability. As a result, we cannot assure you that we will not experience net
losses in the  future.  If we are  unable to make  planned  improvements  in our
operations,  the value of stockholders'  investments may suffer.  Further, there
can be no assurance as to our ability to generate  positive  cash flow in future
periods.  If we are unable to generate  positive cash flow in the future, we may
not be able to  satisfy  contractual  obligations  or fund our  working  capital
needs.

     Our business is subject to general economic and business factors over which
we have little or no control.

     Our  business is affected by a number of factors that may have a materially
adverse  effect on the results of our  operations,  many of which are beyond our
control. These factors include:

     o    Significant increases or rapid fluctuations in fuel prices.

     o    Excess capacity in the trucking industry.

     o    Decline in the resale value of used equipment.

     o    Fluctuations in interest rates.

     o    Rising healthcare costs.

     o    Higher fuel taxes and license and registration fees.

     o    Increases in insurance costs or liability claims.

     o    Difficulty in attracting and retaining qualified drivers.

     We also are  affected by  recessionary  economic  cycles and  downturns  in
customers' business cycles, particularly in market segments and industries, such
as retail,  where we have a significant  concentration  of  customers.  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.  A  significant  amount of our  freight is  concentrated  in Texas and
California. Accordingly, we also are directly impacted by economic conditions in
and affecting Texas and California over which we have no control.

     If we are  unable to  successfully  execute  our  operating  strategy,  our
business and future results of operations may suffer.

     As  part  of our  operating  strategy  for the  immediate  future,  we have
identified  five  specific  areas of focus in our  efforts to improve  operating
results: Reducing our cost structure to better align controllable costs with our
expected revenue base,  streamlining freight movements to consolidate  movements
and reduce the use of third-party purchased  transportation,  improving employee
efficiency,  reducing insurance and claims expense,  and improving revenue yield
and total tonnage. This business strategy is subject to a number of risks, which
include the following:

     o    Revenue growth may be delayed or not occur at all.

     o    Improvements in revenue yield and tonnage growth may be delayed or not
          occur at all.

     o    Our service,  safety, and productivity measures may be further delayed
          or not be successfully implemented throughout our operations.

     o    Our   cost-cutting   measures  may  have   unintended  and  unforeseen
          consequences that adversely affect our business.

     o    Our insurance and claims costs may continue to exceed our expectations
          and may not return to acceptable levels on a timely basis or at all.

                                       26
<PAGE>

     If these risks  materialize,  or if our efforts to improve  performance are
otherwise  unsuccessful,  our  business,  financial  condition,  and  results of
operations will suffer.

     We  may  not be  able  to  successfully  manage  our  growth  or  integrate
acquisitions, which could cause our business to suffer.

     In December  2002, we expanded our LTL service in a  seven-state  region in
the  Midwest.  In March  2004,  we  expanded  our  business  further  to serve a
three-state  region in the  Northwest  through the  acquisition  of the terminal
network  and  selected  assets of EOFF.  We cannot  assure you that our  Midwest
expansion or our Northwest expansion will be successful.  Further, in connection
with our growth generally, we may need to purchase additional equipment, add new
terminals,  hire additional  personnel,  and increase our marketing efforts. Our
growth exposes us to a number of risks, including the following:

     o    Our  geographic  expansion has disrupted (and may continue to disrupt)
          our existing transportation alliances with carriers in those regions.

     o    Our  geographic  expansion  has produced (and may continue to produce)
          freight  imbalances,  customer service issues,  operational issues, or
          other  consequences  that we cannot  manage  successfully  on a timely
          basis or at all.

     o    Our growth has strained  (and may continue to strain) our  management,
          capital resources, and computer and other systems.

     We cannot  assure you that we will overcome the risks  associated  with the
growth of our company.

     We have  significant  ongoing  capital  requirements  that could  adversely
affect our  profitability  if we are  unable to  generate  sufficient  cash from
operations.

     The LTL industry is capital  intensive.  Historically,  we have depended on
cash from  operations,  proceeds  from our accounts  receivable  securitization,
borrowing from banks and finance companies, and leases to expand the size of our
terminal network and maintain and expand our fleet of revenue equipment.  We are
projecting continuing expenditures for tractors and trailers in 2005 and beyond,
primarily due to the need to replace older  equipment in the fleet and increased
costs of new tractors following the October 2002 implementation of new emissions
control regulations.  Our budget for capital expenditures,  giving effect to any
offsets from sales or trades of equipment,  will range from $4.0 to $7.0 million
for 2005.  If we are unable to  generate  sufficient  cash from  operations  and
obtain  financing  on  favorable  terms in the future,  we may have to limit our
growth, enter into less favorable financing arrangements, or operate our revenue
equipment  for longer  periods,  any of which  could have a  materially  adverse
effect on our profitability.

     If we are  unable to retain  our key  employees,  our  business,  financial
condition, and results of operations could be harmed.

     We are highly  dependent  upon the services of the following key employees:
Robert V. Fasso, our Chief Executive Officer and President; Jeffrey A. Hale, our
Senior Vice  President and Chief  Financial  Officer;  and Walt  Ainsworth,  our
Executive  Vice  President.  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. We cannot assure you
that we will be able to do so.

     Our ability to compete  would be  substantially  impaired if our  employees
were to unionize.

     None  of our  employees  are  represented  under  a  collective  bargaining
agreement by a labor union. In 2001, the International  Brotherhood of Teamsters
filed a petition  with the National  Labor  Relations  Board seeking an election
among the employees at our Dallas,  Texas  facility.  Our employees voted not to
form a union when that  election was  conducted in April 2002.  In October 2002,
after we requested an election,  the Teamsters  withdrew from  representing  our


                                       27
<PAGE>

employees in Las Vegas,  our only remaining  facility where employees had at one
time requested union  representation.  While we believe our current relationship
with our  employees  is good,  we cannot  assure you that  further  unionization
efforts will not occur in the future.  Our non-union status is a critical factor
in our ability to compete.  If our employees  vote to join a union and we sign a
collective  bargaining  agreement,  the  results  probably  would be adverse for
several reasons:

     o    Some  shippers have  indicated  that they intend to limit their use of
          unionized  trucking  companies  because of the  threat of strikes  and
          other work  stoppages.  A loss of  customers  would impair our revenue
          base.

     o    Restrictive work rules could hamper our efforts to improve and sustain
          operating  efficiency,  for  example  by  inhibiting  our  ability  to
          implement dynamic resource planning within our workplace.

     o    A strike  or work  stoppage  would  hurt our  profitability  and could
          damage customer and other relationships.

     o    An election and bargaining  process would distract  management's  time
          and attention and impose significant expenses.

     These results,  and unionization of our workforce  generally,  could have a
materially adverse effect on our business,  financial  position,  and results of
operations.

     Ongoing  insurance  and  claims  expenses  could  significantly  affect our
operations .

     Our future  insurance and claims expenses might exceed  historical  levels,
which could reduce our earnings.  We currently  carry $30.0 million of insurance
coverage,  with a  self-insured  retention  of $1.0 million per  occurrence  for
claims resulting from cargo theft or loss, personal injury, property damage, and
physical damage to our equipment.  We also self-insure for workers' compensation
up to $1.0 million per occurrence, and for all health claims up to $0.3 million.
Insurance carriers have raised premiums for most trucking companies.  Additional
increases  could further  increase our  insurance and claims  expense as current
coverages expire or cause us to raise our self-insured  retention. If the number
or severity of claims for which we are self-insured increases, we suffer adverse
development  in claims  compared  with our  reserves,  or any claim  exceeds the
limits of our insurance coverage,  our financial results could be materially and
adversely affected.

     Our large self-insured  retentions require us to make estimates of ultimate
loss amounts and accrue such  estimates as  expenses.  Changes in estimates  may
materially and adversely affect our financial  results.  In 2003, we recorded an
aggregate of $3.8 million in  increases to our reserves for  accident,  workers'
compensation,  and other  liabilities  arising in prior  periods.  Such  accrual
included $1.8 million for two accidents that occurred in 2002.  This compared to
an accrual of $0.5  million in  additional  expense in 2002,  relating to claims
that arose in prior  periods.  The large  accrual in 2003  caused our  financial
results to suffer. We may be required to accrue such additional  expenses in the
future.

     In  October  2002,  we were  forced to seek  replacement  excess  insurance
coverage  after our  insurance  agent  failed to produce  proof of  insurance on
policies for which we had obtained binders as of July 15, 2002. We are not aware
of any claims during the period  between July and October 2002 that are expected
to exceed the  self-insured  retention  level we had at the time. For any claims
arising during such period that exceed that level, we intend to pursue our legal
rights  against the insurance  agent and its errors and omissions  policy but we
cannot  assure  you that such  coverage  will be  available,  in which  case our
financial results could be materially and adversely affected.

     Ongoing insurance requirements could constrain our borrowing capacity.

     Our ability to incur additional indebtedness could be adversely affected by
an increase  in  requirements  that we post  letters of credit in support of our
insurance policies. On January 31, 2005, we entered into our New Credit Facility
with Bank of America,  N.A., as Agent, and certain other lenders. As of March 8,
2005,  $10.9 million in  borrowings  and $20.8 million in letters of credit were
outstanding.  Available borrowings under the New Credit Facility as of that date
were $19.1 million. The face amount of letters of credit we are required to post
is  expected  to  increase  in  the  future.  Increases  in  letters  of  credit
outstanding  will reduce our borrowing  capacity under the New Credit  Facility,
thereby adversely affecting our liquidity.

                                       28
<PAGE>

     Difficulty  in attracting  qualified  drivers  could  adversely  affect our
profitability and ability to grow.

     Periodically,  the trucking industry experiences  substantial difficulty in
attracting and retaining qualified drivers,  including independent  contractors.
If we are unable to attract drivers and contract with  independent  contractors,
we could be required to adjust our compensation package, let trucks sit idle, or
operate with fewer independent  contractors and face difficulty  meeting shipper
demands, all of which could adversely affect our growth and profitability.

     Fluctuations  in the  price  or  availability  of fuel and our  ability  to
collect fuel surcharges may affect our costs of operation.

     We require  large  amounts of diesel fuel to operate our  tractors.  Diesel
fuel prices  fluctuate  greatly due to economic,  political,  and other  factors
beyond  our  control.   For  example,   diesel  fuel  prices  recently   reached
historically  high levels ($2.21 average price per gallon in October 2004), with
our cost averaging $1.76 per gallon for 2004, compared with $1.45 per gallon for
2003. To address  fluctuations in fuel prices, we seek to impose fuel surcharges
on our accounts.  These  arrangements  will not fully protect us from fuel price
increases. In addition, any shortage or interruption in the supply of fuel would
negatively affect us. Accordingly, fluctuations in fuel prices, or a shortage of
diesel fuel, could materially and adversely affect our results of operations. We
base our fuel  surcharge  rates on the weekly  national  average price of diesel
fuel. Because our operations are concentrated in the southwestern United States,
there is some risk that the  national  average will not fully  reflect  regional
fuel prices,  particularly in California.  Historically,  we have not engaged in
hedging transactions to protect us from fluctuations in fuel prices.

     We rely  on  transportation  alliances  with  other  LTL  operators,  and a
breakdown of these alliances could adversely affect our revenues.

     In our regional LTL  operations,  we primarily pick up and deliver  freight
within our own operating regions.  Freight originating outside our territory for
delivery  inside  our  territory  is brought  to us by  several  other  trucking
companies  with which we have formed  transportation  alliances.  In return,  we
deliver to them freight that  originates  in our territory for delivery in their
territories.  In 2004,  transportation alliances generated approximately 9.9% of
our revenue. These alliances subject us to certain risks, including:

     o    Expanding our own operations into an alliance company's  territory may
          cause that company to stop using our alliance.

     o    We may not control the customer  relationship  on freight  moving into
          our territory.

     o    Our alliance companies can end their relationships with us at any time
          and could choose to form an alliance  with one of our  competitors  in
          our territory.

     o    The reduction or termination of our alliances could negatively  impact
          our business and results of operations.

     Our Chairman,  Jerry Moyes,  his family,  and trusts for the benefit of his
family own  approximately  35.8% of our stock and have substantial  control over
us.

     Jerry  Moyes and trusts for the  benefit  of his  family  beneficially  own
approximately  31.7% of our outstanding  common stock.  In addition,  Mr. Moyes'
brother  and   sister-in-law,   Ronald  and  Krista  Moyes,   beneficially   own
approximately 4.1% of our outstanding common stock. Mr. Jerry Moyes, his family,
and certain trusts for the benefit of his family are able to influence decisions
requiring  stockholder  approval,  including election of our board of directors,
our  management  and  policies,  the  adoption  or  extension  of  anti-takeover
provisions,  mergers,  and other business  combinations.  This  concentration of
ownership  may allow Mr.  Jerry Moyes to prevent or delay a change of control of
our company or an amendment to our certificate of  incorporation  or our bylaws.
In matters requiring stockholder approval, Mr. Jerry Moyes' interests may differ
from the  interests of other holders of our common stock and he may take actions
affecting us with which you may disagree.

                                       29
<PAGE>

     We engage in transactions with other businesses  controlled by our officers
and  directors,  and the interests of our officers and directors  could conflict
with the interests of our other stockholders.

     We engage in multiple transactions with related parties. These transactions
include  the  lease of 29 active  terminals  and seven  dormant  terminals  from
Southwest Premier Properties,  L.L.C.  Southwest Premier is owned by some of our
existing stockholders,  including Jerry Moyes, our Chairman of the Board, Robert
V. Fasso, our Chief Executive Officer and Patrick J. Curry, our former Executive
Vice President.  These related party  transactions also include the lease of two
active  terminals  from  Jerry  Moyes,  the lease of two  terminals  from  Swift
Transportation,  the lease of independent  contractor drivers and their tractors
from Interstate Equipment Leasing, Inc., and freight transportation transactions
with Swift  Transportation and Central  Refrigerated,  companies for which Jerry
Moyes serves as Chairman.  As a result, our directors and executive officers may
have  interests  that  conflict  with yours.  Although we have  adopted a policy
requiring that all future  transactions  with affiliated  parties be approved by
our audit committee or another committee of disinterested  directors,  we cannot
assure  you that the policy  will be  successful  in  eliminating  conflicts  of
interests.

     The loss of one or more of our five largest  customers could  significantly
and adversely affect our cash flow, market share, and profits.

     In 2004, our largest customer,  Dell Computer,  accounted for approximately
5.2% of our  total  revenues,  and our  five  largest  customers  accounted  for
approximately  15.5% of our total revenues.  Our largest  customers are under no
firm obligation to ship with us and the contracts are generally  terminable upon
30 or 60 days' notice. In addition,  we have significant  exposure to the retail
sector and to the economies in Texas and  California.  If we lose one or more of
our large  customers,  or if there is a decline in the amount of services  those
customers  purchase from us, our cash flow,  market share,  and profits could be
adversely affected.

     Our results of  operations  may be  affected by seasonal  factors and harsh
weather conditions.

     Our  operations  are  subject to  seasonal  trends  common in the  trucking
industry,  particularly  as customers tend to reduce  shipments after the winter
holiday.  Harsh weather can also  adversely  affect our  performance by reducing
demand,  impeding our ability to transport  freight,  and  increasing  operating
expenses.

     We are party to securities class action and derivative litigation which may
be costly to defend and the outcome of which is uncertain.

     In June and July 2004, three  stockholder  class actions were filed against
us and certain of our officers and  directors.  The class  actions were filed in
the United  States  District  Court - Western  District  of Texas and  generally
allege that false and  misleading  statements  were made in our  initial  public
offering  registration  statement and prospectus,  during the period surrounding
our initial pubic offering, and up to the press release dated June 16, 2004. The
class  actions  are in the  initial  phases and we intend to  vigorously  defend
against the suits.  On August 9 and 10, 2004, two purported  derivative  actions
were  filed  against  us, as  nominal  defendant,  and  against  certain  of our
officers,  directors,  and former  directors.  These  actions  were filed in the
District  Court of  McLennan  County,  Texas  and  generally  allege  breach  of
fiduciary  duty,  abuse of  control,  gross  mismanagement,  waste of  corporate
assets,  and unjust  enrichment on the part of certain of our present and former
officers and directors in the period between  December 12, 2003 and August 2004.
The purported derivative actions seek declaratory, injunctive, and other relief.

     We cannot provide any assurances as to the outcome of this litigation.  Any
conclusion of this  litigation  in a manner  adverse to us could have a material
adverse effect on our business,  financial condition, and results of operations.
In addition, the cost to us of defending the litigation, even if resolved in our
favor, could be substantial.  Such litigation could also divert the attention of
our  management and our resources in general.  Uncertainties  resulting from the
initiation and  continuation  of this  litigation also could harm our ability to
compete in the marketplace.

                                       30
<PAGE>

     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.  agencies.  Our
drivers 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.  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.

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

     We are subject to various  environmental laws and regulations  dealing with
the hauling  and  handling of  hazardous  materials,  fuel  storage  tanks,  air
emissions  from our vehicles and  facilities,  and  discharge  and  retention of
stormwater.  We operate in  industrial  areas,  where truck  terminals and other
industrial  activities  are  located,  and where  groundwater  or other forms of
environmental  contamination have occurred.  Our operations involve the risks of
fuel spillage or seepage,  environmental  damage,  and hazardous waste disposal,
among others.  We also  maintain bulk fuel storage tanks and fueling  islands at
nineteen  of our  facilities.  A small  percentage  of our  freight  consists of
low-grade hazardous substances, such as paint, which subjects us to a wide array
of  regulations.  If we are  involved  in a spill  or other  accident  involving
hazardous  substances,   if  there  are  releases  of  hazardous  substances  we
transport,  or  if we  are  found  to be in  violation  of  applicable  laws  or
regulations,  we could be subject to  liabilities  that could have a  materially
adverse  effect on our  business  and  operating  results.  If we should fail to
comply  with  applicable  environmental  regulations,  we  could be  subject  to
substantial fines or penalties and to civil and criminal liability.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     We are exposed to a variety of market risks,  most  importantly the effects
of the price and  availability  of diesel fuel and changes in interest rates. To
address the risk of high fuel prices, we maintain a fuel surcharge program. Fuel
surcharge programs are well established in the industry and are broadly accepted
by our  customers.  We  believe  our fuel  surcharge  program  is  effective  at
mitigating the risk of high fuel prices. Accordingly, we have not engaged in any
fuel price hedging  activities.  Because fuel surcharges are based on the weekly
national average price of diesel fuel and our operations are concentrated in the
Southwest,  there is some risk that the national  average will not fully reflect
regional fuel prices,  particularly  in California.  We are highly  dependent on
adequate supplies of diesel fuel. If our supply were interrupted, for example as
a result of war or hostile action against the United States or in fuel producing
regions, we would be exposed to significant risks.

     Our  market  risk  is  also   affected   by  changes  in  interest   rates.
Historically,  we have  used a  combination  of  fixed  rate and  variable  rate
obligations to manage our interest rate exposure.  Fixed rate obligations expose
us to the risk that interest rates might fall.  Variable rate obligations expose
us to the risk that interest rates might rise. We did not have any interest rate
swaps at December 31, 2004,  although we may enter into such swaps in the future
if we deem appropriate.

                                       31
<PAGE>

     Our variable rate  obligations  consist of our revolving line of credit and
our accounts receivable  securitization  facility. Our revolving line of credit,
provided  there has been no default,  carries a variable  interest rate based on
either the prime rate or LIBOR. Our  securitization  facility carries a variable
interest rate based on the commercial paper rate.  Assuming  borrowings equal to
the $12.7 million available on the securitization facility at December 31, 2004,
a one  percentage  point  increase in commercial  paper rates would increase our
annual interest expense by $127,000.

Item 8. Financial Statements and Supplementary Data

     Our audited  consolidated  balance sheets,  statements of operations,  cash
flows,  stockholders'  equity and notes related thereto,  are contained at Pages
F-1 to F-26 of this report.

Item 9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
     Financial Disclosure

     None.

Item 9A - Controls and Procedures

(a) Disclosures Control and Procedures

     Under  the  supervision  and  with  the  participation  of our  management,
including our Chief Executive Officer and Chief Financial Officer,  we performed
an  evaluation  of the design  and  operation  of our  disclosure  controls  and
procedures  as of December 31,  2004,  pursuant to Exchange Act Rules 13a-15 and
15d-15 of the Securities and Exchange Act of 1934.  Based on that evaluation and
because of the material  weaknesses  described  in Item 9A(b)  below,  our Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31,
2004, such disclosure  controls and procedures were not effective.  Due to these
material  weaknesses,  the Company,  in  preparing  its  consolidated  financial
statements as of and for the year ended December 31, 2004,  performed additional
procedures relating to revenue, accounts receivable, inventory, and income taxes
to ensure that the consolidated  financial  statements were stated fairly in all
material  respects  in  accordance  with  U.S.  generally  accepted   accounting
principles.

(b) Management's Report on Internal Control Over Financial Reporting

     Our management is responsible for  establishing and maintaining an adequate
system of internal control over financial reporting,  as such term is defined in
Rules  13a-15(f)  and  15d-15(f) of the  Securities  Exchange  Act of 1934.  Our
management  conducted an evaluation of the effectiveness of our internal control
over  financial  reporting as of December 31,  2004,  based on the  framework in
"Internal Control - Integrated  Framework" issued by the Committee of Sponsoring
Organizations  of the  Treadway  Commission  (COSO).  Based  on our  evaluation,
management  concluded  that three  deficiencies  in our  internal  control  over
financial reporting as of December 31, 2004,  constituted  "material weaknesses"
within the meaning of the Public Company  Accounting  Oversight Board's Auditing
Standard  No. 2.  These  material  weaknesses  as of  December  31,  2004 are as
follows:


The  Company's  policies  and  procedures  were not  sufficient  to ensure  that
transactions   processed  through  the  Company's  billing  system  resulted  in
accounting for and reporting of such transactions  pursuant to the provisions of
the respective  customer contract.  Specifically,  the Company's billing process
lacked  controls to ensure the accuracy of entries to the billing  system and to
ensure that changes to customer  contracts  were reflected in the billing system
accurately  and  timely.  These  deficiencies  result  in  more  than  a  remote
likelihood that a material  misstatement  of the annual or interim  consolidated
financial statements would not be prevented or detected.


The Company's  procedures were not sufficient to ensure the accuracy of reported
amounts for the Company's tire and spare parts  inventories.  Specifically,  the
Company did not reconcile,  pursuant to its policy,  physical counts of tire and
spare parts  inventories to the Company's  year-end general ledger. As a result,
errors in  accounting  for inventory  were  identified  and  corrected  prior to
issuance  of  the  Company's  2004  consolidated   financial  statements.   This
deficiency results in more than a remote likelihood that a material misstatement
of  the  annual  or  interim  consolidated  financial  statements  would  not be
prevented or detected.


The  Company  did not  maintain  policies  and  procedures  to  ensure  that the
accounting  for  valuation  allowances  associated  with  deferred  taxes was in
accordance with U.S. generally  accepted  accounting  principles.  Specifically,
management's  procedures did not provide for an effective review of deferred tax
asset amounts for purposes of evaluating realizability.  As a result, a material
error in the  determination of the valuation  allowances for deferred tax assets
was  identified   and  corrected   prior  to  issuance  of  the  Company's  2004
consolidated financial statements. This deficiency results in more than a remote
likelihood that a material  misstatement  of the annual or interim  consolidated
financial statements would not be prevented or detected.



     Because of the material  weaknesses  described  above,  our  management has
concluded that our internal controls over financial reporting were not effective
as of  December  31,  2004.  KPMG LLP has  issued an  attestation  report on our
management's assessment of our internal control over financial reporting,  which
is included in Item 8.

(c) Changes in Internal Controls over Financial Reporting


     Since December 31, 2004, the Company has undertaken the following  measures
to  remediate  the  material  weaknesses  in  internal  control  over  financial
reporting discussed in 9A(b) above:

     Our rate  auditor,  who was hired in the fourth  quarter of 2004,  is being
trained to effectively audit a representative  sample of revenue transactions on
a daily basis, in order to monitor the accuracy of billing entries being made to
the Company's billing system.  In addition,  our pricing personnel are comparing
changes in customer  contracts  and  tariffs to the  billing  system in order to
ensure such changes are being made timely and accurately.


     Physical  inventories  of tires  and spare  parts  will be  completed  on a
quarterly  basis.  The  accounting  department  is  implementing  a  control  to
reconcile  physical  counts of tires and spare parts to the general  ledger on a
quarterly basis.


     In the fourth  quarter of 2004,  we engaged a Big Four  accounting  firm to
assist our  management in ensuring the accuracy of the  valuation  allowance for
deferred taxes.  Despite such assistance,  an error in the  determination of the
valuation  allowance for deferred tax assets was identified and corrected  prior
to issuance of the Company's 2004 consolidated financial statements. In 2005, we
developed a detailed  analysis of our future  utilization of deferred tax assets
and  liabilities to ensure the valuation  allowance is properly stated in future
periods.


     Other than the changes  discussed above,  there have been no changes to the
Company's  internal  control over  financial  reporting  that occurred since the
beginning of the Company's fourth quarter of 2004 that have materially affected,
or are reasonably likely to materially  affect,  the Company's  internal control
over financial reporting.



Item 9B. Other Information

     Not applicable.
                                    Part III

Item 10. Directors and Executive Officers of the Registrant

     We incorporate by reference the  information  contained  under the headings
"Proposal  One -  Election  of  Directors,"  "Corporate  Governance  - Board  of
Directors," "Corporate Governance - Committees of the Board of Directors - Audit
Committee,"   "Corporate  Governance  -  Executive  Officers  of  the  Company,"
"Corporate Governance - Code of Conduct and Ethics," and "Corporate Governance -
Section 16(a)  Beneficial  Ownership  Reporting  Compliance" from our definitive
Proxy Statement to be delivered to our  stockholders in connection with the 2005
Annual Meeting of Stockholders to be held May 3, 2005; provided,  however,  that
the Report of the Audit Committee in such Proxy Statement is not incorporated by
reference.

Item 11. Executive Compensation

     We incorporate by reference the  information  contained  under the headings
"Executive Compensation" and "Corporate Governance - Director Compensation" from
our definitive Proxy Statement to be delivered to our stockholders in connection
with the 2005 Annual Meeting of Stockholders  to be held May 3, 2005;  provided,
however, that the Compensation  Committee Report on Executive  Compensation that
appears under the heading  "Executive  Compensation"  in such Proxy Statement is
not incorporated by reference.

                                       33
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The following table provides certain information,  as of December 31, 2004,
with respect our compensation plans and other arrangements under which shares of
our Common Stock are authorized for issuance.
<TABLE>
<CAPTION>
                      Equity Compensation Plan Information

                                                                                                Number of securities
                                                                                                 remaining eligible
                                               Number of securities                             for future issuance
                                                to be issued upon        Weighted average           under equity
                                                   exercise of           exercise price of       compensation plans
                                               outstanding options,     outstanding options    (excluding securities
                                               warrants and rights      warrants and rights          reflected
                                                                                                   in column (a))
               Plan category                           (a)                      (b)                     (c)
<S>                 <C>                                <C>                      <C>                      <C>
--------------------------------------------   --------------------     -------------------    ---------------------
Equity compensation plans                           1,328,868                 $4.00                  1,117,863
approved by security holders

Equity compensation plans not                               -                     -
approved by security holders                   --------------------     -------------------    ---------------------

Total                                               1,328,868                 $4.00                  1,117,863
                                               ====================     ===================    =====================
</TABLE>

    We incorporate  by reference the  information  contained  under the heading
"Security  Ownership  of  Certain  Beneficial  Owners and  Management"  from our
definitive  Proxy  Statement to be delivered to our  stockholders  in connection
with the 2005 Annual Meeting of Stockholders to be held May 3, 2005.

Item 13. Certain Relationships and Related Transactions

     We incorporate by reference the  information  contained  under the headings
"Executive   Compensation  -  Compensation   Committee  Interlocks  and  Insider
Participation"  and "Certain  Relationships and Related  Transactions"  from our
definitive  Proxy  Statement to be delivered to our  stockholders  in connection
with the 2005 Annual Meeting of Stockholders to be held May 3, 2005.

Item 14. Principal Accountant Fees and Services

     We incorporate  by reference the  information  contained  under the heading
"Principal  Accountant Fees and Services" from our definitive Proxy Statement to
be delivered to our  stockholders  in connection with the 2005 Annual Meeting of
Stockholders to be held May 3, 2005.

                                     Part IV

Item 15. Exhibits, Financial Statements Schedules

(a)  The  following  documents  are filed as part of this report on Form 10-K at
     pages F-1 through F-26, below.

1.   Consolidated Financial Statements:

                  Central Freight Lines, Inc. and Subsidiaries
                  Reports of Independent Registered Public Accounting Firm
                  Consolidated Balance Sheets as of December 31, 2004 and 2003
                  Consolidated Statements of Operations for the years ended
                   December 31, 2004, 2003, and 2002 Consolidated Statements of
                  Stockholders' Equity for the years ended December 31, 2004,
                   2003, and 2002

                                       34
<PAGE>
                  Consolidated Statements of Cash Flows for the years ended
                   December 31, 2004, 2003, and 2002 Notes to
                  Consolidated Financial Statements

          2.   Consolidated  Financial  Statement Schedules required to be filed
               by Item 8 and Paragraph (d) of Item 15:

     All  schedules  are  omitted  because  they  are  not  required,   are  not
applicable,  or  the  information  is  included  in the  consolidated  financial
statements or the notes thereto.

          3.   Exhibits:

     The Exhibits required by Item 601 of Regulation S-K are listed at paragraph
(c), below, and at the Exhibit Index appearing at the end of this report.

(b)  Exhibits:

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

2.1       Amended and Restated Asset Purchase Agreement dated April 18, 2002, by
          and among Central Refrigerated Service,  Inc., a Nebraska corporation,
          and Simon Transportation Services Inc., a Nevada corporation,  and its
          subsidiaries, Dick Simon Trucking, Inc., a Utah corporation, and Simon
          Terminal, LLC, an Arizona limited liability company.  (Incorporated by
          reference to Exhibit 2.1 to the  Company's  Registration  Statement on
          Form S-1 No. 333-109068.)

2.2(a)    Separation  Agreement  dated November 30, 2002, by and among Central
          Freight  Lines,  Inc.,  a  Texas  corporation,   Central  Refrigerated
          Service,  Inc.,  a Nebraska  corporation,  the Jerry and Vickie  Moyes
          Family  Trust,   Interstate   Equipment  Leasing,   Inc.,  an  Arizona
          corporation, and Jerry Moyes individually.  (Incorporated by reference
          to Exhibit 2.2(a) to the Company's  Registration Statement on Form S-1
          No. 333-109068.)

2.2(b)    Amendment  Number One to  Separation  Agreement  dated  December 23,
          2002, by and among Central Freight Lines,  Inc., a Texas  corporation,
          Central Refrigerated Service, Inc., a Nebraska corporation,  the Jerry
          and Vickie Moyes Family Trust,  Interstate Equipment Leasing, Inc., an
          Arizona  corporation,  and Jerry Moyes individually.  (Incorporated by
          reference to Exhibit 2.2(b) to the Company's Registration Statement on
          Form S-1 No. 333-109068.)

2.2(c)    Amendment Number Two to Separation Agreement effective as of October
          28,  2003,  by  and  among  Central  Freight  Lines,   Inc.,  a  Texas
          corporation,   Central   Refrigerated   Service,   Inc.,   a  Nebraska
          corporation,  the Jerry and  Vickie  Moyes  Family  Trust,  Interstate
          Equipment  Leasing,  Inc.  an  Arizona  corporation,  and Jerry  Moyes
          individually.  (Incorporated  by  reference  to Exhibit  2.2(c) to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

3.1       Amended and  Restated  Articles of  Incorporation  of Central  Freight
          Lines,  Inc.,  a Nevada  corporation.  (Incorporated  by  reference to
          Exhibit 3.1(b) to the Company's Registration Statement on Form S-1 No.
          333-109068.)

3.2       Bylaws  of  Central  Freight  Lines,   Inc.,  a  Nevada   corporation.
          (Incorporated   by   reference   to  Exhibit  3.2  to  the   Company's
          Registration Statement on Form S-1 No. 333-109068.)

4.1       Amended and  Restated  Articles of  Incorporation  of Central  Freight
          Lines,  Inc.,  a Nevada  corporation.  (Incorporated  by  reference to
          Exhibit 3.1 to this Report on Form 10-K.)
                                       35
<PAGE>

4.2       Bylaws  of  Central  Freight  Lines,   Inc.,  a  Nevada   corporation.
          (Incorporated  by  reference  to  Exhibit  3.2 to this  Report on Form
          10-K.)

10.1(a)+  Central Freight Lines, Inc. 401(k) Savings Plan.  (Incorporated by
          reference to Exhibit 10.1(a) to the Company's  Registration  Statement
          on Form S-1 No. 333-109068.)

10.1(b)+  First  Amendment to Central  Freight  Lines,  Inc.  401(k) Savings
          Plan.  (Incorporated  by reference to Exhibit 10.1(b) to the Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.2(a)+  Central Freight Lines, Inc. Incentive Stock Plan. (Incorporated by
          reference to Exhibit 10.2(a) to the Company's  Registration  Statement
          on Form S-1 No. 333-109068.)

10.2(b)+  Form of Stock  Option  Agreement.  (Incorporated  by  reference to
          Exhibit  10.2(b) to the Company's  Registration  Statement on Form S-1
          No. 333-109068.)

10.3+     Form of Outside  Director  Stock Option  Agreement.  (Incorporated  by
          reference to Exhibit 10.3 to the Company's  Registration  Statement on
          Form S-1 No. 333-109068.)

10.4(a)   First Amended and Restated  Revolving Credit Loan Agreement,  dated
          July 28, 2004, by and between  Central  Freight  Lines,  Inc., a Texas
          corporation,  and SunTrust Bank, a Georgia state banking  corporation.
          (Incorporated  by reference to Exhibit 10.4(a) to the Company's Report
          on Form 10-Q for the quarterly period ended July 3, 2004.)

10.4(b)   Revolving  Credit Note,  dated July 28,  2004,  by Central  Freight
          Lines, Inc., a Texas corporation, in favor of SunTrust Bank, a Georgia
          state  banking  corporation.  (Incorporated  by  reference  to Exhibit
          10.4(b) to the Company's  Report on Form 10-Q for the quarterly period
          ended July 3, 2004.)

10.4(c)*  First  Amendment to First  Amended and Restated  Revolving  Credit
          Loan  Agreement,  dated July 28, 2004, by and between  Central Freight
          Lines, Inc., a Texas  corporation,  and SunTrust Bank, a Georgia state
          banking corporation.

10.5      Guaranty,  dated July 28,  2004,  by Central  Freight  Lines,  Inc., a
          Nevada corporation, in favor of SunTrust Bank, a Georgia state banking
          corporation.  (Incorporated  by  reference  to  Exhibit  10.5  to  the
          Company's  Report on Form 10-Q for the quarterly  period ended July 3,
          2004.)

10.6      Security  Agreement,  dated  July 28,  2004,  by and  between  Central
          Freight Lines,  Inc., a Texas corporation and Suntrust Bank, a Georgia
          state banking corporation.  (Incorporated by reference to Exhibit 10.6
          to the Company's  Report on Form 10-Q for the  quarterly  period ended
          July 3, 2004.)

10.7      Note  dated  April 30,  2002,  by Jerry C.  Moyes in favor of  Central
          Freight Lines, Inc., a Texas  corporation.  (Incorporated by reference
          to Exhibit 10.7 to the  Company's  Registration  Statement on Form S-1
          No. 333-109068.)

10.8(a)   Loan  Agreement  dated  April  30,  2002,  by  and  among  Central
          Receivables,   Inc.,  a  Nevada  corporation,  Three  Pillars  Funding
          Corporation,  a Delaware  corporation,  and Suntrust  Capital Markets,
          Inc., a Tennessee corporation, as agent. (Incorporated by reference to
          Exhibit  10.8(a) to the Company's  Registration  Statement on Form S-1
          No. 333-109068.)

10.8(b)   First  Amendment to Loan  Agreement  dated April 29,  2003,  by and
          among Central Receivables,  Inc., a Nevada corporation,  Three Pillars
          Funding  Corporation,  a Delaware  corporation,  and SunTrust  Capital
          Markets,  Inc., a Tennessee  corporation,  as agent.  (Incorporated by
          reference to Exhibit 10.8(b) to the Company's  Registration  Statement
          on Form S-1 No. 333-109068.)

10.9      Receivables  Purchase  Agreement  dated April 30, 2002, by and between
          Central  Freight  Lines,  Inc.,  a  Texas  corporation,   and  Central
          Receivables, Inc., a Nevada corporation. (Incorporated by reference to
          Exhibit 10.9 to the Company's  Registration  Statement on Form S-1 No.
          333-109068.)

                                       36
<PAGE>

10.10     Second Amended and Restated  Master Lease  Agreement -- Parcel Group A
          dated February 20, 2003 by and between Southwest  Premier  Properties,
          L.L.C., a Texas limited liability company,  and Central Freight Lines,
          Inc., a Texas corporation. (Incorporated by reference to Exhibit 10.10
          to the Company's Registration Statement on Form S-1 No. 333-109068.)

10.11     Second Amended and Restated  Master Lease  Agreement -- Parcel Group B
          dated February 20, 2003 by and between Southwest  Premier  Properties,
          L.L.C., a Texas limited liability company,  and Central Freight Lines,
          Inc., a Texas corporation. (Incorporated by reference to Exhibit 10.11
          to the Company's Registration Statement on Form S-1 No. 333-109068.)

10.12     Amended and Restated  Lease dated February 20, 2003 by and between JVM
          Associates  and Central  Freight  Lines,  Inc.,  a Texas  corporation.
          (Incorporated   by  reference  to  Exhibit   10.12  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.13     Amended  and  Restated  Lease dated  February  20, 2003 by and between
          Jerry and  Vickie  Moyes and  Central  Freight  Lines,  Inc.,  a Texas
          corporation.  (Incorporated  by  reference  to  Exhibit  10.13  to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.14     Amended  and  Restated  Lease dated  February  20, 2003 by and between
          Jerry and  Vickie  Moyes and  Central  Freight  Lines,  Inc.,  a Texas
          corporation.  (Incorporated  by  reference  to  Exhibit  10.14  to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.15+    Employment  Agreement  dated January 7, 2002, by and between Central
          Freight  Lines,  Inc.,  a Texas  corporation,  and  Robert  V.  Fasso.
          (Incorporated   by  reference  to  Exhibit   10.15  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.16+    Employment Offer Letter to Doak D. Slay, dated December 23, 2002, by
          Central  Freight  Lines,  Inc.,  as  countersigned  by Doak  D.  Slay.
          (Incorporated   by  reference  to  Exhibit   10.16  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.17+    Equity  Advancement  Letter to Doak D. Slay,  dated July 9, 2003, by
          Central  Freight  Lines,  Inc., as  countersigned  by Doak D. Slay and
          Denise D. Slay.  (Incorporated  by reference  to Exhibit  10.17 to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.18+    Employment Offer Letter to J. Mark Conard, dated August 16, 2003, by
          Central  Freight  Lines,  Inc.  (Incorporated  by reference to Exhibit
          10.18  to  the  Company's  Registration  Statement  on  Form  S-1  No.
          333-109068.)

10.19+    Employment  Offer Letter to Jeffrey A. Hale,  dated June 7, 2002, by
          Central  Freight  Lines,  Inc.  (Incorporated  by reference to Exhibit
          10.19  to  the  Company's  Registration  Statement  on  Form  S-1  No.
          333-109068.)

10.20+    Employment  Separation  Agreement and Release,  dated as of February
          21, 2002, to be effective as of March 9, 2002, by and between  Central
          Freight Lines,  Inc. and Joseph Gentry.  (Incorporated by reference to
          Exhibit 10.20 to the Company's  Registration Statement on Form S-1 No.
          333-109068.)

10.21+    Consulting Agreement, dated February 20, 2002, by and between Joseph
          B. Gentry and  Central  Freight  Lines,  Inc.,  a Nevada  corporation.
          (Incorporated   by  reference  to  Exhibit   10.21  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.22     Contract for the Sale of Land dated  September 19, 2003,  between Doak
          D.  Slay  and  Denise  D.  Slay  and  Central   Freight  Lines,   Inc.
          (Incorporated   by  reference  to  Exhibit   10.22  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.23(a)  Indemnification  Agreement,  effective as of December 31, 2002, by
          and between  Central  Freight Lines,  Inc., a Texas  corporation,  and
          Central   Refrigerated   Service,   Inc.,   a  Nebraska   corporation.
          (Incorporated  by  reference  to  Exhibit  10.23(a)  to the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.23(b)  Amendment Number One to Indemnification  Agreement effective as of
          December 31, 2002, by and between Central Freight Lines, Inc., a Texas


                                       37
<PAGE>

          corporation,  and  Central  Refrigerated  Service,  Inc.,  a  Nebraska
          corporation.  (Incorporated  by reference  to Exhibit  10.23(b) to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.24*+   Employment Offer Letter to Walt Ainsworth,  dated July 15, 2004, by
          Central Freight Lines, Inc.

21.1*     Subsidiaries of Central Freight Lines, Inc., a Nevada corporation.

23.1*     Consent of KPMG LLP.

31.1*     Certification  pursuant  to Item  601(b)(31)  of  Regulation  S-K,  as
          adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002, by
          Robert V. Fasso, the Company's Chief Executive Officer.

31.2*     Certification  pursuant  to Item  601(b)(31)  of  Regulation  S-K,  as
          adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002, by
          Jeffrey A. Hale, the Company's Chief Financial Officer.

32.1*     Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the  Sarbanes-Oxley Act of 2002, by Robert V. Fasso,
          the Company's Chief Executive Officer.

32.2*     Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the  Sarbanes-Oxley Act of 2002, by Jeffrey A. Hale,
          the Company's Chief Financial Officer.

* Filed herewith.
+ Management contract or compensatory plan or arrangement.

                                       38
<PAGE>

                                   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.




Date:  March 31, 2005           By: /s/ Robert V. Fasso
                                ----------------------------------------------
                                Name:    Robert V. Fasso
                                Title:   Chief Executive Officer and President



     Signature and Title                                              Date



/s/ Robert V. Fasso                                               March 31, 2005
-------------------------------------------------
Robert V. Fasso
President, Chief Executive Officer;  and Director
(principal executive officer)


/s/ Jeffrey A. Hale                                               March 31, 2005
--------------------------------------------------
Jeffrey A. Hale
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)


Jerry Moyes                                                       March 31, 2005
--------------------------------------------------
Jerry Moyes
Chairman of the Board of Directors


/s/ J. C. Carruth                                                 March 31, 2005
--------------------------------------------------
J. C. Carruth
Director


/s/ John Breslow                                                  March 31, 2005
--------------------------------------------------
John Breslow
Director


/s/ Porter J. Hall                                                March 31, 2005
--------------------------------------------------
Porter J. Hall
Director


/s/ Gordan W. Winburne                                            March 31, 2005
--------------------------------------------------
Gordan W. Winburne
Director

                                       39
<PAGE>

                  Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Central Freight Lines, Inc.:

We  have  audited   Management's  Report  on  Internal  Control  Over  Financial
Reporting,  appearing  under item 9A(b),  that Central  Freight Lines,  Inc. and
subsidiaries  (the  Company) did not maintain  effective  internal  control over
financial  reporting  as of  December  31,  2004,  because  of the effect of the
material  weaknesses  identified in management's  assessment,  based on criteria
established in Internal Control-Integrated  Framework issued by the Committee of
Sponsoring  Organizations  of the  Treadway  Commission  (COSO).  The  Company's
management  is  responsible  for  maintaining  effective  internal  control over
financial  reporting  and for its  assessment of the  effectiveness  of internal
control over financial reporting. Our responsibility is to express an opinion on
management's  assessment  and an opinion on the  effectiveness  of the Company's
internal control over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

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

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

A  material  weakness  is  a  control  deficiency,  or  combination  of  control
deficiencies,  that  results  in more than a remote  likelihood  that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.  The following  three material  weaknesses have been identified and
included in management's assessment as of December 31, 2004:

The  Company's  policies  and  procedures  were not  sufficient  to ensure  that
transactions   processed  through  the  Company's  billing  system  resulted  in
accounting for and reporting of such transactions  pursuant to the provisions of
the respective  customer contract.  Specifically,  the Company's billing process
lacked  controls to ensure the accuracy of entries to the billing  system and to
ensure that changes to customer  contracts  were reflected in the billing system
accurately  and  timely.  These  deficiencies  result  in  more  than  a  remote
likelihood that a material  misstatement  of the annual or interim  consolidated
financial statements would not be prevented or detected.

The Company's  procedures were not sufficient to ensure the accuracy of reported
amounts for the Company's tire and spare parts  inventories.  Specifically,  the
Company did not reconcile,  pursuant to its policy,  physical counts of tire and
spare parts  inventories to the Company's  year-end general ledger. As a result,
errors in  accounting  for inventory  were  identified  and  corrected  prior to
issuance  of  the  Company's  2004  consolidated   financial  statements.   This
deficiency results in more than a remote likelihood that a material misstatement
of  the  annual  or  interim  consolidated  financial  statements  would  not be
prevented or detected.

The  Company  did not  maintain  policies  and  procedures  to  ensure  that the
accounting  for  valuation  allowances  associated  with  deferred  taxes was in
accordance with U.S. generally  accepted  accounting  principles.  Specifically,
management's  procedures did not provide for an effective review of deferred tax
asset amounts for purposes of evaluating realizability.  As a result, a material
error in the  determination of the valuation  allowances for deferred tax assets
was  identified   and  corrected   prior  to  issuance  of  the  Company-s  2004
consolidated financial statements. This deficiency results in more than a remote
likelihood that a material  misstatement  of the annual or interim  consolidated
financial statements would not be prevented or detected.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the consolidated balance sheets of
Central Freight Lines,  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 years in the  three-year  period  ended  December 31,
2004.  These material  weaknesses  were  considered in  determining  the nature,
timing,  and extent of audit tests applied in our audit of the 2004 consolidated
financial statements, and this report does not affect our report dated March 30,
2005,  which expressed an unqualified  opinion on those  consolidated  financial
statements.

In our opinion,  management's  assessment that Central  Freight Lines,  Inc. and
subsidiaries  did  not  maintain   effective  internal  control  over  financial
reporting as of December 31, 2004, is fairly stated,  in all material  respects,
based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring  Organizations  of the Treadway  Commission  (COSO).
Also, in our opinion, because of the effect of the material weaknesses described
above on the  achievement  of the  objectives of the control  criteria,  Central
Freight Lines,  Inc. and  subsidiaries  have not 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 (COSO).

KPMG LLP
Dallas, Texas
March 30, 2005



                                F-2
<PAGE>




                    Report of Independent Registered Public Accounting Firm


The Board of Directors and Stockholders
Central Freight Lines, Inc.:

     We have audited the  accompanying  consolidated  balance  sheets of Central
Freight Lines,  Inc. and subsidiaries  (the Company) as of December 31, 2004 and
2003,  and the related  consolidated  statements  of  operations,  stockholders-
equity,  and cash  flows for each of the years in the  three-year  period  ended
December  31,   2004.   These   consolidated   financial   statements   are  the
responsibility of the Company-s management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.


     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Central
Freight Lines,  Inc. and  subsidiaries as of December 31, 2004 and 2003, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended  December 31, 2004, in conformity  with U.S.  generally
accepted accounting principles.

     As  discussed  in  note 2 to the  consolidated  financial  statements,  the
Company  changed its method of  accounting  for  goodwill  and other  intangible
assets in accordance with Statement of Financial  Accounting  Standards No. 142,
Goodwill and Other Intangible Assets, in 2002.

     We also have  audited,  in  accordance  with the  standards  of the  Public
Company Accounting Oversight Board (United States), the effectiveness of Central
Freight Lines, Inc. and subsidiaries'  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  (COSO),  and our  report  dated  March  30,  2005,
expressed an unqualified  opinion on management's  assessment of, and an adverse
opinion  on  the  effective   operation  of,  internal  control  over  financial
reporting.




KPMG LLP
Dallas, Texas
March 30, 2005




                                       F-3
<PAGE>

                  CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2004 and 2003
                    (Dollars in thousands, except share data)
<TABLE>
<CAPTION>


                          Assets                                                        2004                2003
                           <S>                                                           <C>                 <C>
                                                                                  ----------------    ----------------
Cash and cash equivalents                                                           $      2,144        $     37,269
Restricted cash                                                                           20,825                   -
Accounts receivable less allowance for doubtful accounts and revenue                      51,582              51,864
 Adjustments of $7,854 in 2004 and $5,353 in 2003
Other current assets                                                                       8,655               8,298
Deferred income taxes                                                                      6,689               4,588
                                                                                  ----------------    ----------------
                Total current assets                                                      89,895             102,019
Property and equipment, net                                                              135,274             114,693
Goodwill                                                                                   4,324               4,324
Other assets                                                                               7,761               2,113
                                                                                  ----------------    ----------------
                Total assets                                                        $    237,254        $     223,149
                                                                                  ================    ================

              Liabilities and stockholders' equity
Current maturities of long-term debt                                                $     10,958        $      6,375
Short-term notes payable                                                                  28,108                   -
Trade accounts payable                                                                    23,835              15,391
Payables for related party transportation services                                           988               1,020
Accrued expenses                                                                          23,050              25,728
                                                                                  ----------------    ----------------
                Total current liabilities                                                 86,939              48,514
Long-term debt, excluding current maturities                                              21,884              19,988
Related party financing                                                                   22,852              23,154
Deferred income taxes                                                                      8,375              15,633
Claims and insurance accruals                                                              9,646               7,422
                                                                                  ----------------    ----------------
                Total liabilities                                                        149,696             114,711
                                                                                  ----------------    ----------------


Commitments and contingencies(Notes 12 and 14)
Stockholders' equity:
 Preferred stock; $0.001 par value per share; 10,000,000 shares authorized; none
  issued or outstanding                                                                        -                   -
 Common Stock; $0.001 par value per share; 100,000,000 shares authorized,
  18,188,894 and 17,632,545 shares issued and outstanding as of
  December 31, 2004 and 2003                                                                  18                  17
Additional paid-in capital                                                               109,554             108,143
Unearned compensation                                                                       (266)              (822)
Retained earnings (accumulated deficit)                                                  (21,748)              1,100
                                                                                  ----------------    ----------------
                Total stockholders' equity                                                87,558             108,438
                                                                                  ----------------    ----------------
                Total liabilities and stockholders' equity                          $    237,254        $    223,149
                                                                                  ================    ================
See accompanying notes to consolidated financial statements.
</TABLE>

                                       F-4
<PAGE>


                  CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years ended December 31, 2004, 2003 and 2002
                  (Dollars in thousands except per share data)
<TABLE>
<CAPTION>
                                                                           2004           2003           2002
                                                                       ------------   ------------   ------------
           <S>                                                             <C>             <C>            <C>

Operating revenues                                                     $  386,601     $  389,696     $  371,445
                                                                       ------------   ------------   ------------
Operating expenses:
  Salaries, wages and benefits                                            222,230        205,393        209,302
  Purchased transportation                                                 42,152         38,113         28,806
  Purchased transportation - related parties                               14,571         18,582         21,106
  Operating and general supplies and expenses                              82,702         66,144         59,270
  Operating and general supplies and expenses - related parties               274             12            286
  Insurance and claims                                                     25,186         16,057         14,576
  Building and equipment rentals                                            4,297          3,181          3,241
  Building and equipment rentals - related parties                          1,795          1,903          1,779
  Depreciation and amortization                                            17,049         16,605         17,974
                                                                       ------------   ------------   ------------
      Total operating expenses                                            410,256        365,990        356,340
                                                                       ------------   ------------   ------------
  (Loss) income from operations                                           (23,655)        23,706         15,105
Other expense:
  Interest expense                                                         (1,469)        (3,547)        (4,916)
  Interest expense - related parties                                       (6,197)        (6,130)        (6,359)
                                                                       ------------   ------------   ------------
      (Loss) income from continuing operations before income taxes        (31,321)        14,029          3,830
Income taxes:
  Income tax benefit (expense)                                              8,473         (1,759)         1,412
  Income tax expense - conversion to C corporation                              -         (9,834)             -
                                                                       ------------   ------------   ------------
     (Loss) income from continuing operations                             (22,848)         2,436          5,242
Loss from discontinued operations                                               -         (8,341)             -
                                                                       ------------   ------------   ------------
      Net (loss) income                                                $  (22,848)    $   (5,905)     $   5,242
                                                                       ============   ============   ============
Pro forma C Corporation data (unaudited):
  Historical income from continuing operations before
   income taxes                                                        $        -     $   14,029 $        3,830
  Pro forma income tax expense                                                  -         (5,666)        (2,781)
                                                                       ------------   ------------   ------------
  Pro forma income from continuing operations                                   -          8,363          1,049
  Loss from discontinued operations                                             -         (8,341)             -
                                                                       ------------   ------------   ------------
  Pro forma net income                                                 $        -     $       22 $        1,049
                                                                       ============   ============   ============
  Net loss per share:
    Basic                                                              $    (1.27)    $        -     $        -
    Diluted                                                                 (1.27)             -              -
  Pro forma income (loss) per share:
  Basic:
    Income from continuing operations                                  $        -     $     0.75     $     0.10
    Loss from discontinued operations                                           -          (0.75)             -
    Net income                                                                  -              -           0.10
   Diluted:
    Income from continuing operations                                  $        -     $     0.69     $     0.09
    Loss from discontinued operations                                           -          (0.69)             -
    Net income                                                                  -              -           0.09
Weighted average outstanding shares (in thousands):
  Basic                                                                    17,971         11,163         10,868
  Diluted                                                                  17,971         12,103         11,548
See accompanying notes to consolidated financial statements.
</TABLE>

                                       F-5
<PAGE>

                  CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
                  Years ended December 31, 2004, 2003, and 2002
                  (Dollars in thousands, except share data)
<TABLE>
<CAPTION>
                                          Common stock
                                      ---------------------                         Notes receivable
                                      Shares, net of        Additional              from stockholder Retained              Total
                                         treasury            paid-in     Unearned        and         earnings Treasury stockholders'
                                          shares     Amount  capital   Compensation    affiliate   (Accumulated  stock     equity
                                                                                                     deficit)
                                      -------------- ------ ---------- ------------ ---------------- -------- -------- -------------
              <S>                          <C>        <C>      <C>          <C>           <C>           <C>      <C>       <C>

Balances at December 31, 2001            10,868,218  $  12  $  28,894  $         -  $        (6,688) $ 2,871  $(1,787) $    23,302
Issuance of common shares                    11,148      -          -            -                -        -        -            -
Purchase of treasury stock                  (11,148)     -          -            -                -        -     (300)        (300)
Retirement of treasury stock                      -     (1)    (2,086)           -                -        -    2,087            -
Advances to stockholder                           -      -          -            -           (1,300)       -        -       (1,300)
Non-cash contribution from stockholder            -      -      3,300            -                -        -        -        3,300
Net earnings                                      -      -          -            -                -    5,242        -        5,242
Stock option compensation                         -      -      1,189       (1,059)               -        -        -          130
                                      -------------- ------ ---------- ------------ ---------------- -------- -------- -------------
Balances at December 31, 2002            10,868,218  $  11     31,297       (1,059)          (7,988)   8,113        -       30,374
Exercise of stock options, including      1,064,327      1      3,088            -                -        -        -        3,089
non-cash tax benefit of $1,340
Non-cash contribution from stockholder            -      -        500            -                -        -        -          500
Proceeds from initial public offering     5,700,000      5     77,629            -                -        -        -       77,634
Distributions paid                                -      -          -            -                -   (6,139)       -       (6,139)
Payment from stockholder                          -      -        660            -            7,988        -        -        8,648
Net loss                                          -      -          -            -                -   (5,905)       -       (5,905)
Transfer of undistributed S corporation
deficit or "loss"                                 -      -     (5,031)           -                -    5,031        -            -
Stock option compensation                         -      -          -          237                -        -        -          237
                                      -------------- ------ ---------- ------------ ---------------- -------- -------- -------------
Balances at December 31, 2003            17,632,545  $  17    108,143         (822)               -    1,100        -      108,438
Exercise of stock options, including
non-cash tax benefit of $621                545,686      1      1,727            -                -        -        -        1,728
Issuance of common stock                     10,663      -         48            -                -        -        -           48
Net loss                                          -      -          -            -                -  (22,848)       -      (22,848)
Stock option compensation, net of
forfeitures                                       -      -       (364)          556               -        -        -          192
                                      -------------  ------ ---------- ------------ ---------------- -------- -------- -------------
Balances at December 31, 2004            18,188,894  $  18  $ 109,554  $      (266) $             - $(21,748) $     -  $    87,558
                                      ============== ====== ========== ============ ================ ======== ======== =============

See accompanying notes to consolidated financial statements.
</TABLE>

                                      F-6
<PAGE>


                  CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2004, 2003, and 2002
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                         2004               2003              2002
                                                                     -------------     -------------      ------------
                 <S>                                                       <C>              <C>                <C>
Cash flows from operating activities:
     Net (loss) income                                               $   (22,848)      $   (5,905)        $   5,242
     Adjustments to reconcile net (loss) income to
       net cash (used in) provided by operating activities:
         Bad debt expense                                                  1,669              876                82
         Non-cash interest expense - related parties                           -              500             3,300
         Equity in loss (income) of affiliate                                 21               (4)               (4)
         Loss on sale of subsidiary                                            -            8,341             1,256
         Depreciation and amortization                                    17,049           16,605            22,819
         Deferred income taxes                                            (8,738)           1,707               712
         Establishment of deferred taxes upon conversion to C
           corporation                                                         -            9,834                 -
         Decrease in unearned compensation                                   192              237               130
         Gain on curtailment of health plan                                    -           (7,799)                -
         Change in operating assets and liabilities, net
            of purchase accounting effects:
              Accounts receivable                                         (1,387)          (4,657)           (4,434)
              Accounts receivable - related parties                            -              651               449
              Other assets                                                (1,363)          (1,261)           (1,078)
              Trade accounts payable                                       8,444           (3,226)            8,332
              Trade accounts payable - related parties                       (32)            (690)             (670)
              Claims and insurance accruals                                4,314            2,010             1,601
              Accrued expenses and other liabilities                      (4,768)          (2,144)           (2,579)
                                                                     -------------     -------------      ------------
                  Net cash (used in) provided by operating                (7,447)          15,075            35,158
                     activities
                                                                     -------------     -------------      ------------
Cash flows from investing activities:
     Additions to property and equipment                                 (36,717)          (7,024)           (6,008)
     Proceeds from sale of property and equipment                          4,204            1,466             1,980
     Cash paid for disposition of subsidiary                                   -           (8,341)                -
     Cash paid for acquisition of businesses                              (9,273)               -            (2,606)
     Cash of subsidiary sold                                                   -                -            (1,197)
     Advances to stockholders and affiliates                                   -                -            (1,300)
     Repayment of advances to affiliate                                        -            8,648               367
                                                                     -------------     -------------      ------------
                  Net cash used in investing activities                  (41,786)          (5,251)           (8,764)
                                                                     -------------     -------------      ------------
Cash flows from financing activities:
     Restricted cash                                                     (20,825)               -                 -
     Proceeds from long-term debt                                         14,937           47,198           149,508
     Repayments of long-term debt                                         (8,459)        (100,347)         (168,072)
     Proceeds from securitization facility                                34,300                -                 -
     Repayments of securitization facility                                (7,000)               -                 -
     Exercise of stock options                                             1,107            1,749                 -
     Proceeds from issuance of common stock                                   48           77,634              (367)
     Purchase of treasury stock                                                -                -              (300)
     Distributions paid                                                        -           (6,139)                -
                                                                     -------------     -------------      ------------
                  Net cash provided by (used in) financing
                     activities                                           14,108           20,095           (19,231)
                                                                     -------------     -------------      ------------
                  Net increase (decrease) in cash                        (35,125)          29,919             7,163
Cash at beginning of year                                                 37,269            7,350               187
                                                                     -------------     -------------      ------------
Cash at end of year                                                  $     2,144       $   37,269          $  7,350
                                                                     =============     =============      ============
See accompanying notes to consolidated financial statements.
</TABLE>

                                       F-7
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars, except share and per share amounts)

(1)  Business of the Company

(a)  Basis of Presentation

     Central  Freight Lines,  Inc. is a Nevada holding company that owns Central
Freight  Lines,  Inc.,  a  Texas  corporation,  (collectively,  the  Company  or
Central).  Central is an  inter-regional  less-than-truckload  ("LTL")  trucking
company that has operations in the Southwest,  Northwest, West Coast and Midwest
regions of the United States of America.  Central maintains alliances with other
similar  companies  to  complete  transportation  of  shipments  outside  of its
operating territory.

(b)  Initial Public Offering of Common Stock

     On December 12, 2003, the Company completed an initial public offering (the
"Offering")  of  8,500,000  shares of common  stock at $15 per  share,  of which
5,700,000  were sold by the  Company and  2,800,000  were sold by certain of the
Company's  stockholders.  The net  proceeds  to the  Company  from  the  sale of
5,700,000 shares of common stock, after deduction of associated  expenses,  were
$77,634.

     On November  1, 2003 the Company  converted  from an S  corporation  to a C
corporation for federal income tax purposes.  Undistributed  S Corporation  loss
(accumulated deficit) of $5,031 was transferred to additional paid-in capital.

(2)  Summary of Significant Accounting Policies and Practices

(a)  Basis of Presentation and Principles of Consolidation

     The consolidated  financial  statements include the accounts of Central and
its subsidiaries.  All significant intercompany balances and transactions of the
consolidated  subsidiaries  have been  eliminated.  As  discussed in note 3, the
Company acquired and disposed of Central  Refrigerated  Service,  Inc. ("Central
Refrigerated")  during 2002.  Central  Refrigerated  has been accounted for as a
discontinued operation.

(b)  Use of Estimates

     Management of the Company makes estimates and  assumptions  relating to the
reporting of assets and liabilities and the disclosure of contingent  assets and
liabilities  at the  date  of the  financial  statements  and the  reporting  of
revenues and expenses during the reporting  periods to prepare the  consolidated
financial statements in conformity with accounting principles generally accepted
in the  United  States of  America.  Actual  results  could  differ  from  those
estimates.

(c)  Tires in Service

     The Company capitalizes tires placed in service on new revenue equipment as
a part of the equipment  cost.  Replacement  tires and costs for recapping tires
are expensed at the time the tires are placed in service.

(d)  Property and Equipment

     Property and equipment are recorded at cost. In the first  quarters of 2003
and 2002, the Company  revised the estimated  useful lives and salvage values of
certain classes of property and equipment to more appropriately  reflect how the
assets are  expected  to be used over time.  In the first  quarter of 2003,  the
Company  increased  revenue  equipment lives to five to 15 years from five to 12
years.  If the  Company  had not  changed  the  estimated  useful  lives of such
property and equipment,  additional  depreciation  expense of approximately $580
would have been recorded  during the year ended December 31, 2003.  Accordingly,
the  change in  estimate  resulted  in an  increase  in income  from  continuing
operations of approximately $557 for the year ended December 31, 2003.

                                       F-8
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     In the first quarter of 2002, the Company increased revenue equipment lives
from three to seven years to five to 12 years.  Prior to 2002,  depreciation  of
property and  equipment  was  calculated  on the  straight-line  method over the
estimated  useful  lives of  three  to  seven  years  for  revenue  and  service
equipment,  three to 20 years for structures and improvements and three to seven
years for  furniture  and office  equipment.  If the Company had not changed the
estimated useful lives of such property and equipment,  additional  depreciation
expense of  approximately  $2,939 would have been recorded during the year ended
December 31, 2002. Accordingly the change in estimate resulted in an increase in
income from  continuing  operations of  approximately  $2,807 for the year ended
December 31, 2002.

     Net gains (losses) on the  disposition of property and equipment were $595,
$446  and  ($1)  for  the  years  ended  December  31,  2004,   2003  and  2002,
respectively.

(e)  Impairment of Long-Lived Assets

     The Company reviews long-lived assets and certain identifiable  intangibles
for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable.  Recoverability  of assets to be held
and used is  measured  by a  comparison  of the  carrying  amount of an asset to
future  undiscounted  net cash flows  expected to be generated by the asset.  If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured by the amount by which the  carrying  amount of the assets  exceeds the
fair value of the assets. There were no impairments during 2004, 2003 or 2002.

     The Company adopted Statement of Financial  Accounting  Standards  ("SFAS")
No. 142,  Goodwill and Other Intangible  Assets,  on January 1, 2002. As of that
date,  goodwill is no longer  amortized  (prior to the adoption of SFAS No. 142,
goodwill had been  amortized  on a  straight-line  basis over 15 years),  but is
tested annually, or more frequently if a triggering event occurs, for impairment
using a fair  value  approach.  Pursuant  to  SFAS  No.  142,  the  Company  has
determined  that, as of December 31, 2004 and 2003 there were no  impairments to
the carrying  value of goodwill.  The Company's  market value has declined since
December 31,  2004.  As this is a  triggering  event,  the Company will test for
impairment in the first quarter of 2005.

(f)  Revenue Recognition

     The Company  recognizes revenue upon the delivery of the related freight. A
portion of the Company's  revenue is derived from shipments  that  originated or
terminated in other regions,  where a portion of freight  movement is handled by
another  carrier.  Most of this revenue is with  carriers with which the Company
maintains  transportation  alliances.  The Company does not recognize revenue or
the associated  expenses that relate to the portion of the shipment  transported
by its alliance partners.

     At December 31, 2004 and 2003, there was approximately $4,100 and $7,400 of
services performed and not yet billed.

(g)  Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.

     Significant  management  judgment is required in determining  the 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.  Under SFAS No. 109 and
applicable  interpretations,  if all or some  portion of specific  deferred  tax
assets are  determined  not to be  realizable,  a  valuation  allowance  must be
established  for the amount of such  deferred tax assets.  In 2004,  the Company
established a $4.9 million valuation allowance for deferred tax assets.


                                       F-9
<PAGE>


CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     On November 1, 2003,  the Company  converted  from an S corporation  to a C
corporation  for federal  income tax  purposes.  Prior to November 1, 2003,  the
Company  had  elected S  corporation  status  under  which  federal  income  tax
attributes  flow directly to the  stockholders.  Accordingly,  the  accompanying
consolidated  financial  statements  prior to November  1, 2003,  do not include
federal income taxes.

(h)  Credit Risk

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations   of  credit  risk  consist   primarily  of  trade   receivables.
Concentrations  of credit risk with respect to trade receivables are limited due
to the  Company's  large number of customers and the diverse range of industries
which they  represent.  As of  December  31,  2004 and 2003,  the Company had no
significant concentrations of credit risk.

                                       F-10
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

(i)  Stock-Based Compensation

     The  Company  has  a  stock-based  employee  compensation  plan,  which  is
described  more fully in note 8. The  Company  accounts  for that plan under the
recognition and measurement  principles of Accounting  Principles  Board ("APB")
Opinion  No.  25,  Accounting  for  Stock  Issued  to  Employees,   and  related
interpretations.  As such, the Company records  compensation expense only if the
fair value of the  underlying  stock  exceeds the exercise  price on the date of
grant.  The following  table  illustrates  the effect on net loss,  net loss per
share,  adjusted  pro forma net income  (loss) and adjusted pro forma net income
(loss)  per  share  if the  Company  had  applied  the  fair  value  recognition
provisions of FASB Statement No. 123,  Accounting for Stock-Based  Compensation,
and as allowed by SFAS No.  148,  Accounting  for  Stock-Based  Compensation  --
Transition and Disclosure, an Amendment of FASB No. 123, to stock-based employee
compensation and had the Company been a C corporation in such years.
 <TABLE>
<CAPTION>

                                                                 2004          2003         2002
                                                              ------------  -----------  -----------
            <S>                                                    <C>          <C>          <C>
Net loss, as reported:                                        $   (22,848)
Add:
     Stock-based employee compensation expense included
     in reported net (loss), net of related tax effects               192
Deduct:
     Total stock-based employee compensation expense
     determined under fair value based method for all
     awards                                                          (511)
                                                              ------------
Pro forma net loss                                            $   (23,167)
                                                              ============
Net loss per share
  Basic
       As reported                                            $     (1.27)
       Pro forma                                                    (1.29)
  Diluted
       As reported                                                  (1.27)
        Pro forma                                                   (1.29)

Net (loss) income, as reported:                                             $   (5,905)  $    5,242
Add:
     Stock-based employee compensation expense included
     in reported net (loss) income, net of related tax effects                     237          130
Deduct:
     Total stock-based employee compensation expense
     determined under fair value based method for all
     awards, net of related tax effects                                           (395)      (1,284)
                                                                            -----------  ------------
Adjusted net (loss) income                                                      (6,063)       4,088
Pro forma federal income tax adjustment (unaudited)                              5,989       (4,609)
                                                                            -----------  ------------
Adjusted pro forma net loss (unaudited)                                     $      (74)  $     (521)
                                                                            ===========  ============
Adjusted pro forma net income (loss) per share (unaudited):
  Basic
       As reported                                                          $      0.00  $     0.10
       Pro forma                                                                  (0.01)      (0.05)
  Diluted
       As reported                                                                 0.00        0.09
       Pro forma                                                                  (0.01)      (0.05)
</TABLE>

     In 2002,  the Company  granted  options at an exercise  price that was less
than fair value,  resulting in approximately $1,189 of compensation to employees
which is being expensed over the vesting period of these

                                      F-11
<PAGE>

CENTRAL FREIGHT LINES, INC.
AND SUBSIDIARIES NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

options.  Compensation  expense  is  calculated  net of  options  that have been
forfeited.  Compensation  expense of $192, $237 and $130 was recognized in 2004,
2003, and 2002.

(j)  Claims and Insurance Accruals

     Claims accruals represent the estimated costs to repair and replace damaged
goods resulting from cargo claims. Insurance accruals reflect the estimated cost
of claims for bodily  injury and  property  damage,  workers'  compensation  and
employee   health  care  not  covered  by  insurance.   These   liabilities  for
self-insurance  are accrued  based on claims  incurred  and on estimates of both
unasserted  and  unsettled  claims  which  are  assessed  based on  management's
evaluation of the nature of the claims and the Company's past claims experience.
The  portion  of  the  accrual  classified  as a  current  liability  represents
management's  estimate of that portion of the claims that will be settled in the
next twelve months. Total claims and insurance accruals were $25,081 and $20,767
at December 31, 2004 and 2003, respectively.

     While  management  believes  that  amounts  included  in  the  accompanying
consolidated  financial  statements are adequate,  such estimates may be more or
less than the amounts ultimately paid when the claims are settled. The estimates
are continually reviewed and any changes are reflected in current operations.

(k)  Allowance for Doubtful Accounts and Revenue Adjustments

     The Company establishes an allowance for doubtful accounts and an allowance
for revenue  adjustments to reduce its accounts  receivable balance to an amount
that it estimates is collectible from its customers.  The allowance for doubtful
accounts  is  estimated  by  management  based on  factors  such as aging of the
receivables and historical collection experience. At December 31, 2004 and 2003,
the allowance for doubtful accounts was $3,567 and $2,452, respectively.

     The allowance for revenue  adjustments  is also  established  by management
based on factors such as  historical  trends in actual  adjustments  to revenue.
Revenue will be adjusted for various reasons, such as customer disputes, billing
and rating errors, and weight and inspection  corrections.  At December 31, 2004
and  2003,  the  allowance  for  revenue  adjustments  was  $4,287  and  $2,901,
respectively.

(l)  Loss per Share and Pro Forma Income (Loss) per Share

     Pro forma  income  (loss) per share has been  calculated  as if the Company
were a C corporation  for federal income tax purposes for years  presented prior
to 2004.  Basic loss per share and pro forma basic  income  (loss) per share are
calculated using the weighted average number of shares outstanding. The weighted
average shares outstanding used in the calculation of diluted loss per share and
pro forma diluted income (loss) per share include the dilutive effect of options
to purchase common stock, calculated using the treasury stock method.

(m)  Recently Issued Accounting Standards

     In December 2004, the FASB revised SFAS No. 123, Share-Based Payment.  This
Statement is a revision of FASB Statement No. 123,  Accounting  for  Stock-Based
Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees,  and its related  implementation  guidance.  This Statement
establishes  standards for the  accounting for  transactions  in which an entity
exchanges  its  equity  instruments  for goods or  services.  It also  addresses
transactions  in which an entity  incurs  liabilities  in exchange  for goods or
services that are based on the fair value of the entity's equity  instruments or
that may be settled by the issuance of those equity instruments.  This Statement
focuses  primarily on accounting  for  transactions  in which an entity  obtains
employee services in share-based payment  transactions.  This Statement does not
change the accounting guidance for share-based payment transactions with parties
other than  employees  provided in Statement 123 as  originally  issued and EITF
Issue No. 96-18,  Accounting  for Equity  Instruments  That Are Issued to Other
Than  Employees  for  Acquiring,  or  in  Conjunction  with  Selling,  Goods  or
Services. This Statement does not address the accounting for

                                       F-12
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

employee share ownership plans, which are subject to AICPA Statement of Position
93-6,  Employers' Accounting for Employee Stock Ownership Plans. The Company has
not yet  determined  the method of adoption  or the effect of adopting  SFAS No.
123R,  and the Company has not  determined  whether the adoption  will result in
amounts  that are similar to the current  pro forma  disclosures  under SFAS No.
123.

(n)  Reclassifications

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

(o)  Liquidity

     Although  there  can  be  no  assurance,   management  believes  cash  from
operations,  borrowings  available  under  the new  credit  facility,  and other
sources of liquidity will be sufficient to fund  operations at least through the
end  of  2005.  To  the  extent  that  actual  results  or  events  differ  from
management's financial projections or business plans, liquidity may be adversely
affected  and the  Company  may be  unable  to  meet  its  financial  covenants.
Specifically,  liquidity  may  be  adversely  affected  by one  or  more  of the
following  factors:  weak freight demand or a loss in customer  relationships or
volume,  success  in  executing  management's  turnaround  steps , an ability to
improve the  collection  of accounts  receivable,  elevated  fuel prices and the
ability to collect fuel surcharges,  costs associated with insurance and claims,
an inability to maintain  compliance  with,  or  negotiate  amendments  to, loan
covenants,  the ability to finance tractors and trailers, and the possibility of
shortened  payment  terms by suppliers  and vendors  worried about the Company's
ability to meet payment obligations.


CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

(3)  Acquisition and Discontinued Operations

     On  April  22,  2002,   the  Company,   through  its   subsidiary   Central
Refrigerated,  acquired  substantially all of the operations and assets of Simon
Transportation  Services Inc. DIP, and its  subsidiaries,  Dick Simon  Trucking,
Inc. DIP and Simon  Terminal LLC DIP in exchange for cash and the  assumption of
certain  liabilities.  The  purpose of the  acquisition  was to expand  into the
refrigerated  transportation  business.  The  assets  acquired  and  liabilities
assumed were  recorded at estimated  fair values as  determined by the Company's
management  based on  information  currently  available and on assumptions as to
future operations. The total consideration paid was approximately $600 less than
the estimated fair value of the acquired  assets and was recorded as a reduction
to property and  equipment.  In connection  with this  acquisition,  the Company
borrowed approximately $3,300 and assumed certain notes payable to the Company's
principal  stockholder  and affiliates  totaling  $11,400.  The following  table
summarizes  the  estimated  fair value of the assets  acquired  and  liabilities
assumed in the acquisition:

          Assets acquired:
            Current assets..............................   $    26,511
            Property and equipment......................        57,271
            Other assets................................            55
                                                           -----------
               Total assets acquired....................        83,837
          Less:
            Notes payable to shareholder and affiliate..      (11,400)
            Liabilities assumed.........................      (69,104)
            Direct costs of the acquisition.............         (727)
                                                           -----------
               Cash consideration paid..................   $     2,606
                                                           ===========

                                       F-13
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     The following  unaudited pro forma  consolidated  results of operations for
fiscal 2002 assume the Central Refrigerated acquisition was completed on January
1, 2001:

                                     2002
                                  ---------
            Net loss.......       $(30,023)
            Loss per share:
            Basic..........          (2.76)
            Diluted........          (2.76)

     Effective December 31, 2002, the Company transferred all of its outstanding
shares of Central  Refrigerated to the principal  stockholder of the Company and
one of his affiliates in exchange for the cancellation of approximately  $14,700
of debt  owed by the  Company  to them.  The  purchase  price  was  based on the
beginning equity of Central Refrigerated. As such, the net book value of Central
Refrigerated  assets  exceeded the purchase  price by the amount of current year
earnings  of  Central  Refrigerated.  Thus,  the  loss on  disposal  of  Central
Refrigerated is offset by the earnings from its operations as follows:

            Earnings from discontinued operations..........   $  1,256
            Loss on disposal...............................     (1,256)
                                                              ---------
            Net earnings from discontinued operations....     $      -
                                                              =========

     Included  in  the  earnings   from   discontinued   operations  is  Central
Refrigerated depreciation expense of $4,845 for 2002.

     On October  28,  2003,  the  Company  amended its  agreement  with  Central
Refrigerated and agreed to accelerate payment of approximately $8,341 originally
due to  Central  Refrigerated  upon  closing  of the  Company's  initial  public
offering.  The $8,341  payment was made on October 28, 2003, and was recorded as
an additional loss on disposal of Central Refrigerated.

     In March 2004, the Company expanded into the Pacific  Northwest through the
purchase of selected  terminal  network and rolling stock of Eastern Oregon Fast
Freight ("EOFF"), a non-union LTL carrier that operated in the states of Oregon,
Washington,   and  Idaho.  The  selected  assets  of  EOFF  were  purchased  for
approximately  $10.0  million,  with the purchase price paid from cash reserves.
The  assets  acquired  were  recorded  at fair  market  value as  determined  by
management  based on  information  currently  available and on assumptions as to
future operations.

     Under the terms of the  agreement,  the  Company  paid  approximately  $7.0
million of the purchase price at closing,  and an additional $2.2 million during
2004. The remaining $0.8 million is recorded on the  consolidated  balance sheet
as  short-term  notes  payable at December 31, 2004,  and is expected to be paid
prior to the end of our 2005 first quarter.

                                       F-14
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

(4) Property and Equipment

     Property and  equipment  consist of the  following at December 31, 2004 and
2003:

                                                               2004        2003
                                                         ----------- -----------
    Revenue and service equipment......................  $   177,141 $   153,345
    Land...............................................       14,937      12,343
    Structures and improvements........................       36,209      29,629
    Furniture and office equipment.....................        9,039       8,415
                                                         ----------- -----------
                                                             237,326     203,732
    Less accumulated depreciation and amortization.....      102,052      89,039
                                                         ----------- -----------
                                                         $   135,274 $   114,693
                                                         =========== ===========

     Revenue and service equipment  includes assets under capitalized  leases of
$55,346  and $44,820 at December  31, 2004 and 2003,  respectively,  and related
accumulated  amortization  of $20,518 and $16,486 at December 31, 2004 and 2003,
respectively.

     In 2003, the Company closed certain terminals that were being financed by a
related  party  (see  note  6(c)).  These  assets,  which  consist  of land  and
structures, are no longer in service and were classified as assets held for sale
in the amounts of $504 and $857 as of December 31, 2004 and 2003,  respectively,
and are  included  in other  assets  in the  accompanying  consolidated  balance
sheets. During 2004 and 2003, $301 and $390,  respectively,  of these properties
were sold and accounted for as a reduction of the related party financing.

     Also included in assets held for sale is a terminal,  which is not financed
by a related party, in Phoenix,  Arizona,  as well as terminals purchased in the
EOFF transaction.  The book value of these assets totaled $3,616 and $994, as of
December 31, 2004 and 2003, respectively.

 (5) Accrued Expenses

     Current accrued expenses consist of the following at December 31, 2004, and
2003:

                                                         2004       2003
                                                     ---------- ----------
    Employee related compensation and benefits.....  $    5,703 $   11,751
    Claims and insurance accruals..................      15,435     13,345
    Other accrued expenses.........................       1,912        632
                                                     ---------- ----------
                                                     $   23,050 $   25,728
                                                     ========== ==========

(6)  Debt and Related Party Financing

(a)  Long-Term Debt

     Long-term debt consists of the following at December 31, 2004, and 2003:

                                                   2004       2003
                                                ---------  ---------
    Equipment notes payable..................   $       -  $    169
    Capital lease obligations (see note 12)..      32,842    26,194
                                                ---------  --------
                                                   32,842    26,363
    Less current portion.....................      10,958     6,375
                                                ---------  --------
                                                $  21,884  $ 19,988
                                                =========  ========

     The Company had a note  agreement  with a third party to acquire  equipment
for use in its  operations.  The  balance of the note was $169 at  December  31,
2003, and was paid in full in 2004 The note had a fixed interest rate of 8.75%.

                                       F-15
<PAGE>
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

(b)  Short-Term Notes Payable

     On April 30, 2002, the Company  entered into a $40,000  revolving  accounts
receivable securitization facility (the Securitization Facility) that was set to
expire on April 27, 2005. Under the Securitization  Facility,  the Company, on a
revolving  basis,  sells its  interests  in its accounts  receivable  to Central
Receivables,  a  wholly-owned,   special  purpose  subsidiary.  The  assets  and
liabilities of Central Receivables are included in the accompanying consolidated
financial  statements  of the Company.  The Company can receive up to $40,000 of
proceeds, subject to eligible receivables and will pay a service fee recorded as
interest expense, as defined in the agreement. The Company pays commercial paper
interest rates plus an applicable margin on the proceeds  received.  Interest is
generally  payable  monthly.   The  Securitization   Facility  includes  certain
restrictions  and  financial  covenants.  The Company must pay a commitment  fee
equal to 0.35%  per annum of 102% of the  facility  limit  minus  the  aggregate
principal balance,  as well as an administrative fee equal to 0.15% per annum of
the  uncommitted  balance.  As of  December  31, 2004 there were  borrowings  of
$27,300,  included in short term notes payable in the accompanying  consolidated
balance sheet,  and at December 31, 2003,  there were no borrowings  outstanding
under the Securitization  Facility.  As of December 31, 2004, the borrowing rate
amounted to 2.73%.

     On July 28,  2004,  the Company and  SunTrust  Bank  entered into a $30,000
amended and  restated  revolving  credit  facility  (the  Amended  and  Restated
Revolving Facility). On November 5, 2004, the Company executed a first amendment
to the Amended and Restated Revolving Credit Facility. Under the first amendment
to the Amended and Restated Revolving Facility, the Company can receive up to an
aggregate  of $30,000 of  proceeds in the form of letters of credit,  only.  The
Amended and Restated  Revolving  Facility  accrues  interest at a variable  rate
equal,  at the  Company's  option,  to either (a) the bank's prime  lending rate
minus  an  applicable  margin,  or (b)  LIBOR  plus an  applicable  margin.  The
applicable  margins for both types of loans will vary depending on the Company's
lease adjusted leverage ratio.  Interest is payable in periods from one to three
months at the option of the Company. The Amended and Restated Revolving Facility
is collateralized by certain revenue  equipment,  and letters of credit that are
issued are collateralized by cash collateral. The facility contains, among other
things,  certain  financial and  non-financial  covenants,  and was to mature on
April 30, 2006.  The Company must pay a commitment  fee equal to 0.50% per annum
on the daily unused Amended and Restated  Revolving Facility as well as a letter
of  credit  fee  equal to 0.25% per  annum on the  average  daily  amount of the
letters of credit.  The Company  must also cash  collateralize  its  outstanding
letters of credit.  At December 31,  2004,  the Company had  restricted  cash of
$20,825 (funded by borrowings under the securitization facility), as reported on
the Company's  consolidated balance sheet related to these letters of credit. At
December 31, 2004, the Company had letters of credit of $19,753  outstanding and
$ 10,247 available under the Amended and Restated Revolving Facility.

     On January 31, 2005, the Company  entered into the New Credit Facility with
Bank of America,  N.A.,  as Agent,  and certain  other lenders from time to time
party to the New Credit  Facility,  in the aggregate  principal  amount of up to
$70,000.  The New  Credit  Facility  replaces  both  the  Amended  and  Restated
Revolving  Facility and the  Securitization  Facility.  The New Credit  Facility
terminates on January 31, 2009. (See note 19)

     In  March  2004,   the  Company   acquired   certain  assets  of  EOFF  for
approximately   $10,000  (See  note  3).  The  remaining   liability  from  this
transaction  at  year  end  is  $808  which  is  recorded  on  the  accompanying
consolidated balance sheet as short-term notes payable at December 31, 2004. The
Company  expects to finalize  and settle this  remaining  liability in the first
quarter of 2005.

(c)  Related-Party Financing

     In 1998,  the Company  entered into an  agreement  with  Southwest  Premier
Properties, L.L.C., an entity controlled by the Company's principal stockholder,
for the sale and leaseback of the land,  structures and  improvements of some of
the Company's terminals. For financial accounting purposes, this transaction has


                                       F-16
<PAGE>
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

been accounted for as a financing arrangement.  Consequently,  the related land,
structures and improvements remain on the Company's  consolidated balance sheet.
The  initial  lease term is for ten years with an option for an  additional  ten
years at the then fair market  rental rate.  At the  expiration  of the original
lease  term,  the  Company  has an option  to  purchase  all of the  properties,
excluding certain surplus properties, for the then fair market value.

     Since the fair  value of the  properties  sold and  leased  back has always
equaled or exceeded  the proceeds  from the  financing  arrangement,  the annual
lease  payments  have been  reflected as a cost of the financing and recorded as
interest expense.  During 2004, $301 of these properties were sold and accounted
for as a reduction in the financing obligation and a reduction in property.  The
amount  outstanding  under the  financing  agreement  was $22,852 and $23,154 at
December  31, 2004 and 2003,  respectively.  If the Company  exercises  the fair
value purchase option, the excess of the amount paid over the recorded financing
obligation will be reflected as additional  interest expense.  If the fair value
purchase option is not exercised at the end of the lease term, the excess of the
recorded financing  obligation over the net book value of the related properties
will be reflected as a gain on the financing arrangement.

(d)  Aggregate Maturities

     Aggregate maturities of long-term debt, related party financing and capital
lease  obligations for each of the five years  following  December 31, 2004, and
thereafter are as follows:

            Years ending December 31:
            2005........................  $    10,958
            2006........................        6,339
            2007........................        7,685
            2008........................        2,426
            2009........................        4,121
            Thereafter..................       24,165
                                          -----------
                                          $    55,694
                                          ===========
(7) Stockholders' Equity

     During 2003,  the Company  amended its Articles of  Incorporation,  and all
Class A and Class B common stock were combined into a single class of stock. All
shares existing,  prior to the public offering, were canceled and re-issued with
shares of the new  publicly  traded  company.  The number of  authorized  common
shares was increased  from  60,000,000 to  100,000,000.  The newly issued shares
have a par value of $0.001 per share.

     At December 31, 2004,  there were 18,188,894  shares of common stock issued
and  outstanding.  5,700,000 newly issued shares of the Company were sold during
the  initial  public  offering  in December  2003 along with  2,800,000  sold by
selling stockholders.

     In  December  2003,  the  authorized  number of  preferred  shares was also
increased from 5,000,000 to 10,000,000.  No shares of preferred  stock have been
issued.

(8)  Stock-Based Compensation

     In 1997,  the Company  established  an incentive  stock plan that  provides
multiple alternatives to compensate eligible employees and nonemployee directors
with Company  common stock.  Under the plan, the Company is authorized to award,
in aggregate,  options to purchase not more than 5,000,000  shares of its common
stock.  Grants to optionees of qualified  stock  options  shall have a per share
exercise price of no less than fair value of the underlying  common stock on the
date of grant. At December 31, 2004,  there were 1,117,863  shares available for
granting under the plan.

     The awards are issuable at the  discretion of the board of  directors.  All
option  grants to date expire 10 years from the date of grant.  Options  granted
under the plan to senior management  (754,000  outstanding at December 31, 2004)
generally vest 20% on the first anniversary of the date of grant and 20% on each
subsequent  anniversary  until  fully  vested.  On January 7, 2002,  the Company
granted  1,260,000  options at an exercise price of $1.35 to its newly hired CEO


                                       F-17
<PAGE>
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

as part of his  employment  agreement.  These options vest 50% at grant date and
20% per year  beginning  January 7, 2003 (756,000  options were exercised in the
fourth  quarter of 2003).  Options  granted  under the plan to upper  management
(282,146  outstanding at December 31, 2004) vest 20% on the fifth anniversary of
the date of grant and 20% on each  subsequent  anniversary  until fully  vested.
Termination  of the  employee  for any reason  other than death,  disability  or
certain  cases of  retirement  causes  the  unvested  portion of the award to be
forfeited.

     At December 31, 2004, there were 100,000 options outstanding granted to the
Company's  board of directors.  20,000 of these options vest ratably over a five
year period  beginning in July 2002. The remaining  80,000 of these options vest
at 1,000  shares  per  board of  directors  meeting  attended  in  person by the
directors.  This vesting began in December  2003. At December 31, 2004,  options
outstanding for all non-management  employees and others totaled 192,722.  These
options generally vest 20% on the first anniversary of the date of grant and 20%
on each subsequent anniversary until fully vested.

     Stock option activity  during the years ended December 31, 2002,  2003, and
2004 is as follows:

                                                                 Weighted
                                                 Number of       Average
                                                  Shares      Exercise Price
            Balance at December 31, 2001.....    1,152,622      $  3.53
            Granted..........................    2,161,428         1.46
            Exercised........................            -            -
            Forfeited........................     (276,793)        4.50
                                                -----------
            Balance at December 31, 2002.....    3,037,257         1.96
                                                -----------
            Granted..........................      305,000         8.22
            Exercised........................   (1,064,327)        1.70
            Forfeited........................     (227,767)        1.79
                                                ----------
            Balance at December 31, 2003.....    2,050,163         3.05
                                                ----------
            Granted..........................      342,758         7.30
            Exercised........................     (545,686)        2.25
            Forfeited........................     (518,367)        4.25
                                                -----------
            Balance at December 31, 2004         1,328,868      $  4.00
                                                ===========

                                       F-18
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     The fair value of options  granted was  estimated  using the  Black-Scholes
option  pricing model with the following  assumptions  for 2002,  2003, and 2004
grants to  employees:  risk-free  interest  rate of  6.51%,  4.75%,  and  3.38%,
respectively;  15%, 0%, and 6.9% expected volatility,  respectively; an expected
life of 10 years and a zero dividend  yield.  The fair values of options granted
were as follows:

                                          Weighted Average
                                     -------------------------
                                                    Fair Value
                                     Exercise Price of Option
                                     -------------- ----------
            Granted during 2002....     $  1.46      $  2.56
            Granted during 2003....        8.22        11.27
            Granted during 2004....        7.30         4.43

     Options outstanding and exercisable are summarized as follows:

                                 December 31, 2004
    ---------------------------------------------------------------------------
                                             Weighted
                                             Average                 Weighted
                                Weighted     Remaining               Average
      Exercise     Options      Average     Contractual   Options    Exercise
        Price    Outstanding Exercise Price    Life     Exercisable   Price
     ----------- ----------- -------------- ----------- ----------- -----------
     $      1.35    704,000      $ 1.35         3.6        200,000    $ 1.35
      2.15--2.70    107,392        2.19         3.5         39,729      2.18
      5.77--5.86     45,000        5.79         8.2          6,000      5.78
            6.50     89,718        6.50         6.4         27,740      6.50
      7.35--7.80    322,758        7.39         9.6              -         -
           15.00     60,000       15.00         9.0         18,000     15.00
                    -------                                -------
                  1,328,868        4.00                    291,469      2.89
                  =========                                =======

                                       F-18
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     At December 31, 2004,  2003, and 2002,  options  exercisable  were 291,469,
559,054 and 1,353,998  respectively,  and the weighted average exercise price of
these options was $2.89, $2.39 and $2.04 respectively.

(9)  Income Taxes

     On November 1, 2003,  the Company  converted its federal  income tax status
from a subchapter S corporation to a C Corporation

     Prior to  November  1,  2003,  the  Company  had  elected  to be taxed as a
subchapter S  corporation  for federal  income tax  purposes.  Accordingly,  the
consolidated financial statements prior to November 1, 2003, did not include the
effects of federal income taxes.

     The  components of income tax (benefit)  expense  consists of the following
for the years ended December 31:

                                                   Years Ended December 31,
                                              -------------------------------
                                                 2004        2003      2002
                                              ---------   ---------  --------
            Current -- Federal....            $      -    $   (110)  $(1,784)
            Deferred -Federal.....             (12,207)     10,867         -
            Current -- state......                 265         189      (340)
            Deferred -- state.....              (1,395)        647       712
            Deferred -- valuation allowance      4,864           -         -
                                              ---------   ---------  --------
                                              $ (8,473)   $ 11,593   $(1,412)
                                              =========   =========  ========

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2004, and 2003, are as follows:

                                                          2004       2003
                                                       ---------- ----------
    Deferred tax assets:
    Current:
     Accounts receivable and other current assets....  $    3,850 $    2,921
     Accrued expenses and other current liabilities..       5,169      3,871
     Other assets....................................           -      1,313
                                                       ---------- ----------
                                                            9,019      8,105
    Noncurrent:
     Lease obligations...............................      23,077     19,399
     Other liabilities...............................       3,762      2,917
     Net operating loss carryforward.................       9,390          -
                                                       ---------- ----------
                                                           36,229     22,316
     Less valuation allowance........................       4,864          -
                                                       ---------- ----------
    Total deferred tax assets... ....................      40,384     30,421
                                                       ---------- ----------
    Deferred tax liabilities:
    Current:
     Prepaid expenses................................      (1,360)    (1,317)
     Other liabilities...............................           -     (2,200)
                                                       ---------- ----------
                                                           (1,360)    (3,517)
    Noncurrent:
     Other assets ....................................       (205)       (67)
     Property and equipment due to differences in
     Depreciation and basis..........................     (40,505)   (37,882)
                                                       ---------- ----------
                                                          (40,710)   (37,949)
    Total deferred tax liabilities...................     (42,070)   (41,466)
                                                       ---------- ----------
    Net deferred tax liability                         $   (1,686)$  (11,045)
                                                       ========== ==========

                                       F-19
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     At  December  31,  2004,  the  Company  has a federal  net  operating  loss
carryforward of approximately $24,258 available to reduce future taxable income.
The net  operating  losses  generated  in 2003 and 2004 were $3,313 and $20,945,
respectively, and expire in 2023 and 2024 if not utilized.

     Significant  management  judgment is required in determining  the 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.  Under SFAS No. 109 and
applicable  interpretations,  if all or some  portion of specific  deferred  tax
assets are  determined  not to be  realizable,  a  valuation  allowance  must be
established  for the amount of such  deferred tax assets.  In 2004,  the Company
established a $4.9 million valuation allowance for deferred tax assets.

     A  reconciliation  of the  statutory  federal  income  tax  rate  with  our
effective income tax rate from continuing operations is as follows:

                                                          2004        2003
                                                        --------- -----------
     Federal income tax at statutory rate (35%) .....   $(10,962) $   4,910
     Permanent  differences and other................        628        190
     State income tax ...............................     (1,253)       836
     Reversal of Contested Liability Trust..........      (1,750)         -
     Net change in valuation allowance...............      4,864          -
     Conversion from S to C Corp, net of deferred....          -      5,657
                                                       ---------- -------------
     Total income tax (benefit) expense..............   $ (8,473) $  11,593
                                                       ========== ============
     During  2004,  the IRS  disallowed  certain tax  deductions  taken by the S
corporation shareholders pursuant to a contested liability trust. As a result of
the disallowance of such deductions, the C corporation's tax basis was increased
resulting in a deferred tax benefit of $1,750.

(10) Employee Benefit Plans

     The Company  maintains a defined  contribution  employee  retirement  plan,
which  includes  a  401(k)  option,   under  which  employees  are  eligible  to
participate  after they complete 90 days of service.  Employees are eligible for
Central  matching  contributions  after  one  year  of  service.  The  Company's
contributions  to the plan each year are made at the discretion of the Company's
board of directors.  For the years ended December 31, 2004,  2003, and 2002, the
Company's  contributions to the plan,  including matching 401(k)  contributions,
were $2,113, $2,199 and $2,282, respectively.

     The Company  initiated  an Employee  Stock  Purchase  Plan ("the  Plan") in
August 2004 whose purpose is to allow  qualified  employees to acquire shares of
the Company at a 10% discount to the closing  market price as of the end of each
calendar  month.  These shares are issued from authorized but unissued shares of
the Company. The Plan qualifies as an Employee Stock Purchase Plan under Section
423 of the Internal  Revenue Code of 1986, as amended.  One million total shares
have been  authorized  under the Plan.  As of December 31,  2004,  approximately
eleven thousand shares have been issued. The Plan is administered and the shares
held by Computershare Trust Company, Inc.

     The  Company  also  sponsors  a health  plan that  provides  postretirement
medical  benefits  to  full-time  employees  who meet  minimum  age and  service
requirements. The plan is 100% contributory, with retiree contributions adjusted
annually to cover all  projected  costs.  The  Company  does not fund any of the
retiree costs. The plan has no assets,  and accordingly,  no  reconciliation  of
fair value of plan assets is provided.

                                       F-20
<PAGE>
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     During 2003 the Company amended its health plan resulting in a reduction of
benefits.  The  amendment  to the plan  eliminated  any future  post  retirement
benefit  obligation.  The  Company  reported a gain of $7,799 as a result of the
amendment.  The change in the benefit  obligations  and net benefit  costs is as
follows:

                                                         Years Ended
                                                         December 31,
                                                  -----------------------
                                                       2003       2003
                                                  ---------- ------------
     Change in benefit obligation:
      Benefit obligation at beginning of year..   $        - $    8,313
      Service cost.............................            -          -
      Interest cost............................            -          -
      Benefits paid............................            -     (2,212)
      Plan amendment...........................            -     (7,799)
      Participant contributions................            -      1,698
      Actuarial loss...........................            -          -
                                                  ---------- ----------
      Benefit obligation at end of year........            -          -
      Unrecognized plan amendment gain.........            -          -
                                                  ---------- ----------
      Accrued postretirement benefits..........   $        - $        -
                                                  ========== ==========

                                                             Years Ended
                                                             December 31,
                                                      --------------------------
                                                        2004     2003     2002
                                                      -------  -------  --------
Net benefit cost included the following components:
 Service cost........................................ $     -  $     -  $    36
 Interest cost.......................................       -        -      194
                                                      -------  -------  --------
                                                      $     -  $     -  $   230
                                                      =======  =======  ========

(11) Fair Value of Financial Instruments

     At December  31, 2004 and 2003,  the carrying  value of the  Securitization
Facility  approximates  fair value because amounts  outstanding bear interest at
current commercial paper rates. At December 31, 2004 and 2003, the fair value of
the related party financing  arrangement  cannot be determined without incurring
excessive costs due to the related party nature of the  instrument.  At December
31, 2004, and 2003, the carrying value of other long-term debt approximates fair
value.

(12) Leases

     In 1998, the Company entered into agreements with its principal stockholder
to lease the land and related improvements of two terminals.  The leases are for
10 years,  cancelable  within one month's notice by either party, with a renewal
option for an  additional  ten-year  term.  The annual lease  payments  over the
initial  term of the lease are  $297.  The  leases  have been  accounted  for as
operating leases.

     In 1999,  the Company  entered into  agreements  to lease one terminal from
Southwest Premier for 10 years with a renewal option for an additional 10 years.
The annual lease payments over the initial term of the lease are $139. The lease
has been accounted for as an operating lease.

     In 2001,  the Company  entered into  agreements to lease two terminals from
Southwest  Premier for 76 and 77 months with a renewal  option for an additional
10 years.  The annual  lease  payments  over the initial  term of the leases are
$445. These leases have been accounted for as operating leases.

     The  Company  leases  various  terminal  and office  facilities,  tractors,
trailers  and other  equipment  under  noncancelable  operating  leases.  Rental
expense was $6,092,  $5,084 and $5,114 for the years ended  December  31,  2004,
2003, and 2002, respectively.  Included in these amounts are $1,795, $1,903, and
$1,779 in 2004, 2003, and 2002, respectively,  paid to affiliates of the Company
for the rental of revenue and service equipment, terminals and office space.

                                       F-21
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     Future minimum lease payments under  noncancelable  operating  leases (with
initial or  remaining  lease terms in excess of one year) and capital  leases at
December 31, 2004 are:

                                              Capital  Operating
                                              Leases    Leases
                                             --------- ---------
     Year ending December 31:
      2005................................   $  12,205 $  5,266
      2006................................       7,240    4,398
      2007................................       7,965    3,262
      2008................................       2,585    2,393
      2009................................       4,263    1,443
     Thereafter                                  1,386    3,438
                                                ------ --------
      Total minimum lease payments.....         35,644 $ 20,200
                                                       ========
     Less amount representing interest.....      2,802
                                             ---------
                                             $  32,842
                                             =========

13) Cash Flow Information

     Short-term interest-bearing  instruments with maturities of three months or
less at the date of purchase are considered cash equivalents.

     During 2004,  2003, and 2002, the Company paid cash for interest of $7,892,
$9,852, and $7,815, respectively.

     During  2004,  2003,  and 2002,  the Company  paid cash for income taxes of
$311, $132, and $31, respectively.

     During 2004,  2003, and 2002, the Company  leased certain  equipment  under
capital leases in the amount of $14,938, $5,672, and $2,680, respectively.

     During 2004 and 2003, the Company had non-cash reduction of properties held
for  sale of $301  and  $390,  respectively,  , which  were  accounted  for as a
reduction of the related party financing.

     During 2002, the Company assumed certain notes payable  totaling $11,400 as
part of the Central Refrigerated acquisition. See note 3.

(14) Contingencies

     The Company is involved in certain  claims and pending  litigation  arising
from the normal  conduct of  business.  Based on the  present  knowledge  of the
facts,  management  believes the resolution of the claims and pending litigation
will not have a material adverse effect on the consolidated  financial position,
results of operations or liquidity of the Company.

     In June and July 2004, three  stockholder  class actions were filed against
the Company and certain officers and directors.  The class actions were filed in
the United  States  District  Court - Western  District  of Texas and  generally
allege that false and  misleading  statements  were made in the  initial  public
offering  registration  statement and prospectus,  during the period surrounding
the initial pubic  offering and up to the press release dated June 16, 2004. The
class actions are in the initial  phases.  The Company does not believe there is
any  factual  or legal  basis for the  allegations  and the  Company  intends to
vigorously  defend  against the suits.  The Company has informed  its  insurance
carrier and has retained  outside  counsel to assist in the  Company's  defense.
Prior to December 12, 2004, the Company maintained a $5.0 million directors' and
officers' insurance policy with a $350,000 deductible. On December 12, 2004, the
Company increased its directors' and officers' insurance  coverage.  The Company
currently maintains a $15 million directors' and officers' insurance policy with
a  $350,000  deductible.  In the 2004 third  quarter,  in  connection  with this
litigation,  the Company recorded an expense of $350,000,  representing the full
deductible amount under its current directors' and officers' insurance policy.

                                       F-22
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

     On August 9 and 10,  2004,  two  purported  derivative  actions  were filed
against the Company, as nominal defendant,  and against certain of our officers,
directors, and former directors.  These actions were filed in the District Court
of McLennan  County,  Texas and generally allege breach of fiduciary duty, abuse
of  control,  gross  mismanagement,   waste  of  corporate  assets,  and  unjust
enrichment on the part of certain of the Company's  present and former  officers
and  directors in the period  between  December  12, 2003 and August  2004.  The
purported derivative actions seek declaratory, injunctive, and other relief.

     Although it is not possible at this time to predict the litigation  outcome
of these cases, the Company expects to prevail.  However,  an adverse litigation
outcome could be material to the Company's  consolidated  financial  position or
results of operations.  As a result of the uncertainty  regarding the outcome of
this matter, no provision has been made in the consolidated financial statements
with respect to this contingent liability.

     The Company is subject to loss  contingencies  pursuant to federal,  state,
and local environmental  regulations  dealing with the transportation,  storage,
presence, use, disposal, and handling of hazardous materials, discharge of storm
water and fuel storage tanks. Environmental  liabilities,  including remediation
costs, are accrued when amounts are probable and can be reasonably estimated.

(15) Related-Party Transactions

     At December 31, 2002, the Company had  approximately  $7,988 of outstanding
advances to its  principal  stockholder,  including  $3,400 of notes  receivable
bearing  interest  at a rate of 4.10%.  There is also an  uncollateralized  note
agreement  in the amount of $4,500 with a stated  interest  rate of 9.0%.  These
notes have been reflected as a reduction of stockholders'  equity.  These notes,
along with $660 of unaccrued interest, were paid off in 2003.

     During the years ended  December  31,  2004,  2003,  and 2002,  the Company
incurred  approximately  $14,571,  $18,582,  and  $21,106,   respectively,   for
transportation  services provided by companies for which the Company's principal
stockholder  is the Chairman.  At December 31, 2004,  and 2003,  the Company had
payables of $988 and $1,020, respectively, for these transportation services.

     During the years ended  December  31,  2004,  2003,  and 2002,  the Company
incurred $274, $12 and $286,  respectively,  to an entity owned by a stockholder
of the Company for legal services. The Company also paid $525 for legal services
in 2003, which are related to the initial public offering and accounted for as a
reduction of proceeds.

     During the years ended  December  31,  2003 and 2002,  the Company had tire
sales of approximately $962 and $3,330, respectively,  to an affiliate. In 2004,
the Company did not have any transactions of this nature.

     See also notes 3, 6, 7, and 12 for additional disclosures regarding related
party transactions.

                                       F-23
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

(16) Loss per Share and Pro Forma Income (Loss) Per Share

     The  calculation  for loss per share and pro forma income  (loss) per share
was calculated as shown below.
                                            2004         2003       2002
                                         ---------   ---------- ----------
Net income (loss):
 Net (loss) income................       $ (22,848)  $  (5,905) $    5,242
 Pro forma federal tax adjustment
(unaudited)                                      -      14,268      (4,193)
                                         =========   ---------- ----------
 Pro forma net income (loss) from
  continuing operations (unaudited)              -       8,363       1,049
 Loss from discontinued operations               -      (8,341)          -
                                                     ---------- ----------
 Pro forma net income (unaudited)        $       -    $      22 $    1,049
                                                     ========== ==========
Shares:
 Basic shares (weighted-average shares
  outstanding)..................        17,970,595   11,162,814 10,868,218
 Stock options..................                 -      935,124    654,348
 Other..........................                 -        4,796     25,004
                                       -----------   ---------- ----------
 Diluted shares.................        17,970,595   12,102,734 11,547,570
                                        ==========   ========== ==========
 Net loss per share:
    Basic                                $   (1.27)           -          -
    Diluted                              $   (1.27)           -          -

Pro forma basic income per share
  (unaudited)...................                 -    $    0.00 $     0.10
Pro forma diluted income per share
 (unaudited)....................         $       -    $    0.00 $     0.09

     For the year ended  December 31, 2002 and 2004, the Company had 245,295 and
1,328,868  stock options that were  anti-dilutive,  respectively.  There were no
anti-dilutive  options  in 2003..  As a result,  the  assumed  shares  under the
treasury stock method related to  anti-dilutive  options have been excluded from
the calculation of diluted income (loss) per share.

(17) Pro Forma C Corporation Data (unaudited)

     On November 1, 2003,  the Company  converted  from an S corporation  to a C
corporation  for  federal  income  tax  purposes.  The  unaudited  pro  forma  C
corporation data for the years ended December 31, 2003 and 2002 are based on the
historical  consolidated  statements of operations  and give effect to pro forma
income taxes as if the Company were a C corporation  for the entire  duration of
all years presented.



                                       F-24
<PAGE>

CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

(18) Valuation and Qualifying Accounts

                                      Balance at Charged to           Balance at
                                      Beginning  Costs and     Net      End of
                                       of Year    Expenses  Writeoffs   Year
                                      ---------- ---------- --------- ---------
 Allowance for doubtful accounts
  Year ended December 31, 2004....... $   2,452  $   1,669        554 $  3,567
  Year ended December 31, 2003.......     2,294        876        718    2,452
  Year ended December 31, 2002.......     3,591         82      1,379    2,294
 Allowance for revenue adjustments
  Year ended December 31, 2004....... $   2,901  $  11,355 $    9,969 $  4,287
  Year ended December 31, 2003.......     2,850     12,356     12,305    2,901
  Year ended December 31, 2002.......     3,112     13,692     13,954    2,850


                                      Balance at Charged to           Balance at
                                      Beginning  Costs and    Claims    End of
                                        of Year   Expenses     Paid      Year
                                      ---------- ---------- --------- ---------
 Cargo claims accruals
  Year ended December 31, 2004......  $   3,788  $  19,423  $  17,754 $  5,457
  Year ended December 31, 2003......      4,039     10,326     10,577    3,788
  Year ended December 31, 2002......      4,023     10,793     10,777    4,039
 Insurance accruals
  Year ended December 31, 2004......  $  16,979  $  32,781  $  30,136 $ 19,624
  Year ended December 31, 2003......     14,717     28,949     26,687   16,979
  Year ended December 31, 2002......     15,532     26,632     27,447   14,717

(19) Subsequent Event

     On January 31, 2005, the Company  entered into the New Credit Facility with
Bank of America,  N.A.,  as Agent,  and certain  other lenders from time to time
party to the New Credit  Facility,  in the aggregate  principal  amount of up to
$70,000.  The New  Credit  Facility  replaces  both  the  Amended  and  Restated
Revolving  Facility and the  Securitization  Facility.  The New Credit  Facility
terminates on January 31, 2009.

     Subject  to the terms of the New Credit  Facility,  the  maximum  revolving
borrowing limit under the New Credit  Facility is the lesser of (a) $70,000,  or
(b) 85% of the  Company's  eligible  accounts  receivable,  plus  85% of the net
orderly  liquidation  value of the Company's  eligible rolling stock owned as of
January 31, 2005,  plus 85% of the cost of eligible  rolling  stock  acquired by
Borrower after January 31, 2005. Letters of Credit under the New Credit Facility
are subject to a sub-limit of $40,000 .

     Borrowings under the New Credit Facility bear interest at the base rate, as
defined,  plus an  applicable  margin  of  0.00%  to  1.00%,  or  LIBOR  plus an
applicable margin of 1.50% to 2.75%, based on the average quarterly availability
under the New Credit  Facility.  Letters of credit under the New Credit Facility
are subject to an applicable letter of credit margin of 1.25% to 2.50%, based on
the average quarterly availability under the New Credit Facility. The New Credit
Facility also prescribes additional fees for letter of credit transactions,  and
an unused line fee of 0.25% to 0.375%, based on aggregate amounts outstanding.

     The New Credit  Facility  is  collateralized  by  substantially  all of the
Company's  assets,  other than certain revenue equipment and real estate that is
(or may in the future become) subject to other financing.

     The  New  Credit  Facility  contains  certain  restrictions  and  covenants
relating to, among other things, fixed charge coverage ratio, cash flow, capital
expenditures,   acquisitions  and  dispositions,   sale-leaseback  transactions,
additional   indebtedness,   additional  liens,   dividends  and  distributions,
investment  transactions,  and  transactions  with  affiliates.  The New  Credit


                                       F-25
<PAGE>
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
(Thousands of dollars, except share and per share amounts)

Facility  includes usual and customary  events of default for a facility of this
nature and provides that,  upon the occurrence and  continuation  of an event of
default,  payment of all amounts  payable  under the New Credit  Facility may be
accelerated, and the lenders' commitments may be terminated.


                                       F-26
<PAGE>

                                  EXHIBIT INDEX

Number           Description

2.1       Amended and Restated Asset Purchase Agreement dated April 18, 2002, by
          and among Central Refrigerated Service,  Inc., a Nebraska corporation,
          and Simon Transportation Services Inc., a Nevada corporation,  and its
          subsidiaries, Dick Simon Trucking, Inc., a Utah corporation, and Simon
          Terminal, LLC, an Arizona limited liability company.  (Incorporated by
          reference to Exhibit 2.1 to the  Company's  Registration  Statement on
          Form S-1 No. 333-109068.)

2.2(a)    Separation  Agreement  dated November 30, 2002, by and among Central
          Freight  Lines,  Inc.,  a  Texas  corporation,   Central  Refrigerated
          Service,  Inc.,  a Nebraska  corporation,  the Jerry and Vickie  Moyes
          Family  Trust,   Interstate   Equipment  Leasing,   Inc.,  an  Arizona
          corporation, and Jerry Moyes individually.  (Incorporated by reference
          to Exhibit 2.2(a) to the Company's  Registration Statement on Form S-1
          No. 333-109068.)

2.2(b)    Amendment  Number One to  Separation  Agreement  dated  December 23,
          2002, by and among Central Freight Lines,  Inc., a Texas  corporation,
          Central Refrigerated Service, Inc., a Nebraska corporation,  the Jerry
          and Vickie Moyes Family Trust,  Interstate Equipment Leasing, Inc., an
          Arizona  corporation,  and Jerry Moyes individually.  (Incorporated by
          reference to Exhibit 2.2(b) to the Company's Registration Statement on
          Form S-1 No. 333-109068.)

2.2(c)    Amendment Number Two to Separation Agreement effective as of October
          28,  2003,  by  and  among  Central  Freight  Lines,   Inc.,  a  Texas
          corporation,   Central   Refrigerated   Service,   Inc.,   a  Nebraska
          corporation,  the Jerry and  Vickie  Moyes  Family  Trust,  Interstate
          Equipment  Leasing,  Inc.  an  Arizona  corporation,  and Jerry  Moyes
          individually.  (Incorporated  by  reference  to Exhibit  2.2(c) to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

3.1       Amended and  Restated  Articles of  Incorporation  of Central  Freight
          Lines,  Inc.,  a Nevada  corporation.  (Incorporated  by  reference to
          Exhibit 3.1(b) to the Company's Registration Statement on Form S-1 No.
          333-109068.)

3.2       Bylaws  of  Central  Freight  Lines,   Inc.,  a  Nevada   corporation.
          (Incorporated   by   reference   to  Exhibit  3.2  to  the   Company's
          Registration Statement on Form S-1 No. 333-109068.)

4.1       Amended and  Restated  Articles of  Incorporation  of Central  Freight
          Lines,  Inc.,  a Nevada  corporation.  (Incorporated  by  reference to
          Exhibit 3.1 to this Report on Form 10-K.)

4.2       Bylaws  of  Central  Freight  Lines,   Inc.,  a  Nevada   corporation.
          (Incorporated  by  reference  to  Exhibit  3.2 to this  Report on Form
          10-K.)

10.1(a)+  Central Freight Lines, Inc. 401(k) Savings Plan.  (Incorporated by
          reference to Exhibit 10.1(a) to the Company's  Registration  Statement
          on Form S-1 No. 333-109068.)

10.1(b)+  First  Amendment to Central  Freight  Lines,  Inc.  401(k) Savings
          Plan.  (Incorporated  by reference to Exhibit 10.1(b) to the Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.2(a)+  Central Freight Lines, Inc. Incentive Stock Plan. (Incorporated by
          reference to Exhibit 10.2(a) to the Company's  Registration  Statement
          on Form S-1 No. 333-109068.)

10.2(b)+  Form of Stock  Option  Agreement.  (Incorporated  by  reference to
          Exhibit  10.2(b) to the Company's  Registration  Statement on Form S-1
          No. 333-109068.)

10.3+     Form of Outside  Director  Stock Option  Agreement.  (Incorporated  by
          reference to Exhibit 10.3 to the Company's  Registration  Statement on
          Form S-1 No. 333-109068.)

                                       IV-1
<PAGE>

10.4(a)   First Amended and Restated  Revolving Credit Loan Agreement,  dated
          July 28, 2004, by and between  Central  Freight  Lines,  Inc., a Texas
          corporation,  and SunTrust Bank, a Georgia state banking  corporation.
          (Incorporated  by reference to Exhibit 10.4(a) to the Company's Report
          on Form 10-Q for the quarterly period ended July 3, 2004.)

10.4(b)   Revolving  Credit Note,  dated July 28,  2004,  by Central  Freight
          Lines, Inc., a Texas corporation, in favor of SunTrust Bank, a Georgia
          state  banking  corporation.  (Incorporated  by  reference  to Exhibit
          10.4(b) to the Company's  Report on Form 10-Q for the quarterly period
          ended July 3, 2004.)

10.4(c)*  First  Amendment to First  Amended and Restated  Revolving  Credit
          Loan  Agreement,  dated July 28, 2004, by and between  Central Freight
          Lines, Inc., a Texas  corporation,  and SunTrust Bank, a Georgia state
          banking corporation.

10.5      Guaranty,  dated July 28,  2004,  by Central  Freight  Lines,  Inc., a
          Nevada corporation, in favor of SunTrust Bank, a Georgia state banking
          corporation.  (Incorporated  by  reference  to  Exhibit  10.5  to  the
          Company's  Report on Form 10-Q for the quarterly  period ended July 3,
          2004.)

10.6      Security  Agreement,  dated  July 28,  2004,  by and  between  Central
          Freight Lines,  Inc., a Texas corporation and Suntrust Bank, a Georgia
          state banking corporation.  (Incorporated by reference to Exhibit 10.6
          to the Company's  Report on Form 10-Q for the  quarterly  period ended
          July 3, 2004.)

10.7      Note  dated  April 30,  2002,  by Jerry C.  Moyes in favor of  Central
          Freight Lines, Inc., a Texas  corporation.  (Incorporated by reference
          to Exhibit 10.7 to the  Company's  Registration  Statement on Form S-1
          No. 333-109068.)

10.8(a)   Loan  Agreement  dated  April  30,  2002,  by  and  among  Central
          Receivables,   Inc.,  a  Nevada  corporation,  Three  Pillars  Funding
          Corporation,  a Delaware  corporation,  and Suntrust  Capital Markets,
          Inc., a Tennessee corporation, as agent. (Incorporated by reference to
          Exhibit  10.8(a) to the Company's  Registration  Statement on Form S-1
          No. 333-109068.)

10.8(b)   First  Amendment to Loan  Agreement  dated April 29,  2003,  by and
          among Central Receivables,  Inc., a Nevada corporation,  Three Pillars
          Funding  Corporation,  a Delaware  corporation,  and SunTrust  Capital
          Markets,  Inc., a Tennessee  corporation,  as agent.  (Incorporated by
          reference to Exhibit 10.8(b) to the Company's  Registration  Statement
          on Form S-1 No. 333-109068.)

10.9      Receivables  Purchase  Agreement  dated April 30, 2002, by and between
          Central  Freight  Lines,  Inc.,  a  Texas  corporation,   and  Central
          Receivables, Inc., a Nevada corporation. (Incorporated by reference to
          Exhibit 10.9 to the Company's  Registration  Statement on Form S-1 No.
          333-109068.)

10.10     Second Amended and Restated  Master Lease  Agreement -- Parcel Group A
          dated February 20, 2003 by and between Southwest  Premier  Properties,
          L.L.C., a Texas limited liability company,  and Central Freight Lines,
          Inc., a Texas corporation. (Incorporated by reference to Exhibit 10.10
          to the Company's Registration Statement on Form S-1 No. 333-109068.)

10.11     Second Amended and Restated  Master Lease  Agreement -- Parcel Group B
          dated February 20, 2003 by and between Southwest  Premier  Properties,
          L.L.C., a Texas limited liability company,  and Central Freight Lines,
          Inc., a Texas corporation. (Incorporated by reference to Exhibit 10.11
          to the Company's Registration Statement on Form S-1 No. 333-109068.)

10.12     Amended and Restated  Lease dated February 20, 2003 by and between JVM
          Associates  and Central  Freight  Lines,  Inc.,  a Texas  corporation.
          (Incorporated   by  reference  to  Exhibit   10.12  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.13     Amended  and  Restated  Lease dated  February  20, 2003 by and between
          Jerry and  Vickie  Moyes and  Central  Freight  Lines,  Inc.,  a Texas
          corporation.  (Incorporated  by  reference  to  Exhibit  10.13  to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

                                       IV-2
<PAGE>

10.14     Amended  and  Restated  Lease dated  February  20, 2003 by and between
          Jerry and  Vickie  Moyes and  Central  Freight  Lines,  Inc.,  a Texas
          corporation.  (Incorporated  by  reference  to  Exhibit  10.14  to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.15+    Employment  Agreement  dated January 7, 2002, by and between Central
          Freight  Lines,  Inc.,  a Texas  corporation,  and  Robert  V.  Fasso.
          (Incorporated   by  reference  to  Exhibit   10.15  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.16+    Employment Offer Letter to Doak D. Slay, dated December 23, 2002, by
          Central  Freight  Lines,  Inc.,  as  countersigned  by Doak  D.  Slay.
          (Incorporated   by  reference  to  Exhibit   10.16  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.17+    Equity  Advancement  Letter to Doak D. Slay,  dated July 9, 2003, by
          Central  Freight  Lines,  Inc., as  countersigned  by Doak D. Slay and
          Denise D. Slay.  (Incorporated  by reference  to Exhibit  10.17 to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.18+    Employment Offer Letter to J. Mark Conard, dated August 16, 2003, by
          Central  Freight  Lines,  Inc.  (Incorporated  by reference to Exhibit
          10.18  to  the  Company's  Registration  Statement  on  Form  S-1  No.
          333-109068.)

10.19+    Employment  Offer Letter to Jeffrey A. Hale,  dated June 7, 2002, by
          Central  Freight  Lines,  Inc.  (Incorporated  by reference to Exhibit
          10.19  to  the  Company's  Registration  Statement  on  Form  S-1  No.
          333-109068.)

10.20+    Employment  Separation  Agreement and Release,  dated as of February
          21, 2002, to be effective as of March 9, 2002, by and between  Central
          Freight Lines,  Inc. and Joseph Gentry.  (Incorporated by reference to
          Exhibit 10.20 to the Company's  Registration Statement on Form S-1 No.
          333-109068.)

10.21+    Consulting Agreement, dated February 20, 2002, by and between Joseph
          B. Gentry and  Central  Freight  Lines,  Inc.,  a Nevada  corporation.
          (Incorporated   by  reference  to  Exhibit   10.21  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.22     Contract for the Sale of Land dated  September 19, 2003,  between Doak
          D.  Slay  and  Denise  D.  Slay  and  Central   Freight  Lines,   Inc.
          (Incorporated   by  reference  to  Exhibit   10.22  to  the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.23(a)  Indemnification  Agreement,  effective as of December 31, 2002, by
          and between  Central  Freight Lines,  Inc., a Texas  corporation,  and
          Central   Refrigerated   Service,   Inc.,   a  Nebraska   corporation.
          (Incorporated  by  reference  to  Exhibit  10.23(a)  to the  Company's
          Registration Statement on Form S-1 No. 333-109068.)

10.23(b)  Amendment Number One to Indemnification  Agreement effective as of
          December 31, 2002, by and between Central Freight Lines, Inc., a Texas
          corporation,  and  Central  Refrigerated  Service,  Inc.,  a  Nebraska
          corporation.  (Incorporated  by reference  to Exhibit  10.23(b) to the
          Company's Registration Statement on Form S-1 No. 333-109068.)

10.24*+   Employment Offer Letter to Walt Ainsworth,  dated July 15, 2004, by
          Central Freight Lines, Inc.

21.1*     Subsidiaries of Central Freight Lines, Inc., a Nevada corporation.

23.1*     Consent of KPMG LLP.

                                       IV-3
<PAGE>

31.1*     Certification  pursuant  to Item  601(b)(31)  of  Regulation  S-K,  as
          adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002, by
          Robert V. Fasso, the Company's Chief Executive Officer.

31.2*     Certification  pursuant  to Item  601(b)(31)  of  Regulation  S-K,  as
          adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002, by
          Jeffrey A. Hale, the Company's Chief Financial Officer.

32.1*     Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the  Sarbanes-Oxley Act of 2002, by Robert V. Fasso,
          the Company's Chief Executive Officer.

32.2*     Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the  Sarbanes-Oxley Act of 2002, by Jeffrey A. Hale,
          the Company's Chief Financial Officer.

*  Filed herewith.
+ Management contract or compensatory plan or arrangement.


                                       IV-4
<PAGE>
                                                                EXHIBIT 21.1

                         Subsidiaries of the Registrant

                                                   State or Jurisdiction of
    Name of Subsidiary                          Incorporation or Organization
    ------------------                          -----------------------------
    Central Freight Lines, Inc.                 Texas

    Central Receivables, Inc.                   Nevada



<PAGE>


                                                                EXHIBIT 23.1


                 Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Central Freight Lines, Inc.:

     We consent to the incorporation by reference in the registration statements
on Form S-8 ( File  Nos.  333-111795,  333-114721  and  333-118032)  of  Central
Freight Lines,  Inc. and  subsidiaries  (the Company) of our reports dated March
30, 2005,  with respect to the  consolidated  balance sheets of Central  Freight
Lines,  Inc. as of  December  31,  2004 and 2003,  and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
years in the three-year period ended December 31, 2004,  management's assessment
of the effectiveness of internal control over financial reporting as of December
31, 2004, and the effectiveness of internal control over financial  reporting as
of December  31, 2004,  which  reports  appear in the December 31, 2004,  annual
report  on  Form  10-K  of  Central  Freight  Lines,  Inc.  Our  report  on  the
consolidated financial statements refers to a change in the method of accounting
for goodwill and other intangible assets in 2002.

     Our  report  dated  March  30,  2005,  on  management's  assessment  of the
effectiveness of internal control over financial reporting and the effectiveness
of internal control over financial reporting as of December 31, 2004,  expresses
our opinion that the Company did not maintain  effective  internal  control over
financial  reporting as of December 31, 2004,  because of the effect of material
weaknesses on the  achievement  of the  objectives  of the control  criteria and
contains  an  explanatory  paragraph  that states  that the  following  material
weaknesses have been  identified and included in  management's  assessment as of
December 31, 2004:


The  Company's  policies  and  procedures  were not  sufficient  to ensure  that
transactions   processed  through  the  Company's  billing  system  resulted  in
accounting for and reporting of such transactions  pursuant to the provisions of
the respective  customer contract.  Specifically,  the Company's billing process
lacked  controls to ensure the accuracy of entries to the billing  system and to
ensure that changes to customer  contracts  were reflected in the billing system
accurately  and  timely.  These  deficiencies  result  in  more  than  a  remote
likelihood that a material  misstatement  of the annual or interim  consolidated
financial statements would not be prevented or detected.


The Company's  procedures were not sufficient to ensure the accuracy of reported
amounts for the Company's tire and spare parts  inventories.  Specifically,  the
Company did not reconcile,  pursuant to its policy,  physical counts of tire and
spare parts  inventories to the Company's  year-end general ledger. As a result,
errors in  accounting  for inventory  were  identified  and  corrected  prior to
issuance  of  the  Company's  2004  consolidated   financial  statements.   This
deficiency results in more than a remote likelihood that a material misstatement
of  the  annual  or  interim  consolidated  financial  statements  would  not be
prevented or detected.


The  Company  did not  maintain  policies  and  procedures  to  ensure  that the
accounting  for  valuation  allowances  associated  with  deferred  taxes was in
accordance with U.S. generally  accepted  accounting  principles.  Specifically,
management's  procedures did not provide for an effective review of deferred tax
asset amounts for purposes of evaluating realizability.  As a result, a material
error in the  determination of the valuation  allowances for deferred tax assets
was  identified   and  corrected   prior  to  issuance  of  the  Company's  2004
consolidated financial statements. This deficiency results in more than a remote
likelihood that a material  misstatement  of the annual or interim  consolidated
financial statements would not be prevented or detected.

     In light of this  information,  management is unable to conclude that as of
December 31, 2004, its internal controls over financial reporting are effective.

KPMG LLP

Dallas, Texas
March 30, 2005



<PAGE>
                                                                Exhibit 31.1
                                  CERTIFICATION

I, Robert V. Fasso, certify that:

     1.   I have  reviewed  this annual  report on Form 10-K of Central  Freight
          Lines, Inc.;

     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange Act Rules  13a-15(e) and  15d-15(e))  and internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and 15d-15(f)) for the registrant and have:

          (a)  Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;

          (b)  Designed  such  internal  control over  financial  reporting,  or
               caused such  internal  control  over  financial  reporting  to be
               designed under our supervision,  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;

          (c)  Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures,  as of the  end of the  period  covered  by this
               report based on such evaluation; and

          (d)  Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's  board of directors (or persons performing the equivalent
          functions):

          (a)  All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information; and

          (b)  Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.


Date:    March 30, 2005

                                       /s/ Robert V. Fasso
                                       --------------------------------
                                       Robert V. Fasso
                                       Chief Executive Officer
<PAGE>
                                                                Exhibit 31.2
                                  CERTIFICATION

I,   Jeffrey A. Hale, certify that:

     1.   I have  reviewed  this annual  report on Form 10-K of Central  Freight
          Lines, Inc.;

     2.   Based on my  knowledge,  this  report  does  not  contain  any  untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this report,  fairly  present in all material
          respects the financial condition, results of operations and cash flows
          of the  registrant  as of,  and for,  the  periods  presented  in this
          report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange Act Rules  13a-15(e) and  15d-15(e))  and internal
          control  over  financial  reporting  (as defined in Exchange Act Rules
          13a-15(f) and 15d-15(f)) for the registrant and have:

          (a)  Designed such disclosure controls and procedures,  or caused such
               disclosure  controls  and  procedures  to be  designed  under our
               supervision,  to ensure that material information relating to the
               registrant,  including  its  consolidated  subsidiaries,  is made
               known to us by others within those entities,  particularly during
               the period in which this report is being prepared;

          (b)  Designed  such  internal  control over  financial  reporting,  or
               caused such  internal  control  over  financial  reporting  to be
               designed under our supervision,  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;

          (c)  Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls  and   procedures  and  presented  in  this  report  our
               conclusions  about the  effectiveness of the disclosure  controls
               and  procedures,  as of the  end of the  period  covered  by this
               report based on such evaluation; and

          (d)  Disclosed in this report any change in the registrant's  internal
               control  over  financial   reporting  that  occurred  during  the
               registrant's most recent fiscal quarter (the registrant's  fourth
               fiscal  quarter  in  the  case  of an  annual  report)  that  has
               materially  affected,  or  is  reasonably  likely  to  materially
               affect,   the   registrant's   internal  control  over  financial
               reporting; and

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's  board of directors (or persons performing the equivalent
          functions):

          (a)  All  significant  deficiencies  and  material  weaknesses  in the
               design or operation of internal control over financial  reporting
               which are reasonably  likely to adversely affect the registrant's
               ability  to  record,  process,  summarize  and  report  financial
               information; and

          (b)  Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal control over financial reporting.

Date:    March 30, 2005

                                       /s/ Jeffrey A. Hale
                                       -------------------------------
                                       Jeffrey A. Hale
                                       Chief Financial Officer

<PAGE>

                                                                Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Annual Report of Central  Freight Lines,  Inc. (the
"Company")  on Form 10-K for the period ended  December 31, 2004,  as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Robert V. Fasso, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                       /s/ Robert V. Fasso
                                       --------------------------------
                                       Robert V. Fasso
                                       Chief Executive Officer
                                       March 30, 2005

<PAGE>

                                                                Exhibit 32.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Annual Report of Central  Freight Lines,  Inc. (the
"Company")  on Form 10-K for the period ended  December 31, 2004,  as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Jeffrey A. Hale, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.



                                       /s/Jeffrey A. Hale
                                       --------------------------------
                                       Jeffrey A. Hale
                                       Chief Financial Officer
                                       March 30, 2005