Edgar Filing: PAM TRANSPORTATION SERVICES INC

form10q_2ndqtr2007.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

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

For the transition period from __________to__________

Commission File Number: 0-15057

P.A.M. TRANSPORTATION SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware		71-0633135
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification no.)

297 West Henri De Tonti, Tontitown, Arkansas 72770

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (479) 361-9111

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Yes ý

No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o

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

Yes o

No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding at July 17, 2007
Common Stock, $.01 Par Value		10,270,807

P.A.M. TRANSPORTATION SERVICES, INC.

Form 10-Q

For The Quarter Ended June 30, 2007

Table of Contents

Part I. Financial Information

Item 1.	Financial Statements.

	Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2006

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006

	Condensed Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2007

	Notes to Condensed Consolidated Financial Statements as of June 30, 2007

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

Item 4.	Controls and Procedures.


Part II. Other Information

Item 1.	Legal Proceedings.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

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

Item 6.	Exhibits.

Signatures

Exhibits

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except share and per share data)
	June 30,			December 31,
	2007			2006
ASSETS	(unaudited)			(see note)
Current assets:
Cash and cash equivalents	$	657		$	1,040
Accounts receivable-net:
Trade		68,993			61,469
Other		1,346			1,361
Inventories		954			819
Prepaid expenses and deposits		8,834			14,928
Marketable equity securities available-for-sale		16,405			14,437
Income taxes refundable		-			498
Total current assets		97,189			94,552

Property and equipment:
Land		2,674			2,674
Structures and improvements		9,422			9,383
Revenue equipment		308,403			286,933
Office furniture and equipment		7,112			6,890
Total property and equipment		327,611			305,880
Accumulated depreciation		(110,428	)		(102,566	)
Net property and equipment		217,183			203,314

Other assets:
Goodwill		15,413			15,413
Non-compete agreements		117			217
Other		740			750
Total other assets		16,270			16,380
TOTAL ASSETS	$	330,642		$	314,246

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	24,531		$	38,510
Accrued expenses and other liabilities		11,983			9,994
Current maturities of long-term debt		934			1,915
Income taxes payable		105			-
Deferred income taxes-current		5,958			5,658
Total current liabilities		43,511			56,077

Long-term debt-less current portion		45,931			21,205
Deferred income taxes-less current portion		52,794			51,902
Other		-			34
Total liabilities		142,236			129,218

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued		-			-
Common stock, $.01 par value, 40,000,000 shares authorized; 11,366,207 and
11,362,207 shares issued; 10,270,807 and 10,303,607 shares outstanding
at June 30, 2007 and December 31, 2006, respectively		114			114
Additional paid-in capital		77,504			77,309
Accumulated other comprehensive income		3,545			3,142
Treasury stock, at cost; 1,095,400 and 1,058,600 shares at June 30, 2007 and December 31, 2006, respectively		(18,546	)		(17,869	)
Retained earnings		125,789			122,332
Total shareholders’ equity		188,406			185,028
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	330,642		$	314,246

Note: The consolidated balance sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited) (in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
OPERATING REVENUES:
Revenue, before fuel surcharge	$	92,547		$	89,692		$	180,090		$	180,541
Fuel surcharge		14,153			13,673			25,418			23,349
Total operating revenues		106,700			103,365			205,508			203,890

OPERATING EXPENSES AND COSTS:
Salaries, wages and benefits		34,036			31,886			67,741			65,115
Fuel expense		29,017			25,964			53,609			48,219
Rent and purchased transportation		9,535			11,640			19,569			22,989
Depreciation and amortization		10,150			8,428			19,499			16,794
Operating supplies and expenses		7,954			6,568			15,436			12,506
Operating taxes and license		4,603			4,114			8,954			8,171
Insurance and claims		4,667			4,092			9,202			8,288
Communications and utilities		762			629			1,530			1,323
Other		1,793			1,087			3,433			2,585
Loss (gain) on disposition of equipment		11			(33	)		29			(142	)
Total operating expenses and costs		102,528			94,375			199,002			185,848

NET OPERATING INCOME		4,172			8,990			6,506			18,042

NON-OPERATING INCOME		167			116			408			173
INTEREST EXPENSE		(676	)		(353	)		(1,163	)		(817	)

INCOME BEFORE INCOME TAXES		3,663			8,753			5,751			17,398

FEDERAL AND STATE INCOME TAXES:
Current		832			3,314			1,344			6,585
Deferred		639			198			950			388
Total federal and state income taxes		1,471			3,512			2,294			6,973

NET INCOME	$	2,192		$	5,241		$	3,457		$	10,425

EARNINGS PER COMMON SHARE:
Basic	$	0.21		$	0.51		$	0.34		$	1.01
Diluted	$	0.21		$	0.51		$	0.34		$	1.01

AVERAGE COMMON SHARES OUTSTANDING:
Basic		10,306			10,293			10,306			10,290
Diluted		10,307			10,301			10,307			10,295


See notes to condensed consolidated financial statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands)

	Six Months Ended
	June 30,
	2007			2006
OPERATING ACTIVITIES:
Net income	$	3,457		$	10,425
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,499			16,794
Bad debt expense		362			37
Stock compensation-net of excess tax benefits		112			311
Provision for deferred income taxes		950			388
Reclassification of unrealized loss on marketable equity securities		12			-
Gain on sale of marketable equity securities		(120	)		-
Loss (gain) on sale or disposal of equipment		29			(142	)
Changes in operating assets and liabilities:
Accounts receivable		(7,871	)		(5,247	)
Prepaid expenses, inventories, and other assets		5,969			6,067
Income taxes payable		603			(134	)
Trade accounts payable		(1,095	)		2,309
Accrued expenses		2,056			2,242
Net cash provided by operating activities		23,963			33,050

INVESTING ACTIVITIES:
Purchases of property and equipment		(53,644	)		(20,992	)
Proceeds from sale or disposal of equipment		7,362			7,319
Net purchases of marketable equity securities		(1,215	)		(227	)
Net cash used in investing activities		(47,497	)		(13,900	)

FINANCING ACTIVITIES:
Borrowings under line of credit		263,478			209,928
Repayments under line of credit		(238,364	)		(227,504	)
Repayments of long-term debt		(1,368	)		(1,337	)
Repurchases of common stock		(677	)		-
Exercise of stock options		83			101
Net cash provided by (used in) financing activities		23,152			(18,812	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(382	)		338

CASH AND CASH EQUIVALENTS-Beginning of period		1,039			1,129

CASH AND CASH EQUIVALENTS-End of period	$	657		$	1,467

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the period for:
Interest	$	1,175		$	860
Income taxes	$	728		$	6,742

NONCASH INVESTING AND FINANCING ACTIVITIES-
Purchases of property and equipment included in accounts payable	$	1,389		$	-




See notes to condensed consolidated financial statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Shareholders’ Equity (unaudited) (in thousands)


	Common Stock Shares / Amount					Additional Paid-In Capital		Other Comprehensive Income		Accumulated Other Comprehensive Income		Treasury Stock			Retained Earnings		Total

Balance at December 31, 2006		10,303		$	114	$	77,309			$	3,142	$	(17,869	)	$	122,332	$	185,028

Components of comprehensive income:
Net income								$	3,457							3,457		3,457
Other comprehensive gain:
Unrealized gain on marketable
securities, net of tax of $241									403		403							403
Total comprehensive income								$	3,860

Treasury stock repurchases		(36	)										(677	)				(677	)

Exercise of stock options-shares issued
including tax benefits		4					83											83

Share-based compensation							112											112

Balance at June 30, 2007		10,271		$	114	$	77,504			$	3,545	$	(18,546	)	$	125,789	$	188,406


See notes to condensed consolidated financial statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

June 30, 2007

NOTE A: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2006.

NOTE B: RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities— Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits an entity the option to measure many financial instruments and certain other items at fair value on specified election dates. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. Most of the provisions in SFAS No. 159 are elective; however, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity adopts SFAS No. 159 in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company did not early-adopt SFAS No. 159 and management is currently evaluating the impact that adoption of SFAS No. 159 might have on the Company’s consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). SFAS No. 158 requires recognition of a net liability or asset to report the funded status of defined benefit pension and other postretirement plans on the balance sheet and recognition (as a component of other comprehensive income) of changes in the funded status in the year in which the changes occur. Additionally, SFAS No. 158 requires measurement of a plan’s assets and obligations as of the balance sheet date and additional annual disclosures in the notes to the financial statements. The recognition and disclosure provisions of SFAS No. 158 are effective for fiscal years ending after December 15, 2006, while the requirement to measure a plan’s assets and obligations as of the balance sheet date is effective for fiscal years ending after December 15, 2008. Adoption of this statement did not have a material effect on the Company’s consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities, establishes a common definition of fair value, provides a framework for measuring fair value under United States Generally Accepted Accounting Principles (“GAAP”) and expands disclosure requirements about fair value measurements. SFAS No. 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the impact that adoption of SFAS No. 157 might have on the Company’s consolidated financial statements.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition and is effective for fiscal years beginning after December 15, 2006. Adoption of this statement did not have a material effect on the Company’s consolidated financial statements.

Table of Contents

NOTE C: MARKETABLE EQUITY SECURITIES

The Company accounts for its marketable securities in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS No. 115”). SFAS No. 115 requires companies to classify their investments as either trading, available-for-sale or held-to-maturity. The Company’s investments in marketable securities are classified as available-for-sale and consist of equity securities. Management determines the appropriate classification of these securities at the time of purchase and re-evaluates such designation as of each balance sheet date. During the first six months of 2007, there were no reclassifications of marketable securities. Marketable equity securities are carried at fair value, with the unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income in shareholders’ equity. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in non-operating income. Realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities, if any, are included in the determination of net income as gains (losses) on the sale of securities.

As of June 30, 2007, these equity securities had a combined cost basis of approximately $10.5 million and a combined fair market value of approximately $16.4 million. During the first six months of 2007 the Company received proceeds of approximately $265,000 for the sale of marketable equity securities with a combined cost of approximately $145,000, resulting in a realized gain of approximately $120,000. For the six months ended June 30, 2007, the Company had net unrealized gains in market value of approximately $400,000, net of deferred income taxes. As of June 30, 2007, these securities had gross unrealized gains of approximately $6.1 million and gross unrealized losses of approximately $245,000. As of June 30, 2007, the total net unrealized gain, net of deferred income taxes, in accumulated other comprehensive income was approximately $3.5 million.

The following table shows the investments that were in a loss position at June 30, 2007 and December 31, 2006 and their related fair value at June 30, 2007 and December 31, 2006. These investments are all classified as available-for-sale and consist of equity securities. As of June 30, 2007 and December 31, 2006 there were no investments that had been in a continuous unrealized loss position for twelve months or longer.

	June 30, 2007				December 31, 2006
	(in thousands)
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Equity securities with unrealized losses	$	1,769	$	245	$	417	$	12
Totals	$	1,769	$	245	$	417	$	12

NOTE D: STOCK BASED COMPENSATION

The Company maintains a stock option plan under which incentive stock options and nonqualified stock options may be granted. On March 2, 2006, the Company’s Board of Director’s adopted, and shareholders later approved, the 2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan replaces the expired 1995 Stock Option Plan which had 263,500 options remaining which were never issued. Under the 2006 Plan 750,000 shares are reserved for the issuance of stock options to directors, officers, key employees and others. The option exercise price under the 2006 Plan is the fair market value of the stock on the date the option is granted. The fair market value is determined by the average of the highest and lowest sales prices for a share of the Company’s common stock, on its primary exchange, on the same date that the option is granted. During 2007, options for 16,000 shares were issued under the 2006 Plan at an option exercise price of $22.92 per share, and at June 30, 2007, 718,000 shares were available for granting future options.

Outstanding incentive stock options at June 30, 2007, must be exercised within six years from the date of grant and vest in increments of 20% each year. Outstanding nonqualified stock options at June 30, 2007, must be exercised within five to ten years from the date of grant.

Table of Contents

In August 2002, the Company granted performance-based variable stock options for 300,000 shares to certain key executives. The exercise price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date. On the date of grant, options for 60,000 shares vested immediately and vesting of the options for the remaining 240,000 shares was scheduled to occur on a straight-line basis each year from March 15, 2003 through March 15, 2008 upon meeting performance criteria. In order to meet the performance criteria, net income for each fiscal year must be at least equal to 1.05 times net income for the preceding fiscal year, unless net income for the preceding fiscal year was zero or negative, in which case net income for the fiscal year must be at least 90% of net income for the most recent year with positive income. The number of shares for which options vest each fiscal year will not be known until the date the performance criteria is measured. As of June 30, 2007, options for 180,000 shares have vested under this 300,000 share option grant (including those options which immediately vested upon grant) while options for 80,000 shares have been forfeited as the performance criteria were not met for the fiscal years 2003 and 2004. As of June 30, 2007 it appears remote that the performance criteria will be met for 2007. Therefore compensation expense related to these options has not been recognized during the first six months of 2007.

At June 30, 2007, the Company had stock-based compensation plans with total unrecognized stock compensation expense of approximately $411,000. Of this amount approximately $33,000 will be amortized on a straight line basis over the remaining vesting period and $378,000 will be recognized only if it becomes probable that the performance criteria required for vesting will be met. As a result, the Company expects to recognize approximately $11,000 in additional compensation expense related to unvested options awards during the remainder of 2007 and to recognize approximately $22,000 of expense in 2008. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the second quarter of 2007 and 2006 was approximately $5,000 and $211,000, respectively. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first six months of 2007 and 2006 was approximately $112,000 and $311,000, respectively. The weighted average grant date fair value of options granted during the first six months of 2007 was $6.32 per share. The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately $0.01 during the six months ending June 30, 2007 but did not have a recognizable impact on diluted or basic earnings per share reported for the second quarter ending June 30, 2007. The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately $0.01 and $0.02 during the three and six months ending June 30, 2006, respectively.

The fair value of the Company’s employee stock options was estimated at the date of grant using a Black-Scholes-Merton (“BSM”) option-pricing model using the following assumptions:

	Six Months Ended
	June 30,
	2007	2006
Dividend yield	0%	0%
Volatility range	37.34% - 38.54%	33.34% - 38.54%
Risk-free rate range	4.38% - 4.48%	4.38% - 5.02%
Expected life	2.5 years - 5 years	2.5 years - 5 years
Fair value of options	$6.32 - $9.45	$6.93 - $9.45

The Company has never paid any cash dividends on its common stock and we do not anticipate paying any cash dividends in the foreseeable future. The estimated volatility is based on the historical volatility of our stock. The risk free rate for the periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of the options are calculated using temporary guidance provided by the SEC which allows companies to elect a “simplified method” where the expected life is the average of the vesting period and the original contractual term. This simplified method is not available for share option grants after December 31, 2007.

Table of Contents

Information related to option activity for the six months ended June 30, 2007 is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value*
						(in years)
Outstanding-beginning of year		284,500		$	22.83
Granted		16,000			22.92
Exercised		(4,000	)		20.79
Cancelled/forfeited/expired		-			-
Outstanding at June 30, 2007		296,500		$	22.86		4.6	$	10,440

Exercisable at June 30, 2007		254,000		$	22.84		4.5	$	10,440
___________________________
* The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The per share market value of our common stock, as determined by the closing price on June 30, 2007, was $18.28.

The number, exercise price and weighted average remaining contractual life of options outstanding as of June 30, 2007 and the number and exercise price of options exercisable as of June 30, 2007 is as follows:

Exercise Price	Options Outstanding	Weighted Average Remaining Contractual Term	Options Exercisable
		(in years)
$16.99	8,000	1.7	8,000
$18.27	12,000	2.7	12,000
$19.88	12,500	1.3	10,000
$22.68	12,000	0.7	12,000
$22.92	16,000	4.7	16,000
$23.22	220,000	5.2	180,000
$26.73	16,000	4.0	16,000
	296,500	4.6	254,000

Cash received from option exercises totaled approximately $83,000 and $101,000 during the six months ended June 30, 2007 and June 30, 2006, respectively. The Company issues new shares upon option exercise.

NOTE E: SEGMENT INFORMATION

The Company considers the guidance provided by Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”), in its identification of operating segments. The Company has determined that it has a total of eight operating segments whose primary operations can be characterized as either Truckload Services or Brokerage and Logistics Services, however in accordance with the aggregation criteria provided by SFAS No. 131 the Company has determined that the operations of the eight operating segments can be aggregated into a single reporting segment, motor carrier operations. Truckload Services revenues and Brokerage and Logistics Services revenues, each before fuel surcharges, were as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
	2007				2006				2007				2006
	Amount		%		Amount		%		Amount		%		Amount		%
	(in thousands, except percentage data)

Truckload Services revenue	$	84,069		90.8	$	78,276		87.3	$	162,443		90.2	$	157,981		87.5
Brokerage and Logistics Services revenue		8,478		9.2		11,416		12.7		17,647		9.8		22,560		12.5
Total revenues	$	92,547		100.0	$	89,692		100.0	$	180,090		100.0	$	180,541		100.0

NOTE F: TREASURY STOCK

On May 30, 2007, the Company announced that its Board of Directors had authorized the Company to repurchase up to 600,000 shares of its common stock during the twelve month period following the announcement. During the three months ended June 30, 2007, the Company repurchased 36,800 shares of its common stock. The Company accounts for Treasury stock using the cost method and as of June 30, 2007, 1,095,400 shares were held in the treasury at an aggregate cost of approximately $18,546,000.

Table of Contents

NOTE G: COMPREHENSIVE INCOME

Comprehensive income was comprised of net income plus or minus market value adjustments related to our interest rate swap agreement and marketable securities. The components of comprehensive income were as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(in thousands)

Net income	$	2,192	$	5,241	$	3,457	$	10,425

Other comprehensive income:
Reclassification adjustment for losses on derivative instruments
included in net income accounted for as hedges, net of income taxes		-		-		-		18
Reclassification adjustment for unrealized losses on marketable
securities included in net income, net of income taxes		-		14		7		58
Change in fair value of interest rate swap agreements, net of income taxes		-		-		-		1
Change in fair value of marketable securities, net of income taxes		311		40		396		351
Total comprehensive income	$	2,503	$	5,295	$	3,860	$	10,853

NOTE H: EARNINGS PER SHARE

Diluted earnings per share computations assume the exercise of stock options to purchase shares of common stock. The shares assumed exercised are based on the weighted average number of shares under options outstanding during the period and only include those options for which the exercise price is less than the average share price during the period. The net additional shares issuable are calculated based on the treasury stock method and are added to the weighted average number of shares outstanding during the period.

A reconciliation of the basic and diluted income per share computations for the three and six months ended June 30, 2007 and 2006, respectively, is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(in thousands, except per share data)

Net income	$	2,192	$	5,241	$	3,457	$	10,425

Basic weighted average common shares outstanding		10,306		10,293		10,306		10,290

Dilutive effect of common stock equivalents		1		8		1		5

Diluted weighted average common shares outstanding		10,307		10,301		10,307		10,295

Basic earnings per share	$	0.21	$	0.51	$	.34	$	1.01

Diluted earnings per share	$	0.21	$	0.51	$	.34	$	1.01

Options to purchase 264,000 and 232,500 shares of common stock were outstanding at June 30, 2007 and 2006, respectively, but were not included in the computation of diluted earnings per share because to do so would have an anti-dilutive effect.

NOTE I: INCOME TAXES

The Company adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007. FIN 48 addressed the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position. Upon adoption, and as of June 30, 2007, an adjustment to the Company’s consolidated financial statements for uncertain tax positions was not required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws.

The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which we operate generally provide for a deficiency assessment statute of limitation period of three years and as a result, the Company’s tax years 2003 through 2006 remain open to examination in those jurisdictions. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During the three and six months ended June 30, 2007, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING INFORMATION

Certain information included in this Quarterly Report on Form 10-Q constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to expected future financial and operating results or events, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, excess capacity in the trucking industry; surplus inventories; recessionary economic cycles and downturns in customers’ business cycles; increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, tolls, license and registration fees; the resale value of the Company’s used equipment and the price of new equipment; increases in compensation for and difficulty in attracting and retaining qualified drivers and owner-operators; increases in insurance premiums and deductible amounts relating to accident, cargo, workers' compensation, health, and other claims; unanticipated increases in the number or amount of claims for which the Company is self insured; inability of the Company to continue to secure acceptable financing arrangements; seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, and intermodal competitors including reductions in rates resulting from competitive bidding; the ability to identify acceptable acquisition candidates, consummate acquisitions, and integrate acquired operations; a significant reduction in or termination of the Company's trucking service by a key customer; and other factors, including risk factors, included from time to time in filings made by the Company with the SEC. The Company undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, 2006, except as follows:

Income Taxes – FIN 48. In July 2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), which became effective for the Company beginning in 2007. FIN 48 addressed the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position. The application of income tax law to multi-jurisdictional operations such as those performed by the Company, are inherently complex. Laws and regulations in this area are voluminous and often ambiguous. As such, we may be required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations may change over time which could cause changes in our assumptions and judgments that could materially affect amounts recognized in the consolidated financial statements. For additional information with respect to accounting for uncertain tax positions, see Note I to our condensed consolidated financial statements.

BUSINESS OVERVIEW

The Company’s administrative headquarters are in Tontitown, Arkansas. From this location we manage operations conducted through wholly owned subsidiaries based in various locations around the United States and Canada. The operations of these subsidiaries can generally be classified into either truckload services or brokerage and logistics services. Truckload services include those transportation services in which we utilize company owned tractors or owner-operator owned tractors. Brokerage and logistics services consist of services such as transportation scheduling, routing, mode selection, transloading and other value added services related to the transportation of freight which may or may not involve the usage of company owned or owner-operator owned equipment. Both our truckload operations and our brokerage/logistics operations have similar economic characteristics and are impacted by virtually the same economic factors as discussed elsewhere in this Report. All of the Company’s operations are in the motor carrier segment.

For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated miles. These aspects of our business are carefully managed and efforts are continuously underway to achieve favorable results. For the three and six month periods ended June 30, 2007, truckload services revenues, excluding fuel surcharges, represented 90.8% and 90.2% of total revenues, excluding fuel surcharges, with remaining revenues, excluding fuel surcharges, being generated from brokerage and logistics services. For the three and six month periods ended June 30, 2006, truckload services revenues, excluding fuel surcharges, represented 87.3% and 87.5% of total revenues, excluding fuel surcharges, with remaining revenues, excluding fuel surcharges, being generated from brokerage and logistics services.

The main factors that impact our profitability on the expense side are costs incurred in transporting freight for our customers. Currently our most challenging costs include fuel, driver recruitment, training, wage and benefit costs, independent broker costs (which we record as purchased transportation), insurance, and maintenance and capital equipment costs.

Table of Contents

In discussing our results of operations we use revenue, before fuel surcharge, (and fuel expense, net of surcharge), because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period. During the three and six months ending June 30, 2007, approximately $14.1 million and $25.4 million, respectively, of the Company’s total revenue was generated from fuel surcharges. During the three and six months ending June 30, 2006 approximately $13.7 million and $23.3 million, respectively, of the Company’s total revenue was generated from fuel surcharges. We also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes. We do this because we believe the high variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.

RESULTS OF OPERATIONS – TRUCKLOAD SERVICES

The following table sets forth, for truckload services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Fuel costs are shown net of fuel surcharges.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(percentages)

Operating revenues, before fuel surcharge		100.0			100.0			100.0			100.0

Operating expenses:
Salaries, wages and benefits		39.9			40.0			41.0			40.6
Fuel expense, net of fuel surcharge		17.9			16.0			17.6			16.1
Rent and purchased transportation		2.3			1.7			2.3			1.5
Depreciation and amortization		12.1			10.7			12.0			10.6
Operating supplies and expenses		9.4			8.4			9.5			7.9
Operating taxes and license		5.5			5.3			5.5			5.2
Insurance and claims		5.5			5.2			5.7			5.3
Communications and utilities		0.9			0.8			0.9			0.8
Other		1.9			1.2			1.9			1.4
(Gain) loss on sale or disposal of property		0.0			0.0			0.0			(0.1	)
Total operating expenses		95.4			89.3			96.4			89.3
Operating income		4.6			10.7			3.6			10.7
Non-operating income		0.2			0.1			0.3			0.1
Interest expense		(0.8	)		(0.4	)		(0.7	)		(0.4	)
Income before income taxes		4.0			10.4			3.2			10.4

THREE MONTHS ENDED JUNE 30, 2007 VS. THREE MONTHS ENDED JUNE 30, 2006

For the quarter ended June 30, 2007, truckload services revenue, before fuel surcharges, increased 7.4% to $84.1 million as compared to $78.3 million for the quarter ended June 30, 2006. The increase was primarily due to an increase in the number of miles traveled from 58.3 million miles during the second quarter of 2006 to 64.9 million miles during the second quarter of 2007 and resulting largely from an increase in the average number of company-owned tractors from 1,776 during the second quarter of 2006 to 2,055 during the second quarter of 2007. However, due to a softer freight market during the second quarter of 2007 as compared to the second quarter of 2006, the Company experienced both a decrease in the average rate per total mile charged to customers from approximately $1.34 during the second quarter 2006 to approximately $1.30 during the second quarter of 2007 and lower equipment utilization as the average miles traveled each work day per tractor decreased from 508 miles each work day in the second quarter of 2006 to 488 miles each work day in the second quarter of 2007.

Salaries, wages and benefits remained relatively constant as a percentage of revenues, before fuel surcharges, however, due to the direct correlation between driver wages, which are primarily based on miles, and mileage-based revenue, salaries, wages and benefits increased to $33.5 million for the second quarter of 2007 as compared to $31.4 million for the second quarter of 2006 as the number of miles traveled increased from 58.3 million during the second quarter of 2006 to 64.9 million during the second quarter of 2007. Also affecting the dollar-based increase was an increase in amounts paid for driver lease expense, which is a component of salaries, wages and benefits, as the average number of owner operators under contract increased from 45 during the second quarter of 2006 to 57 during the second quarter of 2007 and a decrease in amounts accrued for employee bonus plans during the second quarter of 2007 as compared to the second quarter of 2006.

Table of Contents

Fuel expense, net of fuel surcharge, increased from 16.0% of revenues, before fuel surcharges, during the second quarter of 2006 to 17.9% of revenues, before fuel surcharges, during the second quarter of 2007 which represented an increase from $12.6 million during the second quarter of 2006 to $15.0 million during the second quarter of 2007. The primary reason for the increase was a reduction in the amount of fuel surcharges collected from customers on a per-gallon basis from an average of $1.27 per gallon during the second quarter of 2006 to an average of $1.17 per gallon during the second quarter of 2007. Fuel surcharge collections vary from period to period as they are generally based on changes in fuel prices from period to period so that during periods of rising fuel prices fuel surcharge collections increase while fuel surcharge collections decrease during periods of falling fuel prices. The average price paid per-gallon for diesel fuel decreased as the Company progressed through the second quarter of 2007 while during the second quarter of 2006 the average price paid per-gallon for diesel fuel rose during the quarter. Also contributing to the increase was the combined effect of an increase in the number of miles traveled from 58.3 million miles during the second quarter of 2006 to 64.9 million miles during the second quarter of 2007 and a lower miles-per-gallon (mpg) ratio of 5.91 mpg experienced by the Company during the second quarter of 2007 as compared to a 6.01 mpg ratio during the second quarter of 2006.

Rent and purchased transportation increased from 1.7% of revenues, before fuel surcharges, during the second quarter of 2006 to 2.3% of revenues, before fuel surcharges, during the second quarter of 2007. The increase relates to an increase in amounts paid to third party transportation companies for intermodal services resulting from an increase in business with customers who require intermodal services.

Depreciation and amortization increased from 10.7% of revenues, before fuel surcharges, during the second quarter of 2006 to 12.1% of revenues, before fuel surcharges, during the second quarter of 2007. Depreciation expense increased from $8.4 million during the second quarter of 2006 to $10.1 million during the second quarter of 2007 primarily as a result of fleet expansion and higher new tractor and trailer prices coupled with decreased residual trade-in values guaranteed by the manufacturer. The Company increased its tractor fleet from an average count of 1,776 units during the second quarter of 2006 to an average count of 2,055 units during the second quarter of 2007.

Operating supplies and expenses increased from 8.4% of revenues, before fuel surcharges, during the second quarter of 2006 to 9.4% of revenues, before fuel surcharges, during the second quarter of 2007. The increase relates primarily to an increase in amounts paid for tractor repairs expense as the Company had an average of 279 more tractors in-service during the second quarter of 2007 as compared to tractors in-service during the second quarter of 2006.

Operating taxes and license increased from 5.3% of revenues, before fuel surcharges, during the second quarter of 2006 to 5.5% of revenues, before fuel surcharges, during the second quarter of 2007. The increase relates to an increase in amounts paid for federal and state fuel taxes resulting from an increase in the number of gallons of diesel fuel purchased during the second quarter of 2007 as compared to the second quarter of 2006 due to a decrease in fuel efficiency experienced by the Company during the periods compared.

Insurance and claims expense increased from 5.2% of revenues, before fuel surcharges, during the second quarter of 2006 to 5.5% of revenues, before fuel surcharges, during the second quarter of 2007. The increase relates primarily to an increase in auto liability insurance premiums which are determined based on a negotiated rate-per-mile with the Company’s insurance carrier and as a result, insurance expense increased as the number of miles traveled increased from 58.3 million during the second quarter of 2006 to 64.9 million during the second quarter of 2007. Also, during the third quarter of 2006 the Company’s auto liability insurance policy expired and was renewed with a rate-per-mile increase of approximately 4.4% which also contributed to the increase for the periods compared.

Other expenses increased from 1.2% of revenues, before fuel surcharges, during the second quarter of 2006 to 1.9% of revenues, before fuel surcharges, during the second quarter of 2007. The increase relates primarily to an increase in uncollectible revenue expense which during the second quarter of 2006 included credits for recoveries of amounts previously written-off as uncollectible while similar credits were not present during the second quarter of 2007. Also contributing to the increase was an increase in amounts paid for the outsourcing of shop employees at one of the Company’s terminals during the second quarter of 2007 as compared to the second quarter of 2006.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 89.3% for the second quarter 2006 to 95.4% for the second quarter of 2007.

Table of Contents

SIX MONTHS ENDED JUNE 30, 2007 VS. SIX MONTHS ENDED JUNE 30, 2006

For the first six months ended June 30, 2007, truckload services revenue, before fuel surcharges, increased 2.8% to $162.4 million as compared to $158.0 million for the first six months ended June 30, 2006. The increase was primarily due to an increase in the number of miles traveled from 116.5 million miles during the first six months of 2006 to 125.5 million miles during the first six months of 2007 and resulting largely from an increase in the average number of company-owned tractors from 1,757 during the first six months of 2006 to 2,036 during the first six months of 2007. However, due to a softer freight market during the first six months of 2007 as compared to the first six months of 2006, the Company experienced both a decrease in the average rate per total mile charged to customers from approximately $1.36 during the first six months 2006 to approximately $1.29 during the first six months of 2007 and lower equipment utilization as the average miles traveled each work day per tractor decreased from 508 miles each work day in the first six months of 2006 to 473 miles each work day in the first six months of 2007.

Salaries, wages and benefits increased from 40.6% of revenues, before fuel surcharges, in the first six months of 2006 to 41.0% of revenues, before fuel surcharges, during the first six months of 2007. The increase was primarily related to an increase in driver wages which increased from $39.5 million during the first six months of 2006 to $42.7 million during the first six months of 2007 as the number of company driver compensated miles increased from 116.5 million miles during the first six months of 2006 to 125.5 million miles during the first six months of 2007. Also contributing to the increase was an increase of approximately $900,000 in self-insured health insurance expense during the first six months of 2007 as compared to the first six months of 2006. Partially offsetting the increase was a decrease of approximately $1.7 million in amounts accrued for employee bonus expense during the first six months of 2007 as compared to the first six months of 2006.

Fuel expense, net of fuel surcharge, increased from 16.1% of revenues, before fuel surcharges, during the first six months of 2006 to 17.6% of revenues, before fuel surcharges, during the first six months of 2007 which represented an increase from $25.5 million during the first six months of 2006 to $28.6 million during the first six months of 2007. The primary reason for the increase was the combined effect of an increase in the number of miles traveled from 116.5 million miles during the first six months of 2006 to 125.5 million miles during the first six months of 2007 and a lower miles-per-gallon (mpg) ratio of 5.84 mpg experienced by the Company during the first six months of 2007 as compared to a 5.99 mpg ratio during the first six months of 2006. Also contributing to the increase was a reduction in the amount of fuel surcharges collected from customers on a per-gallon basis from an average of $1.09 per gallon during the first six months of 2006 to an average of $1.07 per gallon during the first six months of 2007.

Rent and purchased transportation increased from 1.5% of revenues, before fuel surcharges, during the first six months of 2006 to 2.3% of revenues, before fuel surcharges, during the first six months of 2007. The increase relates to an increase in amounts paid to third party transportation companies for intermodal services resulting from an increase in business with customers who require intermodal services.

Depreciation and amortization increased from 10.6% of revenues, before fuel surcharges, during the first six months of 2006 to 12.0% of revenues, before fuel surcharges, during the first six months of 2007. Depreciation expense increased from $16.8 million during the first six months of 2006 to $19.5 million during the first six months of 2007 primarily as a result of fleet expansion and higher new tractor and trailer prices coupled with decreased residual trade-in values guaranteed by the manufacturer. The Company increased its tractor fleet from an average count of 1,757 units during the first six months of 2006 to an average count of 2,036 units during the first six months of 2007.

Operating supplies and expenses increased from 7.9% of revenues, before fuel surcharges, during the first six months of 2006 to 9.5% of revenues, before fuel surcharges, during the first six months of 2007. The increase relates primarily to an increase in amounts paid for tractor repairs expense as the Company had an average of 279 more tractors in-service during the first six months of 2007 as compared to tractors in-service during the first six months of 2006.

Operating taxes and license increased from 5.2% of revenues, before fuel surcharges, during the first six months of 2006 to 5.5% of revenues, before fuel surcharges, during the first six months of 2007. The increase relates to an increase in amounts paid for federal and state fuel taxes resulting from an increase in the number of gallons of diesel fuel purchased during the first six months of 2007 as compared to the first six months of 2006 due to a decrease in fuel efficiency experienced by the Company during the periods compared.

Insurance and claims expense increased from 5.3% of revenues, before fuel surcharges, during the first six months of 2006 to 5.7% of revenues, before fuel surcharges, during the first six months of 2007. The increase relates primarily to an increase in auto liability insurance premiums which are determined based on a negotiated rate-per-mile with the Company’s insurance carrier and as a result, insurance expense increased as the number of miles traveled increased from 116.5 million during the first six months of 2006 to 125.5 million during the first six months of 2007. Also, during the third quarter of 2006 the Company’s auto liability insurance policy expired and was renewed with a rate-per-mile increase of approximately 4.4% which also contributed to the increase for the periods compared.

Table of Contents

Other expenses increased from 1.4% of revenues, before fuel surcharges, during the first six months of 2006 to 1.9% of revenues, before fuel surcharges, during the first six months of 2007. The increase relates primarily to an increase in uncollectible revenue expense which during the first six months of 2006 included credits for recoveries of amounts previously written-off as uncollectible while similar credits were not present during the first six months of 2007. Also contributing to the increase was an increase in amounts paid for the outsourcing of shop employees at one of the Company’s terminals during the first six months of 2007 as compared to the first six months of 2006.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 89.3% for the first six months 2006 to 96.4% for the first six months of 2007.

RESULTS OF OPERATIONS – LOGISTICS AND BROKERAGE SERVICES

The following table sets forth, for logistics and brokerage services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Brokerage service operations occur specifically in certain divisions; however, brokerage operations occur throughout the Company in similar operations having substantially similar economic characteristics. Rent and purchased transportation, which includes costs paid to third party carriers, are shown net of fuel surcharges.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(percentages)

Operating revenues, before fuel surcharge		100.0			100.0			100.0			100.0

Operating expenses:
Salaries, wages and benefits		6.0			4.6			6.1			4.7
Fuel expense, net of fuel surcharge		0.0			0.0			0.0			0.0
Rent and purchased transportation		88.1			88.1			88.1			88.6
Depreciation and amortization		0.0			0.0			0.0			0.0
Operating supplies and expenses		0.0			0.0			0.0			0.0
Operating taxes and license		0.0			0.0			0.0			0.0
Insurance and claims		0.1			0.1			0.1			0.1
Communications and utilities		0.3			0.2			0.3			0.3
Other		2.0			1.5			2.1			1.5
(Gain) loss on sale or disposal of property		0.0			0.0			0.0			0.0
Total operating expenses		96.5			94.5			96.7			95.2
Operating income		3.5			5.5			3.3			4.8
Non-operating income		0.0			0.0			0.0			0.0
Interest expense		(0.4	)		(0.4	)		(0.4	)		(0.4	)
Income before income taxes		3.1			5.1			2.9			4.4

THREE MONTHS ENDED JUNE 30, 2007 VS. THREE MONTHS ENDED JUNE 30, 2006

For the quarter ended June 30, 2007, logistics and brokerage services revenue, before fuel surcharges, decreased 25.7% to $8.5 million as compared to $11.4 million for the quarter ended June 30, 2006. The decrease was the result of a 26.0% decrease in the number of loads brokered during the second quarter of 2007 as compared to the second quarter of 2006.

Salaries, wages and benefits increased from 4.6% of revenues, before fuel surcharges, in the second quarter of 2006 to 6.0% of revenues, before fuel surcharges, during the second quarter of 2007. The increase relates to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 94.5% for the second quarter of 2006 to 96.5% for the second quarter of 2007.

SIX MONTHS ENDED JUNE 30, 2007 VS. SIX MONTHS ENDED JUNE 30, 2006

For the first six months ended June 30, 2007, logistics and brokerage services revenue, before fuel surcharges, decreased 21.8% to $17.6 million as compared to $22.6 million for the first six months ended June 30, 2006. The decrease was the result of a 22.8% decrease in the number of loads brokered during the first six months of 2007 as compared to the first six months of 2006.

Salaries, wages and benefits increased from 4.7% of revenues, before fuel surcharges, during the first six months of 2006 to 6.1% of revenues, before fuel surcharges, during the first six months of 2007. The increase relates to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.

Table of Contents

Rent and purchased transportation decreased from 88.6% of revenues, before fuel surcharges, during the first six months of 2006 to 88.1% of revenues, before fuel surcharges during the first six months of 2007. The decrease relates to a decrease in amounts charged by third party logistics and brokerage service providers primarily as a result of a more competitive and softer freight market during the first six months of 2007 as compared to the first six months of 2006.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 95.2% for the first six months of 2006 to 96.7% for the first six months of 2007.

RESULTS OF OPERATIONS – COMBINED SERVICES

THREE MONTHS ENDED JUNE 30, 2007 VS. THREE MONTHS ENDED JUNE 30, 2006

Net income for all divisions was $2.2 million, or 2.4% of revenues, before fuel surcharge for the second quarter of 2007 as compared to $5.2 million or 5.8% of revenues, before fuel surcharge for the second quarter of 2006. The decrease in net income resulted in a decrease in diluted earnings per share to $0.21 for the second quarter of 2007 compared to $0.51 for the second quarter of 2006.

SIX MONTHS ENDED JUNE 30, 2007 VS. SIX MONTHS ENDED JUNE 30, 2006

Net income for all divisions was $3.5 million, or 1.9% of revenues, before fuel surcharge for the first six months of 2007 as compared to $10.4 million or 5.8% of revenues, before fuel surcharge for the first six months of 2006. The decrease in net income resulted in a decrease in diluted earnings per share to $0.34 for the first six months of 2007 compared to $1.01 for the first six months of 2006.

LIQUIDITY AND CAPITAL RESOURCES

The growth of our business has required, and will continue to require, a significant investment in new revenue equipment. Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, issuances of equity securities, and borrowings under our lines of credit.

During the first six months of 2007, we generated $24.0 million in cash from operating activities. Investing activities used $47.5 million in cash in the first six months of 2007. Financing activities provided $23.2 million in cash in the first six months of 2007.

Our primary use of funds is for the purchase of revenue equipment. We typically use our existing lines of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations, to finance capital expenditures and repay long-term debt. During the first six months of 2007, we utilized cash on hand and our lines of credit to finance revenue equipment purchases of approximately $51.3 million.

Occasionally we finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to 48 months, however as of June 30, 2007, we had no outstanding indebtedness under such installment notes.

In order to maintain our tractor and trailer fleet count it is often necessary to purchase replacement units and place them in service before trade units are removed from service. The timing difference created during this process often requires the Company to pay for new units without any reduction in price for trade units. In this situation, the Company later receives payment for the trade units as they are delivered to the equipment vendor and have passed vendor inspection. During the six months ended June 30, 2007, the Company received approximately $4.4 million for tractors delivered for trade and expects to receive approximately $6.9 million during the remainder of the year.

During the remainder of the year, we expect to purchase approximately 300 new tractors and approximately 475 trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $32.4 million. Management believes we will be able to finance our near term needs for working capital over the next twelve months, as well as acquisitions of revenue equipment during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources. We will continue to have significant capital requirements over the long-term, which may require us to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Nevertheless, based on our recent operating results, current cash position, anticipated future cash flows, and sources of financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints in the foreseeable future.

Table of Contents

We maintain two $30.0 million revolving lines of credit (Line A and Line B, respectively) with separate financial institutions. Amounts outstanding under Line A bear interest at LIBOR (determined as of the first day of each month) plus 1.25% (6.57% at June 30, 2007), are secured by our accounts receivable and mature on May 31, 2009. At June 30, 2007 outstanding advances on line A were approximately $19.9 million, including $310,000 in letters of credit, with availability to borrow $10.1 million. Amounts outstanding under Line B bear interest at LIBOR (determined on the last day of the previous month) plus 1.15% (6.47% at June 30, 2007), are secured by revenue equipment and mature on June 30, 2008, however the Company has the intent and ability to extend the terms of this line of credit for an additional one year period until June 30, 2009. At June 30, 2007, $27.5 million, including $2.5 million in letters of credit were outstanding under Line B with availability to borrow $2.5 million.

Trade accounts receivable at June 30, 2007 increased approximately $7.5 million as compared to December 31, 2006. The increase resulted from a general increase in revenue, which flows through the accounts receivable account, during the month of June 2007 as compared to the revenues generated during the month of December 2006.

Prepaid expenses and deposits at June 30, 2007 decreased approximately $6.1 million as compared to December 31, 2006. The decrease reflects the amortization of prepaid tractor and trailer license fees and auto liability insurance premiums. In December 2006 approximately $2.9 million of the 2007 license fees and approximately $3.0 million of the 2007 auto liability insurance premiums were paid in advance. These prepaid expenses will be amortized to expense through the remainder of the year.

Revenue equipment, which generally consists of tractors, trailers, and revenue equipment accessories such as Qualcomm™ satellite tracking units, increased approximately $21.5 million as compared to December 31, 2006. This increase is primarily the result of an increase in the size of the Company’s tractor and trailer fleet as compared to December 31, 2006.

Accounts payable at June 30, 2007 decreased approximately $14.0 million as compared to December 31, 2006. Approximately $12.4 million of the decrease is related to the payment of accounts payable to vendors for tractors received in December 2006 but not paid for until the payment due date in January 2007. The net decrease also reflects a decrease of approximately $1.9 million in amounts accrued under employee bonus plans and a $2.6 million decrease in amounts reclassified as bank drafts outstanding at June 30, 2007 as compared to December 31, 2006. Partially offsetting these decreases was an increase in amounts accrued for fuel purchases of approximately $1.1 million.

Accrued expenses and other liabilities at June 30, 2007 increased approximately $2.0 million as compared to December 31, 2006. The increase is primarily related to an increase in amounts accrued at the end of the period for employee wages and benefits which can vary significantly throughout the year depending on many factors, including the timing of the actual date employees are paid in relation to the last day of the reporting period.

Long-term debt at June 30, 2007 increased approximately $24.7 million as compared to December 31, 2006. The increase is primarily related to an increase in the balance due on the Company’s lines of credit at June 30, 2007 as compared to December 31, 2006. During the first six months of 2007 the Company borrowed approximately $25.1 million more than it repaid under its lines of credit in order to finance the purchase of revenue equipment during 2007 and to reduce accounts payable related to 2006 revenue equipment purchases previously discussed above.

NEW ACCOUNTING PRONOUNCEMENTS

See Note B to the condensed consolidated financial statements for a description of the most recent accounting pronouncements and their impact, if any, on the Company.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our primary market risk exposures include equity price risk, interest rate risk, and commodity price risk (the price paid to obtain diesel fuel for our tractors). The potential adverse impact of these risks and the general strategies we employ to manage such risks are discussed below.

The following sensitivity analyses do not consider the effects that an adverse change may have on the overall economy nor do they consider additional actions we may take to mitigate our exposure to such changes. Actual results of changes in prices or rates may differ materially from the hypothetical results described below.

Equity Price Risk

We hold certain actively traded marketable equity securities which subjects the Company to fluctuations in the fair market value of its investment portfolio based on current market price. The recorded value of marketable equity securities increased to $16.4 million at June 30, 2007 from $14.4 million at December 31, 2006. The increase during the first six months of 2007 reflects additional purchases of approximately $1.5 million, sales of approximately $150,000, and an increase in the fair market value of approximately $650,000. A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately $1.6 million. For additional information with respect to the marketable equity securities, see Note C to our condensed consolidated financial statements.

Interest Rate Risk

Our two lines of credit each bear interest at a floating rate equal to LIBOR plus a fixed percentage. Accordingly, changes in LIBOR, which are effected by changes in interest rates, will affect the interest rate on, and therefore our costs under, the lines of credit. Assuming $40.0 million of variable rate debt was outstanding, a hypothetical 100 basis point increase in LIBOR for a one year period would result in approximately $400,000 of additional interest expense.

Commodity Price Risk

Prices and availability of all petroleum products are subject to political, economic and market factors that are generally outside of our control. Accordingly, the price and availability of diesel fuel, as well as other petroleum products, can be unpredictable. Because our operations are dependent upon diesel fuel, significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our 2006 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by $9.7 million.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Company's management evaluated, with the participation of the Company's President and Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2007. Based upon that evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2007 so that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this quarterly report on Form 10-Q was being prepared.

Changes in internal controls over financial reporting. There was no change in the Company's internal control over financial reporting that occurred during the quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The nature of our business routinely results in litigation, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. We believe that all such routine litigation is adequately covered by insurance and that adverse results in one or more of those cases would not have a material adverse effect on our financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On May 30, 2007, the Company announced that its Board of Directors had authorized the Company to repurchase up to 600,000 shares of its common stock during the twelve month period following the announcement. The following table summarizes the Company’s common stock repurchases during the second quarter of 2007 made pursuant to this authorization. No shares were purchased during the quarter other than through this program, and all purchases were made by or on behalf of the Company and not by any “affiliated purchaser”.

Issuer Purchases of Equity Securities
	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
Period	Total number of shares purchased	Average price paid per share
April 1-30, 2007	-	-	-	600,000
May 1-31, 2007	-	-	-	600,000
June 1-30, 2007	36,800	$18.3614	36,800	563,200
Total	36,800	$18.3614	36,800

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

Our annual meeting of stockholders was held on May 24, 2007. The matters voted on at the meeting and the votes cast with respect to each matter were as follows:

Proposal to elect eight directors:	Votes For	Votes Withheld	Abstentions	Broker Non-votes
Frederick P. Calderone	8,262,024	1,675,352	0	0
Frank L. Conner	9,824,188	113,188	0	0
Christopher L. Ellis	9,720,839	216,537	0	0
Manual J. Moroun	8,170,048	1,767,328	0	0
Matthew T. Moroun	8,141,485	1,795,891	0	0
Daniel C. Sullivan	9,720,839	216,537	0	0
Robert W. Weaver	7,974,126	1,963,250	0	0
Charles F. Wilkins	9,665,054	272,322	0	0

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-K:
3.1	Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15, 2002)
3.2	Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company's Form 8-K filed on January 22, 2007.)
31.1	Rule 13a-14(a) Certification of Principal Executive Officer
31.2	Rule 13a-14(a) Certification of Principal Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

Table of Contents

SIGNATURES

Pursuant to the requirements 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.

	P.A.M. TRANSPORTATION SERVICES, INC.


Dated: August 3, 2007	By: /s/ Robert W. Weaver
	Robert W. Weaver
	President and Chief Executive Officer
	(principal executive officer)

Dated: August 3, 2007	By: /s/ Larry J. Goddard
	Larry J. Goddard
	Vice President-Finance, Chief Financial
	Officer, Secretary and Treasurer
	(principal accounting and financial officer)

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC.

Index to Exhibits to Form 10-Q

Exhibit Number		Exhibit Description

3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15, 2002.)
3.2		Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company's Form 8-K filed on January 22, 2007.)
31.1		Rule 13a-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a) Certification of Principal Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer