P.A.M. Transportation Services, Inc. Annual Report 2007

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FY2007 Annual Report · P.A.M. Transportation Services, Inc.

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10-K 1 form10k_2007.htm PTSI 2007 FORM 10-K

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

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2007
or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 0-15057

P.A.M. TRANSPORTATION SERVICES, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

71-0633135
(I.R.S. Employer
Identification No.)

297 West Henri De Tonti Blvd, Tontitown, Arkansas 72770

(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to section 12(b) of the Act:

Title of each class
Common Stock, $.01 par value

Name of each exchange on which registered
The NASDAQ Stock Market, LLC

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o

No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o

No þ

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

Yes þ

No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o

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

Yes o

No þ

The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant computed by
reference to the average of the closing bid and asked prices of the common stock as of the last business day of the
registrant's most recently completed second quarter was $88,311,474. Solely for the purposes of this response, executive
officers, directors and beneficial owners of more than five percent of the registrant’s common stock are considered the
affiliates of the registrant at that date.

The number of shares outstanding of the issuer’s common stock, as of March 10, 2008: 9,709,607 shares of $.01 par value
common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held in 2008 are
incorporated by reference in answer to Part III of this report, with the exception of information regarding executive officers
required under Item 10 of Part III, which information is included in Part I, Item 1.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements, including statements about our operating and growth strategies, our
expected financial position and operating results, industry trends, our capital expenditure and financing plans and similar
matters. Such forward-looking statements are found throughout this Report, including under Item 1, Business, Item 1A,
Risk Factors, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item
7A, Quantitative and Qualitative Disclosures About Market Risk. In those and other portions of this Report, the words
“believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “project” and similar expressions, as they
relate to us, our management, and our industry are intended to identify forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections about future events and financial trends
affecting our business. Actual results may differ materially. Some of the risks, uncertainties and assumptions about P.A.M.
that may cause actual results to differ from these forward-looking statements are described under the headings “Risk
Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and
Qualitative Disclosures About Market Risk.”

All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety
by this cautionary statement.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this Report might not transpire.

P.A.M. TRANSPORTATION SERVICES, INC.
FORM 10-K
For the fiscal year ended December 31, 2007
TABLE OF CONTENTS

Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4

Item 5

Item 6
Item 7

Item 7A
Item 8
Item 9

Item 9A
Item 9B

Item 10
Item 11
Item 12

Item 13
Item 14

PART I

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders

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

PART II

Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operation

Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

Controls and Procedures
Other Information

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters

PART III

Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

Item 15

Exhibits, Financial Statement Schedules

PART IV

SIGNATURES

EXHIBIT INDEX

Page
1
8
11
11
11
11

12
14

15
26
28

55
55
56

57
57

57
58
58

Item 1. Business.

PART I

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “P.A.M.,” the “Company,” “we,”
“our,” or “us” mean P.A.M. Transportation Services, Inc. and its subsidiaries.

We are a truckload dry van carrier transporting general commodities throughout the continental United States, as well as in
certain Canadian provinces. We also provide transportation services in Mexico under agreements with Mexican carriers.
Our freight consists primarily of automotive parts, consumer goods, such as general retail store merchandise, and
manufactured goods, such as heating and air conditioning units.

P.A.M. Transportation Services, Inc. is a holding company organized under the laws of the State of Delaware in June 1986
which conducts operations through the following wholly owned subsidiaries: P.A.M. Transport, Inc., T.T.X., Inc., P.A.M.
Dedicated Services, Inc., P.A.M. Logistics Services, Inc., Choctaw Express, Inc., Choctaw Brokerage, Inc., Transcend
Logistics, Inc., Allen Freight Services, Inc., Decker Transport Co., Inc., East Coast Transport and Logistics, LLC, S & L
Logistics, Inc., P.A.M. International, Inc., P.A.M. Canada, Inc. and McNeill Express, Inc. Our operating authorities are held
by P.A.M. Transport, Inc., P.A.M. Dedicated Services, Inc., Choctaw Express, Inc., Choctaw Brokerage, Inc., Allen Freight
Services, Inc., T.T.X., Inc., Decker Transport Co., Inc., East Coast Transport and Logistics, LLC, and McNeill Express, Inc.

We are headquartered and maintain our primary terminal and maintenance facilities and our corporate and administrative
offices in Tontitown, Arkansas, which is located in northwest Arkansas, a major center for the trucking industry and where
the support services (including warranty repair services) for most major truck and trailer equipment manufacturers are
readily available.

In order to conform to industry practice, the Company began to classify fuel surcharges charged to customers as revenue
rather than as a reduction of operating supplies expense as had been presented in reports prior to the period ended June
30, 2004. During 2006, the Company began to separately display as a line item “Fuel expense” for amounts paid for fuel
which previously had been aggregated with other operating supplies and included in the line item “Operating supplies”.
These reclassifications have had no effect on operating income, net income or earnings per share. The Company has
made corresponding reclassifications to comparative periods shown.

Segment Financial Information

The Company's operations are all in the motor carrier segment and are aggregated into a single operating segment in
accordance with the aggregation criteria presented in SFAS 131.

Operations

Our operations can generally be classified into truckload services or brokerage and logistics services. Truckload services
include those transportation services in which we utilize company owned trucks or owner-operator owned trucks for the
pickup and delivery of freight. The brokerage and logistics services consists 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 and logistics operations have similar economic characteristics and are impacted by virtually the same economic
factors as discussed elsewhere in this Report. Truckload services operating revenues, before fuel surcharges represented
90.4%, 87.8%, and 88.0% of total operating revenues for the years ended December 31, 2007, 2006, and 2005,
respectively. The remaining operating revenues, before fuel surcharge for the same periods were generated by brokerage
and logistics services, representing 9.6%, 12.2%, and 12.0%, respectively. Approximately 99% of the Company's revenues
are generated by operations conducted in the United States and all of the Company's assets are located or based in the
United States.

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Business and Growth Strategy

Our strategy focuses on the following elements:

Maintaining Dedicated Fleets in High Density Lanes. We strive to maximize utilization and increase revenue per truck while
minimizing our time and empty miles between loads. In this regard, we seek to provide dedicated equipment to our
customers where possible and to concentrate our equipment in defined regions and disciplined traffic lanes. Dedicated
fleets in high density lanes enable us to:

· maintain more consistent equipment capacity;

provide a high level of service to our customers, including time-sensitive delivery schedules;

attract and retain drivers; and

· maintain a sound safety record as drivers travel familiar routes.

Providing Superior and Flexible Customer Service . Our wide range of services includes dedicated fleet services, logistics
services, “just-in-time” delivery, two-man driving teams, cross-docking and consolidation programs, specialized trailers, and
Internet-based customer access to delivery status. These services, combined with a decentralized regional operating
strategy, allow us to quickly and reliably respond to the diverse needs of our customers, and provide an advantage in
securing new business. We also maintain ISO 9002 certification to ensure that we operate in accordance with approved
quality assurance standards.

Many of our customers depend on us to make delivery on a “just-in-time” basis, meaning that parts or raw materials are
scheduled for delivery as they are needed on the manufacturer’s production line. The need for this service is a product of
modern manufacturing and assembly methods that are designed to drastically decrease inventory levels and handling
costs. Such requirements place a premium on the freight carrier’s delivery performance and reliability.

Employing Stringent Cost Controls . We focus intently on controlling our costs while not sacrificing customer service. We
maintain this balance by scrutinizing all expenditures, minimizing non-driver personnel, operating a late-model fleet of
trucks and trailers to minimize maintenance costs, and adopting new technology only when proven and cost justified.

Making Strategic Acquisitions. We continually evaluate strategic acquisition opportunities, focusing on those that
complement our existing business or that could profitably expand our business or services. Our operational integration
strategy is to centralize administrative functions of acquired businesses at our headquarters, while maintaining the localized
operations of acquired businesses. We believe that allowing acquired businesses to continue to operate under their pre-
acquisition names and in their original regions allows such businesses to maintain driver loyalty and customer
relationships.

Industry

According to the American Trucking Association’s “American Trucking Trends 2007-2008” report, the trucking industry
transported approximately 70% of the total volume of freight transported in the United States during 2006, which equates to
an all-time high carrying load of 10.7 billion tons, and $645.6 billion in revenue, representing 83.8% of the nation’s freight
bill. The truckload industry is highly fragmented and is impacted by several economic and business factors, many of which
are beyond the control of individual carriers. The state of the economy, coupled with equipment capacity levels, can impact
freight rates. Volatility of various operating expenses, such as fuel and insurance, make the predictability of profit levels
uncertain. Availability, attraction, retention and compensation for drivers affect operating costs, as well as equipment
utilization. In addition, the capital requirements for equipment, coupled with potential uncertainty of used equipment values,
impact the ability of many carriers to expand their operations. The current operating environment is characterized by the
following:

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Price increases by truck and trailer equipment manufacturers, rising fuel costs, and intense competition for drivers.

In the last few years, many less profitable or undercapitalized carriers have been forced to consolidate or to exit the
industry.

Competition

The trucking industry is highly competitive and includes thousands of carriers, none of which dominates the market in
which the Company operates. The Company's market share is less than 1% and we compete primarily with other irregular
route medium- to long-haul truckload carriers, with private carriage conducted by our existing and potential customers,
and, to a lesser extent, with the railroads. Increased competition has resulted from deregulation of the trucking industry.
We compete on the basis of quality of service and delivery performance, as well as price. Many of the other irregular route
long-haul truckload carriers have substantially greater financial resources, own more equipment or carry a larger total
volume of freight.

Marketing and Significant Customers

Our marketing emphasis is directed to that portion of the truckload market which is generally service-sensitive, as opposed
to being solely price competitive. We seek to become a “core carrier” for our customers in order to maintain high utilization
and capitalize on recurring revenue opportunities. Our marketing efforts are diversified and designed to gain access to
dedicated fleet services (including those in Mexico and Canada), domestic regional freight traffic, and cross-docking and
consolidation programs.

Our marketing efforts are conducted by a sales staff of 12 employees who are located in our major markets and supervised
from our headquarters. These individuals work to improve profitability by maintaining an even flow of freight traffic (taking
into account the balance between originations and destinations in a given geographical area) and high utilization, and
minimizing movement of empty equipment.

Our five largest customers, for which we provide carrier services covering a number of geographic locations, accounted for
approximately 56%, 59% and 57% of our total revenues in 2007, 2006 and 2005, respectively. General Motors Corporation
accounted for approximately 38%, 41% and 39% of our revenues in 2007, 2006 and 2005, respectively.

We also provide transportation services to other manufacturers who are suppliers for automobile manufacturers.
Approximately 49%, 52% and 52% of our revenues were derived from transportation services provided to the automobile
industry during 2007, 2006 and 2005, respectively. This portion of our business, however, is spread over 18 assembly
plants and over 60 suppliers/vendors located throughout North America, which we believe reduces the risk of a material
loss of business.

Revenue Equipment

At December 31, 2007, we operated a fleet of 2,055 trucks and 4,882 trailers. We operate late-model, well-maintained
premium trucks to help attract and retain drivers, promote safe operations, minimize maintenance and repair costs, and
improve customer service by minimizing service interruptions caused by breakdowns. We evaluate our equipment
decisions based on factors such as initial cost, useful life, warranty terms, expected maintenance costs, fuel economy,
driver comfort, customer needs, manufacturer support, and resale value. Our current policy is to replace most of our trucks
at 500,000 miles, which normally occurs 30 to 48 months after purchase.

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We historically have contracted with owner-operators to provide and operate a small portion of our truck fleet. Owner-
operators provide their own trucks and are responsible for all associated expenses, including financing costs, fuel,
maintenance, insurance, and taxes. We believe that a combined fleet complements our recruiting efforts and offers greater
flexibility in responding to fluctuations in shipper demand. At December 31, 2007 the Company's truck fleet included 55
owner-operator trucks.

During 1999, the U.S. Environmental Protection Agency (“EPA”) proposed a three-phase strategy to reduce engine
emissions from heavy-duty vehicles through a combination of advanced emissions control technologies and diesel fuel
with a reduced sulfur content. Each phase and its effect on the Company’s operations, if known, are described below.

The first phase (Phase I) mandated new engine emission standards for all model year 2004 heavy-duty trucks, however,
through agreements with heavy-duty diesel engine manufacturers, the effective date was accelerated to October 1, 2002.
Therefore, effective October 1, 2002, all newly manufactured truck engines had to comply with the new engine emission
standards. All truck engines manufactured prior to October 1, 2002 were not subject to these new standards. As of
December 31, 2007, the majority of our Company-owned truck fleet consisted of trucks with engines that comply with these
emission standards. The Company has experienced a reduction in fuel efficiency and increased depreciation expense due
to the higher cost of trucks with these new engines.

In the second phase (Phase II), effective January 1, 2007, the EPA mandated a new set of more stringent emissions
standards for vehicles powered by diesel fuel engines manufactured in 2007 through 2009. These new engines have been
designed for and require the use of a more costly type of fuel known as ultra-low-sulfur-diesel (“ULSD”) which, according to
EPA estimates, will cost from $0.04 to $0.05 more per gallon due to increased refining costs. The EPA has also mandated
that refiners and importers nationwide must ensure that at least 80% of the volume of the highway diesel fuel they produce
or import is ULSD-compliant by June 1, 2006, however, the EPA does not require service stations and truck stops to sell
ULSD fuel. Therefore, it is possible that ULSD fuel might not be available in a particular area in which the Company
operates. A majority of the Company’s current truck fleet can be fueled with either ULSD or low-sulfur diesel (“LSD”) but
additional future purchases of trucks which contain 2007 or later diesel engines will require the use of ULSD fuel which
may result in lower fuel economy as the process that removes sulfur can also reduce the energy content of the fuel. As of
December 31, 2007, 163 trucks in our Company-owned truck fleet consisted of trucks with engines that comply with the
Phase II emission standards and require the use of ULSD. During 2008, the Company expects to take delivery of 550 new
trucks, all of which will contain engines compliant with the Phase II emission standards requiring the use of ULSD. As
compared to our current Company-owned truck fleet which contain primarily Phase I diesel engines, trucks powered by the
Phase II compliant diesel engines have a higher purchase price and as a result, we expect that depreciation expense will
increase as we continue to replace older trucks with trucks powered by the Phase II diesel engines. We also expect that
these engines will result in higher maintenance costs and be less fuel efficient. To the extent we are unable to offset these
anticipated increased costs with rate increases charged to customers or offsetting cost savings in other areas, our results
of operations would be adversely affected.

During the third phase (Phase III), effective in 2010, final emission standards become effective and LSD fuel will no longer
be available for highway use. The EPA requires that by June 1, 2010 all diesel fuel imported or produced must be ULSD-
compliant as it phases out low-sulfur-diesel fuel availability by December 1, 2010 when all highway diesel fuel must be
ULSD fuel. We are unable at this time to determine the increase in acquisition and operating costs of trucks powered by the
Phase III compliant engines but we expect that the engines produced under the final standards will be less fuel-efficient
and have higher acquisition and maintenance costs than either the 2002 or 2007 engines.

Table of Contents

Technology

We have installed Qualcomm Omnitracs™ display units in all of our trucks. The Omnitracs system is a satellite-based
global positioning and communications system that allows fleet managers to communicate directly with drivers. Drivers can
provide location status and updates directly to our computer which increases productivity and convenience. The Omnitracs
system provides us with accurate estimated time of arrival information, which optimizes load selection and service levels to
our customers. In order to optimize our truck-to-trailer ratio, we have also installed Qualcomm TrailerTracs™ tracking units
in all of our trailers. The TrailerTracs system is a trailer tracking product that enables us to more efficiently track the location
of trailers in our inventory. During 2006, the Company began replacing its tethered TrailerTracs units, which were unable to
transmit data unless connected to Qualcomm-equipped trucks, with more advanced untethered TrailerTracs units which
are able to operate and transmit data independent of a truck connection. At December 31, 2007, substantially all of the
Company’s trailer fleet has been fitted with these new untethered devices.

Our computer system manages the information provided by the Qualcomm devices to provide us real-time information
regarding the location, status and load assignment of all of our equipment, which permits us to better meet delivery
schedules, respond to customer inquiries and match equipment with the next available load. Our system also provides
electronically to our customers real-time information regarding the status of freight shipments and anticipated arrival times.
This system provides our customers flexibility and convenience by extending supply chain visibility through electronic data
interchange, the Internet and e-mail.

Maintenance

We have a strictly enforced comprehensive preventive maintenance program for our trucks and trailers. Inspections and
various levels of preventive maintenance are performed at set mileage intervals on both trucks and trailers. A maintenance
and safety inspection is performed on all vehicles each time they return to a terminal.

Our trucks carry full warranty coverage for at least three years or 350,000 miles. Extended warranties are negotiated with
the truck manufacturer and manufacturers of major components, such as engine, transmission and differential
manufacturers, for up to four years or 500,000 miles. Trailers carry full warranties by the manufacturer and major
component manufacturers for up to five years.

Employees

At December 31, 2007, we employed 3,181 persons, of whom 2,667 were drivers, 178 were maintenance personnel, 178
were employed in operations, 17 were employed in marketing, 71 were employed in safety and personnel, and 70 were
employed in general administration and accounting. None of our employees are represented by a collective bargaining unit
and we believe that our employee relations are good.

Drivers

At December 31, 2007, we utilized 2,667 company drivers in our operations. We also had 55 owner-operators under
contract compensated on a per mile basis. Our drivers are compensated on the basis of miles driven, loading and
unloading, extra stops and layovers in transit. Drivers can earn bonuses by recruiting other qualified drivers who become
employed by us and both cash and non-cash prizes are awarded for consecutive periods of safe, accident-free driving. All
of our drivers are recruited, screened, drug tested and trained and are subject to the control and supervision of our
operations and safety departments. Our driver training program stresses the importance of safety and reliable, on-time
delivery. Drivers are required to report to their driver managers daily and at the earliest possible moment when any
condition en route occurs that might delay their scheduled delivery time.

In addition to strict application screening and drug testing, before being permitted to operate a vehicle our drivers must
undergo classroom instruction on our policies and procedures, safety techniques as taught by the Smith System of
Defensive Driving, the proper operation of equipment, and must pass both written and road tests. Instruction in defensive
driving and safety techniques continues after hiring, with seminars at several of our terminals. At December 31, 2007, we
employed 71 persons on a full-time basis in our driver recruiting, training and safety instruction programs.

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Intense competition in the trucking industry for qualified drivers over the last several years, along with difficulties and
added expense in recruiting and retaining qualified drivers, has had a negative impact on the industry. Our operations have
also been impacted and from time to time we have experienced under-utilization and increased expenses due to a shortage
of qualified drivers. We place a high priority on the recruitment and retention of an adequate supply of qualified drivers.

Executive Officers of the Registrant

Our executive officers are as follows:

Name

Robert W. Weaver
W. Clif Lawson
Larry J. Goddard

Age
58
54
49

Position

President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Vice President - Finance, Chief Financial Officer, Secretary

and Treasurer

Years of service
25
23
20

Each of our executive officers has held his present position with the Company for at least the last five years. The Company
has entered into an employment agreement with Robert W. Weaver that expires on July 10, 2009. The Company has the
option to extend the employment agreement for two consecutive years following the July 10, 2009 expiration date for an
additional one year at a time. The Company has also entered into employment agreements with both W. Clif Lawson and
Larry J. Goddard which each expire on June 1, 2010. The Company has the option to extend these employment
agreements for one additional year following the June 1, 2010 expiration date.

Internet Web Site

The Company maintains a web site where additional information concerning its business can be found. The address of that
web site is www.pamt.com. The Company makes available free of charge on its Internet web site its Annual Report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as
reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission.

Seasonality

Our revenues do not exhibit a significant seasonal pattern due primarily to our varied customer mix. Operating expenses
can be somewhat higher in the winter months primarily due to decreased fuel efficiency and increased maintenance costs
associated with inclement weather. In addition, the automobile plants for which we transport a large amount of freight
typically utilize scheduled shutdowns of two weeks in July and one week in December and the volume of freight we ship is
reduced during such scheduled plant shutdowns.

Regulation

We are a common and contract motor carrier regulated by various federal and state agencies. We are subject to safety
requirements prescribed by the U.S. Department of Transportation (“DOT”). Such matters as weight and dimension of
equipment are also subject to federal and state regulations. All of our drivers are required to obtain national driver’s
licenses pursuant to the regulations promulgated by the DOT. Also, DOT regulations impose mandatory drug and alcohol
testing of drivers. We believe that we are in compliance in all material respects with applicable regulatory requirements
relating to our trucking business and operate with a “satisfactory” rating (the highest of three grading categories) from the
DOT.

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The Federal Motor Carrier Safety Administration (“FMCSA”), a separate administration within the DOT charged with
regulating motor carrier safety, issued a final rule on April 24, 2003 (“2003 rule”) that made several changes to the
regulations that govern truck drivers' hours-of-service (“HOS”). These new federal regulations became effective on January
4, 2004. On July 16, 2004, the U.S. Circuit Court of Appeals for the District of Columbia (the “Court”) rejected these new
hours of service rules for truck drivers that had been in place since January 2004 because it agreed that the FMCSA had
failed to address the impact of the rules on the health of drivers as required by Congress. In addition, the Court’s ruling
noted other areas of concern including the increase in driving hours from 10 hours to 11 hours, the exception that allows
drivers in trucks with sleeper berths to split their required rest periods, the new rule allowing drivers to reset their 70-hour
clock to 0 hours after 34 consecutive hours off duty, and the decision by the FMCSA not to require the use of electronic
onboard recorders to monitor driver compliance. However, to avoid industry disruption and burden on the state
enforcement, Congress enacted section 7(f) of the Surface Transportation Extension Act of 2004. This section provided
that the 2003 rule would remain in effect until a new rule addressed the Court’s issues or until September 30, 2005,
whichever occurred first. On January 24, 2005, the FMCSA re-proposed its April 2003 HOS rules, adding references to
how the rules would affect driver health, but made no other changes to the regulations. The FMCSA sought public
comments by March 10, 2005 on what changes to the rule, if any, were necessary to respond to the concerns raised by the
court, and to provide data or studies that would support changes to, or continued use of, the 2003 rule. On August 25,
2005, the FMCSA published a final HOS rule (“2005 rule”) that retained most of the provisions of the 2003 rule with the
most significant exception being that of requiring drivers that utilize the sleeper berth provision to take at least eight
consecutive hours in the sleeper berth during their ten hours off-duty. Under the 2003 rule, drivers were allowed to split
their ten hour off-duty time in the sleeper berth into two periods, provided neither period was less than two hours.

The 2005 rule was later challenged in court on several grounds and in July 2007 the Court vacated the 11-hour driving time
and 34-hour restart provisions stating that the FMCSA methodologies, used in the studies regarding how the 2003 rules
affected driver health, were not disclosed in time for public comment and that the explanation for some of its critical
elements were not provided. In an order filed on September 28, 2007, the Court granted a 90-day stay of the mandate and
directed that issuance of the mandate be withheld until December 27, 2007. In an effort to prevent disruption to
enforcement and compliance with HOS rules when the stay expires, as well as possible effects on timely delivery of
essential goods and services, the FMCSA issued an interim final rule (“IFR”) effective December 27, 2007 which allows
commercial motor vehicle drivers up to 11 hours of driving time within a 14-hour, non-extendable window from the start of
the workday, following 10 consecutive hours off duty (11-hour limit). This IFR also allows motor carriers and drivers to
restart calculations of the weekly on-duty time limits after the driver has at least 34 consecutive hours off duty (34-hour
restart provision). The FMCSA expects to issue a final rule in 2008.

In general, more restrictive sleeper berth provisions may impact multiple-stop shipments and those shipments incurring
delays in loading or unloading. Improper planning on such shipments could result in delivery delays and equipment
utilization inefficiencies.

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

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Company operations conducted in industrial areas, where truck terminals and other industrial activities are conducted, and
where groundwater or other forms of environmental contamination have occurred, potentially expose us to claims that we
contributed to the environmental contamination.

We believe we are currently in material compliance with applicable laws and regulations and that the cost of compliance
has not materially affected results of operations.

In addition to environmental regulations directly affecting our business, we are also subject to the effects of new truck
engine design requirements implemented by the EPA. See "Revenue Equipment" above.

Item 1A. Risk Factors.

Set forth below and elsewhere in this Report and in other documents we file with the SEC are risks and uncertainties that
could cause our actual results to differ materially from the results contemplated by the forward-looking statements
contained in this Report.

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

These factors include significant increases or rapid fluctuations in fuel prices, excess capacity in the trucking industry,
surpluses in the market for used equipment, interest rates, fuel taxes, license and registration fees, insurance premiums,
self-insurance levels, and difficulty in attracting and retaining qualified drivers and independent contractors.

We are also affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market
segments and industries, such as the automotive industry, where we have a significant concentration of customers.
Economic conditions may adversely affect our customers and their ability to pay for our services.

We operate in a highly competitive and fragmented industry, and our business may suffer if we are unable to adequately
address downward pricing pressures and other factors that may adversely affect our ability to compete with other carriers.

Numerous competitive factors could impair our ability to maintain our current profitability. These factors include, but are not
limited to, the following:

w e compete with many other truckload carriers of varying sizes and, to a lesser extent, with less-than-truckload
carriers and railroads, some of which have more equipment and greater capital resources than we do;

some of our competitors periodically reduce their freight rates to gain business, especially during times of reduced
growth rates in the economy, which may limit our ability to maintain or increase freight rates, maintain our margins or
maintain significant growth in our business;

many customers reduce the number of carriers they use by selecting so-called “core carriers” as approved service
providers, and in some instances we may not be selected;

many customers periodically accept bids from multiple carriers for their shipping needs, and this process may
depress freight rates or result in the loss of some of our business to competitors;

t h e trend toward consolidation in the trucking industry may create other large carriers with greater financial
resources and other competitive advantages relating to their size and with whom we may have difficulty competing;

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advances in technology require increased investments to remain competitive, and our customers may not be willing
to accept higher freight rates to cover the cost of these investments;

competition from Internet-based and other logistics and freight brokerage companies may adversely affect our
customer relationships and freight rates; and

economies of scale that may be passed on to smaller carriers by procurement aggregation providers may improve
their ability to compete with us.

We are highly dependent on our major customers, the loss of one or more of which could have a material adverse effect on
our business.

A significant portion of our revenue is generated from our major customers. For 2007, our top five customers, based on
revenue, accounted for approximately 56% of our revenue, and our largest customer, General Motors Corporation,
accounted for approximately 38% of our revenue. We also provide transportation services to other manufacturers who are
suppliers for automobile manufacturers. As a result, concentration of our business within the automobile industry is greater
than the concentration in a single customer. Approximately 49% of our revenues for 2007 were derived from transportation
services provided to the automobile industry.

Generally, we do not have long-term contractual relationships with our major customers, and we cannot assure that our
customer relationships will continue as presently in effect. A reduction in or termination of our services by our major
customers could have a material adverse effect on our business and operating results.

Ongoing insurance and claims expenses could significantly reduce our earnings.

Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. The Company
is self insured for health and workers compensation insurance coverage up to certain limits. If medical costs continue to
increase, or if the severity or number of claims increase, and if we are unable to offset the resulting increases in expenses
with higher freight rates, our earnings could be materially and adversely affected.

We may be unable to successfully integrate businesses we acquire into our operations.

Integrating businesses we acquire may involve unanticipated delays, costs or other operational or financial problems.
Successful integration of the businesses we acquire depends on a number of factors, including our ability to transition
acquired companies to our management information systems. In integrating businesses we acquire, we may not achieve
expected economies of scale or profitability or realize sufficient revenues to justify our investment. We also face the risk
that an unexpected problem at one of the companies we acquire will require substantial time and attention from senior
management, diverting management’s attention from other aspects of our business. We cannot be certain that our
management and operational controls will be able to support us as we grow.

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

Periodically, the transportation industry experiences difficulty in attracting and retaining qualified drivers, including
independent contractors, resulting in intense competition for drivers. We have from time to time experienced under-
utilization and increased expenses due to a shortage of qualified drivers. If we are unable to continue to attract drivers and
contract with independent contractors, we could be required to further adjust our driver compensation package or let trucks
sit idle, which could adversely affect our growth and profitability.

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

We are highly dependent upon the services of the following key employees: Robert W. Weaver, our President and Chief
Executive Officer; W. Clif Lawson, our Executive Vice President and Chief Operating Officer; and Larry J. Goddard, our
Vice President and Chief Financial Officer. We do not maintain key-man life insurance on any of these executives. The loss
of any of their services could have a material adverse effect on our operations and future profitability. We must continue to
develop and retain a core group of managers if we are to realize our goal of expanding our operations and continuing our
growth. We cannot assure that we will be able to do so.

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

The trucking industry is capital intensive. If we are unable to generate sufficient cash from operations in the future, we may
have to limit our growth, enter into financing arrangements, or operate our revenue equipment for longer periods, any of
which could have a material adverse affect on our profitability.

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

We are subject to various environmental laws and regulations dealing with the handling of hazardous materials,
underground fuel storage tanks, and discharge and retention of storm-water. We operate in industrial areas, where truck
terminals and other industrial activities are located, and where groundwater or other forms of environmental contamination
could occur. We also maintain bulk fuel storage and fuel islands at four of our facilities. Our operations involve the risks of
fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. If we are involved in a spill
or other accident involving hazardous substances, or if we are found to be in violation of applicable laws or regulations, it
could have a materially adverse effect on our business and operating results. If we should fail to comply with applicable
environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

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

The U.S. Department of Transportation and various state agencies exercise broad powers over our business, generally
governing such activities as authorization to engage in motor carrier operations, safety, and financial reporting. We may
also become subject to new or more restrictive regulations relating to fuel emissions, drivers’ hours in service, and
ergonomics. Compliance with such regulations could substantially impair equipment productivity and increase our
operating expenses.

The EPA adopted new emissions control regulations, which require progressive reductions in exhaust emissions from
diesel engines through 2010. In part to offset the costs of compliance with the new EPA engine design requirements, some
manufacturers have increased new equipment prices and eliminated or sharply reduced the price of repurchase or trade-in
commitments. If new equipment prices were to increase, or if the price of repurchase commitments by equipment
manufacturers were to decrease more than anticipated, we may be required to increase our depreciation and financing
costs and/or retain some of our equipment longer, which may result in an increase in maintenance expenses. To the extent
we are unable to offset any such increases in expenses with rate increases or cost savings, our results of operations would
be adversely affected. If our fuel or maintenance expenses were to increase as a result of our use of the new, EPA-
compliant engines, and we are unable to offset such increases with fuel surcharges or higher freight rates, our results of
operations would be adversely affected. Further, our business and operations could be adversely impacted if we
experience problems with the reliability of the new engines. Although we have not experienced any significant reliability
issues with these engines to date, the expenses associated with the trucks containing these engines have been slightly
elevated, primarily as a result of lower fuel efficiency and higher depreciation.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our executive offices and primary terminal facilities, which we own, are located in Tontitown, Arkansas. These facilities are
located on approximately 49.3 acres and consist of 114,403 square feet of office space and maintenance and storage
facilities.

Our subsidiaries lease facilities in Jacksonville, Florida; Breese and Effingham, Illinois; Parsippany and Paulsboro, New
Jersey; North Jackson, Ohio; Oklahoma City, Oklahoma; and Laredo and El Paso, Texas. Our terminal facilities in
Columbia, Mississippi; Irving, Texas; North Little Rock, Arkansas; and Willard, Ohio are owned. The leased facilities are
leased primarily on contractual terms ranging from one to five years. As of December 31, 2007, the following provides a
summary of the ownership and types of activities conducted at each location:

Location

Tontitown, Arkansas
North Little Rock, Arkansas
Jacksonville, Florida
Breese, Illinois
Effingham, Illinois
Columbia, Mississippi
Parsippany, New Jersey
Paulsboro, New Jersey
North Jackson, Ohio
Willard, Ohio
Oklahoma City, Oklahoma
El Paso, Texas
Irving, Texas
Laredo, Texas

Own/
Lease

Own
Own
Lease
Lease
Lease
Own
Lease
Lease
Lease
Own
Lease
Lease
Own
Lease

Dispatch
Office

Maintenance
Facility

Safety
Training

Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Yes
Yes
Yes
No
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes

Yes
No
Yes
No
No
No
No
No
Yes
Yes
Yes
No
Yes
No

We also have access to trailer drop and relay stations in various other locations across the country. We lease certain of
these facilities on a month-to-month basis from an affiliate of our largest shareholder.

We believe that all of the properties that we own or lease are suitable for their purposes and adequate to meet our needs.

Item 3. Legal Proceedings.

During 2007, the Company experienced an adverse settlement and was found partly liable for an environmental
remediation claim dating back to 1986 and was ordered to pay approximately $300,000 in damages.

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

No matters were submitted to a vote of our security holders during the fourth quarter ended December 31, 2007.

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PART II

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

Our common stock is traded on the NASDAQ Global Market under the symbol PTSI. The following table sets forth, for the
quarters indicated, the range of the high and low sales prices per share for our common stock as reported on the NASDAQ
Global Market.

Calendar Year Ended December 31, 2007

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Calendar Year Ended December 31, 2006

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

$25.19
22.48
19.31
18.69

High

Low

$25.18
28.96
31.50
26.68

$19.29
16.98
17.43
13.80

$17.51
23.24
23.78
20.90

As of February 29, 2008, there were approximately 166 holders of record of our common stock.

Dividends

We have never declared or paid any cash dividends on our common stock. The policy of our Board of Directors is to retain
earnings for the expansion and development of our business and the payment of our debt service obligations. Future
dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances
then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.

Repurchases of Common Stock

On April 11, 2005, 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 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 repurchased 458,600 shares of these additional shares
prior to the September 6, 2006 program expiration date.

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. Subsequent to the date
of the announcement and through the remainder of 2007, the Company repurchased 471,500 shares of its common stock,
with 422,700 shares being repurchased during the fourth quarter of 2007.

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The following table summarizes the Company's common stock repurchases during the fourth quarter of 2007. 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”.

Period
October 1-31, 2007
November 1-30, 2007
December 1-31, 2007

Total

Total number
of shares
purchased
3,300
308,100
111,300
422,700

Average
price paid
per share

$16.47
15.07
15.46
$15.18

Total number of
shares purchased as
part of publicly
announced
plans or programs
3,300
308,100
111,300
422,700

Maximum number of
shares that may yet be
purchased under the
plans or programs
547,900
239,800
128,500

128,500

Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”
of this Annual Report for a presentation of compensation plans under which equity securities of the Company are
authorized for issuance.

Performance Graph

Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on our
common stock against the cumulative total return of the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
companies) and the CRSP Total Return Index for the Nasdaq Trucking and Transportation Stocks for the period of five
years commencing December 31, 2002 and ending December 31, 2007. The graph assumes that the value of the
investment in our common stock and in each index was $100 on December 31, 2002 and that all dividends were
reinvested.

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Item 6. Selected Financial Data.

The following selected financial and operating data should be read in conjunction with the Consolidated Financial
Statements and notes thereto included elsewhere in this Report.

2007

Year Ended December 31,
2005
(in thousands, except earnings per share amounts)

2004

2006

2003

Statement of Operations Data:
Operating revenues:
Operating revenues, before fuel surcharge
Fuel surcharge (1)
Total operating revenues

Operating expenses:
Salaries, wages and benefits
Fuel expense (2)
Rent and purchased transportation
Depreciation and amortization
Operating supplies (1)(2)
Operating taxes and licenses
Insurance and claims
Communications and utilities
Other
(Gain) loss on sale or disposal of property
Total operating expenses
Operating income
Non-operating income
Interest expense
Income before income taxes
Income taxes
Net income

Earnings per common share:
Basic

Diluted

351,701 $
57,140
408,841

351,373 $
48,896
400,269

326,353 $
34,527
360,880

309,475 $
15,591
325,066

293,547
7,491
301,038

135,606
114,242
38,718
38,759
30,845
17,520
17,591
3,113
7,130
(48)
403,476
5,365
1,707
(2,453)
4,619
1,966
2,653 $

127,539
97,286
43,844
33,929
25,682
16,421
16,389
2,642
5,426
47
369,205
31,064
448
(1,475)
30,037
12,073
17,964 $

122,005
81,017
39,074
31,376
23,114
15,776
15,992
2,648
6,205
147
337,354
23,526
477
(1,881)
22,122
8,983
13,139 $

119,519
55,645
38,938
30,016
21,718
15,488
15,820
2,690
5,131
915
305,880
19,186
464
(1,758)
17,892
7,304
10,588 $

119,350
42,883
35,287
26,601
20,358
14,710
13,500
2,540
4,755
368
280,352
20,686
276
(1,667)
19,295
7,805
11,490

0.26 $

1.74 $

1.20 $

0.94 $

1.02

1.01

Average common shares outstanding – Basic

10,238

10,296

10,966

11,298

11,291

Average common shares outstanding –
Diluted(3)

10,239

10,302

10,976

11,324

11,326

__________
(1) In order to conform to industry practice, during 2004 the Company began to classify fuel surcharges charged
to customers as revenue rather than as a reduction of operating supplies expense. This reclassification has no
effect on net operating income, net income or earnings per share. The Company has made corresponding
reclassifications to comparative periods shown.

(2) Because of the increased impact of fuel costs on the Company’s results of operations in recent years, during
2006 the Company began to separately display as a line item “Fuel expense” for amounts paid for fuel which
h a d previously been aggregated with other operating supplies and included in the line item “Operating
supplies”. This reclassification has no effect on net operating income, net income or earnings per share. The
Company has made corresponding reclassifications to comparative periods shown.

(3) Diluted income per share for 2007, 2006, 2005, 2004 and 2003 assumes the exercise of stock options to
purchase an aggregate of 19,213, 55,738, 22,297, 62,224 and 77,758 shares of common stock, respectively.

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Balance Sheet Data:
Total assets
Long-term debt, excluding current portion
Stockholders' equity

$ 319,904
44,172
179,377

$ 314,246
21,205
185,028

2007

2006

At December 31,
2005
(in thousands)
$ 293,441
39,693
164,762

2004

2003

$ 285,349
23,225
168,543

264,849
26,740
156,875

2007

Year Ended December 31,
2005

2004

2006

2003

Operating Data:
Operating ratio (1)
Average number of truckloads per week
Average miles per trip
Total miles traveled (in thousands)
Average miles per truck
Average revenue, before fuel surcharge per
truck per day
Average revenue, before fuel surcharge per
loaded mile
Empty mile factor

98.5%

91.2%

92.8%

93.8%

92.9%

7,849
647
246,801
118,483

7,200
659
229,810
123,156

6,946
680
228,624
125,479

7,278
664
235,894
127,124

7,105
701
242,890
131,934

695

778

740

684

653

1.38

$
6.5%

1.43

$
5.9%

1.33

$
5.5%

1.19

$
4.7%

1.13

4.5%

At end of period:
Total company-owned/leased trucks
Average age of trucks (in years)
Total trailers
Average age of trailers (in years)
Number of employees

2,055(2)

1,998(3)

1,792(4)

1,857(5)

1.75
4,882
4.44
3,181

1.55
4,540
4.16
3,062

1.43
4,406
3.92
3,035

1.70
4,257
4.69
2,736

1,913(6)
1.94
4,175
5.15
2,765

__________
(1) Total operating expenses, net of fuel surcharge as a percentage of operating revenues, before fuel surcharge.
(2) Includes 55 owner operator trucks; (3) Includes 49 owner operator trucks; (4) Includes 50 owner operator

trucks.

(5) Includes 85 owner operator trucks; (6) Includes 103 owner operator trucks.

The Company has not declared or paid any cash dividends during any of the periods presented above.

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

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 trucks or owner-
operator owned trucks. 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 90.4%, 87.8%, and 88.0% of total revenues,
excluding fuel surcharges for the twelve months ended December 31, 2007, 2006, and 2005, respectively.

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.

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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 2007, 2006 and 2005, approximately
$57.1 million, $48.9 million and $34.5 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.

Years Ended December 31,
2006

2005

2007

Operating revenues, before fuel surcharge
Operating expenses:
Salaries, wages and
benefits
Fuel expense, net of fuel
surcharge
Rent and purchased
transportation
Depreciation and
amortization
Operating supplies
Operating taxes and
licenses
Insurance and claims
Communications and
utilities
Other
Loss on sale or disposal of
property
Total operating expenses
Operating income
Non-operating income
Interest expense
Income before income
taxes

100.0%

42.0

18.2

2.5

12.2
9.7

5.5
5.5

0.9
2.0

40.6

16.0

1.7

11.0
8.3

5.3
5.3

0.8
1.6

0.0
98.5
1.5
0.5
(0.7)

0.0
90.6
9.4
0.1
(0.4)

41.8

16.6

1.2

10.9
8.0

5.5
5.5

0.9
1.8

0.1
92.3
7.7
0.1
(0.5)

1.3%

9.1%

7.3%

2007 Compared to 2006

For the year ended December 31, 2007, truckload services revenue, before fuel surcharges, increased 3.0% to $317.9
million as compared to $308.7 million for the year ended December 31, 2006. The increase was primarily due to an 11.6%
increase in the average size of the Company’s truck fleet from 1,866 units in 2006 to 2,083 units in 2007. However, a 4.1%
decrease in the average rate per total mile charged to customers from approximately $1.34 during 2006 to approximately
$1.29 during 2007 and a decrease in the average daily miles traveled per unit from 509 miles in 2006 to 488 miles in 2007
partially offset revenue growth attributable to fleet growth.

Salaries, wages and benefits increased from 40.6% of revenues, before fuel surcharges, in 2006 to 42.0% of revenues,
before fuel surcharges, in 2007 which represents an increase from $125.4 million in 2006 to $133.5 million in 2007. The
increase relates primarily to an increase in driver wages as the number of company driver compensated miles increased
from 229.8 million miles in 2006 to 246.8 million miles in 2007. Also contributing to the increase was an increase in driver
lease expense and amounts recorded for employee health insurance expense. Driver lease expense, which is a
component of salaries, wages and benefits, increased from $6.2 million in 2006 to $7.8 million in 2007, as the average
number of owner operators under contract increased from 45 during 2006 to 57 during 2007. Employee health insurance
expense increased from $4.3 million in 2006 to $6.3 million in 2007 as a result of healthcare cost increases, in general, and

to an increase in the number and severity of health claims reported during 2007 as compared to 2006. Partially offsetting
the increases discussed above was a decrease in amounts accrued for employee bonus plans during 2007 as compared to
2006.

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Fuel expense increased from 16.0% of revenues, before fuel surcharges, in 2006 to 18.2% of revenues, before fuel
surcharges, in 2007 which represents an increase from $49.4 million during 2006 to $57.8 million during 2007. The
increase was primarily due to higher fuel prices as the average price paid per gallon of diesel fuel increased from $2.55 per
gallon during 2006 to $2.76 per gallon during 2007. During periods of rising fuel prices the Company is often able to
partially offset fuel cost increases through the use of fuel surcharges charged to customers. The Company collected fuel
surcharges of approximately $47.8 million during 2006 compared to fuel surcharge collections of $56.4 million during 2007.

Rent and purchased transportation increased from 1.7% of revenues, before fuel surcharges, in 2006 to 2.5% of revenues,
before fuel surcharges, in 2007. The increase relates primarily to an increase in amounts paid to third party transportation
service providers for intermodal services.

Depreciation and amortization increased from 11.0% of revenues, before fuel surcharges, in 2006 to 12.2% of revenues,
before fuel surcharges, in 2007 representing an increase from $33.9 million during 2006 to $38.7 million during 2007.
Depreciation expense increased primarily due to an increase in the average size of the Company-owned truck fleet from
1,820 trucks during 2006 to 2,027 trucks during 2007. To a lesser extent, a larger trailer fleet and higher new trailer prices
also contributed to the increase.

Operating supplies and expenses increased from 8.3% of revenues, before fuel surcharges, in 2006 to 9.7% of revenues,
before fuel surcharges, in 2007. The increase relates primarily to an increase in amounts paid to third party driver training
schools, driver layover pay, and for truck repairs expense.

Operating taxes and licenses increased from 5.3% of revenues, before fuel surcharges, in 2006 to 5.5% of revenues,
before fuel surcharges, in 2007. Operating taxes and licenses, which consists primarily of fuel taxes, increased from $16.4
million during 2006 to $17.5 million during 2007. Fuel tax expense is primarily affected by the number of gallons of diesel
fuel purchased which is primarily a factor of the number of miles traveled and the miles-per-gallon (“mpg”) achieved. During
2007, a decrease in the average mpg to 5.91 from an average mpg of 5.94 during 2006 combined with an increase in the
number of miles traveled to 246.8 million in 2007 from 229.8 million miles in 2006, resulted in an increase in the number of
diesel fuel gallons purchased.

Insurance and claims expense increased from 5.3% of revenues, before fuel surcharges, in 2006 to 5.5% of revenues,
before fuel surcharges, in 2007. The increase represents an increase from $16.4 million during 2006 to $17.6 million during
2007. The increase relates primarily to an increase in auto liability insurance premiums which are determined based on a
negotiated rate-per-mile (“NRPM”) with the Company’s insurance carrier. During 2007, the number of miles used to
calculate the premiums increased to 246.8 million miles from 229.8 million miles which translated into increased auto
liability insurance expense. During October 2007 the Company’s auto liability insurance policy was renewed at a rate which
represented a 5.5% reduction in the NRPM and since that time this lower rate-per-mile has helped to partially offset the
increase in auto liability insurance expense associated with the increase in miles traveled during 2007 as compared to
2006.

Other expenses increased from 1.6% of revenues, before fuel surcharges, in 2006 to 2.0% of revenues, before fuel
surcharges, in 2007. The increase relates primarily to an increase in amounts paid for outsourcing shop employees at the
Company’s terminals during 2007 as compared to 2006. Also contributing to the increase was a one-time expense accrual
of approximately $300,000 during December 2007 to settle a 1986 environmental remediation claim in which the Company
was found partly liable for remediation.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to
operating revenues, before fuel surcharges, increased to 98.6% for 2007 from 90.6% for 2006.

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2006 Compared to 2005

For the year ended December 31, 2006, truckload services revenue, before fuel surcharges, increased 7.5% to $308.7
million as compared to $287.1 million for the year ended December 31, 2005. The increase was primarily due to a 6.9%
increase in the average rate per total mile charged to customers from approximately $1.26 during 2005 to approximately
$1.34 during 2006. Also contributing to the increase was a slight increase in the average size of the Company’s truck fleet
from 1,822 units in 2005 to 1,866 units in 2006, however, a decrease in the average daily miles traveled per unit from 519
miles in 2005 to 509 miles in 2006 partially offset revenue growth attributable to our fleet growth.

Salaries, wages and benefits decreased from 41.8% of revenues, before fuel surcharges, in 2005 to 40.6% of revenues,
before fuel surcharges, in 2006. The decrease 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 66
during 2005 to 45 during 2006. The decrease associated with driver lease expense was partially offset by an increase in
amounts paid to the corresponding company driver replacement, and in other costs normally absorbed by the owner
operator such as repairs and fuel. The settlement of claims for amounts less than the estimated reserve under the
Company’s self-insured workers’ compensation plan also contributed to the decrease. Although to a lesser degree, the
effect of higher revenues without a corresponding increase in those wages with fixed cost characteristics, such as general
and administrative wages, also contributed to the decrease in salaries, wages and benefits as a percentage of revenues,
before fuel surcharges. Partially offsetting the decreases discussed above was an increase in amounts accrued for
employee bonus plans and an increase in driver pay as a result of the modified driver pay plans implemented in January
2006. Management anticipates that salaries, wages and benefits will increase to the extent the Company is unable to pass
the additional costs to customers in the form of rate increases.

Fuel expense decreased from 16.6% of revenues, before fuel surcharges, in 2005 to 16.0% of revenues, before fuel
surcharges, in 2006. Fuel costs, net of fuel surcharges, increased from $47.6 million during 2005 to $49.4 million during
2006 primarily due to higher fuel prices. During periods of rising fuel prices the Company is often able to recoup a portion of
the increase through fuel surcharges passed along to its customers. The Company collected approximately $34.5 million in
fuel surcharges during 2005 and $48.9 million during 2006. Fuel costs were also affected by the replacement of owner
operators with Company drivers as discussed above.

Rent and purchased transportation increased from 1.2% of revenues, before fuel surcharges, in 2005 to 1.7% of revenues,
before fuel surcharges, in 2006. The increase relates primarily to an increase in amounts paid to third party transportation
service providers for intermodal services.

Depreciation and amortization increased from 10.9% of revenues, before fuel surcharges, in 2005 to 11.0% of revenues,
before fuel surcharges, in 2006. Depreciation expense increased from $31.3 million during 2005 to $33.9 million during
2006 primarily due to an increase in the size of the Company-owned truck fleet from 1,742 trucks in service at the end of
2005 to 1,949 trucks in service at the end of 2006. To a lesser extent, a larger trailer fleet and higher new trailer prices also
contributed to the increase.

Operating supplies and expenses increased from 8.0% of revenues, before fuel surcharges, in 2005 to 8.3% of revenues,
before fuel surcharges, in 2006. The increase relates to an increase in amounts paid to third party driver training schools
and for truck repairs expense. Truck repairs expense increased in part as a result of the replacement of owner operators
with Company drivers as discussed above.

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Operating taxes and licenses decreased from 5.5% of revenues, before fuel surcharges, in 2005 to 5.3% of revenues,
before fuel surcharges, in 2006. Operating taxes and licenses, which consists primarily of fuel taxes, increased slightly
from $15.8 million during 2005 to $16.4 million during 2006. Fuel tax expense is primarily affected by both the number of
miles traveled and the miles-per-gallon (mpg) achieved. During 2006 the Company experienced a lower mpg of 5.94 as
compared to a mpg of 6.11 during 2005 as the Company continued the replacement of older trucks with new trucks
containing the less efficient EPA-compliant engines originally mandated for all engines produced after October 1, 2002.
Also contributing to the increase was an increase in the number of miles traveled from 228.6 million in 2005 to 229.8 million
in 2006.

Insurance and claims expense decreased from 5.5% of revenues, before fuel surcharges, in 2005 to 5.3% of revenues,
before fuel surcharges, in 2006. During the third quarter of 2005 the Company and one of its insurance providers
renegotiated the method used in determining the Company’s auto liability insurance premiums which were previously
based on a specified rate per one hundred dollars of revenue. This method had the unintended consequence of penalizing
the Company with increased insurance costs solely from passing higher costs along to its customers in the form of rate
increases. As a result of these renegotiations, the method of determining the Company’s auto liability insurance premium
was amended to use the number of miles traveled instead of revenue generated which allowed the Company to recognize
a credit of approximately $600,000 against insurance expense during the third quarter of 2005. Excluding the effect of this
credit, insurance and claims expense decreased from 5.8% of revenues, before fuel surcharges, during 2005 to 5.3% of
revenues, before fuel surcharges, during 2006. This decrease, as a percentage of revenue, was due to the effect of an
increase in Company revenues due to rate increases which dilutes the impact of mileage based expenses. During the third
quarter of 2006 the Company’s auto liability insurance policy renewal negotiations resulted in a rate increase of
approximately 4.4% and management expects insurance expense to increase to the extent the Company is unable to pass
the additional insurance costs to customers in the form of rate increases.

Other expenses decreased from 1.8% of revenues, before fuel surcharges, in 2005 to 1.6% of revenues, before fuel
surcharges, in 2006. The decrease relates primarily to a decrease in amounts considered as uncollectible revenue during
2006 as compared to 2005. This decrease was partially offset by an increase in amounts paid for advertising expense
during 2006 as compared to 2005.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to
operating revenues, before fuel surcharges, decreased to 90.6% for 2006 from 92.3% for 2005.

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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.

Years Ended December 31,
2006

2005

2007

Operating revenues, before fuel surcharge
Operating expenses:
Salaries, wages and
benefits
Fuel expense
Rent and purchased transportation, net of fuel surcharge
Depreciation and
amortization
Operating supplies
Operating taxes and
licenses
Insurance and claims
Communications and
utilities
Other
Loss on sale or disposal of
property
Total operating expenses
Operating income
Non-operating income
Interest expense
Income before income
taxes

100.0%

6.3
0.0
88.9

0.0
0.0

0.0
0.1

0.3
2.1

5.0
0.0
88.3

0.0
0.0

0.3
1.4

0.0
97.7
2.3
0.0
(0.4)

0.0
95.0
5.0
0.0
(0.4)

5.1
0.0
88.0

0.2
0.0

0.0
0.1

0.4
2.5

0.0
96.3
3.7
0.0
(0.6)

1.9%

4.6%

3.1%

2007 Compared to 2006

For the year ended December 31, 2007, logistics and brokerage services revenues, before fuel surcharges, decreased
20.9% to $33.8 million as compared to $42.7 million for the year ended December 31, 2006. The decrease was primarily
the result of a 22.2% decrease in the number of loads brokered during 2007 as compared to 2006.

Rent and purchased transportation increased from 88.3% of revenues, before fuel surcharges, in 2006 to 88.9% of
revenues, before fuel surcharges, in 2007. The increase relates to an increase in amounts charged by third party logistics
and brokerage service providers primarily as a result of higher fuel costs.

Other expenses increased from 1.4% of revenues, before fuel surcharges, in 2006 to 2.1% of revenues, before fuel
surcharges, in 2007. The increase relates primarily to an increase in amounts considered as uncollectible revenue during
2007 as compared to 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 to 97.7% for 2007 from 95.0% for 2006.

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2006 Compared to 2005

Logistics and brokerage services revenues, before fuel surcharges, increased 8.9% to $42.7 million for the year ended
December 31, 2006 as compared to $39.2 million for the year ended December 31, 2005. The increase was primarily the
result of rate increases charged to customers to recover increases in amounts charged by third party logistics and
brokerage service providers, and to a lesser extent, an increase in the number of loads brokered.

Rent and purchased transportation increased from 88.0% of revenues, before fuel surcharges, in 2005 to 88.3% of
revenues, before fuel surcharges, in 2006. The increase relates to an increase in amounts charged by third party logistics
and brokerage service providers primarily as a result of higher fuel costs.

Other expenses decreased from 2.5% of revenues, before fuel surcharges, in 2005 to 1.4% of revenues, before fuel
surcharges, in 2006. The decrease relates primarily to a decrease in amounts considered as uncollectible revenue during
2006 as compared to 2005.

Results of Operations - Combined Services

2007 Compared to 2006

Income tax expense was approximately $2.0 million in 2007 resulting in an effective rate of 42.6% as compared to income
tax expense of approximately $12.1 million in 2006 which resulted in an effective rate of 40.2%. The effective tax rate
differs from the statutory rate primarily due to the existence of partially non-deductible meal and incidental expense per-
diem payments to company drivers. These per-diem payments may cause a significant difference in the Company’s
effective tax rate from period-to-period as the proportion of non-deductible expenses to pre-tax net income increases or
decreases.

We have determined, based on significant judgment, that a valuation allowance against our deferred tax assets has not
been necessary. Management evaluates the realizability of its deferred tax assets based upon negative and positive
evidence available and based on the evidence available at this time, management concludes that it is "more likely than not"
that we will be able to realize the benefit of our deferred tax assets in the near future.

The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation 48, Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“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 December 31, 2007, there were no unrecognized tax benefits and an adjustment
to the Company’s consolidated financial statements for uncertain tax positions was not required as management believes
that the Company’s significant 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 2004 through 2006 remain open to
examination in those jurisdictions. During 2007, the Company has not recognized or accrued any interest or penalties
related to uncertain income tax positions and does not believe it is reasonably possible that our unrecognized tax benefits
will significantly change within the next twelve months.

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Net income for all divisions was $2.7 million, or 0.8% of revenues, before fuel surcharge for 2007 as compared to $18.0
million or 5.1% of revenues, before fuel surcharge for 2006. The decrease in net income combined with the effect of
treasury stock repurchases resulted in a decrease in diluted earnings per share to $0.26 for 2007 compared to $1.74 for
2006.

2006 Compared to 2005

Net income for all divisions was $18.0 million, or 5.1% of revenues, before fuel surcharge for 2006 as compared to $13.1
million or 4.0% of revenues, before fuel surcharge for 2005. The increase in net income combined with the effect of
treasury stock repurchases resulted in an increase in diluted earnings per share to $1.74 for 2006 compared to $1.20 for
2005.

Quarterly Results of Operations

The following table presents selected consolidated financial information for each of our last eight fiscal quarters through
December 31, 2007. The information has been derived from unaudited consolidated financial statements that, in the
opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the quarterly information.

Mar. 31,
2007

June 30,

Sept. 30,

Dec. 31,

Mar. 31,

June 30,

Sept. 30,

Dec. 31,

2007

2006

Quarter Ended

(unaudited)
(in thousands, except earnings per share data)

$ 106,700 $ 101,171 $ 102,162 $ 100,525 $ 103,365 $ 99,874 $ 96,505

$ 98,809

Operating revenues
Total operating
expenses
Operating income (loss)
Net income (loss)
Earnings (loss) per
common share:
Basic

Diluted

96,475
2,334
1,265

102,528 100,688 103,785 91,473 94,375 94,202 89,154
7,351
4,272

(1,623)
(840)

5,672
3,268

8,990
5,241

4,172
2,192

9,052
5,183

483
36

0.12

0.21 $

0.00 $

(0.08) $

0.50 $

0.51 $

0.32 $

0.21 $

0.00 $

(0.08) $

0.50 $

0.51 $

0.32 $

0.41

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 2007, we generated $45.2 million in cash from operating activities compared to $60.7 million and $23.7 million in
2006 and 2005, respectively. Investing activities used $61.7 million in cash during 2007 compared to $42.7 million and
$41.0 million in 2006 and 2005, respectively. The cash used in all three years related primarily to the purchase of revenue
equipment (trucks and trailers) used in our operations. Financing activities provided $15.9 million in cash during 2007
compared to financing activities in 2006 and 2005 which used $18.1 million and $1.2 million, respectively. See
Consolidated Statements of Cash Flows.

Our primary use of funds is for the purchase of revenue equipment. We typically use our existing lines of credit on an
interim basis, in addition to cash flows from operations, to finance capital expenditures and repay long-term debt. During
2007 and 2006, we utilized cash on hand and our lines of credit to finance revenue equipment purchases for an aggregate
of $72.6 million and $50.7 million, respectively.

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 December 31, 2007 and 2006, we had no outstanding indebtedness under
such installment notes.

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In order to maintain our truck 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
twelve months ended December 31, 2007 and 2006, the Company received approximately $5.9 million and $9.9 million,
respectively, for units delivered for trade.

We maintain two separate $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% (6.48% at December 31, 2007), are secured by our accounts receivable and mature on May 31, 2009. At December
31, 2007 outstanding advances on line A were approximately $28.5 million, including $300,000 in letters of credit, with
availability to borrow $1.5 million. Amounts outstanding under Line B bear interest at LIBOR (determined on the last day of
the previous month) plus 1.15% (6.39% at December 31, 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 December 31, 2007, $17.5 million, including $2.5 million in letters of credit were
outstanding under Line B with availability to borrow $12.5 million. In an effort to reduce interest rate risk associated with
these floating rate facilities, we entered into interest rate swap agreements in an aggregate notional amount of $20.0 million
that terminated in 2006. For additional information regarding the interest rate swap agreements, see Item 7A of this Report.

Marketable equity securities available for sale at December 31, 2007 increased approximately $2.8 million as compared to
December 31, 2006. During the year ended December 31, 2007, the Company purchased approximately $5.4 million of
equity securities with the remaining increase or decrease attributable to changes in the market value of the investments,
net of sales and other-than-temporary write-downs. These securities, combined with equity securities purchased in prior
periods, have a combined cost basis of approximately $13.9 million and a combined fair market value of approximately
$17.3 million. The Company has developed a strategy to invest in securities from which it expects to receive dividends that
qualify for favorable tax treatment, as well as, appreciate in value. The Company anticipates that increases in the market
value of the investments combined with dividend payments will exceed interest rates paid on borrowings for the same
period. During 2007 the Company had net unrealized pre-tax losses of approximately $1.9 million and received dividends of
approximately $655,000. The holding term of these securities depends largely on the general economic environment, the
equity markets, borrowing rates and the Company's cash requirements.

Accounts receivable-other at December 31, 2007 increased approximately $4.0 million as compared to December 31,
2006. During 2007, the Company contracted with a third-party qualified intermediary in order to implement a like-kind
exchange tax program. Under the program, dispositions of eligible trucks or trailers and acquisitions of replacement trucks
or trailers are made in a form whereby any associated tax gains related to the disposal are deferred. To qualify for like-kind
exchange treatment, we exchange, through our qualified intermediary, eligible trucks or trailers being disposed with trucks
or trailers being acquired. At December 31, 2007 approximately $4.1 million of tractor and trailer sales proceeds were being
held by the third-party qualified intermediary. The Company intends to use these $4.1 million in sales proceeds during 2008
to purchase qualified replacement tractors or trailers.

Revenue equipment, which generally consists of trucks, trailers, and revenue equipment accessories such as Qualcomm™
satellite tracking units, increased approximately $5.2 million as compared to December 31, 2006. The increase is primarily
related to the net effect of purchasing approximately 610 trucks and 530 trailers during 2007 while only disposing of
approximately 590 trucks and 340 trailers during 2007. Also contributing to the increase was an increase in the cost of new
truck and trailer units as compared to the units they replaced and to the acquisition of additional Qualcomm™ satellite
tracking units. At December 31, 2007, approximately 70 trucks included in revenue equipment had been placed in inactive
status as they were prepared for sale or trade. The sale or trade of these trucks in 2008 will reduce the carrying amount of
the Company’s revenue equipment and accumulated depreciation at the time of sale or trade.

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Accounts payable at December 31, 2007 decreased approximately $13.2 million as compared to December 31, 2006. The
decrease is primarily related to $14.3 million in truck and trailer purchases made during December 2006 for which payment
was made in January 2007 as the Company increased its December 2006 truck purchases in an effort to delay purchasing
trucks with the 2007 model diesel engines. The 2007 model diesel engines are designed to meet stricter EPA emission
standards and were discussed in this report above in “Part I, Item 1, Revenue Equipment”.

Long-term debt at December 31, 2007 increased approximately $23.0 million as compared to December 31, 2006. The
increase relates primarily to borrowings against the Company’s two lines of credit in order to finance the purchase of
replacement trucks and trailers. During 2007, purchases of revenue equipment, net of sales or trade proceeds received for
retired revenue equipment, required the use of cash or borrowings against the lines of credit of approximately $50.4 million.
Also, approximately $12.7 million of cash provided by operating activities, which would have been available to purchase
revenue equipment, was used to purchase approximately $7.3 million of treasury stock and $5.4 million of marketable
investments.

Treasury stock at December 31, 2007 increased approximately $7.3 million as the Company purchased 471,500 shares of
its common stock at various times throughout 2007 as part of a stock repurchase plan approved by the Company’s Board
of Directors during May 2007. The stock repurchase plan authorizes the purchase of up to 600,000 shares of the
Company’s common stock and expires in May 2008.

For 2008, we expect to purchase approximately 550 new trucks and approximately 730 trailers while continuing to sell or
trade older equipment, which we expect to result in net capital expenditures of approximately $45.1 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 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.

Contractual Obligations and Commercial Commitments

The following table sets forth the Company's contractual obligations and commercial commitments as of December 31,
2007:

Payments due by period
(in thousands)
1 to 3
Years

4 to 5
Years

Less than
1 year

Total

More than
5 Years

Long-term debt
Operating leases (1)
Total

46,237 $
1,741
47,978 $

2,065 $
520
2,585 $

44,172 $
762
44,934 $

- $
379
379 $

-
80
80

(1) Represents building, facilities, and drop yard operating leases.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements as defined in Regulation S-K 303 (a)(4)(ii) issued by the Securities
and Exchange Commission.

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Insurance

With respect to physical damage for trucks, cargo loss and auto liability, the Company maintains insurance coverage to
protect it from certain business risks. These policies are with various carriers and have per occurrence deductibles of
$2,500, $10,000 and $2,500 respectively. The Company maintains workers’ compensation coverage in Arkansas, Ohio,
Oklahoma, Mississippi, and Florida with a $500,000 self-insured retention and a $500,000 per occurrence excess policy.
The Company has elected to opt out of workers' compensation coverage in Texas and is providing coverage through the
P.A.M. Texas Injury Plan. The Company has reserved for estimated losses to pay such claims as well as claims incurred
but not yet reported. The Company has not experienced any adverse trends involving differences in claims experienced
versus claims estimates for workers’ compensation claims. Letters of credit aggregating $400,000 and certificates of
deposit totaling $200,000 are held by banks as security for workers’ compensation claims. The Company self insures for
employee health claims with a stop loss of $200,000 per covered employee per year and estimates its liability for claims
incurred but not reported.

Inflation

Inflation has an impact on most of our operating costs. Recently, the effect of inflation has been minimal.

Competition for drivers has increased in recent years, leading to increased labor costs. While increases in fuel and driver
costs affect our operating costs, we do not believe that the effects of such increases are greater for us than for other
trucking concerns.

Adoption of Accounting Policies

See “Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements - Recent
Accounting Pronouncements.”

Critical Accounting Policies

The Company's significant accounting policies are described in Note 1 to the Consolidated Financial Statements. The
policies described below represent those that are broadly applicable to the Company's operations and involve additional
management judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the
related amounts.

Accounts Receivable. 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 trucks 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.

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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.

Income Taxes. Significant management judgment is required to determine the provision for income taxes and to determine
whether deferred income tax assets will be realized in full 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. When it is more likely that all or some portion of specific deferred income tax
assets will not be realized, a valuation allowance must be established for the amount of deferred income tax assets that
are determined not to be realizable. A valuation allowance for deferred income tax assets has not been deemed to be
necessary. Accordingly, if the facts or financial circumstances were to 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
required in any given period.

Effective January 1, 2007, the Company adopted the provisions of FIN 48. FIN 48 contains a two-step approach to
recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109. The first step is to
evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not
that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second
step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate
settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may
require periodic adjustments and which may not accurately anticipate actual outcomes.

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, 2007 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.”

Item 7A. 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 trucks). 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.

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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 $17.3 million at December 31, 2007 from $14.4 million at December 31, 2006. The increase includes
additional purchases, net of sales or write-downs, of approximately $4.8 million during 2007 and a decrease in the fair
market value of approximately $1.9 million during 2007. 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 $1.7
million. For additional information with respect to the marketable equity securities, see Note 3 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 were 5.08% and 4.83%,
respectively. The “receive floating rate” for both swap agreements was “1-month” LIBOR. These interest rate swap
agreements terminated on March 2, 2006 and June 2, 2006, respectively. Assuming $40.0 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 would result in approximately $400,000 of additional interest expense. For additional information with
respect to the interest rate swap agreements, see Note 17 to our consolidated financial statements.

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 2007 fuel consumption, a
10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by $11.4
million.

In July 2001, we entered into an agreement to obtain price protection and reduce a portion of our exposure to fuel price
fluctuations. Under this agreement, we were obligated to purchase minimum amounts of diesel fuel per month, with a price
protection component, for the six-month period ended February 28, 2002. The agreement also provided that if during the
twelve-month period commencing January 2005, the price of heating oil on the New York Mercantile Exchange (“NY MX
HO”) fell below $.58 per gallon, we would have been obligated to pay the contract holder the difference between $.58 per
gallon and the NY MX HO average price, multiplied by 1,000,000 gallons. Accordingly, in any month in which the holder
exercised such right, we would have been obligated to pay the holder $10,000 for each cent by which $.58 exceeded the
average NY MX HO price for that month. For example, if the NY MX HO average price during March 2005 was
approximately $.54, and if the holder were to exercise its payment right, we would have been obligated to pay the holder
approximately $40,000. During the twelve-month period commencing January 2005 the average NY MX HO price
remained well above the $.58 per gallon threshold and as of December 31, 2005 the agreement expired without any further
obligation of either party. For the twelve-month period ended December 31, 2005 an adjustment of $500,000 was made to
reflect the decline in fair value of the agreement which had the effect of reducing operating supplies expense and other
current liabilities each by $500,000 in the accompanying consolidated financial statements. For the twelve-month period
ended December 31, 2004 an adjustment of $250,000 was made to reflect the decline in fair value of the agreement which
had the effect of reducing operating supplies expense and other current liabilities each by $250,000 in the accompanying
consolidated financial statements, see Note 17 to our consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data.

The following statements are filed with this report:

Report of Independent Registered Public Accounting Firm – Grant Thornton LLP
Consolidated Balance Sheets - December 31, 2007 and 2006
Consolidated Statements of Income - Years ended December 31, 2007, 2006 and 2005
Consolidated Statements of Shareholders’ Equity and Other Comprehensive Income - Years ended

December 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows - Years ended December 31, 2007, 2006 and 2005
Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
P.A.M. Transportation Services, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of P.A.M. Transportation Services, Inc. (a Delaware
corporation) and subsidiaries (collectively, the Company) as of December 31, 2007 and 2006, and the related consolidated
statements of income, stockholders' equity and other comprehensive income, and cash flows for each of the three years in
the period ended December 31, 2007. These
the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

financial statements are

the responsibility of

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of P.A.M. Transportation Services, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with
accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), P.A.M. Transportation Services, Inc. and subsidiaries’ internal control over financial reporting as of December 31,
2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 12, 2008 expressed an unqualified
opinion thereon.

/s/ GRANT THORNTON LLP

Tulsa, Oklahoma
March 12, 2008

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

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
(in thousands, except share and per share data)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents
Accounts receivable—net:

Trade
Other
Inventories
Prepaid expenses and deposits
Marketable equity securities
Income taxes refundable

Total current assets

PROPERTY AND EQUIPMENT:

Land
Structures and improvements
Revenue equipment
Office furniture and equipment

Total property and equipment

Accumulated depreciation

Net property and equipment

OTHER ASSETS:

Goodwill
Non-compete agreements, net
Other

Total other assets

TOTAL ASSETS

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2007

2006

407 $

1,040

58,397
5,349
905
14,978
17,269
2,199

61,469
1,361
819
14,928
14,437
498

99,504

94,552

2,674
9,795
292,133
7,482

2,674
9,383
286,933
6,890

312,084

305,880

(107,841)

(102,566)

204,243

203,314

15,413
17
727

15,413
217
750

16,157

16,380

319,904 $

314,246

(Continued)

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
(in thousands, except share and per share data)

LIABILITIES AND SHAREHOLDERS' EQUITY

2007

2006

CURRENT LIABILITIES:

Accounts payable
Accrued expenses and other liabilities
Current maturities of long-term debt
Deferred income taxes—current

Total current liabilities

Long-term debt—less current portion
Deferred income taxes—less current portion
Other

Total liabilities

COMMITMENTS AND CONTINGENCIES (Note 15)

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares
authorized; none issued
Common stock, $.01 par value, 40,000,000 shares
authorized; 11,368,207 and 11,362,207 shares issued;
9,838,107 and 10,303,607 shares outstanding at
December 31, 2007 and December 31, 2006, respectively
Additional paid-in capital
Accumulated other comprehensive income
Treasury stock, at cost; 1,530,100 and 1,058,600
shares, respectively
Retained earnings

Total shareholders’ equity

25,346 $
10,323
2,065
5,117

38,510
9,994
1,915
5,658

42,851

56,077

44,172
53,504
-

21,205
51,902
34

140,527

129,218

114
77,557
1,921

114
77,309
3,142

(25,200)
124,985

(17,869)
122,332

179,377

185,028

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

319,904 $

314,246

(Concluded)

See notes to consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(in thousands, except per share data)

OPERATING REVENUES:

Revenue, before fuel surcharge
Fuel surcharge

2007

2006

2005

351,701 $
57,140

351,373 $
48,896

326,353
34,527

Total operating revenues

408,841

400,269

360,880

OPERATING EXPENSES AND COSTS:

Salaries, wages and benefits
Fuel expense
Rents and purchased transportation
Depreciation and amortization
Operating supplies and expenses
Operating taxes and licenses
Insurance and claims
Communications and utilities
Other
(Gain) loss on sale or disposal of equipment

135,606
114,242
38,718
38,759
30,845
17,520
17,591
3,113
7,130
(48)

127,539
97,286
43,844
33,929
25,682
16,421
16,389
2,642
5,426
47

122,005
81,017
39,074
31,376
23,114
15,776
15,992
2,648
6,205
147

Total operating expenses and costs

403,476

369,205

337,354

OPERATING INCOME

NON-OPERATING INCOME
INTEREST EXPENSE

5,365

31,064

23,526

1,707
(2,453)

448
(1,475)

477
(1,881)

INCOME BEFORE INCOME TAXES

4,619

30,037

22,122

FEDERAL AND STATE INCOME TAXES:

Current
Deferred

217
1,749

9,768
2,305

7,572
1,411

Total federal and state income taxes

1,966

12,073

8,983

NET INCOME

2,653 $

17,964 $

13,139

EARNINGS PER COMMON SHARE:

Basic

Diluted

AVERAGE COMMON SHARES OUTSTANDING:

Basic

Diluted

See notes to consolidated financial statements.

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0.26 $

1.74 $

1.20

0.26 $

1.74 $

1.20

10,238

10,296

10,966

10,239

10,302

10,976

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(in thousands)

Common Stock
Shares / Amount

Additional
Paid-In
Capital

Other
Comprehensive
Income

Accumulated
Other
Comprehensive
Income

Treasury

Stock

Retained
Earnings

Total

11,303

113 $

76,050

1,151

91,229 $ 168,543

13,139

282

288

13,709

282

288

(1,059)

(17,869)

379

10,285

113

76,429

1,721

(17,869) 104,368 164,762

17,964

1,402

19,385

369

511

1,402

370

511

10,303

114

77,309

3,142

(17,869) 122,332 185,028

BALANCE— January 1,
2005

Components of

comprehensive
income:
Net earnings
Other comprehensive
gain:

Unrealized gain on
hedge,
net of tax of $195
Unrealized gain on
marketable
securities, net of tax
of $189

Total comprehensive
income

Treasury stock
repurchases
Exercise of stock
options-shares

issued including tax
benefits

BALANCE— December
31, 2005

Components of

comprehensive
income:
Net earnings
Other comprehensive
gain:

Unrealized gain on
hedge,
net of tax of $13
Unrealized gain on
marketable
securities, net of tax
of $923

Total comprehensive
income

Exercise of stock
options-shares

issued including tax
benefits
Share-based
compensation

BALANCE— December
31, 2006

Components of

comprehensive

income:
Net earnings
Other comprehensive
gain:

Realized gain on
marketable
securities, net of tax
of $241
Unrealized loss on
marketable
securities, net of tax
of $(448)

Total comprehensive
income

Treasury stock
repurchases
Exercise of stock
options-shares

issued including tax
benefits
Share-based
compensation

BALANCE— December
31, 2007

2,653

(359)

(862)

1,432

(359)

(862)

(471)

125

123

(7,331)

125

123

9,838

114 $

77,557

1,921

$ (25,200) $ 124,985 $ 179,377

See notes to consolidated financial statements.

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(in thousands)

OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation and amortization
Bad debt expense
Stock compensation—net of excess tax benefits
Non-compete agreement amortization—net of payments
Provision for deferred income taxes
Reclassification of unrealized loss on marketable equity securities
Gain on sale of marketable equity securities
(Gain) loss on sale or disposal of equipment
Changes in operating assets and liabilities:

Accounts receivable
Prepaid expenses, inventories, and other assets
Income taxes refundable
Trade accounts payable
Accrued expenses

2007

2006

2005

2,653 $

17,964 $

13,139

38,759
573
118
-
1,749
95
(1,071)
(48)

2,585
(113)
(1,696)
1,089
496

33,929
310
441
-
2,305
120
(30)
47

3,685
440
(202)
2,219
(525)

31,376
1,428
-
37
1,411
153
-
147

(19,236)
(40)
528
(5,881)
679

Net cash provided by operating activities

45,189

60,703

23,741

INVESTING ACTIVITIES:

Purchases of property and equipment
Proceeds from sale or disposal of equipment
Changes in restricted cash
Sales of marketable equity securities
Purchases of marketable equity securities
Other

(76,166)
22,273
(4,073)
1,622
(5,389)
-

(53,514)
11,987
-
85
(1,288)
-

(62,013)
22,850
-
-
(1,884)
20

Net cash used in investing activities

(61,733)

(42,730)

(41,027)

FINANCING ACTIVITIES:

Borrowings under line of credit
Repayments under line of credit
Borrowings of long-term debt
Repayments of long-term debt
Repurchases of common stock
Stock compensation excess tax benefits
Exercise of stock options

508,076
(484,322)
2,067
(2,704)
(7,331)
5
120

446,221
(463,967)
1,996
(2,682)
-
70
300

422,460
(405,277)
1,977
(2,913)
(17,869)
-
378

Net cash provided by (used in) financing activities

15,911

(18,062)

(1,244)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(633)

(89)

(18,530)

CASH AND CASH EQUIVALENTS—Beginning of year

1,040

1,129

19,659

CASH AND CASH EQUIVALENTS—End of year

407 $

1,040 $

1,129

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—

Cash paid during the period for:

Interest

Income taxes

2,410 $

1,481 $

1,976 $

10,061 $

1,928

7,190

NONCASH INVESTING AND FINANCING ACTIVITIES—

Purchases of revenue equipment included in accounts payable

- $

14,276 $

See notes to consolidated financial statements.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005

1. ACCOUNTING POLICIES

Description of Business and Principles of Consolidation –P.A.M. Transportation Services, Inc. (the “Company”),
through its subsidiaries, operates as a truckload transportation and logistics company.

The consolidated financial statements include the accounts of the Company and its wholly owned operating
subsidiaries: P.A.M. Transport, Inc., P.A.M. Dedicated Services, Inc., Choctaw Express, Inc., Allen Freight Services,
Inc., Decker Transport Co., Inc., McNeill Express, Inc., T.T.X., Inc., Transcend Logistics, Inc., and East Coast
Transport and Logistics, LLC. The following subsidiaries were inactive during all periods presented: P.A.M.
International, Inc., P.A.M. Logistics Services, Inc., Choctaw Brokerage, Inc., P.A.M. Canada, Inc. and S & L
Logistics, Inc. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates–The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. The Company periodically reviews
these estimates and assumptions. The Company's estimates were based on its historical experience and various
other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ
from those estimates.

Cash and Cash Equivalents –The Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.

Restricted Cash– Restricted cash consists of cash proceeds from the sale of trucks and trailers under our like-kind
exchange (“LKE”) tax program. See Note 11, “Federal and State Income Taxes,” for a discussion of the Company’s
LKE tax program. We classify restricted cash as a current asset within “Accounts receivable-other” as the exchange
process must be completed within 180 days in order to qualify for income tax deferral treatment. The changes in
restricted cash balances are reflected as an investing activity in our Consolidated Statements of Cash Flows as they
relate to the sales and purchases of revenue equipment.

Bank Overdrafts–The Company classifies bank overdrafts in current liabilities as an accounts payable and does not
offset other positive bank account balances located at the same or other financial institutions. Bank overdrafts
generally represent checks written that have not yet cleared the Company’s bank accounts. The majority of the
Company’s bank accounts are zero balance accounts that are funded at the point items clear against the account by
drawings against a line of credit, therefore the outstanding checks represent bank overdrafts. Because the recipients
of these checks have generally not yet received payment, the Company continues to classify bank overdrafts as
accounts payable. Bank overdrafts are classified as changes in accounts payable in the cash flows from operating
activities section of the Company’s Consolidated Statement of Cash Flows. Bank overdrafts as of December 31,
2007 and 2006 were approximately $11,088,000 and $8,230,000, respectively.

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Accounts Receivable Other–The components of accounts receivable other consist primarily of amounts held by a
third-party qualified intermediary that the Company uses to effectuate deferral of income taxes on gains from sales of
trucks and trailers under the Company’s LKE tax program. Also included are amounts representing company driver
advances, owner operator advances and equipment manufacturer warranties. Advances receivable from company
drivers as of December 31, 2007 and 2006, were approximately $598,000 and $503,000, respectively.

Accounts Receivable Allowance–An allowance is provided for accounts receivable based on historical collection
experience. Additionally, management considers any accounts individually known to exhibit characteristics indicating
a collection problem.

Marketable Equity Securities–Marketable equity securities are classified by the Company as either available for
sale or trading. Securities classified as available for sale are carried at market value with unrealized gains and losses
recognized in accumulated other comprehensive income in the statements of stockholders’ equity. Securities
classified as trading are carried at market value with unrealized gains and losses recognized in the statements of
income. Realized gains and losses are computed utilizing the specific identification method.

Impairment of Long-Lived Assets –The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An
impairment loss would be recognized if the carrying amount of the long-lived asset is not recoverable, and it exceeds
its fair value. For long-lived assets classified as held and used, if the carrying value of the long-lived asset exceeds
the sum of the future net cash flows, it is not recoverable. The Company does not separately identify assets by
subsidiary, as trucks and trailers are routinely transferred from one division to another. As a result, none of the
Company's long-lived assets have identifiable cash flows from use that are largely independent of the cash flows of
other assets and liabilities. Thus, the asset group used to assess impairment would include all assets and liabilities
of the Company.

Property and Equipment–Property and equipment is recorded at cost, less accumulated depreciation. For financial
reporting purposes, the cost of such property is depreciated principally by the straight-line method. For tax reporting
purposes, accelerated depreciation or applicable cost recovery methods are used. Depreciation is recognized over
the estimated asset life, considering the estimated salvage value of the asset. Such salvage values are based on
estimates using expected market values for used equipment and the estimated time of disposal which, in many
cases include guaranteed residual values by the manufacturers. Gains and losses are reflected in the year of
disposal. The following is a table reflecting estimated ranges of asset useful lives by major class of depreciable
assets:

Asset Class

Estimated Asset Life

Service vehicles
Office furniture and equipment
Revenue equipment
Structure and improvements

3-5 years
3-7 years
3-10 years
5-30 years

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.
Amounts paid for the recapping of tires are expensed when incurred.

Advertising Expense–Advertising costs are expensed as incurred and totaled approximately $605,000, $550,000
and $350,000 for the years ended December 31, 2007, 2006, and 2005, respectively.

Repairs and Maintenance –Repairs and maintenance costs are expensed as incurred.

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Goodwill–The Company follows the provisions of Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, (“SFAS No. 142”), which requires the Company to assess acquired goodwill for
impairment at least annually in the absence of an indicator of possible impairment, and immediately upon an
indicator of possible impairment. The Company has selected December 31 for its annual impairment testing and
determined as of December 31, 2007 there was no impairment.

Self Insurance Liability—A liability is recognized for known health, workers’ compensation, cargo damage, property
damage and auto liability damage. An estimate of the incurred but not reported claims for each type of liability is
made based on historical claims made, estimated frequency of occurrence, and considering changing factors that
contribute to the overall cost of insurance.

Income Taxes–The Company applies the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (“SFAS No. 109”). Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial reporting basis and the tax reporting basis of assets and
liabilities using enacted tax rates. In June 2006, the Financial Accounting Standards Board (“FASB”) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN
48”), which became effective for the Company 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. 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.

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 pro rata based on relative transit
miles completed as a portion of the estimated total transit miles. Expenses are recognized as incurred.

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 described 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. For additional information
with respect to share-based compensation, see Note 12 to our consolidated financial statements.

Earnings Per Share–The Company computes and presents earnings per share (“EPS”) in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share (“SFAS No. 128”). The difference
between the Company's weighted-average shares outstanding and diluted shares outstanding is due to the dilutive
effect of stock options for all periods presented. See Note 13 for computation of diluted EPS.

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Business Segment and Concentrations of Credit Risk –The Company operates in one business segment, motor
carrier operations. The Company provides truckload transportation services as well as brokerage and logistics
services to customers throughout the United States and portions of Canada and Mexico. Truckload transportation
services revenues, excluding fuel surcharges, represented 90.4%, 87.8%, and 88.0% of total revenues, excluding
fuel surcharges, for the twelve months ended December 31, 2007, 2006, and 2005, respectively. Remaining
revenues, excluding fuel surcharges, for each respective year were generated by brokerage and logistics services.
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.

Recent Accounting Pronouncements–In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS No. 160”). SFAS No. 160
re-characterizes minority interests in consolidated subsidiaries as non-controlling interests and requires the
classification of minority interests as a component of equity. Under SFAS No. 160, a change in control will be
measured at fair value, with any gain or loss recognized in earnings. The effective date for SFAS No. 160 is for
annual periods beginning on or after December 15, 2008. Early adoption and retroactive application of SFAS No. 160
to fiscal years preceding the effective date are not permitted. Management does not expect the adoption of SFAS
No. 160 to have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business
Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) expands the definition of transactions and events that qualify
as business combinations; requires that the acquired assets and liabilities, including contingencies, be recorded at
the fair value determined on the acquisition date and changes thereafter reflected in earnings, not goodwill; changes
the recognition timing for restructuring costs; and requires acquisition costs to be expensed as incurred. Adoption of
SFAS No. 141(R) is required for combinations occurring in fiscal years beginning after December 15, 2008. Early
adoption and retroactive application of SFAS 141(R) to fiscal years preceding the effective date are not permitted.
Beginning on January 1, 2009, adoption of SFAS No. 141(R) will impact our accounting for business combinations
completed on or after that date.

In February 2007, the 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 does not
expect adoption of this statement to have a significant impact 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. On February 6, 2008, the FASB deferred the
effective date of SFAS No. 157 for one year for all non-financial assets and non-financial liabilities, except for those
items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
Management is currently evaluating the impact that adoption of SFAS No. 157 might have on the Company’s
consolidated financial statements.

Table of Contents

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation
of FASB Statement No. 109 (“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.

2. TRADE ACCOUNTS RECEIVABLE

The Company's receivables result primarily from the sale of transportation and logistics services. The Company
performs ongoing credit evaluations of its customers and generally does not require collateral for accounts
receivable. Accounts receivable which consist of both billed and unbilled receivables are recorded at their invoiced
amount and are presented net of an allowance for doubtful accounts. Accounts outstanding longer than contractual
payment terms are considered past due and are reviewed individually for collectibility. Accounts receivable balances
consist of the following components as of December 31, 2007 and 2006:

Billed
Unbilled
Allowance for doubtful accounts

Total accounts receivable—net

2007

2006

(in thousands)

53,439 $
6,849
(1,891)

55,132
7,794
(1,457)

58,397 $

61,469

An analysis of changes in the allowance for doubtful accounts for the years ended December 31, 2007, 2006, and
2005 follows:

Balance—beginning of year
Provision for bad debts
Charge-offs
Recoveries
Balance—end of year

3. MARKETABLE EQUITY SECURITIES

2007

2006
(in thousands)

2005

1,457 $
607
(361)
188
1,891 $

2,030 $
354
(960)
33
1,457 $

768
1,490
(228)
-
2,030

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 either trading or 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 2007, the Company received proceeds of
approximately $1,622,000 for the sale of marketable equity securities with a combined cost of approximately
$550,000, resulting in a realized gain of approximately $1,071,000. During 2007, two securities were transferred from
available-for-sale to trading. These securities were transferred because, historically, they have significantly
underperformed in relation to their benchmarks. The resulting gain recognized was not material. During 2006, there
were no reclassifications of marketable securities. Marketable equity securities classified as available-for-sale 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 marketable securities 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.

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As of December 31, 2007, equity securities classified as available-for-sale and equity securities classified as trading
had a cost basis of approximately $13,272,000 and $661,000, respectively and fair market values of approximately
$16,608,000 and $661,000, respectively. For the year ended December 31, 2007, the Company had net unrealized
losses in market value on securities classified as available-for-sale of approximately $1,221,000, net of deferred
income taxes. These securities had gross unrealized gains of approximately $4,916,000 and gross unrealized losses
of approximately $1,572,000. As of December 31, 2007, the total unrealized gain, net of deferred income taxes, in
accumulated other comprehensive income was approximately $1,921,000.

As of December 31, 2006, the Company’s equity securities were all classified as available-for-sale and had a
combined cost basis of approximately $9,189,000 and a combined fair market value of approximately $14,437,000.
For the year ended December 31, 2006, the Company had net unrealized gains in market value of approximately
$1,402,000, net of deferred income taxes. These securities had gross unrealized gains of approximately $5,260,000
and gross unrealized losses of approximately $12,000. As of December 31, 2006, the total unrealized gain, net of
deferred income taxes, in accumulated other comprehensive income was approximately $3,142,000.

The following table shows the Company’s investments’ approximate gross unrealized losses and fair value at
December 31, 2007 and 2006. These investments consist of equity securities. As of December 31, 2007 and 2006
there were no investments that had been in a continuous unrealized loss position for twelve months or longer.

2007

2006

(in thousands)

Fair Value

Unrealized
Losses

Equity securities – Available for sale
Equity securities – Trading

5,308 $
409

1,541 $
31

417 $
-

Totals

5,717 $

1,572 $

417 $

12
-

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INTANGIBLE ASSETS

The Company applies the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (“SFAS No. 142”), which requires the Company to assess acquired goodwill for impairment at least
annually in the absence of an indicator of possible impairment, and immediately upon an indicator of possible
impairment. The annual assessment of impairment was completed on December 31, 2007 and the Company
determined there was no impairment as of that date. Goodwill at December 31 is summarized as follows:

Goodwill, beginning of year
Goodwill acquired
Goodwill impairment

Goodwill—end of year

2007

2006
(in thousands)

2005

15,413 $
-
-

15,413
-
-

15,413 $

15,413

Non-compete agreements are amortized on a straight-line basis over the contractual term of the related agreement.
Amortization expense associated with non-compete agreements was approximately $200,000, $200,000 and
$237,000, for the years ending December 31, 2007, 2006 and 2005. The Company's non-compete agreements at
December 31 are summarized as follows:

Non-compete agreements, original cost
Accumulated amortization

Non-compete agreements—net

2007

2006

(in thousands)

1,000 $
(983)

1,000
(783)

17 $

217

Over the remaining life of the non-compete agreement currently held by the Company, approximately $17,000 of
amortization expense will be recognized during 2008.

5. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities at December 31 are summarized as follows:

Payroll
Accrued vacation
Taxes—other than income
Interest
Driver escrows
Self-insurance claims reserves

2007

2006

(in thousands)

1,818 $
1,966
2,598
123
1,023
2,795

1,779
1,827
2,591
80
939
2,778

Total accrued expenses and other liabilities

10,323 $

9,994

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6. CLAIMS LIABILITIES

With respect to physical damage for trucks, cargo loss and auto liability, the Company maintains insurance coverage
to protect it from certain business risks. These policies are with various carriers and have per occurrence deductibles
of $2,500, $10,000 and $2,500 respectively. Since 2002, the Company has elected to self insure itself for physical
damage to trailers. The Company maintains workers’ compensation coverage in Arkansas, Ohio, Oklahoma,
Mississippi, and Florida with a $500,000 self-insured retention and a $500,000 per occurrence excess policy. The
Company has elected to opt out of workers' compensation coverage in Texas and is providing coverage through the
P.A.M. Texas Injury Plan. The Company has reserved for estimated losses to pay such claims as well as claims
incurred but not yet reported. The Company has not experienced any adverse trends involving differences in claims
experienced versus claims estimates for workers’ compensation claims. Letters of credit aggregating $400,000 and
certificates of deposit totaling $200,000 are held by banks as security for workers’ compensation claims. The
Company self insures for employee health claims with a stop loss of $200,000 per covered employee per year and
estimates its liability for claims incurred but not reported.

7. LONG-TERM DEBT

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

Line of credit with a bank—due May 31, 2009, and

collateralized by accounts receivable (1)

Line of credit with a bank—due June 30, 2008, and

collateralized by revenue equipment (2)

Note payable (3)
Other (4)
Other (5)

Total long-term debt

Less current maturities

Long-term debt—net of current maturities

2007

2006

(in thousands)

28,192 $

14,437

15,000
1,767
1,124
154
46,237 $
(2,065)

5,000
2,510
1,173
-
23,120
(1,915)

44,172 $

21,205

(1) Line of credit agreement with a bank provides for maximum borrowings of $30.0 million and contains certain
restrictive covenants that must be maintained by the Company on a consolidated basis. Borrowings on the
line of credit are at an interest rate of LIBOR as of the first day of the month plus 1.25% (6.48% at
December 31, 2007). Monthly payments of interest are required under this agreement. Also, under the terms
of the agreement the Company must have (a) a debt to equity ratio of no more than 2:1, and (b) maintain a
tangible net worth of at least $125 million. The Company was in compliance with all provisions of the
agreement at December 31, 2007.

(2) Line of credit agreement with a bank provides for maximum borrowings of $30.0 million and contains certain
restrictive covenants that must be maintained by the Company on a consolidated basis. Borrowings on the
line of credit are at an interest rate of LIBOR as of the last day of the previous month plus 1.15% (6.39% at
December 31, 2007). Monthly payments of interest are required under this agreement. Also, under the terms
of the agreement the Company must have (a) positive net income, (b) a funded debt to EBITDA ratio of less
than 3:1, (c) a leverage ratio of less than 3:1, and (d) maintain a tangible net worth of at least $42 million
increased by (1) 50% of cumulative quarterly net income and (2) proceeds of any public stock offering. The
Company was in compliance with all provisions of the agreement at December 31, 2007. The Company has
the intent and ability to extend the terms of this agreement for an additional one year period until June 30,
2009 and accordingly has classified the debt as long-term.

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(3) 6.0% note to the former owner of an acquired entity with an original face amount of $4,974,612, payable in

monthly installments of $72,672 through March 2010.

(4) 5.75% note to insurance premium finance company at December 31, 2007 with an original face amount of

$1,912,934, payable in monthly installments of $163,636 through August 2008.

(5) 5.23% note to insurance premium finance company at December 31, 2007 with an original face amount of

$154,023, payable in monthly installments of $19,547 through August 2008.

The Company has provided letters of credit to third parties totaling approximately $2,389,000 at December 31, 2007.
The letters are held by these third parties to assist such parties in collection of any amounts due by the Company
should the Company default in its commitments to the parties.

Scheduled annual maturities on long-term debt outstanding at December 31, 2007, are:

2008
2009
2010
2011
2012

Total

8. CAPITAL STOCK

(in
thousands)

2,065
44,028
144
-
-

46,237

The Company's authorized capital stock consists of 40,000,000 shares of common stock, par value $.01 per share,
and 10,000,000 shares of preferred stock, par value $.01 per share. At December 31, 2007, there were 11,368,207
shares of our common stock issued and 9,838,107 shares outstanding. No shares of our preferred stock were issued
or outstanding at December 31, 2007.

Common Stock

The holders of our common stock, subject to such rights as may be granted to any preferred stockholders, elect all
directors and are entitled to one vote per share. All shares of common stock participate equally in dividends when
and as declared by the Board of Directors and in net assets on liquidation. The shares of common stock have no
preference, conversion, exchange, preemptive or cumulative voting rights.

Preferred Stock

Preferred stock may be issued from time to time by our Board of Directors, without stockholder approval, in such
series and with such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or other provisions, as may be fixed by the Board of Directors in the resolution authorizing their
issuance. The issuance of preferred stock by the Board of Directors could adversely affect the rights of holders of
shares of common stock; for example, the issuance of preferred stock could result in a class of securities outstanding
that would have certain preferences with respect to dividends and in liquidation over the common stock, and that
could result in a dilution of the voting rights, net income per share and net book value of the common stock. As of
December 31, 2007, we have no agreements or understandings for the issuance of any shares of preferred stock.

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Treasury Stock

In April 2005 our Board of Directors authorized the repurchase of up to 600,000 shares of our 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 our Board of Directors authorized an extension of the stock repurchase program until
September 2006 and the repurchase of up to an additional 900,000 shares of our common stock. The Company
repurchased 458,600 of these additional shares prior to December 31, 2005 and made no additional purchases
during 2006.

In May 2007, our Board of Directors authorized the repurchase of up to 600,000 shares of our common stock during
the twelve month period following the announcement. Subsequent to the date of the announcement and through the
remainder of 2007, the Company repurchased 471,500 shares of its common stock.

The Company accounts for Treasury stock using the cost method and as of December 31, 2007, 1,530,100 shares
were held in the treasury at an aggregate cost of approximately $25,200,000.

9. COMPREHENSIVE INCOME

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

Net income

2,653 $

17,964 $

13,139

2007

2006
(in thousands)

2005

Other comprehensive income (loss):

Reclassification adjustment for realized gains

on marketable securities, included in
net income, net of income taxes
Reclassification adjustment for losses on

derivative instruments included in net income

accounted for as hedges, net of income taxes

Reclassification adjustment for unrealized

losses on marketable securities, included in

net income, net of income taxes
Change in fair value of interest rate

swap agreements, net of income taxes

Change in fair value of marketable
securities, net of income taxes

(359)

227

(917)

1,349

197

Total comprehensive income

1,432 $

19,385 $

13,709

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10.

SIGNIFICANT CUSTOMERS AND INDUSTRY CONCENTRATION

In 2007, 2006, and 2005, one customer, who is in the automobile manufacturing industry, accounted for 38%, 41%
and 39% of revenues, respectively. The Company also provides transportation services to other manufacturers who
are suppliers for automobile manufacturers including suppliers for the Company’s largest customer. As a result,
concentration of the Company’s business within the automobile industry is significant. Of the Company’s revenues
for 2007, 2006, and 2005, 49%, 52%, and 52%, respectively, were derived from transportation services provided to
the automobile manufacturing industry. Accounts receivable from the largest customer totaled approximately
$25,830,000 and $30,040,000 at December 31, 2007 and 2006, respectively.

11.

FEDERAL AND STATE INCOME TAXES

Under SFAS No. 109, deferred income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and for income tax reporting purposes.

Significant components of the Company’s deferred tax liabilities and assets at December 31 are as follows:

Deferred tax liabilities:

Property and equipment
Unrealized gains on securities
Prepaid expenses and other

2007

2006

(in thousands)

Current

Long-Term Current

Long-Term

- $
1,423
5,650

52,062 $
-
3,428

- $
2,113
5,665

49,731
-
2,920

Total deferred tax liabilities

7,073

55,490

7,778

52,651

Deferred tax assets:

Allowance for doubtful accounts
Alternative minimum tax credit
Compensated absences
Self-insurance allowances
Share-based compensation
Bonus compensation
Net operating loss carryover
Non-competition agreement
Other

718
-
630
492
-
-
-
-
116

-
481
-
-
289
-
722
494
-

553
-
564
664
-
235
-
-
104

-
-
-
-
242
-
-
507
-

Total deferred tax assets

1,956

1,986

2,120

749

Net deferred tax liability

5,117 $

53,504 $

5,658 $

51,902

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The reconciliation between the effective income tax rate and the statutory Federal income tax rate for the years
ended December 31, 2007, 2006 and 2005 is presented in the following table:

2007

2006
(in thousands)

2005

Amount

Percent

Amount

Percent

Amount

Percent

Income tax at the

statutory federal rate
Nondeductible expense
State income taxes—net

of federal benefit
Total income taxes

1,571
381

14
1,966

34.0 $
8.3

10,513
378

35.0 $
1.3

7,743
450

0.3
42.6 $

1,182
12,073

3.9
40.2 $

790
8,983

35.0
2.0

3.6
40.6

The provision for income taxes consisted of the following:

Current:
Federal
State

Deferred:
Federal
State

2007

2006
(in thousands)

2005

305 $
(88)
217

1,295
454
1,749

8,397 $
1,371
9,768

1,768
537
2,305

6,422
1,150
7,572

876
535
1,411

Total income tax expense

1,966 $

12,073 $

8,983

The Company has alternative minimum tax credits of approximately $480,000 at December 31, 2007, which have no
expiration date under the current federal income tax laws. The Company also has a net operating loss carryover for
federal income purposes of approximately $1.9 million which will expire after the year 2027.

The Company adopted the provisions of FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes-an
Interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. Prior to adoption, the Company’s policy
was to establish reserves that reflected the probable outcome of known tax contingencies. The effects of final
resolution, if any, were recognized as changes to the effective income tax rate in the period of resolution. FIN 48
requires application of a more likely than not threshold to the recognition and derecognition of uncertain tax positions.
FIN 48 permits the Company to recognize the amount of tax benefit that has a greater than 50% likelihood of being
ultimately realized upon settlement. It further requires that a change in judgment related to the expected ultimate
resolution of uncertain tax positions be recognized in earnings in the quarter of such change.

Upon adoption of FIN 48 on January 1, 2007, the Company recognized no adjustment in the liability for
unrecognized income tax benefits and no corresponding change in retained earnings. The Company does not have
any material accrued interest or penalties associated with any unrecognized tax benefits. The Company's policy is to
account for interest and penalties related to uncertain tax positions, if any, in income tax expense. There was no
change in total gross unrecognized tax benefit liabilities for the year ended December 31, 2007.

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During 2007, the Company contracted with a third-party qualified intermediary in order to implement a like-kind
exchange tax program. Under the program, dispositions of eligible trucks or trailers and acquisitions of replacement
trucks or trailers are made in a form whereby any associated tax gains related to the disposal are deferred. To
qualify for like-kind exchange treatment, we exchange, through our qualified intermediary, eligible trucks or trailers
being disposed with trucks or trailers being acquired that allows us to generally carryover the tax basis of the trucks
or trailers sold. The program is expected to result in a significant deferral of federal and state income taxes. Under
the program, the proceeds from the sale of eligible trucks or trailers carry a Company-imposed restriction for the
acquisition of replacement trucks or trailers. These proceeds may be disqualified under the program at any time and
at the Company’s sole discretion, however income tax deferral would not be available on any sale for which the
Company disqualifies the related proceeds. At December 31, 2007, the Company had $4.1 million of restricted cash
held by the third-party qualified intermediary. There were no cash restrictions for any periods prior to the program
implementation occurring during 2007.

12.

SHARE-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 December 31, 2007, 718,000 shares were
available for granting future options.

Outstanding incentive stock options at December 31, 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 December 31, 2007, must be
exercised within five to ten years from the date of grant.

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 December 31, 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 120,000 shares have been forfeited as the performance criteria were not met for
the fiscal years 2003, 2004 and 2007.

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Transactions in stock options under these plans are summarized as follows:

Outstanding—January 1, 2005:

Granted
Exercised

Outstanding—December 31, 2005:

Granted
Exercised

Outstanding—December 31, 2006:

Granted
Exercised
Canceled

Outstanding—December 31, 2007:

Options exercisable—December 31, 2007:

Shares
Under
Option

Weighted-
Average
Exercise
Price

313,500 $
14,000
(41,000)

286,500 $
16,000
(18,000)

284,500 $
16,000
(6,000)
(46,000)

20.70
18.27
9.21

22.22
26.73
16.67

22.83
22.92
19.95
23.34

248,500 $

22.81

248,500 $

22.81

Effective January 1, 2006, the Company adopted FASB Statement No. 123(R), Share-Based Payment, (“SFAS No.
123(R)”) utilizing 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. As of December 31, 2007 all option awards are classified as equity awards.

Prior to January 1, 2006, 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 year ending December 31, 2005 is illustrated in the following table:

Net income—as reported
Deduct total stock-based employee compensation expense

determined under fair value based method for
all awards—net of related tax effects

Pro forma net income

Earnings per share:

Basic—as reported
Basic—pro forma

Diluted—as reported
Diluted—pro forma

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2005
(in
thousands,
except per
share data)

13,139

(296)

12,843

1.20
1.17

$
$

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:

2007

2006

2005

Dividend yield
Volatility range
Risk-free rate range
Expected life
Fair value of options (per share)

0%
37.34%—38.54%
4.38%—4.48%
2.5 years—5 years
$6.32—$9.45

0%
33.34%—38.54%
4.38%—5.02%
2.5 years—5 years
$6.93—$9.45

0%
33.86%—38.54%
4.08%—4.38%
5 years
$6.73—$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 Securities
and Exchange Commission which allows companies to elect a “simplified method” where the expected life is the
average of the vesting period and the original contractual term.

Information related to the Company’s option activity as of December 31, 2007, and changes during the year then
ended is presented below:

Outstanding at January 1, 2007
Granted
Exercised
Canceled/forfeited/expired
Outstanding at December 31, 2007

Fully vested and
exercisable at December 31, 2007

Shares
Under
Option

Weighted-
Average
Exercise
Price
(per share)

Weighted-
Average
Remaining
Contractual

Term

(in years)

Aggregate
Intrinsic Value*

284,500 $
16,000
(6,000)
(46,000)
248,500 $

22.83
22.92
19.95
23.34
22.81

4.0 $

248,500 $

22.81

4.0 $

___________________________
* 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
December 31, 2007, was $15.54.

The weighted-average grant-date fair value of options granted during the years 2007, 2006, and 2005 was $6.32,
$6.93, and $6.73 per share, respectively. The total intrinsic value of options exercised during the years ended
December 31, 2007, 2006, and 2005, was approximately $11,000, $175,000, and $323,000, respectively.

Table of Contents

A summary of the status of the Company’s nonvested options as of December 31, 2007 and changes during the
year ended December 31, 2007, is presented below:

Nonvested at January 1, 2007
Granted
Vested
Canceled/forfeited/expired

Nonvested at December 31, 2007

Weighted-
Average
Grant Date
Fair Value

Number of

Options

82,500 $
16,000
(58,500)
(40,000)

- $

9.43
6.32
8.57
9.45

The total fair value of options vested during 2007, 2006, and 2005 was approximately $501,000, $511,000, and
$494,000, respectively. As of December 31, 2007, the Company had stock-based compensation plans with total
unvested stock-based compensation expense of approximately $22,000 which is being amortized on a straight-line
basis over the remaining vesting period of one year. As a result, the Company expects to recognize approximately
$22,000 in additional compensation expense related to unvested option awards during 2008. Total pre-tax stock-
based compensation expense, recognized in Salaries, wages and benefits was approximately $123,000 during 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 2007. The Company recognized a total income tax benefit of
approximately $43,000 related to stock-based compensation expense during 2007. The recognition of stock-based
compensation expense decreased diluted and basic earnings per common share by approximately $0.01 during
2007. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during 2006 was
approximately $511,000 and includes approximately $111,000 recognized as a result of the annual grant of 2,000
shares to each non-employee director during the second quarter of 2006. The Company recognized a total income
tax benefit of approximately $197,000 related to stock-based compensation expense during 2006. The recognition of
stock-based compensation expense decreased diluted and basic earnings per common share by approximately
$0.03 during 2006. No stock-based compensation expense or related tax benefits were recognized in 2005.

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

Exercise Price

Shares Under
Outstanding Options

$16.99
$18.27
$19.88
$22.68
$22.92
$23.22
$26.73

8,000
10,000
12,500
10,000
14,000
180,000
14,000
248,500

Weighted-Average Remaining
Contractual Term
(in years)
1.2
2.2
0.7
0.2
4.2
4.7
3.5
4.0

Shares Under
Exercisable Options

8,000
10,000
12,500
10,000
14,000
180,000
14,000
248,500

Cash received from option exercises totaled approximately $120,000, $300,000, and $378,000 during the years
ended December 31, 2007, 2006, and 2005, respectively. The Company issues new shares upon option exercise.

Table of Contents

13.

EARNINGS PER SHARE

The Company applies SFAS No. 128 for computing and presenting earnings per share. Basic earnings per common
share were computed by dividing net income by the weighted average number of shares outstanding during the
period. Diluted earnings per common share were calculated as follows:

For the Year Ended December 31,
2005
2006
2007
(in thousands, except per share data)

Net income

2,653 $

17,964 $

13,139

Basic weighted average common shares outstanding
Dilutive effect of common stock equivalents

10,238
1

10,296
6

10,966
10

Diluted weighted average common shares outstanding

10,239

10,302

10,976

Basic earnings per share

Diluted earnings per share

0.26 $

1.74 $

1.20

0.26 $

1.74 $

1.20

Options to purchase 234,456, 229,337, and 280,160 shares of common stock were outstanding as of December 31,
2007, 2006, and 2005, respectively, but were not included in the computation of diluted earnings per share because
to do so would have an anti-dilutive effect.

14.

BENEFIT PLAN

The Company sponsors a benefit plan for the benefit of all eligible employees. The plan qualifies under Section
401(k) of the Internal Revenue Code thereby allowing eligible employees to make tax-deductible contributions to the
plan. The plan provides for employer matching contributions of 50% of each participant’s voluntary contribution up to
3% of the participant’s compensation and vests at the rate of 20% each year until fully vested after five years. Total
employer matching contributions to the plan totaled approximately $340,000, $330,000 and $300,000 in 2007, 2006
and 2005, respectively.

15.

COMMITMENTS AND CONTINGENCIES

The Company is not a party to any pending legal proceedings which management believes to be material to the
financial position or results of operations of the Company. The Company maintains liability insurance against risks
arising out of the normal course of its business.

The Company leases certain premises under noncancelable operating lease agreements. Future minimum annual
lease payments under these leases are as follows:

2008
2009
2010
2011
2012 and thereafter

Total

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519,817
394,818
367,000
187,000
272,000

$ 1,740,635

Total rental expense, net of amounts reimbursed for the years ended December 31, 2007, 2006 and 2005 was
approximately $3,035,000, $2,369,000, and $1,760,000, respectively.

16.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosure About Fair Value of Financial Instruments , (“SFAS
No. 107”) requires disclosure of fair value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. The estimated fair value amounts have been
determined by the Company using available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize
in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial
instruments:

For cash and cash equivalents, accounts receivable, and trade accounts payable, the carrying amount is a
reasonable estimate of fair value as the assets are readily redeemable or short-term in nature and the
liabilities are short-term in nature. Marketable equity securities are carried at their fair value.

For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow
analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing
arrangements. The carrying value of this other long-term debt at December 31, 2007 and 2006, respectively, is
$3,046,000 and $3,683,000. The fair value of this other long-term debt is estimated to be $3,032,000 and
$3,661,000 at December 31, 2007 and 2006, respectively.

The carrying amount for the lines of credit approximates fair value because the lines of credit interest rates are
adjusted frequently.

17.

DERIVATIVES 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 was 4.83%,
while the receive floating rate was “1-month” LIBOR. This interest rate swap agreement terminated on June 2, 2006.

The Company had designated both of these interest rate swaps as cash flow hedges 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 agreements changes in cash flows from the interest rate swaps offset changes in interest rate payments on the
first $20,000,000 of the Company’s revolving credit facility. The hedge locked the interest rate at 5.08% or 4.83%
plus the pricing spread for the notional amounts of $15,000,000 and $5,000,000, respectively.

Table of Contents

These interest rate swap agreements met the specific hedge accounting criteria. The measurement of hedge
effectiveness was 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 was reported as a component of
accumulated other comprehensive income in shareholders’ equity and was reclassified into current earnings during
2006, the termination year for all swap agreements. The December 31, 2005 balance of the net after tax deferred
hedging loss in accumulated other comprehensive income (“AOCI”) related to these swap agreements was
approximately $19,000 which was the amount reclassified into current earnings during 2006. 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.

In July 2001, the Company entered into an agreement to obtain price protection and reduce a portion of our
exposure to fuel price fluctuations. Under this agreement, we were obligated to purchase minimum amounts of diesel
fuel per month, with a price protection component, for the six month period ended February 28, 2002. The
agreement also provided that if during the twelve-month period commencing January 2005, the average NY MX HO
was below $.58 per gallon, we would have been obligated to pay the contract holder the difference between $.58
and the average NY MX HO price for such month, multiplied by 1,000,000 gallons. During the twelve-month period
commencing January 2005, the average NY MX HO remained well above the $.58 per gallon threshold and as of
December 31, 2005 the agreement expired without any further obligation of either party. For the twelve-month period
ended December 31, 2005 an adjustment of $500,000 was made to reflect the decline in fair value of the agreement
which had the effect of reducing operating supplies expense and other current liabilities each by $500,000 in the
accompanying consolidated financial statements.

18.

RELATED PARTY TRANSACTIONS

In the normal course of business, the Company provides and receives transportation, repair and other services for
and from companies affiliated with a major stockholder, and recognized $1,861,773, $46,576, and $111,510 in
operating revenue and $1,909,585, $1,558,371, and $1,616,534 in operating expenses in 2007, 2006, and 2005,
respectively. In addition the Company purchased physical damage insurance through an unaffiliated insurance
broker which was written by an insurance company affiliated with a major stockholder. Annual premiums were
$1,927,964, $1,816,759 and $1,667,928 for 2007, 2006 and 2005, respectively.

Amounts owed to the Company by these affiliates were $1,183,266 and $1,315,844 at December 31, 2007 and 2006
respectively. Of the accounts receivable at December 31, 2007, $11,970 represents revenue resulting from
maintenance performed in the Company’s maintenance facilities and maintenance charges paid by the Company to
third parties on behalf of their affiliate and charged back at the amount paid, $522,413 represents freight
transportation and $648,883 represents a prepayment of physical damage insurance premiums. Amounts payable to
affiliates at December 31, 2007 and 2006 were $198,416 and $223,420 respectively.

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19.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The tables below present quarterly financial information for 2007 and 2006:

2007
Three Months Ended

March 31

June 30

September
30

December
31

(in thousands, except per share data)

98,809 $
96,475

106,700 $
102,528

101,171 $
100,688

102,162
103,785

2,334
241
487
823

4,172
167
676
1,471

483
199
620
26

(1,623)
1,099
670
(354)

1,265 $

2,192 $

36 $

(840)

0.12 $

0.21 $

0.00 $

(0.08)

10,305

10,306

10,265

10,308

10,307

10,266

10,077

2006
Three Months Ended

March 31

June 30

September
30

December
31

(in thousands, except per share data)

100,525 $
91,473

103,365 $
94,375

99,874 $
94,202

96,505
89,154

9,052
57
465
3,461

8,990
116
353
3,512

5,672
140
300
2,244

7,351
135
357
2,857

5,183 $

5,241 $

3,268 $

4,272

0.50 $

0.51 $

0.32 $

0.41

10,288

10,293

10,301

10,288

10,301

10,309

10,303

10,308

Operating revenues
Operating expenses

Operating income
Non-operating income
Interest expense
Income taxes

Net income

Net income per common share:
Basic

Diluted

Average common shares outstanding:
Basic

Diluted

Operating revenues
Operating expenses

Operating income
Non-operating income
Interest expense
Income taxes

Net income

Net income per common share:
Basic

Diluted

Average common shares outstanding:
Basic

Diluted

Table of Contents

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

None.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule
13a-15(e) promulgated under the Exchange Act, as amended. Based on this evaluation, our principal executive officer and
our principal financial officer concluded that our disclosure controls and procedures are effective as of the end of the period
covered by this Annual Report.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of
the Company's internal control over financial reporting based on the framework in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the
framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial
reporting is effective as of December 31, 2007.

Our internal control over financial reporting as of December 31, 2007 has been audited by Grant Thornton LLP, an
independent registered public accounting firm, who has issued an attestation report on the Company's internal control over
financial reporting, as stated in their report which is included below.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal controls over financial reporting that occurred during the quarter ended
December 31, 2007, that have materially affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
P.A.M. Transportation Services, Inc. and Subsidiaries

We have audited P.A.M. Transportation Services, Inc. (a Delaware Corporation) and subsidiaries’ (collectively, the
Company) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.

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

Table of Contents

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

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

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by COSO .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of P.A.M. Transportation Services, Inc. and subsidiaries as of December 31, 2007
and 2006, and the related consolidated statements of income, stockholders’ equity and other comprehensive income, and
cash flows for each of the three years in the period ended December 31, 2007, and our report dated March 12,
2008 expressed an unqualified opinion on those consolidated financial statements.

/s/ GRANT THORNTON LLP

Tulsa, Oklahoma
March 12, 2008

Item 9B. Other Information.

None.

Table of Contents

PART III

Portions of the information required by Part III of Form 10-K are, pursuant to General Instruction G (3) of Form 10-K,
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A for our Annual Meeting
of Stockholders to be held on May 29, 2008. We will, within 120 days of the end of our fiscal year, file with the Securities
and Exchange Commission a definitive proxy statement pursuant to Regulation 14A.

Item 10. Directors, Executive Officers and Corporate Governance.

Information concerning our executive officers is set forth in Item 1 of this Form 10-K under the caption “Executive Officers
of the Registrant.”

The information presented under the captions “Election of Directors,” “Section 16(a) Beneficial Ownership Compliance,”
“Corporate Governance - Code of Ethics” and “Corporate Governance–Audit Committee,” in the proxy statement is
incorporated here by reference.

We have a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934. The members of the Audit Committee consist of Frank L. Conner, Christopher L. Ellis,
and Charles F. Wilkins.

Item 11. Executive Compensation.

The information presented under the captions “Executive Compensation,” “Corporate Governance–Compensation
Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the proxy statement is
incorporated here by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information presented under the caption “Security Ownership of Certain Beneficial Owners and Management” in the
proxy statement is incorporated here by reference.

Equity Compensation Plan Information

The following table summarizes, as of December 31, 2007, information about compensation plans under which equity
securities of the Company are authorized for issuance:

Number of
securities to
be issued
upon
exercise of
outstanding
options,
warrants
and rights

Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights

Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans

Plan Category

Equity Compensation Plans approved by Security Holders

248,500 $

22.81

718,000

Equity Compensation Plans not approved by Security Holders

-0-

Total

Table of Contents

248,500 $

22.81

718,000

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information presented under the captions (i) “Transactions with Related Persons,” including the information referenced
there that is set forth under the caption “Corporate Governance – Compensation Committee Interlocks and Insider
Participation” and (ii) “Corporate Governance – Director Independence” in the proxy statement is incorporated here by
reference.

Item 14. Principal Accountant Fees and Services.

The information presented under the caption “Independent Public Accountants – Principal Accountant Fees and Services”
in the proxy statement is incorporated here by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

(1)

Financial Statements and Schedules.

Financial Statements: See Part II, Item 8 hereof.

Report of Independent Registered Public Accounting Firm - Grant Thornton LLP
Consolidated Balance Sheets - December 31, 2007 and 2006
Consolidated Statements of Income - Years ended December 31, 2007, 2006 and 2005
Consolidated Statements of Shareholders’ Equity and Other Comprehensive Income - Years ended

December 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows - Years ended December 31, 2007, 2006 and 2005
Notes to Consolidated Financial Statements

(2)

Financial Statement Schedules.

All schedules for which provision is made in the applicable accounting regulations of the SEC areomitted as the
requiredinformation is inapplicable, or because the information is presented in the consolidated financial statements or
related notes.

(3)

Exhibits.

The following exhibits are filed with or incorporated by reference into this Report. The exhibits which are
denominated by an asterisk (*) were previously filed as a part of, and are hereby incorporated by reference from
either (i) the Form S-1 Registration Statement under the Securities Act of 1933, as filed with the Securities and
Exchange Commission on July 30, 1986, Registration No. 33-7618, as amended on August 8, 1986, September 3,
1986 and September 10, 1986 (“1986 S-1”); (ii) the Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 (“6/30/94 10-Q”); (iii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (“6/30/95 10-
Q”); (iv) the Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 (“9/30/96 10-Q”); (v) the
Form S-8 Registration Statement filed on June 11, 1999 (“6/11/99 S-8”); (vi) the Annual Report on Form 10-K for
the year ended December 31, 2001 (“2001 10-K”); (vii) the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2002 (“3/31/02 10-Q”); (viii) the Quarterly Report on Form 10-Q for the quarter ended September 30,
2004 (“9/30/2004 10-Q”); (ix) Form 8-K filed on March 7, 2005 (“3/07/2005 8-K”); (x) Form 8-K filed on May 31,
2006 (“5/31/2006 8-K”); (xi) Form 8-K filed on July 28, 2006 (“7/28/2006 8-K”); (xii) the Form 8-K filed on
December 11, 2007 (“12/11/2007 8-K”); or (xiii) the Quarterly Report on Form 10-Q for the quarter ended June 30,
2006 (“6/30/06 10-Q”).

Table of Contents

Exhibit #
*3.1

Description of Exhibit
Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 3/31/02 10-Q)

*3.2

*4.1

*4.2

*4.2.1

*4.3

*4.3.1

*4.3.2

*4.3.3

*4.4

*4.4.1

*4.4.2

*4.4.3

*4.5.1

*4.5.2

*4.5.3

*4.5.4

4.6

Amended and Restated By-Laws of the Registrant (Exh. 3.2, 12/11/07 8-K)

Specimen Stock Certificate (Exh. 4.1, 1986 S-1)

Loan Agreement dated July 26, 1994 among First Tennessee Bank National Association, Registrant and
P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)

Security Agreement dated July 26, 1994 between First Tennessee Bank National Association and P.A.M.
Transport, Inc. (Exh. 4.2, 6/30/94 10-Q)

First Amendment to Loan Agreement dated June 27, 1995 by and among P.A.M. Transport, Inc., First
Tennessee Bank National Association and P.A.M. Transportation Services, Inc., together with Promissory
Note in the principal amount of $2,500,000 (Exh. 4.1.1, 6/30/95 10-Q)

First Amendment to Security Agreement dated June 28, 1995 by and between P.A.M. Transport, Inc. and
First Tennessee Bank National Association (Exh. 4.2.2, 6/30/95 10-Q)

Security Agreement dated June 27, 1995 by and between Choctaw Express, Inc. and First Tennessee
Bank National Association (Exh. 4.1.3, 6/30/95 10-Q)

Guaranty Agreement of P.A.M. Transportation Services, Inc. dated June 27, 1995 in favor of First
Tennessee Bank National Association respecting $10,000,000 line of credit (Exh. 4.1.4, 6/30/95 10-Q)

Second Amendment to Loan Agreement dated July 3, 1996 by P.A.M. Transport, Inc., First Tennessee
Bank National Association and P.A.M. Transportation Services, Inc., together with Promissory Note in the
principal amount of $5,000,000 (Exh. 4.1.1, 9/30/96 10-Q)

Second Amendment to Security Agreement dated July 3, 1996 by and between P.A.M. Transport, Inc. and
First Tennessee National Bank Association (Exh. 4.1.2, 9/30/96 10-Q)

First Amendment to Security Agreement dated July 3, 1996 by and between Choctaw Express, Inc. and
First Tennessee Bank National Association (Exh. 4.1.3, 9/30/96 10-Q)

Security Agreement dated July 3, 1996 by and between Allen Freight Services, Inc. and First Tennessee
Bank National Association (Exh. 4.1.4, 9/30/96 10-Q)

Loan Agreement dated as of November 22, 2000 by and between P.A.M. Transport, Inc. and SunTrust
Bank (Exh. 4.5.1, 2001 10-K)

Revolving Credit Note dated November 22, 2000 (Exh. 4.5.2, 2001 10-K)

Security Agreement by and between P.A.M. Transport, Inc. and SunTrust Bank (Exh. 4.5.3, 2001 10-K)

First Amendment to Loan Agreement, Revolving Credit Note and Security Deposit (Exh. 4.5.4, 2001 10-K)

Fourth Amendment to Loan Agreement dated July 26, 1994 among First Tennessee Bank National
Association, Registrant and P.A.M. Transport, Inc. together with Promissory Note

*10.1

(1) Employment Agreement between the Registrant and Robert W. Weaver, dated July 10, 2006 (Exh. 10.1,

7/28/2006 8-K)

*10.2

(1) Employment Agreement between the Registrant and W. Clif Lawson, dated June 1, 2006 (Exh. 10.2,

7/28/2006 8-K)

*10.3

(1) Employment Agreement between the Registrant and Larry J. Goddard, dated June 1, 2006 (Exh. 10.3,

7/28/2006 8-K)

*10.4

(1) 1995 Stock Option Plan, as Amended and Restated (Exh. 4.1, 6/11/99 S-8)

*10.4.1

(1) Amendment to 1995 Stock Option Plan (Exh. 10.1, 3/07/2005 8-K)

Table of Contents

*10.4.2

(1) 2006 Stock Option Plan (Exh. 10.1, 5/31/2006 8-K)

*10.5

*10.6

Interest rate swap agreement, dated March 1, 2001 (Exh. 10.5, 2001 10-K)

Interest rate swap agreement dated June 1, 2001 (Exh. 10.6, 2001 10-K)

*10.7

(1) Employee Non-Qualified Stock Option Agreement (Exh. 10.1, 9/30/2004 10-Q)

*10.8

(1) Director Non-Qualified Stock Option Agreement (Exh. 10.2, 9/30/2004 10-Q)

*10.8.1

(1) Form of Non-Qualified Stock option Agreement for Non-Employee Director stock options that are granted

under the 2006 Stock Option Plan (Exh. 10.2, 5/31/2006 8-K)

*10.9

(1) Executive Incentive Plan (Exh. 10.2, 6/30/2006 10-Q)

10.10

(1) Consulting Agreement between the Registrant and Manuel J. Moroun, dated December 6, 2007

21.1

23.1

31.1

31.2

32.1

32.2

Subsidiaries of the Registrant

Consent of Grant Thornton LLP

Rule 13a-14(a) Certification of Principal Executive Officer

Rule 13a-14(a) Certification of Principal Financial Officer

Section 1350 Certification of Chief Executive Officer

Section 1350 Certification of Chief Financial Officer

(1) Management contract or compensatory plan or arrangement.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 13, 2008

By:/s/ Robert W. Weaver

P.A.M. TRANSPORTATION SERVICES, INC.

ROBERT W. WEAVER
President and Chief Executive Officer
(principal executive officer)

Dated: March 13, 2008

By:/s/ Larry J. Goddard

LARRY J. GODDARD
Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
(principal financial and accounting officer)

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

Dated: March 13, 2008

By:/s/ Frederick P. Calderone

FREDERICK P. CALDERONE, Director

Dated: March 13, 2008

By:/s/ Frank L. Conner

FRANK L. CONNER, Director

By:/s/ W. Scott Davis

W. SCOTT DAVIS, Director

By:/s/ Christopher L. Ellis

CHRISTOPHER L. ELLIS, Director

By:/s/ Manuel J. Moroun

MANUEL J. MOROUN, Director

Dated: March 13, 2008

By:/s/ Matthew T. Moroun

MATTHEW T. MOROUN, Director and Chairman of
the Board

Dated: March 13, 2008

By:/s/ Daniel C. Sullivan

DANIEL C. SULLIVAN, Director

Dated: March 13, 2008

By:/s/ Robert W. Weaver

Dated: March 13, 2008

Table of Contents

ROBERT W. WEAVER,
President and Chief Executive Officer, Director

By:/s/ Charles F. Wilkins

CHARLES F. WILKINS, Director

EXHIBIT INDEX

The following exhibits are filed with or incorporated by reference into this Report. The exhibits which are denominated by
an asterisk (*) were previously filed as a part of, and are hereby incorporated by reference from either (i) the Form S-1
Registration Statement under the Securities Act of 1933, as filed with the Securities and Exchange Commission on July 30,
1986, Registration No. 33-7618, as amended on August 8, 1986, September 3, 1986 and September 10, 1986 (“1986 S-1”);
(ii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 (“6/30/94 10-Q”); (iii) the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (“6/30/95 10-Q”); (iv) the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 (“9/30/96 10-Q”); (v) the Form S-8 Registration Statement filed on June 11, 1999 (“6/11/99 S-
8”); (vi) the Annual Report on Form 10-K for the year ended December 31, 2001 (“2001 10-K”); (vii) the Quarterly Report
on Form 10-Q for the quarter ended March 31, 2002 (“3/31/02 10-Q”); (viii) the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004 (“9/30/2004 10-Q”); (ix) Form 8-K filed on March 7, 2005 (“3/07/2005 8-K”); (x) Form 8-
K filed on May 31, 2006 (“5/31/2006 8-K”); (xi) Form 8-K filed on July 28, 2006 (“7/28/2006 8-K”); (xii) the Form 8-K filed on
December 11, 2007 (“12/11/2007 8-K”); or (xiii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
(“6/30/06 10-Q”).

Exhibit #

Description of Exhibit

*3.1

*3.2

*4.1

*4.2

*4.2.1

*4.3

*4.3.1

*4.3.2

*4.3.3

*4.4

*4.4.1

*4.4.2

*4.4.3

Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 3/31/02 10-Q)

Amended and Restated By-Laws of the Registrant (Exh. 3.2, 12/11/07 8-K)

Specimen Stock Certificate (Exh. 4.1, 1986 S-1)

Loan Agreement dated July 26, 1994 among First Tennessee Bank National Association, Registrant and
P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)

Security Agreement dated July 26, 1994 between First Tennessee Bank National Association and P.A.M.
Transport, Inc. (Exh. 4.2, 6/30/94 10-Q)

First Amendment to Security Agreement dated June 28, 1995 by and between P.A.M. Transport, Inc. and
First Tennessee Bank National Association (Exh. 4.2.2, 6/30/95 10-Q)

Security Agreement dated June 27, 1995 by and between Choctaw Express, Inc. and First Tennessee Bank
National Association (Exh. 4.1.3, 6/30/95 10-Q)

Guaranty Agreement of P.A.M. Transportation Services, Inc. dated June 27, 1995 in favor of First
Tennessee Bank National Association respecting $10,000,000 line of credit
(Exh. 4.1.4, 6/30/95 10-Q)

Second Amendment to Loan Agreement dated July 3, 1996 by P.A.M. Transport, Inc., First Tennessee Bank
National Association and P.A.M. Transportation Services, Inc., together with Promissory Note in the
principal amount of $5,000,000 (Exh. 4.1.1, 9/30/96 10-Q)

Second Amendment to Security Agreement dated July 3, 1996 by and between P.A.M. Transport, Inc. and
First Tennessee National Bank Association (Exh. 4.1.2, 9/30/96 10-Q)

First Amendment to Security Agreement dated July 3, 1996 by and between Choctaw Express, Inc. and First
Tennessee Bank National Association (Exh. 4.1.3, 9/30/96 10-Q)

Security Agreement dated July 3, 1996 by and between Allen Freight Services, Inc. and First Tennessee
Bank National Association (Exh. 4.1.4, 9/30/96 10-Q)

Table of Contents

*4.5.1

Loan Agreement dated as of November 22, 2000 by and between P.A.M. Transport, Inc. and SunTrust Bank
(Exh. 4.5.1, 2001 10-K)

*4.5.2

Revolving Credit Note dated November 22, 2000 (Exh. 4.5.2, 2001 10-K)

*4.5.3

Security Agreement by and between P.A.M. Transport, Inc. and SunTrust Bank (Exh. 4.5.3, 2001 10-K)

*4.5.4

First Amendment to Loan Agreement, Revolving Credit Note and Security Deposit (Exh. 4.5.4, 2001 10-K)

4.6

Fourth Amendment to Loan Agreement dated July 26, 1994 among First Tennessee Bank National
Association, Registrant and P.A.M. Transport, Inc. together with Promissory Note

*10.1

(1) Employment Agreement between the Registrant and Robert W. Weaver, dated July 10, 2006 (Exh. 10.1,

7/28/2006 8-K)

*10.2

(1) Employment Agreement between the Registrant and W. Clif Lawson, dated June 1, 2006 (Exh. 10.2,

7/28/2006 8-K)

*10.3

(1) Employment Agreement between the Registrant and Larry J. Goddard, dated June 1, 2006 (Exh. 10.3,

7/28/2006 8-K)

*10.4

(1) 1995 Stock Option Plan, as Amended and Restated (Exh. 4.1, 6/11/99 S-8)

*10.4.1

(1) Amendment to 1995 Stock Option Plan (Exh. 10.1, 3/07/2005 8-K)

*10.4.2

(1) 2006 Stock Option Plan (Exh. 10.1, 5/31/2006 8-K)

*10.5

*10.6

Interest rate swap agreement, dated March 1, 2001 (Exh. 10.5, 2001 10-K)

Interest rate swap agreement dated June 1, 2001 (Exh. 10.6, 2001 10-K)

*10.7

(1) Employee Non-Qualified Stock Option Agreement (Exh. 10.1, 9/30/2004 10-Q)

*10.8

(1) Director Non-Qualified Stock Option Agreement (Exh. 10.2, 9/30/2004 10-Q)

*10.8.1

(1) Form of Non-Qualified Stock option Agreement for Non-Employee Director stock options that are granted

under the 2006 Stock Option Plan (Exh. 10.2, 5/31/2006 8-K)

*10.9

(1) Executive Incentive Plan (Exh. 10.2, 6/30/2006 10-Q)

10.10

(1) Consulting Agreement between the Registrant and Manuel J. Moroun, dated December 6, 2007

21.1

Subsidiaries of the Registrant

23.1

Consent of Grant Thornton LLP

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

(1) Management contract or compensatory plan or arrangement.