**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-Q**




ý **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**FOR
      THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007**





**OR**





o**TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**FOR
      THE TRANSITION PERIOD FROM _____________ TO ______________**











**FROZEN
      FOOD EXPRESS INDUSTRIES, INC.**


(Exact
      name of registrant as specified in its charter)





**Texas**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **1-10006**
              Commission
              File
                Number
            **75-1301831**
              (IRS
                Employer Identification No.)**1145
                Empire Central Place**
              **Dallas,
                Texas 75247-4309**
              (Address
                of principal executive offices)
            
            **(214)
                630-8090**
              (Registrant's
                telephone number,
              including
                area code)




Indicate
                by check mark whether the registrant (l) 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.  xYes    
                oNo


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




Large
                accelerated filer   o
            Accelerated
                Filer   ý
            Non-accelerated
                filer   o


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





Indicate
      the number of shares outstanding of each of the issuer’s classes of Common
      Stock, as of the latest practicable date.





Class
            
            Number
                of Shares OutstandingCommon
                stock, $1.50 par value
            
            16,983,846 at
                September 30, 2007










**INDEX**




**PART
                I  Financial Information**
            **Page
                No.****Item
                1**
            Financial
                StatementsConsolidated
                Condensed Balance Sheets
              September
                30, 2007 (unaudited) and December 31, 2006
            1Consolidated
                Condensed Statements of Income (unaudited)
              Three
                and nine months ended September 30, 2007 and 2006
            2Consolidated
                Condensed Statements of Cash Flows (unaudited)
              Nine
                months ended September 30, 2007 and 2006
            3Notes
                to Consolidated Condensed Financial Statements (unaudited)
            4**Item
                2**
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            9**Item
                3**
            Quantitative
                and Qualitative Disclosures about Market Risk
            21**Item
                4**
            Controls
                and Procedures
            21**PART
                II** **Other Information****Item
                1**
            Legal
                Proceedings
            23**Item
                1A**
            Risk
                Factors
            23**Item
                2**
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            26**Item
                3**
            Defaults
                Upon Senior Securities
            27**Item
                4**
            Submission
                of Matters to a Vote of Security Holders
            27**Item
                5**
            Other
                Information
            27**Item
                6**
            Exhibits
            27Signatures
            28Exhibit
                Index
            29





-i-





**PART
      I.  FINANCIAL INFORMATION**




**Item
      1.****Financial
      Statements**




**FROZEN
      FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES**


**Consolidated
      Condensed Balance Sheets**


*(In
      thousands)*




**September
                30,**
              **2007**
              **(unaudited)**
            
            
            **December  31,**
              **2006****Assets**Current
                assetsCash
                and cash equivalents
            
            $
            8,650
            
            
            $
            9,589Accounts
                receivable, net
            
            
            52,848
            
            
            
            49,895Tires
                on equipment in use, net
            
            
            5,197
            
            
            
            4,953Other
                current assets
            
            
            13,659
            
            
            
            21,749Total
                current assets
            
            
            80,354
            
            
            
            86,186Property
                and equipment, net
            
            
            91,177
            
            
            
            97,808Other
                assets
            
            
            7,505
            
            
            
            7,768Total
                assets
            
            $
            179,036
            
            
            $
            191,762**Liabilities
                and shareholders' equity**Current
                liabilitiesAccounts
                payable
            
            $
            31,959
            
            
            $
            23,206Accrued
                claims
            
            
            9,229
            
            
            
            11,084Accrued
                payroll and deferred compensation
            
            
            6,528
            
            
            
            8,478Accrued
                liabilities
            
            
            1,811
            
            
            
            2,005Total
                current liabilities
            
            
            49,527
            
            
            
            44,773Long-term
                debt
            
            
            --
            
            
            
            4,900Deferred
                income taxes
            
            
            9,105
            
            
            
            9,752Accrued
                claims
            
            
            7,750
            
            
            
            9,806Total
                liabilities
            
            
            66,382
            
            
            
            69,231**Shareholders'
                equity**Par
                value of common stock (18,572 shares issued)
            
            
            27,858
            
            
            
            27,858Paid-in
                capital
            
            
            5,604
            
            
            
            6,045Retained
                earnings
            
            
            92,557
            
            
            
            98,257126,019
            
            
            
            132,160Treasury
                stock (1,671 and 1,170 shares, at cost)
            
            
            (13,365
            )
            
            
            (9,629
            )Total
                shareholders' equity
            
            
            112,654
            
            
            
            122,531Total
                liabilities and shareholders' equity
            
            $
            179,036
            
            
            $
            191,762





*See
      accompanying notes* *to consolidated condensed financial
      statements.*




Page
          1




**FROZEN
      FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES**


**Consolidated
      Condensed Statements of Income**


Three
      and
      Nine Months Ended September 30,


*(Unaudited
      and in thousands, except per-share amounts)*





**Three
                Months**
            
            
            **Nine
                Months****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Revenue
            
            $
            114,730
            
            
            $
            124,133
            
            
            $
            334,288
            
            
            $
            371,285Operating
                expensesSalaries,
                wages and related expenses
            
            
            31,893
            
            
            
            30,813
            
            
            
            97,101
            
            
            
            97,688Purchased
                transportation
            
            
            30,813
            
            
            
            30,335
            
            
            
            83,216
            
            
            
            88,234Fuel
            
            
            21,684
            
            
            
            23,499
            
            
            
            61,435
            
            
            
            67,968Supplies
                and expenses
            
            
            13,911
            
            
            
            15,296
            
            
            
            40,926
            
            
            
            44,364Revenue
                equipment rent
            
            
            7,640
            
            
            
            7,537
            
            
            
            22,885
            
            
            
            23,153Depreciation
            
            
            4,592
            
            
            
            5,082
            
            
            
            14,697
            
            
            
            15,325Communications
                and utilities
            
            
            1,169
            
            
            
            1,120
            
            
            
            3,213
            
            
            
            3,176Claims
                and insurance
            
            
            3,125
            
            
            
            4,579
            
            
            
            12,212
            
            
            
            13,640Operating
                taxes and licenses
            
            
            1,188
            
            
            
            1,138
            
            
            
            3,550
            
            
            
            3,383Gains
                on disposition of equipment
            
            
            (799
            )
            
            
            (958
            )
            
            
            (2,331
            )
            
            
            (2,609
            )Miscellaneous
                expenses
            
            
            772
            
            
            
            313
            
            
            
            2,501
            
            
            
            4,714Total operating expenses
            
            
            115,988
            
            
            
            118,754
            
            
            
            339,405
            
            
            
            359,036(Loss)
                income from continuing operations
            
            
            (1,258
            )
            
            
            5,379
            
            
            
            (5,117
            )
            
            
            12,249Interest
                and other (income) expenseInterest
                expense
            
            
            --
            
            
            
            103
            
            
            
            --
            
            
            
            225Interest
                income
            
            
            (189
            )
            
            
            (93
            )
            
            
            (571
            )
            
            
            (393
            )Equity
                in earnings of limited partnership
            
            
            (211
            )
            
            
            (226
            )
            
            
            (418
            )
            
            
            (478
            )Life
                insurance and other
            
            
            163
            
            
            
            327
            
            
            
            523
            
            
            
            236Total
                interest and other (income) expense
            
            
            (237
            )
            
            
            111
            
            
            
            (466
            )
            
            
            (410
            )Pre-tax
                (loss) income from continuing operations
            
            
            (1,021
            )
            
            
            5,268
            
            
            
            (4,651
            )
            
            
            12,659Income
                tax expense (benefit)
            
            
            2,214
            
            
            
            2,423
            
            
            
            (522
            )
            
            
            5,781Net
                (loss) income from continuing operations
            
            
            (3,235
            )
            
            
            2,845
            
            
            
            (4,129
            )
            
            
            6,878Income
                from discontinued operations, net of tax
            
            
            --
            
            
            
            17
            
            
            
            --
            
            
            
            32Net
                (loss) income
            
            $
            (3,235
            )
            
            $
            2,862
            
            
            $
            (4,129
            )
            
            $
            6,910Net
                (loss) income from continuing operations per share of common
                stockBasic
            
            $
            (0.19
            )
            
            $
            0.16
            
            
            $
            (0.24
            )
            
            $
            0.38Diluted
            
            $
            (0.19
            )
            
            $
            0.15
            
            
            $
            (0.24
            )
            
            $
            0.37Net
                income from discontinued operations per share of common
                stockBasic
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            --Diluted
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            --Net
                (loss) income per share of common stockBasic
            
            $
            (0.19
            )
            
            $
            0.16
            
            
            $
            (0.24
            )
            
            $
            0.38Diluted
            
            $
            (0.19
            )
            
            $
            0.16
            
            
            $
            (0.24
            )
            
            $
            0.37Weighted
                average shares outstandingBasic
            
            
            17,293
            
            
            
            17,876
            
            
            
            17,335
            
            
            
            17,971Diluted
            
            
            17,293
            
            
            
            18,374
            
            
            
            17,335
            
            
            
            18,688





*See
      accompanying notes* *to consolidated condensed financial
      statements.*




Page
          2




**FROZEN
      FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES**


**Consolidated
      Condensed Statements of Cash Flows**


For
      the
      Nine Months Ended September 30,


*(Unaudited
      and in thousands)*





**2007**
            
            
            **2006****Net
                cash provided by operating activities**
            
            $
            8,884
            
            
            $
            14,108**Cash
                flows from investing activities**Expenditures
                for property and equipment
            
            
            (11,893
            )
            
            
            (31,020
            )Proceeds
                from sale of property and equipment
            
            
            11,251
            
            
            
            13,279Other
            
            
            (14
            )
            
            
            (582
            )**Net
                cash used in investing activities**
            
            
            (656
            )
            
            
            (18,323
            )**Cash
                flows from financing activities**Proceeds
                from borrowings
            
            
            200
            
            
            
            20,900Payments
                against borrowings
            
            
            (5,100
            )
            
            
            (19,900
            )Debt
                repaid by variable interest entities
            
            
            --
            
            
            
            (670
            )Proceeds
                from capital stock transactions
            
            
            1,366
            
            
            
            2,810Dividends
                paid
            
            
            (1,571
            )
            
            
            --Purchases
                of treasury stock
            
            
            (4,482
            )
            
            
            (8,863
            )Income
                tax benefit of stock options exercised
            
            
            420
            
            
            
            1,193Other
            
            
            --
            
            
            
            97**Net
                cash used in financing activities**
            
            
            (9,167
            )
            
            
            (4,433
            )Net
                decrease in cash and cash equivalents
            
            
            (939
            )
            
            
            (8,648
            )Cash
                and cash equivalents at January 1
            
            
            9,589
            
            
            
            10,957Cash
                and cash equivalents at September 30
            
            $
            8,650
            
            
            $
            2,309




*See
      accompanying notes to consolidated condensed financial
      statements.*




Page
          3




**FROZEN
      FOOD EXPRESS INDUSTRIES, INC. AND SUBSIDIARIES**


**Notes
      to Consolidated Condensed Financial Statements**


*(Unaudited)*




**1.Basis
      of
      Presentation**




These
      consolidated condensed financial statements include Frozen Food Express
      Industries, Inc., a Texas corporation, and our subsidiary companies, all of
      which are wholly-owned. These financial statements have been prepared pursuant
      to the rules and regulations of the Securities and Exchange Commission (“SEC”).
      In the opinion of management, all adjustments (which consisted only of normal
      recurring entries) necessary to present fairly our financial position, cash
      flows and results of operations have been made. All intercompany balances and
      transactions have been eliminated in consolidation.




Pursuant
      to SEC rules and regulations, certain information and disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America (“US GAAP”) have
      been condensed or omitted from these statements unless significant changes
      have
      taken place since the end of the most recent fiscal year. We believe the
      disclosures contained herein, when read in conjunction with the audited
      financial statements and notes included in our Annual Report on Form 10-K,
      filed with the SEC on March 16, 2007, are adequate to make the information
      presented not misleading. It is suggested, therefore, that these statements
      be
      read in conjunction with the statements and notes included in our most
      recent Annual Report on Form 10-K.





**2.Revenue
      and Expense
      Recognition**




Revenue
      and associated direct operating expenses are recognized on the date the freight
      is picked up from the shipper in accordance with the Financial Accounting
      Standards Board's (“FASB”) Emerging Issues Task Force Issue No. 91-9,*Revenue and Expense Recognition for Freight Services In
      Process*  (“EITF No. 91-9”).




One
      of
      the preferable methods outlined in EITF No. 91-9 provides for the allocation
      of
      revenue between reporting periods based on relative transit time in each
      reporting period with expense recognized as incurred. Changing to this method
      would not have a material impact on our quarterly or annual financial
      statements.




We
      are
      the sole obligor with respect to the performance of our freight services, and
      we
      assume all of the related credit risk. Accordingly, our revenue and our related
      direct expenses are recognized on a gross basis. Payments we make to others
      for
      the use of their trucks in transporting freight are typically calculated based
      on the gross revenue generated or the miles traveled by their trucks. Such
      payments to others are recorded as purchased transportation
      expense.




Revenue
      from equipment rental is recognized ratably over the term of the associated
      rental agreements.





**3.****Related
      Party
      Transactions**




We
      buy
      most of the trailers and trailer refrigeration units we use in our operations
      from W&B Service Company, L.P. ("W&B"), an entity in which we own a 20%
      equity interest. We account for that investment by the equity method of
      accounting. All of our trailer purchase orders are awarded after a competitive
      bidding process to ensure that we are getting the best possible product quality,
      price, warranty and terms. We also rely on W&B to provide routine
      maintenance and warranty repair of the trailers and refrigeration units. During
      the nine-month period ended September 30, 2007, we purchased trailers and
      refrigeration units aggregating $1.8 million from W&B. We made $3.1 million
      of such purchases in the first nine months of 2006. During the nine-month
      periods ended September 30, 2007 and 2006, respectively, we paid W&B $1.1
      million and $1.4 million for maintenance and repair services and for parts
      and
      accessories.   As of September 30, 2007 and 2006, respectively, our
      accounts payable included amounts owed to W&B of $2.3 million and $333
      thousand for the purchase of trailers, repair services and for parts and
      accessories.





Page
          4




During
      the nine-month period ended September 30, 2006, we leased tractors from our
      Chief Executive Officer (“CEO”) and our former (effective May 2006) Chief
      Operating Officer (“COO”), or partnerships under the control of such officers.
 The leases were cancelled during the third quarter of 2006. We paid the
      officers a premium over the tractor rentals we pay to unaffiliated lessors.
      During the nine-month period ended September 30, 2006, total payments under
      these leases were $1.3 million, which is approximately $125 thousand more than
      it would have been had the tractors been leased from unrelated
      parties.




We
      also
      rented trailers from the same officers on a month-to-month basis. The rentals
      we
      paid for the trailers leased from related parties were approximately $500
      thousand during the nine-month period ended September 30, 2006, which was about
      $170 thousand more than the trailers' fair rental value.




A
      member
      of our finance staff devotes a portion of his time rendering tax and other
      professional services for the personal benefit of our CEO, our current COO
      and
      our former COO. We have determined that approximately $30 thousand of the
      finance staff member's salary was related to the provision of such services
      during each of the nine-month periods ended September 30, 2007 and
      2006.





**4.Long-Term
      Debt**




As
      of
      September 30, 2007, we had a secured line of credit pursuant to a revolving
      credit agreement with two commercial banks. The amount we may borrow may not
      exceed the lesser of $50 million, as adjusted for letters of credit and other
      debt as defined in the agreement, a borrowing base or a multiple of a measure
      of
      cash flow as described in the agreement. Loans and letters of credit will become
      due upon the expiration of the agreement. As of September 30, 2007, we were
      in
      compliance with the terms of the agreement, which expires in 2010.




We
      may
      elect to borrow at a daily interest rate based on the bank's prime rate or
      for
      specified periods of time at fixed interest rates which are based on the London
      Interbank Offered Rate in effect at the time of a fixed rate
      borrowing.




Interest
      is paid monthly. At September 30, 2007, no money was borrowed against this
      facility and approximately $5 million was being used as collateral for letters
      of credit. Accordingly, at September 30, 2007, approximately $45 million was
      available under the agreement.




Borrowings
      are secured by our accounts receivable.  We have the option to provide the
      banks with liens on a portion of our truck and trailer fleets to secure
      borrowings and letters of credit in excess of the amount that can be borrowed
      against accounts receivable. The agreement contains a pricing “grid” where
      increased levels of profitability and cash flows or reduced levels of
      indebtedness can reduce the rates of interest expense we incur. The agreement
      permits, with certain limits, payments of cash dividends, repurchases of our
      stock and certain levels of capital expenditures. During the nine months ended
      September 30, 2007, the agreement was amended in order to adjust the limitation
      on our ability to pay cash dividends and repurchase our stock.





**5.** **Income
      Taxes**




We
      incur income tax in the United States of America and in various
      state jurisdictions. Although our federal tax return for 2004 has been audited
      by the IRS, our returns for 2003 and forward are presently subject to further
      examination by the IRS.





For
      the
      three months ended September 30, 2007, our effective tax rate was a negative
      217%, as compared to a positive 46% in the comparable year-ago
      period.  As required by US GAAP, at the end of the second quarter of
      2007, we projected our expectations for the remainder of the year regarding
      the
      taxable and non-taxable components of our pre-tax income.  Non-taxable
      items primarily consist of certain expenses incurred by our employee drivers
      in
      the course of their duties.  Based on our second quarter expectations,
      we estimated our effective tax rate for 2007 would be approximately 75%, which
      we used to calculate our benefit from income taxes for the six months ended
      June
      30, 2007.  The variance between that 75% and the federal statutory
      rate of 35% was due primarily to the non-deductible driver
      expenses.





Page
          5




Some
      of
      the events that we projected to generate taxable income during the latter half
      of 2007 are no longer expected to occur, but the level of non-deductible driver
      expenses has been in line with our expectations.  Accordingly, as of
      September 30, 2007, we projected our expectations for the last quarter of
      2007.  We now expect our tax rate for all of 2007 to be about 11%, due
      primarily to the magnitude of the non-deductible driver expenses relative to
      our
      pre-tax loss.  Because of the decline in our expected 2007 income tax
      benefit from 75% of our pre-tax loss to the currently-expected 11% (a difference
      of 64%), we are required to reverse about 64/75ths of our previously anticipated
      2007 tax benefit.  The tax benefit we had recorded though June 30,
      2007 was 75% of our $3.6 million six month pre-tax loss, or about $2.7
      million.  At 11%, the six-month tax benefit would have been about $400
      thousand.  Because of our changed expectations, we reversed the
      difference between the $2.7 million and the $400 thousand, or about $2.3 million
      from our third-quarter tax benefit.  Because our third quarter pre-tax
      loss was well below $2.3 million, the result of the reversal was an effective
      tax rate well above 100%.





We
      will
      again update our effective tax rate at December 31, 2007.  If our
      results for the fourth quarter of 2007 vary from our current expectations,
      our
      effective tax rate for the year will probably differ significantly from the
      11%
      that we projected as of September 30, 2007.





For
      the
      nine months ended September 30, 2007, as required by US GAAP, our effective
      tax
      rate reflects our current full-year expectation of 11%.





On
      July 13, 2006, the FASB issued Financial Interpretation No. 48 (“FIN
      No. 48”),*Accounting for Uncertainty in Income Taxes - An Interpretation of
      FASB Statement No. 109*. FIN No. 48 clarifies the accounting for
      uncertainty in income taxes recognized in an entity's financial statements
      and
      prescribes a recognition threshold and measurement attributes for financial
      statement disclosure of tax positions taken or expected to be taken on a tax
      return. Under FIN No. 48, the impact of an uncertain income tax position on
      the
      income tax return must be recognized at the largest amount that is
      more-likely-than-not to be sustained upon audit by the relevant taxing
      authority. An uncertain tax position may not be recognized if it has less than
      a
      50% likelihood of being sustained. Additionally, FIN No. 48 provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition.




We
      adopted FIN No. 48 on January 1, 2007. Because we have identified no
      material uncertain tax positions as a result of the implementation of FIN
      No. 48, we recognized no effect from the adoption of FIN No. 48 in our
      financial statements. There are no unrecognized tax benefits included in the
      balance sheet and therefore, none to be recognized that would impact the
      effective tax rate.




We
      had no
      accrual for interest and penalties on our consolidated condensed balance sheets
      at September 30, 2007 or December 31, 2006, and we have recognized no
      expense for interest and/or penalties in our consolidated condensed
      statements of income for the nine-months ended September 30, 2007 or
      2006.  If incurred, such items would be recorded as income tax
      expense.




**6.Commitments
      and
      Contingencies**




We
      have
      accrued for costs related to public liability, cargo, employee health
      insurance and work-related injury claims. When an incident occurs, we
      record a reserve for the incident's estimated outcome. As additional information
      becomes available, adjustments are made. Accrued claims liabilities include
      all
      such reserves and our estimate for incidents that have been incurred but not
      reported.





**7.Non-Cash
      Financing and
      Investing Activities**




During
      the nine months ended September 30, 2007 and 2006, we funded contributions
      to a
      Supplemental Executive Retirement Plan (“SERP”) and our 401(k) Savings Plan by
      transferring approximately 45 thousand and 66 thousand, respectively, of
      treasury stock to the Plan trustees. We recorded expense for the fair market
      value of the shares, which at the time of the contributions, was $406 thousand
      for 2007 and $687 thousand for 2006.





During
      the nine months ended September 30, 2007 and 2006, respectively, 922 and 17,221
      shares of common stock, which had been issued and outstanding to their owners
      for more than one year were exchanged  as consideration for the exercise of
      employee stock options, as permitted by our stock option plans. The value
      of the shares exchanged was $10 thousand during 2007 and $146 thousand during
      2006.





Page
          6




During
      the nine months ended September 30, 2007 and 2006, respectively, we issued
      60
      thousand and 93 thousand shares of restricted stock with fair market value
      of
      $500 thousand and $1.1 million. Of the shares issued during 2007 and 2006,
      17 thousand and 13 thousand were forfeited in 2007 and 2006, respectively,
      before they could be vested. Of the remaining 70 thousand shares granted during
      2005 and through the nine months ended September 30, 2006, 19 thousand with
      a market value of $180 thousand became vested during 2007 and 2 thousand with
      a
      market value of $21 thousand became vested during 2006. The compensation expense
      associated with the vesting of restricted stock is accounted for as deferred
      compensation expense ratably over the three-year vesting period of each grant.
      Such non-cash expense associated with restricted stock grants was approximately
      $107 and $200 thousand during 2007 and 2006, respectively.





As
      of
      September 30, 2007 and 2006, respectively, other current assets included $1.0
      million and $711 thousand due to us from the sale of equipment we sold
      during those years. As of September 30, 2007 and 2006, respectively,
      accounts payable included $5.6 million and $112 thousand related to capital
      expenditures we made during those years.





As
      of
      September 30, 2007, accrued accounts payable included $2.1 million we owed
      for
      300,000 shares of our common stock we purchased in September and paid for in
      October.





We
      own a
      19.9% share of W&B Refrigeration Service Company. We account for our
      investment in the buyer by the equity method. The total amount of that
      investment, which is included in other assets on our balance sheet, was $2.0
      million and $1.8 million at September 30, 2007 and 2006, respectively.
      During the nine months ended September 30, 2007 and 2006, our equity in the
      earnings of the buyer was $418 thousand and $478 thousand, respectively. These
      amounts are included in interest and other (income) expense in our statements
      of
      income. Cash distributions to us from W&B’s earnings were $455 thousand for
      the nine months ended September 30, 2007 and $694 thousand for the same period
      of 2006.





**8.Loss
      or Income per
      Share of Common Stock**




Basic
      net
      loss or income per share was computed by dividing our net income or loss by
      the
      weighted average number of shares of common stock outstanding during the period.
      The table below sets forth information regarding weighted average basic and
      diluted shares for each of the three- and nine-month periods ended September
      30,
      2007 and 2006 (in thousands):





**Three
                Months**
            
            
            **Nine
                Months****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Basic
                shares
            
            
            17,293
            
            
            
            17,876
            
            
            
            17,335
            
            
            
            17,971Common
                stock equivalents
            
            
            --
            
            
            
            498
            
            
            
            --
            
            
            
            717Diluted
                shares
            
            
            17,293
            
            
            
            18,374
            
            
            
            17,335
            
            
            
            18,688





Anti-dilutive
                shares excluded due to:Exercise
                price of stock options
            
            
            580
            
            
            
            823
            
            
            
            647
            
            
            
            606Net
                loss
            
            
            373
            
            
            
            --
            
            
            
            416
            
            
            
            --Total
                excluded common stock equivalents
            
            
            953
            
            
            
            823
            
            
            
            1,063
            
            
            
            606





US
      GAAP
      requires that stock options with an exercise price higher than the stock’s
      actual average market value during the period be excluded from common stock
      equivalents.  US GAAP also requires all other common stock equivalents
      to be excluded from the number of basic shares whenever a net loss is incurred
      for the period.




Each
      component of earnings per share is calculated independently from the other
      components.  Consequently, for the third quarter of 2006, diluted
      earnings per share from continuing operations plus diluted earnings per share
      from discontinued operations does not equal total diluted earnings per share
      due
      to rounding.




Page
          7


**9.New
      Accounting
      Pronouncements**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157,*Fair Value Measurements* (“SFAS 157”), which defines fair value,
      establishes a framework for measuring fair value and expanded disclosures about
      fair value measurement. Companies are required to adopt the new standard for
      fiscal periods beginning after November 15, 2007. We are evaluating the impact
      of this standard and we do not expect it to have a material impact on our
      consolidated financial statements.




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
      159”).  SFAS 159 provides companies with an option to report selected
      financial assets and financial liabilities at fair value, which can be elected
      on an instrument-by-instrument basis. Unrealized gains and losses on items
      for
      which the fair value option has been elected are reported in earnings at each
      subsequent reporting date. SFAS 159 is effective for fiscal years beginning
      after November 15, 2007. We are evaluating the impact of this standard and
      we do
      not expect it to have a material impact on our consolidated financial
      statements.




No
      other
      new accounting pronouncement issued or effective had or is expected to have
      a
      material impact on our consolidated financial statements.




Page
          8





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




**GENERAL**




The
      following management's discussion and analysis describes the principal factors
      affecting our results of operations, liquidity and capital resources. This
      discussion should be read in conjunction with the accompanying unaudited
      consolidated condensed financial statements and our Annual Report on Form 10-K
      for the year ended December 31, 2006, which include additional information
      about
      our business, our significant accounting policies and other relevant information
      that underlies our financial results. Without limiting the foregoing, the
“Overview” and “Critical Accounting Policies and Estimates” sections under Item
      7, “Management's Discussion and Analysis of Financial Condition and Results of
      Operations” of our last Annual Report on Form 10-K should be read in conjunction
      with this Quarterly Report.




Included
      in discontinued operations in our consolidated condensed statements of income
      for the three- and nine-month periods ended September 30, 2006 are the
      operations of Airpro Mobile Air, LLC (“AMA”), an entity previously consolidated
      under FASB Interpretation No. 46,*Consolidation of Variable
      Interest Entities (revised December 2003)--an interpretation of ARB No.
      51,*  as a variable interest entity. We sold our investment in AMA
      in December 2006.




A
      family
      partnership from which we leased 68 tractors was also consolidated into our
      consolidated condensed financial statements until September 30, 2006. Effective
      September 30, 2006, we terminated those leases, and the partnership is not
      consolidated into our 2007 financial statements.




Our
      Internet address is www.ffex.net. All of our filings with the SEC are
      available free of charge through our website as soon as reasonably practicable
      after we file them.





**RESULTS
      OF OPERATIONS**


***Three and
      Nine Months Ended September 30, 2007 and 2006***




***Revenue*****:**
      Our revenue is derived from five types of transactions.  Linehaul revenue
      is order-based and earned by transporting cargo for our customers using tractors
      and trailers that we control by ownership, long-term leases, agreements with
      independent contractors (sometimes referred to as “owner-operators”) or through
      rail providers. Within our linehaul freight service portfolio we offer both
      truckload and less-than-truckload (“LTL”) services. Over 90% of our LTL
      shipments must be refrigerated or “temperature-controlled” to prevent damage to
      the cargo. We operate fleets, including dedicated fleets, that focus on
      temperature-controlled LTL shipments, temperature-controlled truckload shipments
      and non-refrigerated, or “dry”, truckload shipments. Our freight
      brokerage service provides freight transportation services to customers
      using third-party trucking companies.




Our
      dedicated fleet operation consists of tractors and trailers that haul freight
      for a specific customer only. Dedicated fleet revenue is asset based. Customers
      typically pay us weekly for trucks assigned to their service.




Income
      from equipment rental represents amounts we charge to independent contractors
      for the use of trucks that we own and lease to the owner-operator, as well
      as
      income for special-use equipment rentals. During the first nine months of 2006,
      we provided trailers in the aftermaths of Hurricanes Katrina and Rita. The
      revenue from the rental of refrigerated trailers used by governmental agencies
      in ongoing hurricane relief efforts was $2.2 million for that period. 
There was no significant such revenue during the first nine months of
      2007.




The
      rates
      we charge for our freight services include fuel adjustment charges. In periods
      when the price we incur for diesel fuel is high, we add fuel surcharges to
      our
      charges for freight services in an effort to recover the additional costs from
      our customers. Fuel surcharges fluctuate with the price of diesel
      fuel.




Page
          9




During
      2006, the capacity of the trucking industry to haul freight expanded at the
      same
      time that customer demand for such services decreased. One result of the
      imbalance in supply and demand was industry-wide downward pressure on the rates
      companies were able to charge for their transportation services. Most
      participants and observers of the trucking industry had anticipated equalization
      of supply and demand by year-end, but now do not expect the current imbalance
      to
      adjust itself before the end of 2008.




The
      following table summarizes and compares the significant components of freight
      revenue for each of the three- and nine-month periods ended September 30, 2007
      and 2006:




**Three
                Months**
            
            
            **Nine
                Months**Revenue
                from: (a)
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Temperature-controlled
                fleet
            
            $
            34.5
            
            
            $
            37.7
            
            
            $
            103.2
            
            
            $
            121.6Dry-freight
                fleet
            
            
            18.0
            
            
            
            19.7
            
            
            
            55.8
            
            
            
            60.5Total
                truckload linehaul services
            
            
            52.5
            
            
            
            57.4
            
            
            
            159.0
            
            
            
            182.1Dedicated
                fleets
            
            
            3.7
            
            
            
            5.2
            
            
            
            12.1
            
            
            
            16.5Total
                full-truckload
            
            
            56.2
            
            
            
            62.6
            
            
            
            171.1
            
            
            
            198.6Less-than-truckload
                linehaul services
            
            
            33.9
            
            
            
            34.0
            
            
            
            96.2
            
            
            
            97.1Fuel
                surcharges
            
            
            18.7
            
            
            
            22.2
            
            
            
            51.5
            
            
            
            59.4Freight
                brokerage
            
            
            4.4
            
            
            
            3.7
            
            
            
            11.5
            
            
            
            9.7Equipment
                rental
            
            
            1.5
            
            
            
            1.6
            
            
            
            4.0
            
            
            
            6.5Total
                revenue
            
            $
            114.7
            
            
            $
            124.1
            
            
            $
            334.3
            
            
            $
            371.3Operating
                expenses(a)
            
            $
            116.0
            
            
            $
            118.8
            
            
            $
            339.4
            
            
            $
            359.0(Loss)
                Income from operations(a)
            
            $
            (1.3
            )
            
            $
            5.3
            
            
            $
            (5.1
            )
            
            $
            12.3Operating
                ratio(b)
            
            
            101.1
            %
            
            
            95.7
            %
            
            
            101.5
            %
            
            
            96.7
            %Total
                full-truckload revenue
            
            $
            56.2
            
            
            $
            62.6
            
            
            $
            171.1
            
            
            $
            198.6Less-than-truckload
                revenue
            
            
            33.9
            
            
            
            34.0
            
            
            
            96.2
            
            
            
            97.1Total
                linehaul and dedicated fleet revenue
            
            $
            90.1
            
            
            $
            96.6
            
            
            $
            267.3
            
            
            $
            295.7Weekly
                average trucks in service
            
            
            2,097
            
            
            
            2,175
            
            
            
            2,136
            
            
            
            2,239Revenue
                per truck per week(c)
            
            $
            3,269
            
            
            $
            3,379
            
            
            $
            3,209
            
            
            $
            3,386




**Computational
                notes:**(a)
            Revenue
                and expense amounts are stated in millions of dollars.  The amounts
                presented in the table may not agree to the amounts shown in the
                accompanying statements of income due to rounding.(b)
            Operating
                expenses divided by total revenue.(c)
            Average
                daily revenue times seven, divided by weekly average trucks in
                service.




Page
          10




The
      following table summarizes and compares our revenue-related data from
      full-truckload and LTL linehaul services for each of the three- and nine-month
      periods ended September 30, 2007 and 2006:




**Three
                Months**
            
            
            **Nine Months****Truckload**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Total
                linehaul miles(a)
            
            
            40.2
            
            
            
            42.5
            
            
            
            122.2
            
            
            
            136.1Loaded
                miles(a)
            
            
            36.2
            
            
            
            38.5
            
            
            
            110.1
            
            
            
            123.2Empty
                mile ratio(b)
            
            
            10.0
            %
            
            
            9.4
            %
            
            
            9.9
            %
            
            
            9.5
            %Linehaul
                revenue per total mile(c)
            
            $
            1.31
            
            
            $
            1.35
            
            
            $
            1.30
            
            
            $
            1.34Linehaul
                revenue per loaded mile(d)
            
            $
            1.45
            
            
            $
            1.49
            
            
            $
            1.44
            
            
            $
            1.48Linehaul
                shipments(e)
            
            
            36.6
            
            
            
            40.8
            
            
            
            116.0
            
            
            
            128.9Loaded
                miles per shipment(f)
            
            
            989
            
            
            
            944
            
            
            
            949
            
            
            
            956**Less-than-truckload**Hundredweight(e)
            
            
            2,225
            
            
            
            2,172
            
            
            
            6,438
            
            
            
            6,315Shipments(e)
            
            
            72.8
            
            
            
            69.8
            
            
            
            208.1
            
            
            
            201.9Linehaul
                revenue per hundredweight(g)
            
            $
            15.24
            
            
            $
            15.65
            
            
            $
            14.94
            
            
            $
            15.38Linehaul
                revenue per shipment(h)
            
            $
            466
            
            
            $
            487
            
            
            $
            462
            
            
            $
            481Average
                weight per shipment(i)
            
            
            3,056
            
            
            
            3,112
            
            
            
            3,094
            
            
            
            3,128




**Computational
                notes:**(a)
            In
                millions.(b)
            Total
                linehaul miles minus loaded miles, divided by total linehaul
                miles.(c)
            Revenue
                from linehaul services divided by total linehaul miles.(d)
            Revenue
                from linehaul services divided by loaded miles.(e)
            In
                thousands.(f)
            Total
                loaded miles divided by number of linehaul shipments.(g)
            LTL
                revenue divided by hundredweight.(h)
            LTL
                revenue divided by number of shipments.(i)
            LTL
                hundredweight times one hundred divided by number of
                shipments.




For
      the
      three- and nine-month periods ended September 30, 2007, total revenue was $114.7
      million and $334.3 million, respectively, as compared to $124.1 million and
      $371.3 during the comparable periods of 2006.  Of the $9.4 million and
      $37.0 million decreases for the quarter and year-to-date, respectively, when
      comparing 2007 to 2006, the decrease in fuel surcharges accounted for $3.5
      million (37%) and $7.9 million (21%).





Revenue,
      net of fuel surcharges, decreased by $5.9 million (5.8%) and by $29.1 million
      (9.3%), respectively, when comparing the three- and nine-month periods ended
      September 30, 2007 to the same periods of 2006.  Full-truckload
      revenue declined by $6.4 million (10.2%) and by $27.5 million (13.8%)
      during the three- and nine-month periods ended September 30, 2007, respectively,
      as compared to the same periods of 2006. Linehaul revenue per loaded
      mile declined by 2.7% to $1.45 for the third quarter of 2007 as compared to
      the same period of 2006. When comparing year-to-date results for 2007 to 2006,
      linehaul revenue per loaded mile declined by 2.7% to $1.44 per mile. During
      the
      three- and nine-month periods ended September 30, 2007, as compared to the
      same
      periods of 2006, the average full-truckload length of haul increased to 989
      miles (4.8%) and decreased to 949 miles (0.7%), respectively. Our empty mile
      ratio increased from 9.4% to 10.0% and from 9.5% to 9.9% for the three- and
      nine-month periods ended September 30, 2007, respectively, when compared to
      the
      prior year. The number of full-truckload linehaul shipments we transported
      during the third quarter of 2007 declined 10.3% to 36,600 shipments, as compared
      to 40,800 during the year-ago quarter. The same comparison for year-to-date
      results shows a decline of 10.0%, from 128,900 to 116,000
      shipments.




Since
      mid-2006, customer demand for truckload service during 2007 has been weak,
      impairing our ability to expand our full-truckload linehaul
      service.




Included
      in our truckload linehaul revenue is revenue from our intermodal operations.
      We
      have experienced a 133% increase in the number of intermodal loads, from 1,018
      to 2,374, comparing the third quarter of 2007 to the same period of 2006.
      Intermodal service entails transporting loaded trailers over long distances
      on
      railroad flat cars, generally at a lower cost than using a tractor to transport
      the trailer.  Using a tractor, however, usually takes fewer days to
      transport the trailer.  When marketing intermodal service, we are able
      to offer our customers a lower-cost alternative while being able to move the
      freight without needing to pay for a driver, a tractor or fuel for the
      tractor.




Page
          11




Brokerage
      revenue improved by $700 thousand (18.9%) and by $1.8 million (18.6%) between
      the three- and nine-month periods ended September 30, 2007 and 2006,
      respectively. Our freight brokerage service enables us to accept additional
      loads by engaging unaffiliated trucking companies to haul the freight. Our
      brokerage service bills the customer and pays the third-party trucking
      company. During the latter half of 2006, we began to refocus on our
      brokerage service as a potential source of growth. At the end of 2006 and
      early in 2007, we brought in new management to devise and implement plans to
      achieve that potential.





Dedicated
        fleet revenue (freight hauled by equipment dedicated to specific customers),
        also included in our truckload linehaul revenue, fell by $1.5 million (28.8%)
        and by $4.4 million (26.7%) for the three- and nine-month periods ended
        September 30, 2007, respectively, as compared to the same periods of 2006. 
In an effort to expand our dedicated revenue, we have directed our resources
        to
        specific goals that may generate more acceptable levels of profitability. 
While excess capacity in the trucking industry is restricting rates and yield
        in
        the marketplace, new customers have been added in 2007.  We plan for
        continued growth in this service offering.




Our
      linehaul rates are typically related to providing service between an origin
      and
      a destination. Often, it is necessary for trucks to run empty, or “deadhead”,
      for long distances from the city of their last delivery to the city of their
      next load. Historically, the expenses we incurred for deadhead miles could
      not
      be passed to the customer. The rapid escalation of fuel prices in 2005 and
      2006
      prompted negotiations that resulted in concessions from our customers that
      we should no longer bear 100% of the costs of deadhead miles, and at that
      time many of our customers agreed to absorb at least some of our incremental
      deadhead expense. Now that demand for trucking services in general has declined
      compared to a year ago, this shift from a seller's market to a buyer's market
      in
      the trucking industry has meant that fewer customers are compensating us for
      deadheads during 2007.




LTL
      linehaul revenue decreased by $100 thousand (0.3%) during the three months
      ended
      September 30, 2007 as compared to the same period of
      2006.  Year-to-date, LTL linehaul revenue decreased by $900 thousand
      (0.9%) when comparing 2007 to 2006. When comparing the third quarter of 2007
      to
      the same period of 2006, the number of LTL shipments transported increased
      by 4.3%, the average weight of the shipments transported decreased by
      1.8% and the average linehaul revenue per LTL shipment declined by 4.3%.
      The same comparisons for year-to-date results indicate a 3.1% increase in the
      number of LTL shipments, a 1.1% decline in the weight per shipment and a 4.0%
      decline in the revenue per shipment. Concurrent with anticipated growth in
      customer demand as we near the end of the year, we plan to initiate LTL rate
      increases.




Recent
      high operating expenses in the trucking industry, particularly for maintenance
      and fuel, have contributed to a long-term trend of declining numbers of
      independent contractors providing equipment to the industry. Our ability to
      mitigate this industry-wide trend by expanding our company-operated fleets
      has
      been constrained by a lack of drivers qualified to operate the
      equipment.





***Operating
      Expenses:*** The following table sets forth, as a percentage of
      revenue, certain major operating expenses for each of the three- and nine-month
      periods ended September 30, 2007 and 2006:





**Three
                Months**
            
            
            **Nine
                Months****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Salaries,
                wages and related expenses
            
            
            27.8
            %
            
            
            24.8
            %
            
            
            29.0
            %
            
            
            26.3
            %Purchased
                transportation
            
            
            26.9
            
            
            
            24.4
            
            
            
            24.9
            
            
            
            23.8Fuel
            
            
            18.9
            
            
            
            18.9
            
            
            
            18.4
            
            
            
            18.3Supplies
                and expenses
            
            
            12.1
            
            
            
            12.3
            
            
            
            12.2
            
            
            
            11.9Revenue
                equipment rent and depreciation
            
            
            10.7
            
            
            
            10.2
            
            
            
            11.2
            
            
            
            10.4Claims
                and insurance
            
            
            2.7
            
            
            
            3.7
            
            
            
            3.7
            
            
            
            3.7Other
            
            
            2.0
            
            
            
            1.4
            
            
            
            2.1
            
            
            
            2.3Total
                freight operating expenses
            
            
            101.1
            %
            
            
            95.7
            %
            
            
            101.5
            %
            
            
            96.7
            %




***Salaries,
      Wages and Related Expenses:*** Salaries, wages and related expenses
      increased by $1.1 million (3.5%) and decreased by $587 thousand (0.6%) during
      the three- and nine-month periods ended September 30, 2007, respectively, as
      compared to the same periods of 2006. The following table summarizes and
      compares the major components of these expenses for each of the three- and
      nine-month periods (in millions):





**Three
                Months**
            
            
            **Nine
                Months****Salaries,
                Wages and Related Expenses from**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Driver
                salaries and per diem expenses
            
            $
            17.7
            
            
            $
            18.7
            
            
            $
            54.4
            
            
            $
            57.2Non-driver
                salaries
            
            
            9.4
            
            
            
            10.2
            
            
            
            29.3
            
            
            
            29.4Deferred
                compensation
            
            
            (0.6
            )
            
            
            (1.0
            )
            
            
            (0.3
            )
            
            
            (1.0
            )Payroll
                taxes
            
            
            1.9
            
            
            
            1.9
            
            
            
            6.3
            
            
            
            6.4Work-related
                injuries
            
            
            1.3
            
            
            
            (0.1
            )
            
            
            3.1
            
            
            
            1.9Health
                insurance and other
            
            
            2.2
            
            
            
            1.1
            
            
            
            4.3
            
            
            
            3.8$
            31.9
            
            
            $
            30.8
            
            
            $
            97.1
            
            
            $
            97.7





Page
          12





Driver
      salaries and per diem expenses fell by $1.0 million (5.3%) and by $2.8
      million (4.9%) when comparing the three- and nine-month periods ended September
      30, 2007, respectively, to the same periods of 2006.  Employee-drivers are
      typically paid wages and per diem expense allowances calculated on a per-mile
      basis, except in our dedicated fleets where drivers are typically paid by the
      day.  In April 2006, we increased our employee-driver pay scale by about 6%
      in an effort to improve our ability to attract and retain qualified
      employee-drivers. The impact of this was mitigated by the presence of fewer
      trucks in our fleet.  Employee-driver turnover has deteriorated slightly
      from 88% to 93% for the rolling twelve-month periods ended September 30, 2007
      and 2006.  In the trucking industry, driver turnover has often exceeded
      125% for many years, as the industry has competed with construction and other
      trades for labor. Since 2006, we have taken certain steps to address this
      problem, such as the centralization of our truckload operations and improvements
      in communications between drivers and their fleet managers, with favorable
      initial results offset by third quarter relapses.




The
      disparity between the drop in revenue compared to the drop in driver pay is
      primarily due to the per diem rate increase and the higher proportion of our
      freight handled by company drivers rather than owner-operators. Payments to
      owner-operators are included in purchased transportation expense.




As
      the
      size of our fleets declined during 2006 and 2007, we noted that we needed fewer
      non-driver employees to support our business. Also, over the past few years,
      we
      have been able to automate certain back-office functions that were previously
      performed manually. To address the problem of having too many non-driver
      employees, during June 2007 we offered all such employees incentives to
      voluntarily end their employment with us. When comparing the three- and
      nine-month periods ended September 30, 2007 and 2006, non-driver salaries
      decreased by $800 thousand (7.8%) and decreased by $100 thousand (0.3%),
      respectively.  The nine-month period of 2007 included severance
      pay related to voluntary separation payments we made to terminated
      employees. We project the effect of these payments will be to reduce future
      non-driver salaries, wages and related expenses by about $3.0 million on an
      annual basis. We will continue to implement strategies to eliminate, consolidate
      and automate remaining back-office processes in order to further reduce our
      non-driver staff.





During
      the latter part of 2006 and early in 2007, we completed the consolidation of
      our
      truckload dispatch and truck manager functions into one centralized facility
      located in suburban Dallas, a project started in October 2006. As a result,
      more
      work has been accomplished with fewer people, and the quality of the
      work-product has improved. By
      the
      end of September 2007, we had reduced the number of our non-driver employees
      by
      about 90, compared to September of 2006.





We
      sponsor a 401(k) wrap plan that enables certain highly-compensated employees
      to
      defer a portion of their current salaries to their post-retirement years.
      Because the wrap plan's assets are held by a grantor or “rabbi” trust, we are
      required to include the wrap plan's assets and liabilities in our consolidated
      condensed financial statements. As of September 30, 2007 and 2006, respectively,
      such assets included approximately 83 thousand and 119 thousand shares
      of our common stock, the market value of which are classified as treasury
      stock in our consolidated condensed balance sheets.




We
      are
      required to value the assets and liabilities of the wrap plan at market value
      on
      our periodic balance sheets, but US GAAP precludes us from reflecting the
      treasury stock portion of the wrap plan's assets at market value. When the
      market value of our common stock rises, this causes upward pressure on
      non-driver salaries and wages expense. The opposite is true when the market
      value of our common stock falls. During the first nine months of 2007 and 2006,
      the per-share market price of our stock declined by $1.87 and $3.44,
      respectively. That resulted in decreases of approximately $84 thousand in
      salaries and wages expense for the first nine months of 2007 as compared to
      the
      same period of 2006. Also, as of September 30, 2007 and 2006, respectively,
      our
      executive bonus and phantom stock plan was partially denominated in
      approximately 104 thousand and 166 thousand “phantom” shares of our
      stock, the liability for which is also determined by the value of our stock.
      That contributed to a decrease of about $194 thousand for the first nine months
      of 2007 compared to a decrease of $570 thousand for the same period of
      2006.




Costs
      associated with work-related injuries increased by $1.2 million (63.2%) when
      comparing year-to-date expense of this year to last year. Such expenses
      principally relate to injuries sustained by employees during the course of
      their
      employment. Large fluctuations can be caused by the occurrence of just one
      serious injury in a quarter compared to a quarter with lesser experience in
      the frequency, the severity of such injuries or the settlement of claims for
      an
      amount different than previously estimated.




We
      share
      the cost of healthcare coverage with our employees. For the past several years,
      we have experienced double-digit percentage health insurance cost increases.
      We
      have repeatedly increased both the amounts employees pay to participate and
      the
      amount of medical costs that must be borne by our employees. These costs
      increased  by $1.1 million (100.0%) and $500 thousand (13.2%) for the
      three- and nine-month periods ended September 30, 2007, caused by large
      claims  within the third quarter of 2007, the cost of which we
      primarily self-insure.





Page
          13




We
      are
      concerned about the recent increase in our work-related injury costs and
      employee health insurance costs during 2007 and we are taking steps to identify
      and eliminate the root causes of these expenses.  For example, during
      mid-2007, we implemented an employee wellness program that we expect will have
      a
      positive impact on our health insurance costs in the future.





***Purchased
      Transportation:*** Purchased transportation expense increased
      by $500 thousand (1.6%) and decreased by $5.0 million (5.7%) during the three-
      and nine-month periods ended September 30, 2007, respectively, as compared
      to
      the comparable periods of 2006. The following table summarizes and compares
      the
      major components of our purchased transportation expense for each of those
      periods by type of service (in millions):





**Three
                Months**
            
            
            **Nine
                Months****Purchased
                Transportation Expense from**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Linehaul
                service
            
            $
            19.6
            
            
            $
            22.1
            
            
            $
            55.9
            
            
            $
            63.6Fuel
                adjustments
            
            
            4.6
            
            
            
            4.4
            
            
            
            12.5
            
            
            
            12.4Intermodal
            
            
            2.9
            
            
            
            0.8
            
            
            
            5.3
            
            
            
            4.2Freight
                brokerage and other
            
            
            3.7
            
            
            
            3.0
            
            
            
            9.5
            
            
            
            8.0$
            30.8
            
            
            $
            30.3
            
            
            $
            83.2
            
            
            $
            88.2




Purchased
      transportation for linehaul service primarily represents payments to
      owner-operators in exchange for our use of their vehicles to transport
      shipments. The $2.5 million (11.3%) and $7.7 million (12.1%) decreases in
      such expenses during the three- and nine-month periods ended September 30,
      2007,
      respectively, as compared to the same periods of 2006, are the result of a
      decline in revenue.




We
      have
      made a concerted effort to improve our contractor relations and retention,
      including a pro-active focus on the speed and accuracy of their payments and
      improved communications with the contractors.  We upgraded the quality
      of the equipment and the warranties available to those who lease their equipment
      through us.




Owner-operators
      are responsible for all expenses associated with the operation of their
      tractors, including labor, maintenance and fuel. When retail fuel prices rise,
      we charge our customers incremental fuel adjustment charges to offset such
      higher costs, pursuant to the contracts and tariffs by which our freight rates
      are determined. In most cases, those fuel adjustment rates automatically
      fluctuate as diesel fuel prices rise and fall. To the extent that shipments
      are
      transported by owner-operators, we pass the amount of these fuel surcharges
      to
      the owner-operators in order to offset their incremental fuel
      expense.





Intermodal
      purchased transportation expense increased by $1.1 million (26.2%) when
      comparing the year-to-date results of 2007 to the same period of 2006, with
      a
      29.3% increase in the number of loads transported. Management hired to develop
      our intermodal revenue growth initiative has been successful in negotiating
      directly with the railroads, avoiding the cost of fees associated with
      third-party brokers, thus improving our cost structure by 18% per load when
      comparing year-to-date 2007 to the same period of 2006.





Purchased
      transportation expenses associated with our freight brokerage and other service
      offerings increased by $700 thousand (23.3%) and $1.5 million (18.8%) for the
      three- and nine-month periods ended September 30, 2007, respectively, as
      compared to the same periods of 2006. Freight brokerage purchased transportation
      expense is highly correlated to freight brokerage revenue, which increased
      by
      18.9% and 18.6% when making the same comparisons.




***Fuel:***
      Fuel expense decreased by $1.8 million (7.7%) and by $6.5 million (9.6%)
      during the three- and nine-month periods ended September 30, 2007, respectively,
      as compared to the same periods of 2006, and decreased as a percentage of
      linehaul and dedicated fleet revenue to 24.1% from 24.3% for the third quarter
      and stayed unchanged at 23.0% for the year-to-date performance in 2007 and
      2006,
      respectively. The following table summarizes and compares the relationship
      between fuel expense and total linehaul and dedicated fleet revenue during
      each
      of the three- and nine-month periods ended September 30, 2007 and 2006 (dollar
      amounts in millions):





**Three
                Months**
            
            
            **Nine Months****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Total
                linehaul and dedicated fleet revenue
            
            $
            90.1
            
            
            $
            96.6
            
            
            $
            267.3
            
            
            $
            295.7Fuel
                expense
            
            
            21.7
            
            
            
            23.5
            
            
            
            61.4
            
            
            
            68.0Fuel
                expense as a percent of total linehaul and
              dedicated
                fleet revenue
            
            
            24.1
            %
            
            
            24.3
            %
            
            
            23.0
            %
            
            
            23.0
            %





Page
          14




The
      average price per gallon of fuel we paid did not change significantly between
      the first nine months of 2007 and 2006. The monetary decreases in fuel expense
      during 2007 are primarily due to fewer trucks in our company-operated
      fleets.  Fuel adjustment charges do not always fully compensate us or
      our independent contractors for increased fuel costs. Accordingly, fuel price
      volatility can impact our profitability. We have in place a number of strategies
      that mitigate, but do not eliminate, the impact of such volatility. Pursuant
      to
      the contracts and tariffs by which our freight rates are determined, most of
      those rates automatically fluctuate as diesel fuel prices rise and
      fall.





Factors
      that might prevent us from fully recovering fuel cost increases include the
      presence of deadhead miles, tractor engine idling and fuel to power our trailer
      refrigeration units. Such fuel consumption often cannot be attributed to a
      particular load, so there is no revenue to which a fuel adjustment may be
      applied. Also, our fuel adjustment charges are computed by reference to federal
      government indices that are released weekly for the prior week. When prices
      are
      rising, the price we incur in a given week is more than the price the government
      reports for the preceding week. Accordingly, we are not always able to recover
      the excess of the current week's actual price to the preceding week's indexed
      price.




With
      regard to fuel expenses for company-operated equipment, we attempt to further
      mitigate the impact of fluctuating fuel costs by operating more fuel-efficient
      tractors and aggressively managing fuel purchasing. We use computer software
      to
      optimize our routing and our fuel purchasing. The software enables us to select
      the most efficient route for a trip. It also assists us in deciding, on a
      real-time basis, how much fuel to buy at a particular fueling station.
      Furthermore, our fuel expenses are impacted by the mix of freight handled by
      company equipment or by owner-operators, so that as more of our freight volume
      is moved by company equipment, the related cost of fuel is transferred to fuel
      expense from purchased transportation expense.




At
      September 30, 2007, about 200 of our company-operated full-truckload units
      had
      Auxiliary Power Units (“APUs”) installed. Such devices are designed to maintain
      a comfortable environment for off-duty drivers as they rest in a truck's
“sleeper”, while using less fuel. We will continue the testing process to
      determine if these enhancements will produce acceptable returns on
      investment.




New
      federal environmental regulations over diesel engine exhaust cleanliness became
      effective during the first quarter of 2007. Tractors provided under the new
      Environmental Protection Agency (“EPA”) regulations are powered by engines with
      more extensive exhaust filtering systems. The new engines are designed to burn
      diesel fuel more completely, thereby reducing the level of particulates such
      engines discharge into the air.





We
      have
      planned our tractor orders so that we will purchase only a few of the 2007-model
      tractors, with the new DPF (Diesel Particulate Filter) engines, in the last
      quarter of 2007. This plan will allow us to let other fleets test and work
      through any design flaws, and delays the anticipated decline in the miles per
      gallon and increased maintenance costs.  Of course, it does not allow
      us to avoid the increase in fuel prices already in effect.  Our tractor
      fleet should be fully converted to the new engines by the end of 2011, but
      another, stricter, set of requirements takes effect in 2010. We intend to
      continue to pass our increases in fuel expenses to our customers, but there
      can
      be no assurance that we will succeed in those efforts.




***Supplies
      and Expenses****:* Supplies and expenses decreased by $1.4
      million (9.1 %) and by $3.4 million (7.7%) during the three- and nine-month
      periods ended September 30, 2007, respectively, as compared to the same
      periods of 2006. The following table summarizes and compares the major
      components of supplies and expenses for each of the three- and nine-month
      periods (in millions):




**Three
                Months**
            
            
            **Nine
                Months****Supplies
                and Expenses from**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Fleet
                repairs and maintenance
            
            $
            3.9
            
            
            $
            5.1
            
            
            $
            11.8
            
            
            $
            14.2Freight
                handling
            
            
            3.3
            
            
            
            2.9
            
            
            
            9.0
            
            
            
            8.4Driver
                travel expenses (excluding per diem expense)
            
            
            0.8
            
            
            
            0.8
            
            
            
            2.1
            
            
            
            2.4Tires
            
            
            0.9
            
            
            
            1.4
            
            
            
            3.7
            
            
            
            4.6Terminal
                and warehouse expenses
            
            
            1.6
            
            
            
            1.6
            
            
            
            4.6
            
            
            
            4.5Driver
                recruiting
            
            
            1.4
            
            
            
            1.5
            
            
            
            4.2
            
            
            
            4.1Other
            
            
            2.0
            
            
            
            2.0
            
            
            
            5.5
            
            
            
            6.2$
            13.9
            
            
            $
            15.3
            
            
            $
            40.9
            
            
            $
            44.4





Fleet
      repairs and maintenance declined by $1.2 million (23.5%) and by $2.4 million
      (16.9%) for the three- and nine-month periods ended September 30, 2007,
      respectively, as compared to the same periods of 2006. Prior to 2006, we
      had been replacing our tractors on a 42- to 48-month cycle. Late in 2006, we
      began to shorten the cycle to 42 months. Older tractors are more costly to
      maintain and most repairs to newer tractors are covered by manufacturers'
      warranties. We plan to continue phasing out older tractors during the remainder
      of 2007.





Page
          15




Driver
      recruiting expenses were down $100 thousand and up $100 thousand for the three-
      and nine-month periods ended September 30, 2007 as compared to the same periods
      of 2006. The lack of availability of qualified truck drivers has been a problem
      for our industry for many years, and trucking companies usually recruit drivers
      from other trucking companies. The trucking industry also competes with other
      trades, such as the construction industry, agriculture and manufacturing for
      skilled labor. Inexperienced employee-driver candidates must be properly trained
      before qualifying to be “solo” drivers, and when we recruit these inexperienced
      employee-driver candidates, we provide training through a truck-driving school.
      As qualified drivers have become harder to find, we have continued to advertise
      and solicit for drivers and independent contractors. Improved retention of
      drivers currently in service is required in order to mitigate the need to
      recruit drivers to replace those who leave. In order to improve such retention,
      we implemented a pay-rate increase for our employee-drivers in April
      2006.





For
      many
      years, we have paid our owner-operators for the use of their tractors based
      on a
      percentage of the revenue from the shipments they hauled. During 2007, we have
      made significant progress in the retention of our independent contractors
      through the development and implementation of a mileage-based compensation
      contract. Through this new method, independent contractors are paid faster
      and
      more accurately because we can pay the contractor before we are able to
      calculate the revenue. This, along with other enhancements in our contractor
      relations, has helped to further improve retention of these key business
      partners. This should allow us reduce our expenses for recruiting independent
      contractors. We will continue to explore and implement other strategies in
      an
      effort to reduce recruiting costs through improved retention of employee-drivers
      and independent contractors with trucks currently in our fleets.




***Rentals
      and Depreciation:*** Rentals and depreciation declined by $900
      thousand (2.3%) during the first nine months of 2007 compared to the same period
      of 2006. Going forward, we anticipate the EPA-mandated new engine technology
      will increase the cost to acquire such trucks by about $7,500 per truck when
      new. If, at the beginning of 2011, our fleet were to be the same size as it
      was
      at the end of 2006, and if the EPA-mandated engine were the only factor
      affecting the cost of new tractors in the interim, the total of our annual
      equipment and rental expense for 2011 would be about $7.5 million more than
      it
      was during 2006, or almost $2 million per quarter. We may be able to mitigate
      these costs by increasing our rates, reducing fuel consumption and lowering
      our
      maintenance costs.




***Claims
      and Insurance:*** Claims and insurance expenses decreased by $1.5
      million (31.8%) for the three-month period ended September 30, 2007, as compared
      to the same period of 2006, and by $1.4 million (10.5%) when comparing the
      nine-month periods ended September 30, 2007 and 2006. The following table
      summarizes and compares the major components of claims and insurance expenses
      for each of the three- and nine-month periods (in millions):





**Three
                Months**
            
            
            **Nine
                Months****Claims
                and Insurance Expense from**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Liability
            
            $
            1.3
            
            
            $
            3.0
            
            
            $
            7.5
            
            
            $
            9.5Cargo
            
            
            0.9
            
            
            
            1.2
            
            
            
            2.3
            
            
            
            2.6Physical
                damage
            
            
            0.9
            
            
            
            0.3
            
            
            
            2.4
            
            
            
            1.5$
            3.1
            
            
            $
            4.5
            
            
            $
            12.2
            
            
            $
            13.6




Claims
      and insurance expenses can vary significantly from year to year, and even more
      so from quarter to quarter. The number and amount of open claims is significant,
      as well as the severity of the claims. When an incident occurs, we reserve
      for
      the incident's estimated outcome based on all information known at the time.
      We
      have accrued our estimated costs related to all open claims. There can be no
      assurance these claims will be settled without a material adverse effect on
      our
      financial position or our results of operations. As additional information
      becomes available, adjustments may be necessary.




Under
      our
      current policies for liability incidents, we retain all of the risk for losses
      up to $3 million per incident. We are fully insured for losses between $3
      million and $5 million per occurrence. Between $5 million and $10 million,
      we
      retain 25% of the risk and we are fully insured for losses between $10 million
      and $50 million. Our existing policies for liability insurance will expire
      on
      June 1, 2008.




The
      changes in the amounts of liability and physical damage expense we incurred
      between the third quarters of 2007 and 2006 resulted from differences in the
      number and severity of incidents that occurred during the periods involved.
      During 2007, we improved our manner of accounting for cargo claims by
      establishing procedures to ensure that losses are timely identified and
      communicated to management. Based on that and historical trends, we are better
      able to estimate the outcomes of known losses and also estimate our losses
      for
      events that have been incurred but not reported.





Year-to-date
      2007 claims for physical damage to our equipment were $900 thousand (60%) higher
      than the comparable 2006 period, even though we have fewer trucks driving fewer
      miles than a year ago.  Our safety, training and driver management
      teams are searching for the root cause of these trends in an effort to bring
      such events down to an acceptable level.




Page
          16




Accrued
      claims and liabilities on our balance sheets include reserves for over-the-road
      accidents, work-related injuries, self-insured employee medical expenses and
      cargo losses. Employee-related insurance costs such as medical expenses and
      work-related injuries are included in salaries, wages and related expenses
      in
      our consolidated condensed statements of income, while expenses for cargo losses
      and auto liability are included in insurance expense. It is probable the
      estimates we have made at any point in time will change in the
      future.




***Gains
      on Disposition of Equipment:***  Gains from the disposition of
      equipment were $2.3 million during the first nine months of 2007, as compared
      to
      $2.6 million during the same period of 2006.  The periodic amount of
      such gains depends primarily upon conditions in the market for previously-owned
      equipment and on the quantity of retired equipment sold.





***Miscellaneous
      Expenses:*** Miscellaneous operating expenses increased by $459
      thousand (146.6%) but decreased $2.2 million (46.9%) for the three- and
      nine-month periods ended September 30, 2007, respectively, as compared to the
      same periods of 2006. The following table summarizes and compares the major
      components of miscellaneous expenses for each of the three- and nine-month
      periods ended September 30, 2007 and 2006 (in millions):





**Three
                Months**
            
            
            **Nine
                Months****Miscellaneous
                Expense from**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Building
                and office equipment rent
            
            $
            0.3
            
            
            $
            0.4
            
            
            $
            1.0
            
            
            $
            1.2Legal
                fees
            
            
            0.1
            
            
            
            (0.4
            )
            
            
            0.2
            
            
            
            1.8Audit
                fees
            
            
            0.1
            
            
            
            0.2
            
            
            
            0.5
            
            
            
            0.9Sarbanes-Oxley
                fees
            
            
            0.1
            
            
            
            0.4
            
            
            
            0.3
            
            
            
            0.8Other
            
            
            0.2
            
            
            
            (0.3
            )
            
            
            0.5
            
            
            
            --$
            0.8
            
            
            $
            0.3
            
            
            $
            2.5
            
            
            $
            4.7





The
      largest component of miscellaneous expenses for the nine months ended September
      30, 2006 was approximately $2.1 million, included in both legal fees and audit
      fees above, associated with the investigation commissioned by the Audit
      Committee of the Board of Directors, and concluded during the second quarter
      of
      2006.  Audit fees and expenses associated with our efforts to comply
      with Sarbanes-Oxley (“SOX”) regulations have also benefited from our recent
      changes in our public accounting and third-party SOX consulting
      firms.





Legal
      fees for the third quarter of 2006 were offset by an approximate $500 thousand
      recovery of professional fees we had earned by providing certain materials
      to a
      plaintiff in a legal action to which we were not a party.  We
      developed the material in pursuing a claim against equipment providers during
      2003-2005. We settled our claim during 2005 and incurred significant legal
      fees
      in connection with that action. We accounted for our $500 thousand recovery
      during 2006 as a reduction in the legal fees we incurred in prior years. Without
      this credit in 2006, our third quarter legal fees for 2007 were flat as compared
      to the same period of 2006.




Building
      and office equipment rent has declined from 2006 to 2007 because of our move
      from a rented facility in the Atlanta area to one that we constructed and now
      own.





Other
      miscellaneous expenses include expenses incurred for bad debts when customers
      fail to pay for the services we have provided.  Such expenses incurred
      in 2006 were offset by credits realized through improvements in our methodology
      to calculate and reserve for such bad debt expenses.




***Operating
      (Loss) or Income:***For the three- and nine-month periods ended
      September 30, 2007, we incurred operating losses from continuing operations
      of
      $1.3 million and $5.1 million, respectively, as compared to operating income
      of
      $5.4 million and $12.2 million for the comparable periods of 2006.




***Interest
      and Other (Income) Expenses****:* The following table
      summarizes and compares our interest and other (income) expense for each of
      the
      three- and nine-month periods ended September 30, 2007 and 2006 (in
      thousands):




**Three
                Months**
            
            
            **Nine Months****Interest
                and Other (Income) Expense from**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            ****
            **2006**Interest
                expense
            
            $
            --
            
            
            $
            103
            
            
            $
            --
            
            
            $
            225Interest
                income
            
            
            (189
            )
            
            
            (93
            )
            
            
            (571
            )
            
            
            (393
            )Equity
                in earnings of limited partnership
            
            
            (211
            )
            
            
            (226
            )
            
            
            (418
            )
            
            
            (478
            )Life
                insurance and other
            
            
            163
            
            
            
            327
            
            
            
            523
            
            
            
            236$
            (237
            )
            
            $
            111
            
            
            $
            (466
            )
            
            $
            (410
            )




Page
          17




***Pre-Tax
      and Net Income****:*  For the three- and nine-month
      periods ended September 30, 2007, our pre-tax losses from continuing operations
      were $1.0 million and $4.7 million, respectively, as compared to pre-tax income
      from continuing operations of $5.3 million and $12.7 million for the comparable
      periods of 2006.





For
      the
      three- and nine-month periods ended September 30, 2007, our net loss was $3.2
      million and $4.1 million, respectively, as compared to net income of $2.9
      million and $6.9 million for the comparable periods of 2006.





Our
      effective tax rate (income tax provision (benefit) divided by pre-tax income
      (loss)) for fiscal 2007 was 24 percentage points lower than the 35%
      statutory federal rate.  As a result of nondeductible expenses and state
      income taxes combined with the year-to-date pre-tax loss, the effective tax
      rate
      for the nine-month period ended September 30, 2007 was 11.2%, which
      includes 2% for state income tax, net of federal benefit. Our effective tax
      rate
      during the first nine months of 2006 was 45.5%.




For
      the
      nine months ended September 30, 2007, per-diem living expenses incurred by
      our
      employee-drivers are expenses that are not tax-deductible and comprised nearly
      two-thirds of our pre-tax loss. Such non-deductible expenses have the effect
      of
      increasing the effective tax rate, or reducing the effective tax benefit rate
      in
      a period of pre-tax losses. When non-deductible expenses are small relative
      to
      the amount of pre-tax income, their impact on the effective rate is smaller
      than
      when such non-deductible expenses are large relative to the amount of pre-tax
      income (loss), as was the case through September 2007.




US
      GAAP
      requires that for interim periods, we estimate our expected tax rate for the
      year and use that rate throughout all quarters.   The amount of our
      income tax benefit or expense and the effective tax rate may vary considerably
      based on the level of non-deductible expenses relative to our pre-tax loss
      or
      income.  As required by US GAAP, we will revise our estimate at the end of
      the fourth quarter, ending on December 31, 2007.





**LIQUIDITY
      AND CAPITAL RESOURCES**




***Debt
      and Working Capital****:* Cash from our revenue is typically
      collected between 20 and 50 days after the service has been provided. We
      continually seek to accelerate our collection of accounts receivable to enhance
      our liquidity or reduce any debt. Our freight business is highly dependent
      on
      the use of fuel, labor, operating supplies and equipment provided by
      owner-operators. We are typically obligated to pay for these resources within
      seven to fifteen days after we use them, so our payment cycle is a significantly
      shorter interval than our collection cycle. This disparity between cash
      payments to our suppliers and cash receipts from our customers can create needs
      for borrowed funds to finance our working capital, especially during our busiest
      time of year.





As
      of
      September 30, 2007, our working capital (current assets minus current
      liabilities) was $30.8 million, as compared to $41.4 million as of December
      31,
      2006. Accounts payable increased by $8.8 million when comparing the balance
      at
      September 30, 2007 to that at December 31, 2006, caused largely by accruals
      for
      $5.6 million for capital expenditures and $2.1 million in repurchases of stock
      that were not paid until October 2007.  Other current assets decreased
      by $8.1 million during the same time period, partly due to the refund of $5.8
      million in estimated income taxes overpaid to the IRS in 2006.  There
      was also a reduction in accounts receivable for equipment sales of $1.7 million
      between the two reporting periods.  Accounts receivable increased by
      $3.0 million (5.9%) when comparing the balance at September 30, 2007 to that
      at
      December 31, 2006.




Our
      primary needs for capital resources are to finance working capital, expenditures
      for property and equipment and, from time to time, acquisitions. Working capital
      investment typically increases during periods of sales expansion when higher
      levels of receivables occur.




We
      had no
      long-term debt as of September 30, 2007, and after commitments for various
      letters of credit primarily related to insurance policies, the available portion
      of the company's $50.0 million revolving credit facility was $45.0 million.
      The credit agreement expires in 2010.




We
      believe the funds available to us from our working capital, future operating
      cash flows and our credit and leasing facilities will be sufficient to finance
      our operation during the next twelve months.




As
      of
      September 30, 2007, we were in compliance with all of our restrictive covenants
      and we project that our compliance will remain intact through 2007. Due to
      the
      net loss in the first nine months of 2007, we have amended our debt agreement
      in
      order to continue paying cash dividends and repurchasing our stock.




Page
          18




***Cash
      Flows***: During the nine-month period ended September 30, 2007, cash
      provided by operating activities was $8.9 million as compared to $14.1
      million during the same period of 2006.  Operating cash flows were
      positively impacted during the first nine months of 2007 as compared to the
      same
      period of 2006 by, among other things, changes in other current assets, accounts
      payable, income taxes payable and accrued payroll. During 2007, the most
      significant of these was the receipt of a $5.8 million income tax refund
      for the overpayment of estimated taxes during the first nine months of 2006.
      In
      addition, we collected nearly $3.0 million in cash for equipment sold in
      2006.  The impact of these positive factors was offset by changes in
      accrued claims, accounts receivable, and the decline in operating income. Of
      these, the change in accounts receivable, due to reduced revenue levels and
      the
      collection in 2006 of the disaster-related receivables, caused a decline in
      cash
      flows of $13.9 million while the reduction in net income caused a decline of
      $11.2 million.




The
      total
      of depreciation and amortization expense for the nine-month periods ended
      September 30, 2007 and 2006 was $18.2 million and $19.3 million,
      respectively.




Cash
      flows used in investing activities changed from $18.3 million during the first
      nine months of 2006 to $656 thousand in cash during the comparable period of
      2007. Decreased expenditures for property and equipment net of proceeds from
      the
      sale of retired assets accounted for most of the change, while changes in life
      insurance proceeds accounted for another $600 thousand.  Investments
      in property and equipment exclude $5.6 million of expenditures for revenue
      equipment, treated as non-cash items because payment was not made until after
      the end of the third quarter.




Cash
      flows used in financing activities changed to $9.2 million for the nine months
      ended September 30, 2007 from $4.4 million for the nine months ended September
      30, 2006. In the first nine months of 2007, the company purchased 746 thousand
      shares of our common stock on the open market and 94 thousand shares of common
      stock from current and former employees in simultaneous transactions with the
      exercise of the same number of options. During the same nine-month period of
      2006, we purchased 668 thousand shares of our stock on the open market as well
      as 417 thousand shares of common stock from a former executive officer as a
      simultaneous transaction with his exercise of the same number of options. Of
      the
      shares of stock purchased on the open market, the purchase of 300 thousand
      shares for $2.1 million has been treated as a non-cash transaction because
      payment was not consummated until after the quarter ended.  Other
      significant changes in cash flows involving financing activities included net
      payments against borrowings of $4.9 million during the nine-month period of
      2007
      compared to net  borrowings of $1.0 million  during the same
      period of 2006.




***Obligations
      and Commitments****:* As of September 30, 2007, we had
      no debt and we had issued letters of credit for insurance purposes in the amount
      of $5.0 million. The table below sets forth information as to the amounts of
      our
      obligations and commitments as well as the year in which they will become due
      (in millions):





**Payments
                Due by Year**
            
            **Total**
            
            
            **2007(1)**
            
            
            **2008**
            
            
            **2009**
            
            
            **2010**
            
            
            **2011**
            
            
            **After
                2011**Long-term
                debt and letters of credit
            
            $
            5.0
            
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            5.0
            
            
            $
            --
            
            
            $
            --Purchase
                obligations
            
            
            15.4
            
            
            
            15.4
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Operating
                leases forRentals
            
            
            85.6
            
            
            
            7.8
            
            
            
            28.8
            
            
            
            22.5
            
            
            
            12.1
            
            
            
            6.6
            
            
            
            7.8Residual
                guarantees
            
            
            3.6
            
            
            
            --
            
            
            
            0.9
            
            
            
            1.1
            
            
            
            1.6
            
            
            
            --
            
            
            
            --Accounts
                payable
            
            
            32.0
            
            
            
            32.0
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Accrued
                payroll(2)
            
            
            4.4
            
            
            
            4.4
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --146.0
            
            
            $
            59.6
            
            
            $
            29.7
            
            
            $
            23.6
            
            
            $
            18.7
            
            
            $
            6.6
            
            
            $
            7.8Deferred
                compensationPhantom
                stock(3)
            
            
            0.7Rabbi
                trust(4)
            
            
            1.4Total
            
            $
            148.1




(1)
            Represents
                amounts due between October 1, 2007 and December 31,
                2007.(2)
            Accrued
                payroll as presented in our consolidated condensed balance sheets
                includes
                accrued payroll, the liability for phantom stock and the liability
                for the
                rabbi trust.(3)
            Represents
                the period-end market value of approximately 104,000 phantom stock
                units
                awarded pursuant to our Executive Bonus and Phantom Stock Plan and
                a
                Supplemental Executive Retirement Plan. An officer may elect to cash
                out
                any number of the phantom stock units between December 1 and December
                15
                of any year selected by the officer.  Accordingly, we are unable
                to anticipate the year this currently unfunded obligation will be
                paid.(4)
            Includes
                the obligations of a "grantor" (or "rabbi") trust established in
                connection with our 401(k) wrap plan to hold company assets to satisfy
                obligations under the wrap plan. The trust obligations include
                approximately 83,000 shares of our common stock that will be cashed
                out either upon the eligibility of the obligations to be transferred
                to
                our 401(k) Savings Plan or upon the retirement of individual wrap
                plan
                participants. Accordingly, we are unable to anticipate the year this
                amount will be paid in cash or the amount of cash ultimately
                payable.




Page
          19




As
      of
      September 30, 2007, we had purchase commitments of $15.4 million, including
      contracts to purchase tractors and trailers totaling $15.0 million during the
      remainder of 2007. We expect to lease many of the tractor and trailer assets
      when they are placed into service.




We
      lease
      equipment and real estate. Facility and trailer leases do not contain guaranteed
      residual values in favor of the lessors. A minority of the tractors we lease
      are
      leased pursuant to agreements under which we have partially guaranteed the
      assets end-of-lease-term residual value. The portions of the residuals we have
      guaranteed vary from lessor to lessor. Gross residuals are about 40% of the
      leased asset's historical cost, of which we have guaranteed the first 25% to
      30%. The lessors remain at risk for up to 13% of the remainder of such leased
      asset's historical cost. Because our lease payments and residual guarantees
      do
      not exceed 90% of the tractor's cost, the leases are accounted for as operating
      leases and rentals are recorded as rent expense over the terms of the
      leases.




Offsetting
      our lease residual guarantees, when our tractors were originally leased, the
      tractor manufacturer conditionally agreed to repurchase the tractors at the
      end
      of the terms of the leases. Factors which may limit our ability to recover
      the
      amount of the residual guarantee from the manufacturer include specifications
      as
      to the physical condition of each tractor, their mechanical performance, each
      vehicle's accumulated mileage, and whether or not we order replacement and
      additional vehicles from the same manufacturer. The price to be paid by the
      manufacturer is generally equal to the full amount of the lessor's residual.
      In
      addition to residual values, our tractor leases contain fair value purchase
      options. Our agreement with the tractor manufacturer enables, but does not
      require, us to sell the tractors back to the manufacturer at a future date,
      should we own them at such time, at a predetermined price. In order to avoid
      the
      administrative efforts necessary to return leased tractors to the lessor, we
      typically purchase such tractors from the lessor by paying the residual value
      and then sell the tractors to the manufacturer. There is no material gain or
      loss on these transactions because the residual value we pay to the lessor
      is
      generally equal to the manufacturer's purchase price.





At
      September 30, 2007, the amount of our obligations to lessors for residual
      guarantees did not exceed the amount we expect to recover from the
      manufacturer.




Approximately
      85 of our oldest company-operated tractors are expected to be replaced during
      the remainder of 2007. These expenditures will be financed with internally
      generated cash flows, borrowings under available credit agreements and leasing.
      We expect these sources of capital to be sufficient to finance our
      operations.




**NEW
      ACCOUNTING PRONOUNCEMENTS**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157,*Fair Value Measurements* (“SFAS 157”), which defines fair value,
      establishes a framework for measuring fair value and expanded disclosures about
      fair value measurement. Companies are required to adopt the new standard for
      fiscal periods beginning after November 15, 2007. The company is evaluating
      the
      impact of this standard and does not expect it to have a material impact on
      its
      consolidated financial statements.




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
      159”).  SFAS 159 provides companies with an option to report selected
      financial assets and financial liabilities at fair value, which can be elected
      on an instrument-by-instrument basis. Unrealized gains and losses on items
      for
      which the fair value option has been elected are reported in earnings at each
      subsequent reporting date. SFAS 159 is effective for fiscal years beginning
      after November 15, 2007. The company is evaluating the impact of this standard
      and does not expect it to have a material impact on its consolidated financial
      statements.




No
      other
      new accounting pronouncement issued or effective has had or is expected to
      have
      a material impact on the company's consolidated financial
      statements.




**OUTLOOK**




This
      report contains information and forward-looking statements that are based
      on our current beliefs and expectations and assumptions which are based
      upon information currently available. Forward-looking statements include
      statements relating to our plans, strategies, objectives, expectations,
      intentions, and adequacy of resources, and may be identified by words such
      as
      "will", "could", "should", "believe", "expect", "intend", "plan", "schedule",
      "estimate", "project" and similar expressions. These statements are based on
      current expectations and are subject to uncertainty and change.




Although we
      believe the expectations reflected in such forward-looking statements are
      reasonable, there can be no assurance that such expectations will be realized.
      Should one or more of the risks or uncertainties underlying such expectations
      not materialize, or should underlying assumptions prove incorrect, actual
      results may vary materially from those expected.




Page
          20




Among
      the
      key factors that are not within our control and that may cause actual
      results to differ materially from those projected in such forward-looking
      statements are demand for our services and products, and our ability to
      meet that demand, which may be affected by, among other things, competition,
      weather conditions, highway and port congestion, the general economy, the
      availability and cost of labor, the ability to negotiate favorably with lenders
      and lessors, the effects of terrorism and war, the availability and cost of
      equipment, fuel and supplies, the market for previously-owned equipment, the
      impact of changes in the tax and regulatory environment in which we operate,
      operational risks and insurance, risks associated with the technologies and
      systems used and the other risks and uncertainties described in our filings
      with the SEC.




**OFF-BALANCE
      SHEET ARRANGEMENTS**




We
      utilize non-cancelable operating leases to finance a portion of our revenue
      equipment acquisitions. As of September 30, 2007, we leased 1,113 tractors
      and
      2,117 trailers under operating leases with varying termination dates ranging
      from 2007 to 2014. Vehicles held under operating leases are not carried on
      our
      balance sheet, and lease payments for such vehicles are reflected in our income
      statements in the line item “Revenue equipment rent”.  Our rental expense
      related to vehicle operating leases during the nine months ended September
      30, 2007 and 2006 was $22.9 million and $23.2 million,
      respectively.




**Item
      3.  Quantitative and Qualitative Disclosures about Market
      Risk**




We
      held
      no market-risk-sensitive instruments for trading purposes as of September 30,
      2007.  For purposes other than trading, we held the following
      market-risk-sensitive instruments as of September 30, 2007:




**Description**
            
            **Discussion**Rabbi
                Trust investment ($558 thousand) in 83,000 shares of our
                stock.
            
            Our
                consolidated condensed financial statements include the assets and
                liabilities of a Rabbi Trust established to hold the investments
                of
                participants in our 401(k) Wrap Plan and for deferred compensation
                liabilities under our Executive Bonus and Phantom Stock Plan. Such
                liabilities are adjusted from time to time to reflect changes in
                the
                market price of our common stock. Accordingly, our future compensation
                expense and income will be impacted by fluctuations in the market
                price of
                our common stock.




We
      had no
      other material market-risk-sensitive instruments (for trading or non-trading
      purposes) that would involve significant relevant market risks, such as
      equity-price risk. Accordingly, the potential loss in our future earnings
      resulting from changes in such market rates or prices is not
      significant.




**Item
      4.Controls and
      Procedures**




**(a)
      Disclosure Controls and Procedures:** As of the end of the period
      covered by this report, we evaluated, under the supervision and with the
      participation of our management, including the Chief Executive Officer and
      the
      Chief Financial Officer, the effectiveness of the design and the operation
      of
      our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e)
      of the Securities Exchange Act of 1934.  Based on this evaluation, our
      Chief Executive Officer and Chief Financial Officer concluded that our
      disclosure controls and procedures were effective as of September 30, 2007
      in
      light of the remediation of the material weakness discussed
      below.




**(b)
      Management's Report on Internal Control over Financial Reporting:**
      Our management is responsible for establishing and maintaining an adequate
      system of internal control over financial reporting, as defined in Rules
      13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934.  Management
      assessed the effectiveness of our internal control over financial reporting
      as
      of December 31, 2006. In making this assessment, our management used criteria
      set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway
      Commission in*Internal Control - Integrated Framework*.




Page
          21




As
      a
      result of this assessment, management identified the following material
      weaknesses, as defined by the Public Company Accounting Oversight Board's
      Auditing Standard No. 2, as of December 31, 2006:





The
                Company lacked adequate policies and procedures to ensure the completeness
                and accuracy of the reserve for cargo claims. Specifically, the Company
                lacked (a) adequate policies and procedures to ensure the timely
                reporting
                of asserted cargo claims by personnel responsible for the daily management
                of those claims, and (b) adequate management supervision and review
                of the
                reserve for cargo claims. This deficiency resulted in material errors
                in
                the reserve for cargo claims and related expenses in the 2006 annual
                consolidated financial statements.




As
      a
      result of management’s reevaluation of the material weakness in internal control
      over financial reporting described in the preceding paragraph, management has
      concluded that as of September 30, 2007, the Company's internal control over
      financial reporting was effective to provide reasonable assurance regarding
      the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with US GAAP.




**(c)
      Changes in Internal Control over Financial Reporting:**There were
      no changes in the Company's internal control over financial reporting, with
      the
      exception of the remediation measures to address the material weakness
      identified above, during the quarter ended September 30, 2007 that materially
      affected, or are reasonably likely to materially affect, the Company's internal
      control over financial reporting.




**(d)
      Remediation Efforts:** In the third quarter of 2007, the
      Company developed, implemented and improved the following controls to
      remediate the conditions described in Item 4 (b) above:




·
            The
                Company improved its policies on the timely recording of events that
                may
                lead to the eventual assertion of claims for loss of and damage to
                customer freight in order to assure the proper matching and recording
                of
                such claims in the period in which the revenue associated with the
                loss
                was recognized.


·
            Management
                implemented more robust supervision and review procedures over the
                reserve
                for cargo claims and associated changes in the reserves at the end
                of each
                quarterly period.


·
            The
                Company evaluated and improved the controls surrounding its reporting
                for
                incurred but not yet reported
                claims.





Management
      believes that as of September 30, 2007, the Company has fully remediated the
      material weakness in our internal control over financial reporting with respect
      to ensuring the completeness and accuracy of the reserve for cargo
      claims.




Page
          22





**PART
      II.  OTHER INFORMATION**




**Item
      1.Legal
      Proceedings**




We
      are
      party to routine litigation incidental to our business, primarily involving
      claims for personal injury, property damage, work-related injuries of employees
      and cargo losses incurred in the ordinary and routine highway transportation
      of
      freight. We also primarily self-insure for employee health care claims.  As
      of September 30, 2007, the aggregate amount of reserves for such claims on
      our
      consolidated condensed balance sheet was $17.0 million. We maintain excess
      insurance programs and accrue for expected losses in amounts designed to cover
      liability resulting from such claims.




**Item
      1A.Risk
      Factors**




The
      following issues, uncertainties, and risks, among others, should be considered
      in evaluating our business and growth outlook:




**We
      are subject to general economic factors and business risks that are beyond
      our
      control, any of which could significantly reduce our operating margins and
      income.** Recessionary economic cycles, changes in customers'
      business activity and outlook and excess tractor or trailer capacity in
      comparison with shipping demand could impact our operations. Economic conditions
      that decrease shipping demand or increase the supply of tractors and trailers
      generally available in the transportation sector of the economy can exert
      downward pressure on our equipment utilization, thereby decreasing asset
      productivity. Economic conditions also may harm our customers and their ability
      to pay for our services. Customers encountering adverse economic conditions
      represent a greater potential for loss, and we may be required to increase
      our
      allowance for uncollectible accounts.





We
      are
      also subject to increases in costs that are outside of our control that could
      materially reduce our profitability if we are unable to increase our rates
      sufficiently. Such cost increases include, but are not limited to, declines
      in
      the resale value of used equipment, increases in interest rates, fuel prices,
      taxes, tolls, license and registration fees, insurance, revenue equipment,
      and
      wages and health care for our employees. Although none of our employees are
      covered by collective bargaining agreements, we could be affected by strikes
      or
      other work stoppages at shipping or receiving locations.





In
      addition, we cannot predict the effects on the economy or consumer confidence
      of
      actual or threatened armed conflicts or terrorist attacks, efforts to combat
      terrorism, military action against a foreign state or group located in a foreign
      state, or heightened security requirements. Enhanced security measures could
      impair our operating efficiency and productivity and result in higher operating
      costs.





**Future
      insurance and claims expense could reduce our earnings.** Our
      future insurance and claims expense might exceed historical levels, which could
      reduce our earnings. We self-insure for significant portions of our claims
      exposure resulting from work-related injuries, auto liability, general
      liability, cargo and property damage claims, as well as employees' health
      insurance. We reserve currently for anticipated losses and expenses. We
      periodically evaluate and adjust our claims reserves to reflect our experience.
      However, ultimate results usually differ from our estimates.





We
      maintain insurance above the amounts for which we self-insure. Although we
      believe the aggregate insurance limits should be sufficient to cover reasonably
      expected claims, it is possible that one or more claims could exceed our
      aggregate coverage limits. Insurance carriers have raised premiums for many
      businesses, including trucking companies. As a result, our insurance and claims
      expense could increase, or we could raise our self-insured retention when our
      policies are renewed. If these expenses increase, if we experience a claim
      in excess of our coverage limits, or if we experience a claim for which coverage
      is not provided, results of our operations and financial condition could be
      materially and adversely affected.





**Higher
      fuel prices could reduce our operating margins and income.** We are
      subject to risk with respect to purchases of fuel for use in our tractors
      and refrigerated trailers. Fuel prices are influenced by many factors that
      are
      not within our control. 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 unless we are able to pass
      increased costs on to customers through rate increases or fuel surcharges.
      Historically, we have sought to recover increases in fuel prices from customers
      through fuel adjustment charges. Fuel adjustment charges that can be collected
      have not always fully offset the increase in the cost of diesel fuel in the
      past
      and there can be no assurance that fuel adjustment charges that can be collected
      will offset the increase in the cost of diesel fuel in the
      future.****





Page
          23




**We
      will have significant ongoing capital requirements which could negatively impact
      our growth and profitability.** The trucking industry is
      capital intensive, and replacing older equipment requires significant
      investment. Although we agreed to shorten the 48-month tractor replacement
      cycle
      to 42 months, the aging of our tractor fleet continues to contribute to
      increases in our equipment maintenance. In addition, if we elect to expand
      our
      fleet in future periods, our capital needs would increase. We expect to pay
      for our capital expenditures with cash flows from operations, leasing and
      borrowings under our revolving credit facility. If we are unable to generate
      sufficient cash from operations and obtain financing on favorable terms, we
      may need to limit our growth, enter into less favorable financing
      arrangements or operate our revenue equipment for longer periods, any of which
      could impact our profitability.





**Difficulty
      in attracting or retaining qualified employee-drivers and independent
      contractors who provide tractors for use in our business could impede our growth
      and profitability.** Our independent contractors are responsible
      for paying for their own equipment, labor, fuel, and other operating
      costs.  Significant increases in these costs could cause them to seek
      higher compensation from us or other opportunities. Competition for
      employee-drivers continues to increase. If a shortage of employee-drivers
      occurs, or if we were unable to continue to sufficiently contract with
      independent contractors, we could be forced to limit our growth
      or experience an increase in the number of our tractors without drivers,
      which would lower our profitability.  During April 2006, we increased our
      employee-driver pay scale by about 6%. We could be required to further
      adjust our driver's compensation, which could impact our profitability if not
      offset by a corresponding increase in the rates we charge for our
      services.


****


**Reductions
      in service by the railroads or increases in railroad rates can impact our
      intermodal operations, which could reduce our operating margins and
      income.** Our intermodal operations are dependent on railroads, and our
      dependence on railroads may increase if we expand our intermodal services.
      In
      most markets, rail service is limited to a few railroads or even a single
      railroad. Any reduction in service by the railroads may increase the cost of
      the
      rail-based services we provide and reduce the reliability, timeliness and
      overall attractiveness of our rail-based services. Railroads are relatively
      free
      to adjust their rates as market conditions change. That could result
      in higher costs to our customers and impact our ability to offer intermodal
      services. There is no assurance that we will be able to negotiate
      replacement of or additional contracts with railroads, which could limit our
      ability to provide this service.





**Interruptions
      in the operation of our computer and communications systems could reduce our
      operating margins and income.** We depend on the efficient and
      uninterrupted operation of our computer and communications systems and
      infrastructure. Our operations and those of our technology and communications
      service providers are vulnerable to interruption by fire, earthquake, power
      loss, telecommunications failure, terrorist attacks, Internet failures, computer
      viruses and other events beyond our control. In the event of a system failure,
      our business could experience significant disruption.





**Changes
      in the availability of or the demand for new and used trucks could reduce our
      growth and negatively impact our operating margins and income.**
      More restrictive federal emissions standards for 2007 model year trucks require
      new technology diesel engines. As a result, we expect to continue to pay
      increased prices for equipment and incur additional expenses and related
      financing costs for the foreseeable future. The new engines are also expected
      to
      reduce equipment productivity, increase fuel consumption and be more expensive
      to maintain.





We
      have a
      conditional commitment from our principal tractor vendor regarding the amount
      that we will be paid on the disposal of most of our tractors. We could incur
      a
      financial loss upon disposition of our equipment if the vendor cannot
      meet its obligations under these agreements.





**We
      are subject to various environmental and zoning laws and regulations, and costs
      of compliance with and liabilities for violations of existing or future
      regulations could significantly increase our costs of doing
      business.** We operate in industrial areas, where truck terminals
      and other industrial facilities are located, and where groundwater or other
      forms of environmental contamination may have occurred. Our operations involve
      the risks of fuel spillage, environmental damage and hazardous waste disposal,
      rezoning and eminent domain, among others.  If we are involved in a spill
      or other accident involving hazardous substances, if one of our properties
      is
      rezoned, if a governmental agency should assert a right involving eminent domain
      or if we are found to be in violation of applicable laws or regulations, such
      an
      event could significantly increase our cost of doing business. Additionally,
      under specific environmental laws, we could be held responsible for all of
      the
      costs relating to any contamination at our past or present terminals and at
      third-party waste disposal sites.





**We
      operate in an industry subject to extensive government regulations, and costs
      of
      compliance with and liability for violation of existing or future regulations
      could significantly increase our costs of doing business.** Our
      operations are overseen by various agencies. Our drivers must comply with
      federal safety and fitness regulations, including those relating to drug and
      alcohol testing and hours of service. Such matters as weight and equipment
      dimensions are also the subject of federal and state regulations. We are also
      governed by federal and state regulations about fuel emissions, and other
      matters affecting safety or operations. Future laws and regulations may be
      more
      stringent and require changes in our operating practices, influence the demand
      for transportation services or require us to incur significant additional costs.
      Higher costs incurred by us or by our suppliers who pass the costs onto us
      through higher prices could adversely affect our results of
      operations.




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          24




**We
      may not be able to improve our operating efficiency rapidly enough to meet
      market conditions.** Because the markets in which we operate are
      highly competitive, we must continue to improve our operating efficiency in
      order to maintain or improve our profitability. Although we have been able
      to
      improve efficiency and reduce costs in the past, there is no assurance that
      we
      will continue to do so in the future. In addition, the need to reduce ongoing
      operating costs may result in significant up-front costs to reduce workforce,
      close or consolidate facilities, or upgrade equipment and technology.





**An
      extended disruption of vital infrastructure could negatively impact our
      business, results of operations and financial condition.** Our
      operations depend upon, among other things, our infrastructure, including
      equipment and facilities. Extended disruption of vital infrastructure by fire,
      power loss, natural disaster, telecommunications failure, computer hacking
      or
      viruses, technology failure, terrorist activity or the domestic and foreign
      response to such activity, or other events outside of our control could have
      a
      material adverse impact on the transportation services industry as a whole
      and
      on our business, results of operations, cash flows, and financial condition
      in
      particular. Our business recovery plan may not work as intended or may not
      prevent significant interruptions of our operations.





**Our
      operations could be adversely affected by a work stoppage at locations of our
      customers.** Although none of our employees are covered by a collective
      bargaining agreement, a strike or other work stoppage at a customer could
      negatively affect our revenue and earnings and could cause us to incur
      unexpected costs to redeploy or deactivate assets and personnel.





**We
      operate in a competitive and somewhat fragmented industry.  Numerous
      factors could negatively impair our growth and profitability and impair our
      ability to compete with other carriers and private fleets.**





Some
      of
      these factors include:




We
                compete with many other transportation carriers of varying sizes
                and with
                less-than-truckload carriers, 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
                or
                maintain our profit margins.





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





Certain
                of our customers that operate private fleets to transport their own
                freight could decide to expand their operations.The
                trend toward consolidation in the trucking industry may create other
                large
                carriers with greater financial resources and other competitive advantages
                relating to their size.





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.




**We
      are subject to a highly volatile effective income tax
      rate.**  The volatility is due to the methods of estimating
      annual tax rates as required by US GAAP which may result in large swings in
      effective tax rates recorded for individual quarters.  We are
      particularly vulnerable to these swings due to the large non-deductible expenses
      incurred for living expenses of our drivers in relation to the levels of our
      pre-tax income during periods of profitability, and in relation to the levels
      of
      our pre-tax losses during periods of losses.




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          25


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




The
      following table includes information about our common stock repurchases during
      the three-month period ended September 30, 2007.




**Period**
            
            **Total
                Number of Shares**
              **Purchased**
              **(a)**
            
            **Average
                Price**
              **Paid
                per Share**
              **(b)**
            
            **Total
                Number of Shares Purchased**
              **as
                Part of Publicly Announced Plans**
              **or
                Programs**
              **(c)**
            
            **Maximum
                Number**
              **(or
                Approximate Dollar Value) of Shares That May**
              **Yet
                Be Purchased Under the Plans**
              **or
                Programs(1)**
              **(d)**July
                1 to July 31, 2007
            
            
            --
            
            $
            --
            
            
            --
            
            
            814,800August
                1 to August 31, 2007
            
            
            63,600
            ****(2)
            
            8.66
            
            
            62,100
            
            
            752,700September
                1 to September 30, 2007
            
            
            394,800
            
            
            6.90
            
            
            394,800
            
            
            357,900**Total**
            
            
            458,400
            
            $
            7.14
            
            
            456,900




(1)
            On
                November 8, 2006, our Board of Directors renewed our authorization
                to
                purchase up to 1,318,400 shares of our common stock. The authorization
                allows purchases from time to time on the open market or through
                private
                transactions at such times as management deems appropriate. The
                authorization does not specify an expiration date. Purchases may
                be
                increased, decreased or discontinued by our Board of Directors at
                any time
                without prior notice.(2)
            During
                August 2007, current and former employees exchanged 1,500 shares
                they
                owned for more than one year as consideration for the exercise of
                stock
                options, as permitted by our share option plans.  Such
                transactions are not deemed as having been purchased as part of our
                publicly announced plans or
                programs.




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          26




**Item
      3.Defaults Upon
      Senior Securities**




None.




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




None.





**Item
      5.Other
      Information**




None.




**Item
      6.Exhibits**




31.1
            Certification
                of Chief Executive Officer Required by Rule 13a-14(a)(17 CFR
                240.13a-14(a)). (filed herewith)31.2
            Certification
                of Chief Financial Officer Required by Rule 13a-14(a)(17 CFR
                240.13a-14(a)). (filed herewith)32.1
            Certification
                of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
                herewith)32.2
            Certification
                of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
                herewith)




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          27


**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of l934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.





**FROZEN
                FOOD EXPRESS INDUSTRIES, INC.**(Registrant)Dated:
                November 6, 2007
            By
            /s/
                Stoney M. Stubbs, Jr.Stoney
                M. Stubbs, Jr.
              Chairman
                of the Board of Directors and President
              (Principal
                Executive Officer)











**FROZEN
                FOOD EXPRESS INDUSTRIES, INC.**(Registrant)Dated:
                November 6, 2007
            By
            /s/
                Thomas G. YetterThomas
                G. Yetter
              Senior
                Vice President and Chief Financial Officer
              (Principal
                Financial and Accounting Officer)




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          28


**EXHIBIT
      INDEX**




31.1
            Certification
                of Chief Executive Officer Required by Rule 13a-14(a)(17 CFR
                240.13a-14(a)). (filed herewith)31.2
            Certification
                of Chief Financial Officer Required by Rule 13a-14(a)(17 CFR
                240.13a-14(a)). (filed herewith)32.1
            Certification
                of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
                herewith)32.2
            Certification
                of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed
                herewith)













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