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 March 31, 20062007

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 “acceleratedaccelerated filer and large accelerated filer”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 May 4, 2006April 25, 2007
Common Stock, $.01 Par Value 10,293,60710,307,607



P.A.M. TRANSPORTATION SERVICES, INC.
Form 10-Q
For The Quarter Ended March 31, 20062007
Table of Contents



Part I. Financial Information
  
Item 1.
Financial Statements.
  
 
Condensed Consolidated Balance Sheets as of March 31, 20062007 and December 31, 20052006
  
 
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 20062007 and 20052006
  
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20062007 and 20052006
  
 
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 20062007
  
 
Notes to Condensed Consolidated Financial Statements as of March 31, 20062007
  
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 6.
Exhibits.
 
ExhibitsSignatures
 
SignaturesExhibits


2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.Statements.

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 
  
March 31,
 
December 31,
 
  
2006
 
2005
 
ASSETS
 (unaudited) (see note) 
Current assets:     
Cash and cash equivalents $1,466 $1,129 
Accounts receivable-net:       
Trade  72,555  65,433 
Other  1,341  1,392 
Inventories  775  749 
Prepaid expenses and deposits  10,730  15,095 
Marketable equity securities available-for-sale  11,684  10,999 
Income taxes refundable  64  225 
Total current assets  98,615  95,022 
        
Property and equipment:       
Land  2,674  2,674 
Structures and improvements  9,319  9,319 
Revenue equipment  257,587  250,664 
Office furniture and equipment  6,743  6,692 
Total property and equipment  276,323  269,349 
Accumulated depreciation  (91,588) (87,854)
Net property and equipment  184,735  181,495 
        
Other assets:       
Goodwill  15,413  15,413 
Non-compete agreements  367  417 
Other  1,094  1,094 
Total other assets  16,874  16,924 
TOTAL ASSETS
 
$
300,224
 
$
293,441
 
        
LIABILITIES AND SHAREHOLDERS' EQUITY
       
Current liabilities:       
Accounts payable $33,163 $22,055 
Accrued expenses and other liabilities  13,092  10,507 
Current maturities of long-term debt  1,376  1,859 
Income taxes payable  2,793  - 
Deferred income taxes-current  7,482  7,134 
Total current liabilities  57,906  41,555 
        
Long-term debt-less current portion  24,386  39,693 
Deferred income taxes-less current portion  47,262  47,197 
Other  184  234 
Total liabilities  129,738  128,679 
        
SHAREHOLDERS' EQUITY
       
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued  -  - 
Common stock, $.01 par value, 40,000,000 shares authorized; 11,350,207 and       
11,344,207 shares issued; 10,291,607 and 10,285,607 shares outstanding       
at March 31, 2006 and December 31, 2005, respectively  114  113 
Additional paid-in capital  76,595  76,429 
Accumulated other comprehensive income  2,095  1,721 
Treasury stock, at cost; 1,058,600 shares  (17,869) (17,869)
Retained earnings  109,551  104,368 
Total shareholders’ equity  170,486  164,762 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
$
300,224
 
$
293,441
 
        
Note: The balance sheet at December 31, 2005 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.
 
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
 
  
March 31,
 
December 31,
 
  
2007
 
2006
 
ASSETS
  (unaudited)  (see note) 
Current assets:       
Cash and cash equivalents $1,152 $1,040 
Accounts receivable-net:       
Trade  65,844  61,469 
Other  1,504  1,361 
Inventories  956  819 
Prepaid expenses and deposits  10,938  14,928 
Marketable equity securities available-for-sale  15,855  14,437 
Income taxes refundable  -  498 
Total current assets  96,249  94,552 
        
Property and equipment:       
Land  2,674  2,674 
Structures and improvements  9,383  9,383 
Revenue equipment  298,522  286,933 
Office furniture and equipment  7,036  6,890 
Total property and equipment  317,615  305,880 
Accumulated depreciation  (106,951) (102,566)
Net property and equipment  210,664  203,314 
        
Other assets:       
Goodwill  15,413  15,413 
Non-compete agreements  167  217 
Other  762  750 
Total other assets  16,342  16,380 
TOTAL ASSETS
 
$
323,255
 
$
314,246
 
        
LIABILITIES AND SHAREHOLDERS' EQUITY
       
Current liabilities:       
Accounts payable $24,902 $38,510 
Accrued expenses and other liabilities  12,664  9,994 
Current maturities of long-term debt  1,428  1,915 
Deferred income taxes-current  5,669  5,658 
Total current liabilities  44,663  56,077 
        
Long-term debt-less current portion  39,822  21,205 
Deferred income taxes-less current portion  52,195  51,902 
Other  -  34 
Total liabilities  136,680  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; 10,307,607 and 10,303,607 shares outstanding       
at March 31, 2007 and December 31, 2006, respectively  114  114 
Additional paid-in capital  77,499  77,309 
Accumulated other comprehensive income  3,234  3,142 
Treasury stock, at cost; 1,058,600 shares  (17,869) (17,869)
Retained earnings  123,597  122,332 
Total shareholders’ equity  186,575  185,028 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 
$
323,255
 
$
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.
3
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
 
      
  
Three Months Ended
 
  
March 31,
 
  
2006
 
2005
 
OPERATING REVENUES:       
Revenue, before fuel surcharge $90,849 $80,109 
Fuel surcharge  9,676  6,083 
Total operating revenues  100,525  86,192 
        
OPERATING EXPENSES AND COSTS:       
Salaries, wages and benefits  33,229  31,005 
Fuel expense  22,254  17,052 
Rent and purchased transportation  11,349  9,832 
Depreciation and amortization  8,366  7,467 
Operating supplies and expenses  5,939  5,601 
Operating taxes and license  4,057  3,954 
Insurance and claims  4,196  4,099 
Communications and utilities  694  699 
Other  1,498  1,308 
(Gain) loss on disposition of equipment  (109) 17 
Total operating expenses and costs  91,473  81,034 
        
NET OPERATING INCOME  9,052  5,158 
        
NON-OPERATING INCOME  57  191 
INTEREST EXPENSE  (465) (445)
        
NET INCOME BEFORE INCOME TAXES  8,644  4,904 
        
FEDERAL AND STATE INCOME TAXES:       
Current  3,271  252 
Deferred  190  1,749 
Total federal and state income taxes  3,461  2,001 
        
NET INCOME
 
$
5,183
 
$
2,903
 
        
EARNINGS PER COMMON SHARE:
       
Basic
 
$
0.50
 
$
0.26
 
Diluted
 
$
0.50
 
$
0.26
 
        
AVERAGE COMMON SHARES OUTSTANDING:
       
Basic
  
10,288
  
11,305
 
Diluted
  
10,288
  
11,327
 
        
        
See notes to condensed consolidated financial statements.       


43


P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
 
    
    
  
Three Months Ended
 
  
March 31,
 
  
2007
 
2006
 
OPERATING REVENUES:     
Revenue, before fuel surcharge $87,544 $90,849 
Fuel surcharge  11,265  9,676 
Total operating revenues  98,809  100,525 
        
OPERATING EXPENSES AND COSTS:       
Salaries, wages and benefits  33,705  33,229 
Fuel expense  24,592  22,254 
Rent and purchased transportation  10,034  11,349 
Depreciation and amortization  9,349  8,366 
Operating supplies and expenses  7,482  5,939 
Operating taxes and license  4,351  4,057 
Insurance and claims  4,536  4,196 
Communications and utilities  768  694 
Other  1,640  1,498 
Loss (gain) on disposition of equipment  18  (109)
Total operating expenses and costs  96,475  91,473 
        
NET OPERATING INCOME  2,334  9,052 
        
NON-OPERATING INCOME  241  57 
INTEREST EXPENSE  (487) (465)
        
NET INCOME BEFORE INCOME TAXES  2,088  8,644 
        
FEDERAL AND STATE INCOME TAXES:       
Current  512  3,271 
Deferred  311  190 
Total federal and state income taxes  823  3,461 
        
NET INCOME
 
$
1,265
 
$
5,183
 
        
EARNINGS PER COMMON SHARE:
       
Basic
 
$
0.12
 
$
0.50
 
Diluted
 
$
0.12
 
$
0.50
 
        
AVERAGE COMMON SHARES OUTSTANDING:
       
Basic
  
10,305
  
10,288
 
Diluted
  
10,308
  
10,288
 
        
        
See notes to condensed consolidated financial statements.       




P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 
      
  
Three Months Ended
 
  
March 31,
 
  
2006
 
2005
 
OPERATING ACTIVITIES:       
Net income $5,183 $2,903 
Adjustments to reconcile net income to net cash provided by operating activities:       
Depreciation and amortization  8,366  7,467 
Bad debt expense (recoveries)  123  134 
Stock compensation  100  - 
Non-compete agreement amortization-net of payments  -  38 
Provision for deferred income taxes  190  1,749 
(Gain) loss on sale or disposal of equipment  (109) 17 
Changes in operating assets and liabilities:       
Accounts receivable  (7,193) (5,575)
Prepaid expenses, inventories, and other assets  4,339  4,600 
Income taxes payable  2,955  249 
Trade accounts payable  2,605  (10,409)
Accrued expenses  2,585  1,674 
Net cash provided by operating activities  19,144  2,847 
        
INVESTING ACTIVITIES:       
Purchases of property and equipment  (6,228) (13,151)
Proceeds from sale or disposal of equipment  3,265  3,283 
Purchase of marketable equity securities  (121) (216)
Other  -  (19)
Net cash used in investing activities  (3,084) (10,103)
        
FINANCING ACTIVITIES:       
Borrowings under line of credit  99,215  102,178 
Repayments under line of credit  (114,341) (95,861)
Borrowings of long-term debt  -  - 
Repayments of long-term debt  (664) (901)
Exercise of stock options  67  67 
Net cash (used in) provided by financing activities  (15,723) 5,483 
        
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  
337
  
(1,773
)
        
CASH AND CASH EQUIVALENTS-Beginning of period
  
1,129
  
19,659
 
        
CASH AND CASH EQUIVALENTS-End of period
 
$
1,466
 
$
17,886
 
        
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-       
Cash paid during the period for:       
Interest $506 $508 
Income taxes $316 $23 
        
        
See notes to condensed consolidated financial statements.       


54


P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 
      
  
Three Months Ended
 
  
March 31,
 
  
2007
 
2006
 
OPERATING ACTIVITIES:     
Net income $1,265 $5,183 
Adjustments to reconcile net income to net cash provided by operating activities:       
Depreciation and amortization  9,349  8,366 
Bad debt expense  136  123 
Stock compensation-net of excess tax benefits  107  100 
Non-compete agreement amortization-net of payments  16  - 
Provision for deferred income taxes  311  190 
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  18  (109)
Changes in operating assets and liabilities:       
Accounts receivable  (4,653) (7,193)
Prepaid expenses, inventories, and other assets  3,842  4,339 
Income taxes payable  498  2,955 
Trade accounts payable  (1,193) 2,605 
Accrued expenses  2,670  2,585 
Net cash provided by operating activities  12,258  19,144 
        
INVESTING ACTIVITIES:       
Purchases of property and equipment  (32,294) (6,228)
Proceeds from sale or disposal of equipment  3,161  3,265 
Net purchases of marketable equity securities  (1,227) (121)
Net cash used in investing activities  (30,360) (3,084)
        
FINANCING ACTIVITIES:       
Borrowings under line of credit  133,774  99,215 
Repayments under line of credit  (114,964) (114,341)
Repayments of long-term debt  (679) (664)
Exercise of stock options  83  67 
Net cash provided by (used in) financing activities  18,214  (15,723)
        
NET DECREASE IN CASH AND CASH EQUIVALENTS
  
112
  
337
 
        
CASH AND CASH EQUIVALENTS-Beginning of period
  
1,040
  
1,129
 
        
CASH AND CASH EQUIVALENTS-End of period
 
$
1,152
 
$
1,466
 
        
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-       
Cash paid during the period for:       
Interest $501 $506 
Income taxes $76 $316 
        
NONCASH INVESTING AND FINANCING ACTIVITIES-       
Purchases of property and equipment included in accounts payable $1,858 $8,541 
        
        
        
        
See notes to condensed consolidated financial statements.       


5


P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ 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          $1,265        1,265  1,265 
Other comprehensive gain:                         
Unrealized gain on marketable                         
securities, net of tax of $(9)           92  92        92 
Total comprehensive income          $1,357             
                          
Exercise of stock options-shares issued                         
including tax benefits  4     83              83 
                          
Share-based compensation        107              107 
                          
Balance at March 31, 2007
  
10,307
 
$
114
 
$
77,499
    
$
3,234
 
$
(17,869
)
$
123,597
 
$
186,575
 
                          
                          
See notes to condensed consolidated financial statements.



P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
(in thousands)
 
                
                
  
Common Stock
Shares / Amount
 Additional Paid-In Capital Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) Treasury Stock Retained Earnings Total 
                  
Balance at December 31, 2005  10,285 $113 $76,429    $1,721 $(17,869)$104,368 $164,762 
                          
Components of comprehensive income:                         
Net income          $5,183        5,183  5,183 
Other comprehensive gain:                         
Unrealized gain on hedge,                         
net of tax of $13           19  19        19 
Unrealized gain on marketable                         
securities, net of tax of $209           355  355        355 
Total comprehensive income          $5,557             
                          
Exercise of stock options-shares issued                         
including tax benefits  6  1  66              67 
                          
Share-based compensation        100              100 
                          
Balance at March 31, 2006
  
10,291
 
$
114
 
$
76,595
    
$
2,095
 
$
(17,869
)
$
109,551
 
$
170,486
 
                          
                          
See notes to condensed consolidated financial statements.




P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
March 31, 20062007


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 three-month period ended March 31, 20062007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.2007. 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, 2005.

Reclassifications - Certain 2005 amounts have been reclassified to conform to the 2006 presentation.2006.

NOTE B: DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Effective February 28, 2001, the Company entered into an interest rate swap agreement on a notional amount of $15,000,000. The pay fixed rate under the swap was 5.08%, while the receive floating rate was “1-month” LIBOR. This interest rate swap agreement terminated on March 2, 2006. Effective May 31, 2001, the Company entered into an interest rate swap agreement on a notional amount of $5,000,000. The pay fixed rate under the swap is 4.83%, while the receive floating rate is “1-month” LIBOR. This interest rate swap agreement terminates on June 2, 2006.

The Company designates the remaining interest rate swap as cash flow hedge of its exposure to variability in future cash flows resulting from interest payments indexed to “1-month” LIBOR. During the term of the interest rate swap agreement changes in future cash flows from the interest rate swaps will offset changes in interest rate payments on the first $5,000,000 of the Company’s current revolving credit facility or future “1-month” LIBOR based borrowings that reset on the last London Business Day prior to the start of the next interest period. The hedge locks the interest rate at 4.83% plus the pricing spread (currently 1.15%) for the notional amount of $5,000,000.

The interest rate swap agreement met the specific hedge accounting criteria. The measurement of hedge effectiveness is based upon a comparison of the floating-rate leg of the swap and the hedged floating-rate cash flows on the underlying liability. The effective portion of the cumulative gain or loss has been reported as a component of accumulated other comprehensive income in shareholders’ equity and will be reclassified into current earnings by June 2, 2006, the latest termination date for all current swap agreements. The December 31, 2005 balance of the net after tax deferred hedging loss in accumulated other comprehensive income (“AOCI”) related to the swap agreements was approximately $19,000 and the ending balance as of March 31, 2006 was approximately $142. The change in AOCI related to these swap agreements during the current year was approximately $19,000. Ineffectiveness related to these hedges was not significant.

NOTE C: RECENT ACCOUNTING PRONOUNCEMENTS
In February 2006,2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 155,159, 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 Hybrid Financial Instruments-an amendment of FASB Statements No. 133Investments in Debt and 140 Equity Securities(“, applies to all entities with available-for-sale and trading securities. SFAS No. 155”).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. 155 permits fair value remeasurement for any hybrid financial instrument159 in the first 120 days of that contains an embedded derivative that otherwise would require bifurcation in accordance withfiscal year and also elects to apply the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”)157, Fair Value Measurements. The provisionsCompany did not early-adopt SFAS No. 159 and management is currently evaluating the impact that adoption of this statement apply to all financial instruments acquired or issued by the Company after December 31, 2006 and is not expected toSFAS No. 159 might have a material effect on the Company’s consolidated financial statements.

In May 2005,September 2006, the FASB issued Statement of Financial Accounting Standards No. 154,158, Employers’ Accounting Changesfor Defined Benefit Pension and Error Corrections, a replacementOther Postretirement Plans — an amendment of APB OpinionFASB Statements No. 2087, 88, 106, and FASB Statement No. 3132(R) (“(“SFAS No. 154”158”). SFAS No. 154158 requires retrospective applicationrecognition of a net liability or asset to prior periods’ financial statements forreport 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 accounting principle, unless it is impracticable to determine either the period-specific effects orfunded status in the cumulative effectyear in which the changes occur. Additionally, SFAS No. 158 requires measurement of a plan’s assets and obligations as of the change. This Statement applies to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncementbalance sheet date and additional annual disclosures in the unusual instance thatnotes to the pronouncement does not include specific transition provisions. SFAS No. 154 further requires a change in depreciation, amortization or depletion method for long-lived, non-financial assets to be accounted for as a change in accounting estimate effected by a change in accounting principle. Corrections of errors in the application of accounting principles will continue to be reported by retroactively restating the affected financial statements. The recognition and disclosure provisions of this statementSFAS No. 158 are effective for accounting changes and correction of errors made in fiscal years beginningending after December 15, 2005.2006, 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 December 2004,September 2006, the FASB issued Statement of Financial Accounting Standards No. 123(R),157, Share-Based PaymentFair Value Measurements, (“SFAS No. 123(R)”157”) which replaces. SFAS No. 123,157 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 for Stock-Based Compensation,Principles (“GAAP”) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.expands disclosure requirements about fair value measurements. SFAS No. 123(R) requires compensation costs relating to share-based payment transactions be recognized157 is effective for financial statements issued in financial statements. The pro forma disclosure previously permitted under SFAS No. 123 will no longer be an acceptable alternative to recognition of expenses infiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the financial statements. SFAS No. 123(R) was originally to be effective as of the beginning of the first interim or annual reporting periodimpact that begins after June 15, 2005, with early adoption encouraged. In April 2005, the Securities and Exchange Commission announced the adoption of a new rule that amends the effective date of SFAS No. 123(R). The Company adopted this standard157 might have on January 1, 2006 and now reports in itsthe Company’s consolidated financial statements the share-based compensation expense for reporting periods beginning in 2006.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.


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NOTE D: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 three months of 2006,2007, there were no sales or reclassifications of marketable securities. TheseMarketable 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 March 31, 2006,2007, these equity securities had a combined original cost basis of approximately $8,504,000$10.5 million and a combined fair market value of approximately $11,684,000.$15.9 million. During the first three 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 three months ended March 31, 2006,2007, the Company had net unrealized gains in market value of approximately $355,000,$92,000, net of deferred income taxes. As of March 31, 2006,2007, these securities had gross unrealized gains of approximately $3,571,000$5.4 million and gross unrealized losses of approximately $76,000.$89,000. As of March 31, 2006,2007, the total net unrealized gain, net of deferred income taxes, in accumulated other comprehensive income was approximately $2,095,000.$3.2 million.

The following table shows the investments that were in a loss position at March 31, 20062007 and 2005December 31, 2006 and their related fair value at March 31, 20062007 and 2005.December 31, 2006. These investments are all classified as available-for-sale and consist of equity securities. As of March 31, 20062007 and 2005December 31, 2006 there were no investments that had been in a continuous unrealized loss position for twelve months or longer.

 2006 2005  March 31, 2007 December 31, 2006 
 (in thousands)  (in thousands) 
 
Fair
Value
 
Gross Unrealized
Losses
 
Fair
Value
 
Gross Unrealized
Losses
  
Fair
Value
 
Gross Unrealized
Losses
 
Fair
Value
 
Gross Unrealized
Losses
 
Equity securities with unrealized losses $601 $76 $935 $172  $1,607 $89 $417 $12 
Totals $601 $76 $935 $172  $1,607 $89 $417 $12 

NOTE E: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 plan provides2006 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 these plansthe 2006 Plan is the fair market value of the stock aton 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 granted, ranging from $16.99 to $23.22 asissued under the 2006 Plan at an option exercise price of $22.92 per share, and at March 31, 2006. At March 31, 2006, approximately 264,0002007, 718,000 shares were available for granting future options.

Outstanding incentive stock options at March 31, 2006,2007, must be exercised within six years from the date of grant and vest in increments of 20% each year. Outstanding nonqualified stock options at March 31, 2006,2007, must be exercised within five to ten years from the date of grant. Certain nonqualified options may not be exercised within one year of the date of grant.


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In August 2002, the Company granted 300,000 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 optionsshares vested immediately and vesting of the options for the remaining 240,000 optionsshares 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 earnedvest each fiscal year will not be known until the date the performance criteria is measured and asmeasured. As of March 31, 2006, 140,0002007, options for 180,000 shares have vested under the planthis 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.

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Effective January 1, 2006,March 31, 2007 it appears remote that the Company adopted Financial Accounting Standards Board Statement No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”) utilizingperformance criteria will be met for 2007. Therefore compensation expense related to these options was not recognized during the “modified prospective” method as described in SFAS No. 123(R). In the “modified prospective” method, compensation cost is recognized for all share-based payments granted after the effective date and for all unvested awards granted prior to the effective date. In accordance with SFAS No. 123(R), prior period amounts were not restated.first quarter of 2007.

At March 31, 2006,2007, the Company had stock-based compensation plans with total unvested stock-basedunrecognized stock compensation expense of approximately $1.1 million which is being$417,000. Of this amount approximately $39,000 will be amortized on a straight-linestraight line basis over the remaining vesting period.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 $300,000$17,000 in additional compensation expense related to unvested optionoptions awards during the remainder of 20062007 and to recognize approximately $400,000$22,000 of expense in each of the years 2007 and 2008. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately $100,000$107,000 during the first three months of 2007 and includes approximately $101,000 recognized as a result of the annual grant of 2,000 shares to each non-employee director during the first quarter of 2006.2007. The weighted average grant date fair value of options granted during the first three 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 first quarter of 2006.

Prior to the effective date, the stock-based compensation plans were accounted for based on the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (“APB Opinion No. 25”) and related interpretations. Pro-forma information regarding the impact of total stock-based compensation on net income and income per share for prior periods is required by SFAS No. 123(R). Such pro-forma information, determined as if the Company had accounted for its employee stock options under the fair value method during the first quarter of 2005, is illustrated in the following table:

  Three Months Ended 
  March 31, 
  2005 
  
(in thousands, except
per share data)
 
    
Net income-as reported $2,903 
     
Total stock-based employee compensation expense    
determined under fair value based method for all    
awards, net of related tax effects  (74)
     
Pro-forma net income $2,829 
     
Earnings per common share:    
Basic-as reported $0.26 
Basic-pro-forma $0.25 
     
Diluted-as reported $0.26 
Diluted-pro-forma $0.25 
three months ending March 31, 2007.

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:

Three Months EndedThree Months Ended
March 31,March 31,
2006 20052007 2006
Dividend yield0% 0%0% 0%
Volatility range38.54% - 38.54% 33.86% - 38.54%37.34% - 38.54% 38.54% - 38.54%
Risk-free rate range4.38% - 4.38% 4.08% - 4.38%4.38% - 4.48% 4.38% - 4.38%
Expected life5 years 5 years2.5 years - 5 years 5 years
Fair value of options$8.89 - $9.45 $6.73 - $9.45$6.32 - $9.45 $8.89 - $9.45

The Company has never paid any cash dividends on ourits 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 contractualexpected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected termlife of the options representsare 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 of time that options granted are expected to be outstanding.

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and the original contractual term. This simplified method is not available for share option grants after December 31, 2007.

Information related to option activity for the three months ended March 31, 20062007 is as follows:

 Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value*  Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value* 
     (in years)        (in years)   
Outstanding-beginning of year  286,500 $22.22         284,500 $22.83       
Granted  -  -         16,000  22.92       
Exercised  6,000  11.16         (4,000) 20.79       
Cancelled/forfeited/expired  -  -         -  -       
Outstanding at March 31, 2006  280,500 $22.46  5.7 $613,925 
Outstanding at March 31, 2007  296,500 $22.86  4.9 $66,490 
                          
Exercisable at March 31, 2006  195,500 $22.22  5.4 $475,675 
Exercisable at March 31, 2007  254,000 $22.84  4.8 $64,640 
___________________________                          
* 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 March 31, 2006, was $24.65.
* 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 March 31, 2007, was $20.62.* 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 March 31, 2007, was $20.62.

The number, weighted average exercise price and weighted average remaining contractual life of options outstanding as of March 31, 20062007 and the number and weighted average exercise price of options exercisable as of March 31, 2006 follow:2007 is as follows:

Exercise Price Options Outstanding Weighted Average Remaining Contractual Term Options Exercisable Options Outstanding Weighted Average Remaining Contractual Term Options Exercisable
   (in years)     (in years)  
$16.99 12,000 3.0 12,000 8,000 2.0 8,000
$18.27 14,000 4.0 14,000 12,000 3.0 12,000
$19.88 12,500 2.5 7,500 12,500 1.5 10,000
$20.79 8,000 0.9 8,000
$22.68 14,000 1.9 14,000 12,000 0.9 12,000
$22.92 16,000 5.0 16,000
$23.22 220,000 6.5 140,000 220,000 5.5 180,000
$26.73 16,000 4.2 16,000
 280,500 5.7 195,500 296,500 4.9 254,000

Cash received from option exercises totaled approximately $66,980$83,000 and $67,250$67,000 during the three months ended March 31, 20062007 and March 31, 2005,2006, respectively. The Company issues new shares upon option exercise.

NOTE F: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 March 31, 
  2006 2005 
  Amount  % Amount  % 
  (in thousands, except percentage data) 
              
Truckload Services revenue (1) $79,705  87.7 $70,081  87.5 
Brokerage and Logistics Services revenue (1)  11,144  12.3  10,028  12.5 
Total revenues (1) $90,849  100.0 $80,109  100.0 
              
_______________________             
(1) Before fuel surcharges.             


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  Three Months Ended March 31, 
  2007 2006 
  Amount  % Amount  % 
  (in thousands, except percentage data) 
          
Truckload Services revenue $78,374  89.5 $79,705  87.7 
Brokerage and Logistics Services revenue  9,170  10.5  11,144  12.3 
Total revenues $87,544  100.0 $90,849  100.0 
              

NOTE G:F: TREASURY STOCK
On April 11, 2005, the Company announced that the Board of Directors had authorized the Company to repurchase up to 600,000 shares of its common stock during the six month period ending October 11, 2005. These 600,000 shares were all repurchased by September 30, 2005. On September 6, 2005, the Company announced that its Board of Directors had authorized the Company to extend the stock repurchase program until September 6, 2006 and to include up to an additional 900,000 shares of its common stock.

The Company accounts for Treasury stock using the cost method and as of March 31, 2006,2007, 1,058,600 shares were held in the treasury at an aggregate cost of approximately $17,869,000. All purchases of Treasury stock were made during 2005.

NOTE H: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  Three Months Ended 
 March 31,  March 31, 
 2006 2005  2007 2006 
 (in thousands)  (in thousands) 
            
Net income $5,183 $2,903  $1,265 $5,183 
              
Other comprehensive income (loss):              
Reclassification adjustment for losses (gains) on derivative instruments              
included in net income accounted for as hedges, net of income taxes  18  77   -  18 
Reclassification adjustment for unrealized losses (gains) on marketable              
securities included in net income, net of income taxes  44  -   7  44 
Change in fair value of interest rate swap agreements, net of income taxes  1  46   -  1 
Change in fair value of marketable securities, net of income taxes  311  (128)  85  311 
Total comprehensive income $5,557 $2,898  $1,357 $5,557 


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NOTE I: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 months ended March 31, 20062007 and 2005, respectively,2006 is as follows: 
 Three Months Ended  Three Months Ended 
 March 31,  March 31, 
 2006 2005  2007 2006 
 (in thousands, except per share data)  (in thousands, except per share data) 
            
Net income $5,183 $2,903  $1,265 $5,183 
              
Basic weighted average common shares outstanding  10,288  11,305   10,305  10,288 
              
Dilutive effect of common stock equivalents  -  22   3  - 
              
Diluted weighted average common shares outstanding  10,288  11,327   10,308  10,288 
              
Basic earnings per share $0.50 $0.26  $0.12 $0.50 
              
Diluted earnings per share $0.50 $0.26  $0.12 $0.50 

Options to purchase 242,000264,000 and 259,011242,000 shares of common stock were outstanding at March 31, 20062007 and 2005,2006, 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 option price was greaterprovisions 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 average market priceposition will be sustained on examination by taxing authorities, based on the technical merits of the common shares.position. Upon adoption, and as of March 31, 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 months ended March 31, 2007, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

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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 Securities and Exchange Commission.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
The Company’s management makes estimates and assumptions in preparing the condensed consolidated financial statements that affect reported amounts and disclosures therein. In the opinion of management, theThere have been no material changes to our critical accounting policies that generally haveand estimates from the most significant impact on the financial positioninformation provided in Item 7, Management’s Discussion and resultsAnalysis of operationsFinancial Condition and Results of the Company include:

Accounts ReceivableOperations, . We continuously monitor collections and payments from our customers, third parties and vendors and maintain a provision for estimated credit losses based upon our historical experience and any specific collection issues that we have identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.

Property and Equipment. Management must use its judgment in the selection of estimated useful lives and salvage values for purposes of depreciating tractors and trailers which in some cases do not have guaranteed residual values. Estimates of salvage value at the expected date of trade-in or sale are based on the expected market values of equipment at the time of disposal which, in many cases include guaranteed residual values by the manufacturers.

Self Insurance. The Company is self-insured for health and workers’ compensation benefits up to certain stop-loss limits. Such costs are accrued based on known claims and an estimate of incurred, but not reported (IBNR) claims. IBNR claims are estimated using historical lag information and other data either provided by outside claims administrators or developed internally. This estimation process is subjective, and to the extent that future actual results differ from original estimates, adjustments to recorded accruals may be necessary.

Revenue Recognition. Revenue is recognized in full upon completion of delivery to the receiver’s location. For freight in transit at the end of a reporting period, the Company recognizes revenue prorata based on relative transit miles completed as a portion of the estimated total transit miles. Expenses are recognized as incurred.

Prepaid Tires. Tires purchased with revenue equipment are capitalized as a cost of the related equipment. Replacement tires are included in prepaid expenses and deposits and are amortized over a 24-month period. Costs related to tire recapping are expensed when incurred.our Form 10-K for the fiscal year ended December 31, 2006, except as follows:

Income Taxes - FIN 48. Significant management judgment is required to determineIn July 2006, the provisionFASB issued Interpretation 48, Accounting for income taxes and to determine whether deferred incomeUncertainty in Income Taxes (“FIN 48”), which became effective for the Company beginning in 2007. FIN 48 addressed the determination of how tax assets will be realized in fullbenefits claimed or in part. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Whenclaimed 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 all or some portionthe position will be sustained on examination by taxing authorities, based on the technical merits of specific deferredthe position. The application of income tax assets will notlaw 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 realized, a valuation allowance must be established for the amount of deferredrequired to make subjective assumptions and judgments regarding our income tax assets that are determined not to be realizable. A valuation allowance for deferredexposures. Interpretations of and guidance surrounding income tax assets has not been deemed to be necessary due to the Company’s profitable operations. Accordingly, if the facts or financial circumstances were tolaws and regulations may change thereby impacting the likelihood of realizing the deferred income tax assets, judgment would need to be applied to determine the amount of valuation allowance requiredover time which could cause changes in any given period.

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Share-Based Compensation. The Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payments, effective January 1, 2006, utilizing the “modified prospective” method as describedour assumptions and judgments that could materially affect amounts recognized in the standard. Under the “modified prospective” method, compensation cost is recognized for all share-based payments granted after the effective date and for all unvested awards granted prior to the effective date. Prior to adoption, the Company accounted for share-based payments under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company uses historical volatility when estimating the expected volatility of its share price.consolidated financial statements. For additional information with respect to share-based compensation,accounting for uncertain tax positions, see Note EI to our consolidated financial statements.

Business Segment and Concentrations of Credit Risk. The Company operates in one reporting segment, motor carrier operations. The Company provides transportation services to customers throughout the United States and portions of Canada and Mexico. The Company performs ongoing credit evaluations and generally does not require collateral from its customers. The Company maintains reserves for potential credit losses. In view of the concentration of the Company’s revenues and accounts receivable among a limited number of customers within the automobile industry, the financial health of this industry is a factor in the Company’s overall evaluation of accounts receivable.

Business Combinations and Goodwill. Upon acquisition of an entity, the cost of the acquired entity must be allocated to assets and liabilities acquired. Identification of intangible assets, if any, that meet certain recognition criteria, is necessary. This identification and subsequent valuation requires significant judgments. The carrying value of goodwill is tested annually and as of December 31, 2005 the Company determined that there was no impairment. The impairment testing requires an estimate of the value of the Company as a whole, as the Company has determined it only has one reporting unit as defined in Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

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. Truckload services revenues, excluding fuel surcharges, represented 87.7%89.5% and 87.5%87.7% of total revenues, excluding fuel surcharges for the three months ended March 31, 20062007 and 2005,2006, respectively 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.



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 months ending March 31, 2007 and 2006, and 2005, approximately $9.7$11.3 million and $6.1$9.7 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  Three Months Ended 
 March 31,  March 31, 
 2006 2005  2007 2006 
 (percentages)  (percentages) 
            
Operating revenues, before fuel surcharge  100.0  100.0   100.0  100.0 
              
Operating expenses:              
Salaries, wages and benefits  41.0  43.5   42.3  41.0 
Fuel expense, net of fuel surcharge  16.2  15.9   17.3  16.2 
Rent and purchased transportation  1.3  1.1   2.2  1.3 
Depreciation and amortization  10.5  10.6   11.9  10.5 
Operating supplies and expenses  7.4  8.0   9.6  7.4 
Operating taxes and license  5.1  5.7   5.6  5.1 
Insurance and claims  5.3  5.9   5.8  5.3 
Communications and utilities  0.8  0.9   0.9  0.8 
Other  1.7  1.6   1.8  1.7 
(Gain) loss on sale or disposal of property  (0.1) 0.1   0.0  (0.1)
Total operating expenses  89.2  93.3   97.4  89.2 
Operating income  10.8  6.7   2.6  10.8 
Non-operating income  0.1  0.3   0.3  0.1 
Interest expense  (0.6) (0.5)  (0.6) (0.6)
Income before income taxes  10.3  6.5   2.3  10.3 

THREE MONTHS ENDED MARCH 31, 20062007 VS. THREE MONTHS ENDED MARCH 31, 20052006

For the quarter ended March 31, 2006,2007, truckload services revenue, before fuel surcharges, increased 13.7%decreased 1.7% to $79.7$78.4 million as compared to $70.1$79.7 million for the quarter ended March 31, 2005.2006. The increasedecrease was primarily due to a 12.5% increase5.6% decrease in the average rate per total mile charged to customers from $1.22 during the first quarter 2005 toapproximately $1.37 during the first quarter 2006 to approximately $1.29 during the first quarter of 2006. Also contributing to2007. Partially offsetting the increasedecrease in revenue related to rates was an increase in the total number of miles traveled as the average number of company-owned tractors increased from 57.5 million1,739 tractors during the first quarter of 20052006 to 58.2 million2,018 during the first quarter of 2006.2007. These additional tractors contributed to an increase of 4.2% in the number of miles traveled and an increase of 4.9% in the number of loads transported. However, due to a softer freight market during the first quarter of 2007 as compared to the first quarter of 2006, lower equipment utilization resulted in the average miles traveled each work day per tractor decreasing from 508 miles each work day in the first quarter of 2006 to 458 miles each work day in the first quarter of 2007.

Salaries, wages and benefits decreasedincreased from 43.5%41.0% of revenues, before fuel surcharges, in the first quarter of 20052006 to 41.0%42.3% of revenues, before fuel surcharges, during the first quarter of 2006.2007. The decreaseincrease relates primarily to a decrease in driver lease expense, which is a component of salaries, wages and benefits, as the average number of owner operators under contract decreased from 74 during the first quarter of 2005 to 50 during the first quarter of 2006. The decrease associated with driver lease expense was partially offset by an increase in amounts paiddriver wages as a percentage of revenue generated as the Company experienced a lower average rate charged to the customer without a corresponding companydecrease in the driver replacement, and in other costs normally absorbed by the owner operator such as repairs and fuel. Although topay rate. To a lesser degree, the effect of higherlower revenues without a corresponding increasedecrease in those wages with fixed cost characteristics, such as general and administrative wages, also contributed to the decreaseincrease in salaries, wages and benefits as a percentage of revenues, before fuel surcharges. During January 2006Partially offsetting the Company implementedincreases discussed above was a driver pay increase ranging from $.01 to $.03 per mile depending on individual driver qualifications and management anticipates that salaries, wages and benefits will increase to the extent the Company is unable to pass the additional costs to customersdecrease in the form of rate increases.amounts accrued for employee bonus plans.



Fuel expense increased from 15.9% of revenues, before fuel surcharges, during the first quarter of 2005 to 16.2% of revenues, before fuel surcharges, during the first quarter of 2006.2006 to 17.3% of revenues, before fuel surcharges, during the first quarter of 2007. Fuel costs, net of fuel surcharges, increased from $11.2 million during the first quarter of 2005 to $12.9 million during the first quarter of 2006 to $13.5 million during the first quarter of 2007. The increase relates primarily due to higherthe combined effect of an increase in the average price paid by the Company per gallon of diesel fuel prices.and a lower miles-per-gallon (mpg) ratio experienced by the Company during the first quarter of 2007 as compared to the first quarter of 2006. During periods of rising fuel prices the Company is often able to recoup at least a portion of the increase through fuel surcharges passed along to its customers. The Company collected approximately $6.1$9.4 million in fuel surcharges during the first quarter of 20052006 and $9.7$11.0 million during the first quarter of 2006. Fuel costs were also affected by the replacement of owner operators with Company drivers as discussed above.2007.



DepreciationRent and amortization decreasedpurchased transportation increased from 10.6%1.3% of revenues, before fuel surcharges, during the first quarter of 20052006 to 2.2% of revenues, before fuel surcharges, during the first quarter of 2007. The increase relates to an increase in amounts paid to third party transportation companies for intermodal services.

Depreciation and amortization increased from 10.5% of revenues, before fuel surcharges, during the first quarter of 2006. Depreciation expense increased from $7.5 million2006 to 11.9% of revenues, before fuel surcharges, during the first quarter of 2005 to2007. Depreciation expense increased from $8.4 million during the first quarter of 2006 to $9.3 million during the first quarter of 2007 primarily due toas a result of fleet expansion and higher new tractor and trailer prices coupled with decreased residual trade-in values guaranteed by the manufacturer, howevermanufacturer. The Company increased its tractor fleet from an average count of 1,739 units during the first quarter of 2006 to an average count of 2,018 units during the first quarter of 2007. The Company also increased its trailer fleet from an average count of 4,061 units during the first quarter of 2006 to an average count of 4,231 units during the first quarter of 2007. The fixed cost nature of the Company’s depreciation expense also contributed to the increase in depreciation expense as a percentage of revenues before fuel surcharges, a decrease results fromas revenues decreased for the interaction of increased revenues from an increased rate per mile chargedthree months ending March 31, 2007 as compared to customers and the fixed cost nature of depreciation expense.March 31, 2006.

InsuranceOperating supplies and claims expense decreasedexpenses increased from 5.9%7.4% of revenues, before fuel surcharges, during the first quarter of 20052006 to 9.6% of revenues, before fuel surcharges, during the first quarter of 2007. The increase relates primarily to an increase in amounts paid to third party driver training schools and for tractor repairs expense as the Company had approximately 280 more tractors in-service during the first quarter of 2007 as compared to tractors in-service during the first quarter of 2006.

Insurance and claims expense increased from 5.3% of revenues, before fuel surcharges, during the first quarter of 2006.2006 to 5.8% of revenues, before fuel surcharges, during the first quarter of 2007. The decrease was the result of renegotiationsincrease relates primarily to an increase in auto liability insurance premiums which are determined based on a negotiated rate-per-mile with one of the Company’s insurance providerscarrier. As a result, insurance expense increased as the number of miles traveled increased from 58.1 million during the first quarter of 2006 to change60.6 million during the methodfirst quarter of determining2007. Also, during the third quarter of 2006 the Company’s auto liability insurance premiums. Previously,policy expired and was renewed with a rate-per-mile increase of approximately 4.4% which also contributed to the Company’s auto liability premiums were determined using a specified rate per one hundred dollars of revenue including fuel surcharges. This method hadincrease for the unintended consequence of penalizing the Company with increased insurance costs solely from passing higher fuel costs along to its customers in the form of fuel surcharges. The method of determining the Company’s auto liability premium is now based on the number of miles traveled instead of revenue generated.periods compared.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, decreasedincreased from 93.3% for the first quarter 2005 to 89.2% for the first quarter 2006 to 97.4% for the first quarter of 2006.2007.



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  Three Months Ended 
 March 31,  March 31, 
 2006 2005  2007 2006 
 (percentages)  (percentages) 
            
Operating revenues, before fuel surcharge  100.0  100.0   100.0  100.0 
              
Operating expenses:              
Salaries, wages and benefits  4.8  5.0   6.2  4.8 
Fuel expense, net of fuel surcharge  0.0  0.0   0.0  0.0 
Rent and purchased transportation  89.2  88.2   88.0  89.2 
Depreciation and amortization  0.0  0.3   0.0  0.0 
Operating supplies and expenses  0.0  0.0   0.0  0.0 
Operating taxes and licenses  0.0  0.0 
Operating taxes and license  0.0  0.0 
Insurance and claims  0.1  0.1   0.1  0.1 
Communications and utilities  0.3  0.4   0.3  0.3 
Other  1.4  1.7   2.2  1.4 
(Gain) loss on sale or disposal of property  0.0  0.0   0.0  0.0 
Total operating expenses  95.8  95.7   96.8  95.8 
Operating income  4.2  4.3   3.2  4.2 
Non-operating income  0.0  0.0   0.0  0.0 
Interest expense  (0.5) (0.6)  (0.4) (0.5)
Income before income taxes  3.7  3.7   2.8  3.7 

THREE MONTHS ENDED MARCH 31, 20062007 VS. THREE MONTHS ENDED MARCH 31, 20052006

For the quarter ended March 31, 2006,2007, logistics and brokerage services revenue, before fuel surcharges, increased 11.1%decreased 17.7% to $11.1$9.2 million as compared to $10.0$11.1 million for the quarter ended March 31, 2005.2006. The increasedecrease was primarily the result of rate increases, and to a lesser extent, an increase19.7% decrease in the number of loads brokered.brokered during the first quarter of 2007 as compared to the first quarter of 2006.

RentSalaries, wages and purchased transportationbenefits increased from 88.2%4.8% of revenues, before fuel surcharges, in the first quarter of 2006 to 6.2% of revenues, before fuel surcharges, during the first quarter of 20052007. 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.

Rent and purchased transportation decreased from 89.2% of revenues, before fuel surcharges, during the first quarter of 2006.2006 to 88.0% of revenues, before fuel surcharges during the first quarter of 2007. The increasedecrease relates to an increasea decrease in amounts charged by third party logistics and brokerage service providers primarily as a result of higher fuel costs.a more competitive and softer freight market during the first quarter of 2007 as compared to the first quarter 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 95.7% for the first quarter 2005 to 95.8% for the first quarter 2006 to 96.8% for the first quarter of 2006.


2007.

RESULTS OF OPERATIONS - COMBINED SERVICES

THREE MONTHS ENDED MARCH 31, 20062007 VS. THREE MONTHS ENDED MARCH 31, 20052006

Net income for all divisions was approximately $1.3 million, or 1.4% of revenues, before fuel surcharge for the first quarter of 2007 as compared to $5.2 million or 5.7% of revenues, before fuel surcharge for the first quarter of 2006 as compared2006. The decrease in net income resulted in a decrease in diluted earnings per share to $2.9 million or 3.6% of revenues, before fuel surcharge$0.12 for the first quarter of 2005. The increase in net income combined with the effect of treasury stock repurchases resulted in an increase in diluted earnings per share2007 compared to $0.50 for the first quarter of 2006 compared to $0.26 for the first quarter of 2005.2006.



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 three months of 2006,2007, we generated $19.1$12.2 million in cash from operating activities. Investing activities used $3.1$30.4 million in cash in the first three months of 2006.2007. Financing activities used $15.7provided $18.2 million in cash in the first three months of 2006.2007.

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 three months of 2006,2007, we utilized cash on hand and our lines of credit to finance revenue equipment purchases of approximately $6.1$31.1 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 March 31, 2006,2007, 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 three months ended March 31, 2006,2007, the Company received approximately $2.5$2.3 million for tractors delivered for trade and expects to receive approximately $13.6$21.2 million during the remainder of the year.

During the remainder of the year, we expect to purchase approximately 411505 new tractors and approximately 450725 trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $31.4$36.1 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.

We maintain a $20.0 million revolving line of credit and a $30.0 million revolving line 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 1.40%, (6.03%1.25% (6.57% at March 31, 2006)2007), are secured by our accounts receivable and mature on May 31, 2007.2007, however the Company has the intent and ability to extend the terms of this line of credit for an additional one year period until May 31, 2008. At March 31, 20062007 outstanding advances on line A were approximately $9.9$18.6 million, including $310,000 in letters of credit, with availability to borrow $10.1$1.4 million. Amounts outstanding under Line B bear interest at LIBOR (determined on the last day of the previous month) plus 1.15%, (5.81% (6.47% at March 31, 2006)2007), are secured by revenue equipment and mature on June 30, 2007.2008. At March 31, 2006, $18.12007, $22.5 million, including $5.6$2.5 million in letters of credit were outstanding under Line B with availability to borrow $11.9$7.5 million. In an effort to reduce interest rate risk associated with these floating rate facilities, we have entered into an interest rate swap agreement in an aggregate notional amount of $5.0 million. For additional information regarding the interest rate swap agreement, see Note B to the condensed consolidated financial statements.

Trade accounts receivable at March 31, 20062007 increased approximately $7.1$4.4 million as compared to December 31, 2005. Approximately $3.8 million of the increase relates to the timing of payments from a customer which is normally received by the end of the quarter but was not received until after March 31, 2006. The remaining increase was related toresulted from a general increase in revenuesrevenue, which flowflows through ourthe accounts receivable account.

March 2007 as compared to the revenues generated during the month of December 2006.

Prepaid expenses and deposits at March 31, 20062007 decreased approximately $4.4$4.0 million as compared to December 31, 2005.2006. The decrease reflects the amortization of prepaid tractor and trailer license fees and auto liability insurance premiums. In December 20052006 approximately $2.8$2.9 million of the 20062007 license fees and approximately $3.0 million of the 20062007 auto liability insurance premiums were paid in advance. These prepaid expenses will be amortized to expense through the remainder of the year.


Accounts payable at March 31, 2006
15

Revenue equipment, which generally consists of tractors, trailers, and revenue equipment accessories such as Qualcomm™ satellite tracking units, increased approximately $11.1$11.6 million as compared to December 31, 2005.2006. This increase is primarily the result of an increase in the size of the Company’s tractor fleet by approximately 145 units as compared to December 31, 2006.

Accounts payable at March 31, 2007 decreased approximately $13.6 million as compared to December 31, 2006. Approximately $8.5$12.4 million of the increasedecrease is related to an increase in amountsthe payment of accounts payable to vendors for tractors received by the Company before the end of the periodin December 2006 but not paid for which payment was not due until the next period.payment due date in January 2007. The net increasedecrease also reflects the increasea decrease of approximately $2.5$1.9 million in amounts accrued under employee bonus plans and a $2.1 million decrease in amounts reclassified as bank drafts outstanding at March 31, 2007 as compared to December 31, 2006. Partially offsetting these decreases was an increase in amounts accrued for fuel purchases.purchases of approximately $2.2 million.

Accrued expenses and other liabilities at March 31, 20062007 increased approximately $2.6$2.7 million as compared to December 31, 2005.2006. 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.

Income taxes payableLong-term debt at March 31, 20062007 increased approximately $2.8$18.6 million as compared to December 31, 2005. This amount is primarily composed of federal and state income taxes that are payable for the current period with a payment due date after March 31, 2006.

Long-term debt at March 31, 2006 decreased approximately $15.3 million as compared to December 31, 2005. The decreaseincrease is primarily related to a decreasean increase in the balance due on the Company’s lines of credit at March 31, 20062007 as compared to December 31, 2005.2006. During the first three months of 20062007 the Company repaidborrowed approximately $15.1$18.8 million more than it borrowedrepaid under its lines of credit using idle cashin order to finance the purchase of revenue equipment during the first quarter of 2007 and cash generated from operating activities.to reduce accounts payable related to 2006 revenue equipment purchases discussed above.

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



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 $11.7$15.9 million at March 31, 20062007 from $11.0$14.4 million at December 31, 2005.2006. The increase reflects additional purchases of approximately $121,000 during the first three months of 20062007 reflects additional purchases of approximately $1.5 million, sales of approximately $150,000, and an increase in the fair market value of approximately $564,000 during the first three months of 2006.$100,000. 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 $1.2$1.6 million. For additional information with respect to the marketable equity securities, see Note DC to our 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. In an effort to manage the risks associated with changing interest rates, we entered into interest rate swap agreements effective February 28, 2001 and May 31, 2001, on notional amounts of $15,000,000 and $5,000,000, respectively. The “pay fixed rates” under the $15,000,000 and $5,000,000 swap agreements are 5.08% and 4.83%, respectively. The “receive floating rate” for both swap agreements is “1-month” LIBOR. The interest rate swap agreement on the notional amount of $15,000,000 terminated on March 2, 2006 while the interest rate swap agreement on the notional amount of $5,000,000 will terminate on June 2, 2006. Assuming $20.0 million of variable rate debt was outstanding, under Line “A” and not covered by a hedge agreement for a full fiscal year, a hypothetical 100 basis point increase in LIBOR for a one year period would result in approximately $200,000 of additional interest expense. For additional information with respect to the interest rate swap agreements, see Note B to our condensed consolidated financial statements.

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 20052006 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by $8.1$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 March 31, 2006.2007. 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 March 31, 20062007 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 March 31, 20062007 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.




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 6. Exhibits.

Exhibits required by Item 601 of Regulation S-K:
3.1Amended 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.)2002)
3.2Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company's Form 10-Q8-K filed on May 15, 2002.January 22, 2007.)
31.1Rule 13a-14(a) Certification of Principal Executive Officer
31.2Rule 13a-14(a) Certification of Principal Financial Officer
32.1Section 1350 Certification of Chief Executive Officer
32.2Section 1350 Certification of Chief Financial Officer




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: May 5, 20064, 2007
By: /s/ Robert W. Weaver
 Robert W. Weaver
 President and Chief Executive Officer
 (principal executive officer)
  
Dated: May 5, 20064, 2007
By: /s/ Larry J. Goddard
 Larry J. Goddard
 Vice President-Finance, Chief Financial
 Officer, Secretary and Treasurer
 (principal accounting and financial officer)
  


P.A.M. TRANSPORTATION SERVICES, INCINC..
Index to Exhibits to Form 10-Q



Exhibit NumberExhibit 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 10-Q8-K filed on May 15, 2002.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


 
20