**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**





**FORM
      10-Q**





[MARK
      ONE]


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


**SECURITIES
      EXCHANGE ACT OF 1934**





**FOR
      THE QUARTERLY PERIOD ENDED JUNE 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.





x Yes o No





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 x 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).





oYes x No





As
      of
      June 30, 2007, there were 17,432,604 shares of the registrant's common stock,
      par value $1.50 per share, outstanding.










**INDEX**




**PART
                I****Financial Information**
            **Page
                No.****Item
                1**
            Financial
                StatementsConsolidated
                Condensed Balance Sheets
              June
                30, 2007 (unaudited) and December 31, 2006
            1Consolidated
                Condensed Statements of Income (unaudited)
              Three
                and six months ended June 30, 2007 and 2006
            2Consolidated
                Condensed Statements of Cash Flows (unaudited)
              Six
                months ended June 30, 2007 and 2006
            3Notes
                to Consolidated Condensed Financial Statements (unaudited)
            4**Item
                2**
            Management's
                Discussion and Analysis ofFinancial
                Condition and Results of Operations
            7**Item
                3**
            Quantitative
                and Qualitative Disclosures about Market Risk
            20**Item
                4**
            Controls
                and Procedures
            20**PART
                II****Other Information****Item
                1**
            Legal
                Proceedings
            22**Item
                1A**
            Risk
                Factors
            22**Item
                2**
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            22**Item
                3**
            Defaults
                Upon Senior Securities
            23**Item
                4**
            Submission
                of Matters to a Vote of Security Holders
            23**Item
                5**
            Other
                Information
            23**Item
                6**
            Exhibits
            23Signatures
            24Exhibit
                Index
            25











**PART
      I.  FINANCIAL INFORMATION**




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





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


**Consolidated
      Condensed Balance Sheets**


*(In
      thousands)*




**Assets**
            
            **June
                30,**
              **2007**
              **(unaudited)**
            
            **December
                31,**
              **2006**Current
                assetsCash
                and cash equivalents
            
            $
            14,990
            
            $
            9,589Accounts
                receivable, net
            
            
            50,527
            
            
            49,895Tires
                on equipment in use
            
            
            4,559
            
            
            4,953Other
                current assets
            
            
            13,392
            
            
            21,749Total
                current assets
            
            
            83,468
            
            
            86,186Property
                and equipment, net
            
            
            88,180
            
            
            97,808Other
                assets
            
            
            7,570
            
            
            7,768Total
                assets
            
            $
            179,218
            
            $
            191,762**Liabilities
                and shareholders' equity**Current
                liabilitiesAccounts
                payable
            
            $
            23,834
            
            $
            23,206Accrued
                claims
            
            
            10,737
            
            
            11,084Accrued
                payroll
            
            
            7,348
            
            
            8,478Accrued
                liabilities
            
            
            1,642
            
            
            2,005Total
                current liabilities
            
            
            43,561
            
            
            44,773Long-term
                debt
            
            
            --
            
            
            4,900Deferred
                income taxes
            
            
            8,526
            
            
            9,752Accrued
                claims
            
            
            7,483
            
            
            9,806Total
                liabilities
            
            
            59,570
            
            
            69,231**Shareholders'
                equity**Par
                value of common stock (18,572shares
                issued)
            
            
            27,858
            
            
            27,858Capital
                in excess of par value
            
            
            5,633
            
            
            6,045Retained
                earnings
            
            
            96,315
            
            
            98,257129,806
            
            
            132,160Treasury
                stock (1,221 and 1,170 shares, at cost)
            
            
            (10,158
            )
            
            (9,629
            )Total
                shareholders' equity
            
            
            119,648
            
            
            122,531Total
                liabilities and shareholders' equity
            
            $
            179,218
            
            $
            191,762





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





Page
          1





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


**Consolidated
      Condensed Statements of Income**


For
      the
      Three and Six Months Ended June 30,


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





**Three
                Months**
            
            **Six
                Months****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenue
            
            $
            113,050
            
            $
            123,554
            
            $
            219,558
            
            $
            247,152Operating
                expensesSalaries,
                wages and related expenses
            
            
            33,153
            
            
            32,887
            
            
            65,208
            
            
            66,875Purchased
                transportation
            
            
            27,995
            
            
            29,583
            
            
            52,403
            
            
            57,899Fuel
            
            
            20,795
            
            
            23,651
            
            
            39,751
            
            
            44,469Supplies
                and expenses
            
            
            13,599
            
            
            13,743
            
            
            27,015
            
            
            29,068Revenue
                equipment rent
            
            
            7,727
            
            
            7,660
            
            
            15,245
            
            
            15,616Depreciation
            
            
            4,943
            
            
            5,060
            
            
            10,105
            
            
            10,243Communications
                and utilities
            
            
            1,024
            
            
            970
            
            
            2,044
            
            
            2,056Claims
                and insurance
            
            
            6,057
            
            
            5,066
            
            
            9,087
            
            
            9,061Operating
                taxes and licenses
            
            
            1,193
            
            
            944
            
            
            2,362
            
            
            2,245Gains
                on disposition of equipment
            
            
            (1,010
            )
            
            (1,017
            )
            
            (1,532
            )
            
            (1,651
            )Miscellaneous
                expenses
            
            
            765
            
            
            1,626
            
            
            1,729
            
            
            4,401Total operating expenses
            
            
            116,241
            
            
            120,173
            
            
            223,417
            
            
            240,282(Loss)
                income from continuing operations
            
            
            (3,191
            )
            
            3,381
            
            
            (3,859
            )
            
            6,870Interest
                and other (income) expenseInterest
                expense
            
            
            --
            
            
            62
            
            
            --
            
            
            122Interest
                income
            
            
            (241
            )
            
            (219
            )
            
            (381
            )
            
            (336
            )Equity
                in earnings of limited partnership
            
            
            (108
            )
            
            (115
            )
            
            (207
            )
            
            (252
            )Life
                insurance and other
            
            
            332
            
            
            (9
            )
            
            359
            
            
            (55
            )Total
                interest and other (income) expense
            
            
            (17
            )
            
            (281
            )
            
            (229
            )
            
            (521
            )Pre-tax
                (loss) income from continuing operations
            
            
            (3,174
            )
            
            3,662
            
            
            (3,630
            )
            
            7,391Income
                tax (benefit) expense
            
            
            (2,513
            )
            
            1,709
            
            
            (2,736
            )
            
            3,358Net
                (loss) income from continuing operations
            
            
            (661
            )
            
            1,953
            
            
            (894
            )
            
            4,033Income
                from discontinued operations, net of tax
            
            
            --
            
            
            160
            
            
            --
            
            
            15Net
                (loss) income
            
            $
            (661
            )
            $
            2,113
            
            $
            (894
            )
            $
            4,048Net
                (loss) income from continuing operations per share of common
                stockBasic
            
            $
            (0.04
            )
            $
            0.11
            
            $
            (0.05
            )
            $
            0.22Diluted
            
            $
            (0.04
            )
            $
            0.10
            
            $
            (0.05
            )
            $
            0.21Net
                income from discontinued operations per share of common
                stockBasic
            
            $
            --
            
            $
            0.01
            
            $
            --
            
            $
            --Diluted
            
            $
            --
            
            $
            0.01
            
            $
            --
            
            $
            --Net
                (loss) income per share of common stockBasic
            
            $
            (0.04
            )
            $
            0.12
            
            $
            (0.05
            )
            $
            0.22Diluted
            
            $
            (0.04
            )
            $
            0.11
            
            $
            (0.05
            )
            $
            0.21Weighted
                average shares outstandingBasic
            
            
            17,296
            
            
            18,059
            
            
            17,357
            
            
            18,019Diluted
            
            
            17,296
            
            
            18,839
            
            
            17,357
            
            
            18,864





*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
      Six Months Ended June 30,


*(Unaudited
      and in thousands)*





**2007**
            
            **2006****Net
                cash provided by operating activities**
            
            $
            12,003
            
            $
            11,897**Cash
                flows from investing activities**Expenditures
                for property and equipment
            
            
            (8,240
            )
            
            (18,089
            )Proceeds
                from sale of property and equipment
            
            
            9,111
            
            
            4,110Other
            
            
            (14
            )
            
            (931
            )**Net
                cash provided by (used in) investing
                activities**
            
            
            857
            
            
            (14,910
            )**Cash
                flows from financing activities**Proceeds
                from borrowings
            
            
            200
            
            
            2,100Payments
                against borrowings
            
            
            (5,100
            )
            
            (2,100
            )Debt
                repaid by variable interest entities
            
            
            --
            
            
            (427
            )Proceeds
                from capital stock transactions
            
            
            1,348
            
            
            1,572Dividends
                paid
            
            
            (1,048
            )
            
            --Purchases
                of treasury stock
            
            
            (3,262
            )
            
            --Income
                tax benefit of stock options exercised
            
            
            403
            
            
            196Other
            
            
            --
            
            
            (2
            )**Net
                cash (used in) provided by financing activities**
            
            
            (7,459
            )
            
            1,339Net
                increase (decrease) in cash and cash equivalents
            
            
            5,401
            
            
            (1,674
            )Cash
                and cash equivalents at January 1
            
            
            9,589
            
            
            10,957Cash
                and cash equivalents at June 30
            
            $
            14,990
            
            $
            9,283




*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 independent
      contractors 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 independent contractors are recorded as purchased
      transportation expense.




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




Page
          4




**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 six-month period ended June 30, 2006, we purchased trailers and
      refrigeration units aggregating $2.8 million from W&B. We made no such
      purchases in the first half of 2007. During both of the six-month periods ended
      June 30, 2006 and 2007, we paid W&B $0.9 million for maintenance and repair
      services and for parts and accessories.   As of June 30, 2006 and
      2007, respectively, our accounts payable included amounts owed to W&B of
      $0.5 million and $0.3 million for the purchase of trailers, repair services
      and
      for parts and accessories.




During
      the six-month period ended June 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 with related parties 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 six-month period ended June 30, 2006, total payments under
      these leases were $1.0 million, which is approximately $0.1 million 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 $0.2
      million during the six-month period ended June 30, 2006, which was about $0.1
      million 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 $20 thousand of the
      finance staff member's salary was related to the provision of such services
      during each of the six-month periods ended June 30, 2006 and 2007.





**4.** **Long-Term
      Debt**




As
      of
      June 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 June 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 June 30, 2007, no money was borrowed against this facility
      and approximately $6 million was being used as collateral for letters of credit.
      Accordingly, at June 30, 2007, approximately $44 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 six months ended
      June 30, 2007, the agreement was amended in order to adjust the limitation
      on
      our ability to pay cash dividends and repurchase our company stock.





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




Nondeductible
      per diem expenses from employee-drivers have increased our effective tax rate
      (income tax provision divided by pre-tax income) for fiscal 2007 by more than
      40 percentage points over the statutory federal rate of 35%.  As a
      result of the nondeductible expenses and state income taxes, the effective
      tax
      rate for the six-month period ended June 30, 2007 was 75.4%, which includes
      2% for state income tax, net of federal benefit. Our effective tax rate during
      the first six months of 2006 was 45.3%.  The principal factor that
      contributed to the higher rate in 2007 was the increased per diem expenses
      and
      diminished pre-tax income in 2007 as compared to 2006.




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 again update our estimate at the
      end of the third quarter, ending on September 30, 2007.




Page
          5




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 could impact the
      effective tax rate.




We
      reflect interest and/or penalties related to income tax matters in income tax
      expense. We have no accrual for interest and penalties on our consolidated
      condensed balance sheets at December 31, 2006 or June 30, 2007, and we have
      recognized no expense for interest and/or penalties in our consolidated
      condensed statements of income for the six-months ended June 30, 2007 or
      2006.




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 examination.





**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.** **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 six-month periods ended June 30,
      2007
      and 2006 (in thousands):





**Three
                Months**
            
            **Six
                Months****2007**
            
            **2006**
            
            **2007**
            
            **2006**Basic
                shares
            
            
            17,296
            
            
            18,059
            
            
            17,357
            
            
            18,019Common
                stock equivalents
            
            
            --
            
            
            780
            
            
            --
            
            
            845Diluted
                shares
            
            
            17,296
            
            
            18,839
            
            
            17,357
            
            
            18,864




For
      the
      three- and six-month periods ended June 30, 2007, we excluded 565 thousand
      and 662 thousand stock options, respectively, from our calculations of common
      stock equivalents because their exercise prices exceeded the market price of
      our
      stock, which would have been anti-dilutive. For the three- and six-month
      periods ended June 30, 2006, 618 thousand and 42 thousand, respectively, stock
      options were excluded from the calculation for the same reason.




Due
      to
      the net loss incurred during the first half of the year, there were 447 thousand
      and 438 thousand common stock equivalents that were excluded from diluted shares
      for the three- and six-month periods ended June 30, 2007,
      respectively.





**8.** **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.




Page
          6


**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 six-month periods ended June 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. Our investment in AMA was sold 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 no longer
      consolidated into our 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
      Six Months Ended June 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 half 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 $2.1 million for that period. 
There was no such revenue during the comparable six 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.




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 mid-year but now do not expect the current imbalance
      to
      adjust itself before 2008.




Page
          7




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




**Three
                Months**
            
            **Six
                Months****2007**
            
            
            **2006****(d)**
            
            
            **2007**
            
            
            **2006****(d)**Revenue
                from(a):Temperature-controlled
                fleet
            
            $
            34.3
            
            $
            42.2
            
            $
            68.7
            
            $
            83.9Dry-freight
                fleet
            
            
            19.5
            
            
            20.2
            
            
            37.8
            
            
            40.8Total
                truckload linehaul services
            
            
            53.8
            
            
            62.4
            
            
            106.5
            
            
            124.7Dedicated
                fleets
            
            
            4.0
            
            
            5.3
            
            
            8.4
            
            
            11.3Total
                full-truckload
            
            
            57.8
            
            
            67.7
            
            
            114.9
            
            
            136.0Less-than-truckload
                linehaul services
            
            
            31.9
            
            
            30.7
            
            
            62.3
            
            
            63.1Fuel
                surcharges
            
            
            18.1
            
            
            20.2
            
            
            32.8
            
            
            37.2Freight
                brokerage
            
            
            4.0
            
            
            3.1
            
            
            7.1
            
            
            6.0Equipment
                rental
            
            
            1.2
            
            
            1.9
            
            
            2.4
            
            
            4.9Total
                revenue
            
            $
            113.0
            
            $
            123.6
            
            $
            219.5
            
            $
            247.2Operating
                expenses(a)
            
            $
            116.2
            
            $
            120.2
            
            $
            223.4
            
            $
            240.3(Loss)
                income from operations(a)
            
            $
            (3.2
            )
            $
            3.4
            
            $
            (3.9
            )
            $
            6.9Operating
                ratio(b)
            
            
            102.8
            %
            
            97.3
            %
            
            101.8
            %
            
            97.2
            %Total
                full-truckload revenue
            
            $
            57.8
            
            $
            67.7
            
            $
            114.9
            
            $
            136.0Less-than-truckload
                revenue
            
            
            31.9
            
            
            30.7
            
            
            62.3
            
            
            63.1Total
                linehaul and dedicated fleet revenue
            
            $
            89.7
            
            $
            98.4
            
            $
            177.2
            
            $
            199.1Weekly
                average trucks in service
            
            
            2,124
            
            
            2,235
            
            
            2,143
            
            
            2,267Revenue
                per truck per week(c)
            
            $
            3,249
            
            $
            3,387
            
            $
            3,198
            
            $
            3,397




**Computational
                notes:**(a)
            Revenue
                and expense amounts are stated in million of dollars.  The amounts
                presented in the table may not agree to the amounts shown in the
                accompanying consolidated condensed 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.(d)
            Due
                to changes in the way we tabulated the underlying data for 2007 and
                in
                order to provide a valid comparison to the 2006 statistical data,
                amounts
                reported for 2006 may differ from amounts previously
                reported.




Page
          8




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




**Three
                Months**
            
            
            
            **Six Months****Truckload**
            
            
            **2007**
            
            
            
            **2006**
            
            
            
            **2007**
            
            
            
            **2006**Total
                linehaul miles(a)
            
            
            41.5
            
            
            
            46.5
            
            
            
            82.0
            
            
            
            93.6Loaded
                miles(a)
            
            
            37.5
            
            
            
            42.0
            
            
            
            73.9
            
            
            
            84.7Empty
                mile ratio(b)
            
            
            9.6
            %
            
            
            9.7
            %
            
            
            9.9
            %
            
            
            9.5
            %Linehaul
                revenue per total mile(c)
            
            $
            1.30
            
            
            $
            1.34
            
            
            $
            1.30
            
            
            $
            1.33Linehaul
                revenue per loaded mile(d)
            
            $
            1.43
            
            
            $
            1.49
            
            
            $
            1.44
            
            
            $
            1.47Linehaul
                shipments(e)
            
            
            40.1
            
            
            
            43.8
            
            
            
            79.4
            
            
            
            88.1Loaded
                miles per shipment(f)
            
            
            935
            
            
            
            959
            
            
            
            931
            
            
            
            961**Less-than-truckload**Hundredweight(e)
            
            
            2,160
            
            
            
            2,043
            
            
            
            4,213
            
            
            
            4,143Shipments(e)
            
            
            69.7
            
            
            
            65.5
            
            
            
            135.3
            
            
            
            132.1Linehaul
                revenue per hundredweight(g)
            
            $
            14.77
            
            
            $
            15.03
            
            
            $
            14.79
            
            
            $
            15.23Linehaul
                revenue per shipment(h)
            
            $
            458
            
            
            $
            469
            
            
            $
            460
            
            
            $
            478Average
                weight per shipment(i)
            
            
            3,099
            
            
            
            3,119
            
            
            
            3,114
            
            
            
            3,136




**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 LTL
                shipments.


The
      following table summarizes and compares the makeup of our fleets between
      truckload and LTL and between company-provided tractors and tractors provided
      by
      owner-operators as of June 30, 2007 and 2006:





Truckload
                tractors
            
            **2007**
            
            **2006**Company-provided
            
            
            1,378
            
            
            1,428Owner-operator
            
            
            485
            
            
            464Total
                truckload
            
            
            1,863
            
            
            1,892LTL
                tractorsCompany-provided
            
            
            117
            
            
            110Owner-operator
            
            
            120
            
            
            145Total
                LTL
            
            
            237
            
            
            255Total
                company-provided
            
            
            1,495
            
            
            1,538Total
                owner-operator
            
            
            605
            
            
            609Tractors
                in service
            
            
            2,100
            
            
            2,147Trailers
                in service
            
            
            3,729
            
            
            4,040




Page
          9




Excluding
      fuel surcharges, revenue decreased by $8.5 million (8.2%) and by $23.3 million
      (11.1%) respectively, when comparing the three- and six-month periods ended
      June
      30, 2007 to the same periods of 2006.  Full-truckload revenue declined
      by $9.9 million (14.6%) and by $21.1 million (15.5%) during the three- and
      six-month periods ended June 30, 2007, respectively, as compared to
      the same periods of 2006. Linehaul revenue per loaded mile declined by
      4.0% to $1.43 for the second 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 2.0% to $1.44 per mile. During the three- and six-month
      periods ended June 30, 2007, as compared to the same periods of 2006, the
      average full-truckload length of haul declined to 935 miles (2.5%) and to
      931 miles (3.1%), respectively. Our empty mile ratio increased from 9.5% to
      9.9%
      for the six-month period ended June 30, 2007 compared to the prior year, but
      improved to 9.6% for the three-month period ended June 30, 2007, slightly better
      than the same quarter of the prior year. The number of full-truckload linehaul
      shipments we transported during the second quarter of 2007 declined 8.4% to
      40,100 shipments, as compared to 43,800 during the year-ago quarter. The same
      comparison for year-to-date results shows a decline of 9.9%, from 88,100 to
      79,400 shipments.




We
      have
      lost a net of only 4 owner-operator-provided tractors between June 30, 2006
      and
      June 30, 2007, but customer demand for truckload service in the first half
      of
      2007 has been weak, impairing our ability to expand our full-truckload linehaul
      service.




Included
      in our truckload revenue is revenue from our intermodal operations. We have
      experienced a 4% increase in the number of intermodal loads, comparing the
      second quarter of 2007 to the same period of 2006. New marketing initiatives
      to
      expand our intermodal business have had an impact in turning around what was
      formerly a declining component of our service package. These initiatives will
      provide opportunities for revenue growth without depending on our ability to
      attract additional owner-operators. Further, it should reduce our need to invest
      capital in company-operated tractors.




Brokerage
      revenue improved by $0.9 million (29.0%) and by $1.1 million (18.3%) between
      the
      three- and six-month periods ended June 30, 2006 and 2007, respectively. When
      all our equipment is fully utilized, our freight brokerage service enables
      us to accept loads offered to us 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.




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 shippers are compensating us for
      deadheads during 2007.




LTL
      linehaul revenue increased by $1.2 million (3.9%) during the three months ended
      June 30, 2007 as compared to the same period of 2006; year-to-date, LTL linehaul
      revenue decreased by $0.8 million (1.3%) when comparing 2007 to 2006. When
      comparing the second quarter of 2007 to the same period of 2006, the number
      of
      LTL shipments transported increased by 6.4%, the average weight of the
      shipments transported decreased by 0.6% and the average linehaul revenue
      per LTL shipment declined by 2.3%. The same comparisons for year-to-date
      results indicate a 2.4% increase in the number of LTL shipments, a 0.7% decline
      in the weight per shipment and a 3.8% 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.





Page
          10




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





**Three
                Months**
            
            
            **Six
                Months****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Salaries,
                wages and related expenses
            
            
            29.3
            %
            
            26.6
            %
            
            29.7
            %
            
            27.1
            %Purchased
                transportation
            
            
            24.8
            
            
            23.9
            
            
            23.9
            
            
            23.4Fuel
            
            
            18.4
            
            
            19.1
            
            
            18.1
            
            
            18.0Supplies
                and expenses
            
            
            12.0
            
            
            11.1
            
            
            12.3
            
            
            11.8Revenue
                equipment rent and depreciation
            
            
            11.2
            
            
            10.3
            
            
            11.5
            
            
            10.5Claims
                and insurance
            
            
            5.4
            
            
            4.1
            
            
            4.1
            
            
            3.7Other
            
            
            1.7
            
            
            2.2
            
            
            2.2
            
            
            2.7Total
                operating expenses
            
            
            102.8
            %
            
            97.3
            %
            
            101.8
            %
            
            97.2
            %




***Salaries,
      Wages and Related Expenses:*** Salaries, wages and related expenses increased by $0.3 million (.8%) and
      decreased by $1.7 million (2.5%) during the three- and six-month periods ended
      June 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 six-month periods (in millions):


**Three
                  Months**
              
              
              **Six
                  Months****Salaries,
                  Wages and Related Expenses from**
              
              
              **2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Driver
                      salaries and per diem expenses
              
              $
              18.0
              
              $
              19.3
              
              $
              36.7
              
              $
              38.5Non-driver
                  salaries
              
              
              10.7
              
              
              9.8
              
              
              20.2
              
              
              19.2Payroll
                  taxes
              
              
              2.0
              
              
              1.9
              
              
              4.4
              
              
              4.5Work-related
                  injuries
              
              
              1.4
              
              
              0.3
              
              
              1.8
              
              
              2.0Health
                  insurance and other
              
              
              1.0
              
              
              1.6
              
              
              2.1
              
              
              2.7$
              33.1
              
              $
              32.9
              
              $
              65.2
              
              $
              66.9




Driver
      salaries and per diem expenses fell by $1.3 million (6.7%) and by $1.8
      million (4.7%) when comparing the three- and six-month periods ended June 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 remained at about 90%
      during both of the six-month periods ended June 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.




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
      six-month periods ended June 30, 2006 and 2007, non-driver salaries and wages
      increased by $0.9 million (9.2%) and by $1.0 million (5.2%), respectively,
      primarily due to severance pay in the second quarter of 2007 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 $2.5 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. We will
      determine whether or not to offer similar incentives on a case-by-case basis,
      depending on the circumstances involved.




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 June 2007, we had reduced the number of our non-driver employees by
      about
      135.





Page
          11




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 June 30, 2006 and 2007, respectively,
      such
      assets included approximately 148 thousand and 81 thousand shares of
      our common stock, 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 six months of 2006 and 2007,
      the per-share market price of our stock declined by $.01 and increased by $1.54,
      respectively. That resulted in increases of approximately $136 thousand in
      salaries and wages expense for the first six months of 2007 as compared to
      the
      same period of 2006. Also, as of June 30, 2006 and 2007, respectively, our
      executive bonus and phantom stock plan was partially denominated in
      approximately 166 thousand and 104 thousand “phantom” shares of our
      stock, the liability for which is also determined by the value of our stock.
      That contributed to an increase of about $160 thousand for the first six months
      of 2007.




Costs
      associated with work-related injuries increased by $1.1 million (367%) when
      comparing the second quarter of 2007 to the same period of 2006, but decreased
      by $0.2 million (10.0%) when comparing year-to-date results 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 and severity of injuries or the
      settlement of claims for less money than the initial analysis had indicated.
      The
      results for this past quarter reflect a serious injury within the quarter as
      well as unanticipated adjustments to a prior year injury.




We
      share
      the cost of health insurance with our employees. For the past several years,
      we
      have experienced double-digit percentage health insurance cost increases. Since
      2004 and through 2007, we have repeatedly increased both the amounts employees
      pay to participate and the amount of medical costs that must be borne by our
      employees. Consequently, due to program management, increased employee
      cost-sharing and improved claims experience, our costs improved significantly,
      declining by $0.6 million for both the three- and six-month periods ended June
      30, 2007.




***Purchased
      Transportation:*** Purchased transportation expense declined by $1.6 million (5.4%) and by $5.5
      million (9.5%) during the three- and six-month periods ended June 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**
              
              
              **Six
                  Months****Purchased
                    Transportation Expense from**
              
              
              **2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Linehaul
                        service
              
              $
              20.1
              
              $
              22.8
              
              $
              38.7
              
              $
              44.9Fuel
                  adjustments
              
              
              4.5
              
              
              4.2
              
              
              7.9
              
              
              8.0Freight
                  brokerage and other
              
              
              3.4
              
              
              2.6
              
              
              5.8
              
              
              5.0$
              28.0
              
              $
              29.6
              
              $
              52.4
              
              $
              57.9




Page
          12




Purchased
      transportation for linehaul service primarily represents payments to
      owner-operators in exchange for our use of their vehicles to transport
      shipments. The $2.7 million (11.8%) and $6.2 million (13.8%) decreases in
      such expenses during the three- and six-month periods ended June 30, 2007,
      respectively, as compared to the same periods of 2006, are the result of both
      a
      decline in revenue and a decrease in the number of owner-operator-provided
      tractors in our fleets.




While
      the
      owner-operator fleet dropped from 609 at June 30, 2006 to 605 at the end of
      June
      30, 2007, it was up from 563 at the end of March 2007. We have made a concerted
      effort to improve our contractor relations and retention, including a pro-active
      focus on the accuracy of their settlements, improved communications between
      the
      contractor and the contractor relations department and upgraded the quality
      of
      the equipment and the warranties available to those who lease their equipment
      through us. As is typical in our industry, contractors are now encouraged to
      utilize the services of a company that provides business services for them
      and
      facilitates their financial success.




Purchased
      transportation for fuel adjustments represents incremental payments to
      owner-operators to compensate them for currently high fuel costs.
      Owner-operators are responsible for all expenses associated with the operation
      of their tractors, including labor, maintenance and fuel. When retail diesel
      fuel prices rise, we charge our customers incremental fuel adjustment charges
      to
      defray 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.




Purchased
      transportation expenses associated with our freight brokerage and other service
      offerings increased by $0.8 million (30.8%) and $0.8 million (16.0%) for the
      three- and six-month periods ended June 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 29.0% and
      18.3% when making the same comparisons.




Intermodal
      purchased transportation expense (included in “linehaul service” in the above
      table) declined by 29% when comparing the year-to-date results of 2007 to the
      same period of 2006, with only a 20.7% decrease 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 11% per load when comparing year-to-date 2007 to the
      same
      period of 2006. In times of excess capacity compared to customer demand, we
      find
      it more cost effective to haul freight with our own equipment rather than using
      intermodal services.




***Fuel:*** Fuel
      expense decreased by $2.9 million (12.1%) and by $4.7 million (10.6%)
      during the three- and six-month periods ended June 30, 2007, respectively,
      as
      compared to the same periods of 2006, and decreased as a percentage of revenue
      from 24.1% to 23.2% for the second quarter and stayed relatively unchanged
      at 22.5% and 22.4% 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 six-month periods ended June 30, 2007 and 2006 (in
      millions):




**Three
                Months**
            
            **Six Months****2007**
            
            **2006**
            
            **2007**
            
            **2006**Total
                linehaul and dedicated fleet revenue
            
            $
            89.7
            
            $
            98.4
            
            $
            177.2
            
            $
            199.1Fuel
                expense
            
            $
            20.8
            
            $
            23.7
            
            $
            39.8
            
            $
            44.5Fuel
                expense as a percent of total linehaul and dedicated fleet
                revenue
            
            
            23.2
            %
            
            24.1
            %
            
            22.5
            %
            
            22.4
            %





Page
          13


The
      average price per gallon of fuel we paid did not change significantly between
      the first six months of 2006 and 2007. 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
      June
      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 effective 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
      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 not have to accept delivery of the
      2007-model tractors until the fall of 2007. That plan will delay the impact
      of
      an anticipated decline in the miles per gallon but will not 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. 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 $0.1 million (1.0 %) and by $2.1 million (7.1%) during
      the three- and six-month periods ended June 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 six month-periods (in millions):





**Three
                Months**
            
            **Six
                Months****Supplies
                and Expenses from**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Fleet
                repairs and maintenance
            
            $
            3.9
            
            $
            4.1
            
            $
            7.9
            
            $
            9.1Freight
                handling
            
            
            3.0
            
            
            2.7
            
            
            5.7
            
            
            5.5Driver
                travel expenses (excluding per diem expense)
            
            
            0.6
            
            
            0.8
            
            
            1.3
            
            
            1.6Tires
            
            
            1.4
            
            
            1.6
            
            
            2.8
            
            
            3.2Terminal
                and warehouse expenses
            
            
            1.5
            
            
            1.5
            
            
            3.0
            
            
            2.9Driver
                recruiting
            
            
            1.4
            
            
            1.2
            
            
            2.8
            
            
            2.6Other
            
            
            1.8
            
            
            1.9
            
            
            3.5
            
            
            4.2$
            13.6
            
            $
            13.8
            
            $
            27.0
            
            $
            29.1





Fleet
      repairs and maintenance declined by $0.2 million (4.9%) and by $1.2 million
      (13.2%) for the three- and six-month periods ended June 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.




Driver
      recruiting expenses were up $0.2 million for both the three- and six-month
      periods ended June 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.





Page
          14





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 tool, our 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 department, 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 $0.5 million (2.0%) during the first six months
      of
      2007 compared to the same period of 2006. Going forward, we anticipate the
      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
      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 expect to recover these
      costs by increasing our rates, reducing fuel consumption and lowering our
      maintenance costs.




***Claims
      and Insurance:*** Claims
      and insurance expenses increased by $1.0 million (19.6%) for the three-month
      period ended June 30, 2007, as compared to the same period of 2006, and were
      unchanged when comparing the six-month periods ended June 30, 2006 and 2007.
      The
      following table summarizes and compares the major components of claims and
      insurance expenses for each of the three- and six- month periods (in
      millions):




**Three
                  Months**
              
              **Six
                  Months****Claims
                    and Insurance Expenses from**
              
              **2007**
              
              **2006**
              
              **2007**
              
              **2006**Liability
              
              $
              4.4
              
              $
              3.8
              
              $
              6.2
              
              $
              6.5Cargo
              
              
              0.8
              
              
              0.7
              
              
              1.4
              
              
              1.4Physical
                  damage
              
              
              0.9
              
              
              0.6
              
              
              1.5
              
              
              1.2$
              6.1
              
              $
              5.1
              
              $
              9.1
              
              $
              9.1




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 second quarters of 2006 and 2007 resulted from differences in the
      number and severity of incidents that occurred during the periods involved.
      During 2006, 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 what our losses
      for events that have been incurred but not reported.




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 $1.5 million during the first
      six
      months of 2007, as compared to $1.7 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.




Page
          15




***Miscellaneous
      Expenses:*** Miscellaneous operating expenses decreased by $0.9 million (53.0%) and $2.7
      million (60.7%) for the three- and six-month periods ended June 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 six-month periods ended June 30, 2007 and 2006 (in
      millions):





**Three
                Months**
            
            **Six
                Months****Miscellaneous
                Expense from**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Building
                and office equipment rent
            
            $
            0.3
            
            $
            0.4
            
            $
            0.7
            
            $
            0.9Legal
                fees
            
            
            0.2
            
            
            1.2
            
            
            0.2
            
            
            2.2Audit
                fees
            
            
            0.2
            
            
            0.3
            
            
            0.3
            
            
            0.7Sarbanes-Oxley
                fees
            
            
            0.1
            
            
            (0.3
            )
            
            0.2
            
            
            0.3Other
            
            
            --
            
            
            --
            
            
            0.3
            
            
            0.3$
            0.8
            
            $
            1.6
            
            $
            1.7
            
            $
            4.4





The
      largest component of miscellaneous expenses for the six months ended June 30,
      2006 was approximately $2.1 million for legal and audit fees associated with
      the
      investigation commissioned by the Audit Committee of the Board of Directors,
      concluded during the second quarter 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.




***Operating
      Income or Loss:*** Income
      from continuing operations decreased by $6.6 million (194.4%) and $10.7
      million (156.2%) during the three- and six-month periods of 2007, respectively,
      as compared to the same periods of 2006.




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


**Three
                  Months**
              
              **Six
                  Months****Interest
                    and Other (Income) Expense from**
              
              **2007**
              
              **2006**
              
              **2007**
              
              **2006**Interest
                    expense
              
              $
              --
              
              $
              62
              
              $
              --
              
              $
              122Interest
                    (income)
              
              
              (241
              )
              
              (219
              )
              
              (381
              )
              
              (336
              )Equity
                  in earnings of limited partnership
              
              
              (108
              )
              
              (115
              )
              
              (207
              )
              
              (252
              )Life
                  insurance and other
              
              
              332
              
              
              (9
              )
              
              359
              
              
              (55
              )$
              (17
              )
              $
              (281
              )
              $
              (229
              )
              $
              (521
              )




***Pre-Tax
      and Net Income*** *:* Pre-tax
      income from continuing operations declined by $6.8 million (186.7%) and
      $11.0 million (149.1%) when comparing the three- and six-month periods ended
      June 30, 2007, respectively, to the same periods of 2006. Net income decreased
      by $2.8 million (131.3%) and by $4.9 million (122.1%), respectively, when making
      the same comparisons.




Our
      effective tax rate (income tax provision divided by pre-tax income) for fiscal
      2007 was more than 40 percentage points higher than the 35% statutory
      federal rate.  As a result of nondeductible expenses and state income
      taxes, the effective tax rate for the six-month period ended June 30, 2007
      was
      75.4%, which includes 2% for state income tax, net of federal benefit. Our
      effective tax rate during the first six months of 2006 was 45.3%.




For
      the
      six months ended June 30, 2007, expenses that are not tax-deductible were nearly
      two-thirds of our pre-tax loss, principally for meals and incidental expenses
      incurred by our employee-drivers. Such non-deductible expenses have the effect
      of increasing the effective tax rate. 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, as was the case through June, 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 again update our estimate at the
      end of the third quarter, ending on September 30, 2007.





Page
          16





**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
      June 30, 2007, our working capital (current assets minus current liabilities)
      was $39.9 million, as compared to $34.1 million as of June 30, 2006. Accounts
      receivable decreased by $5.3 million (9.7%) when comparing the balance at June
      30, 2007 to that at June 30, 2006, primarily due to the reduction in sales
      levels.




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 June 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 $44.0 million. The
      credit agreement expires on June 1, 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
      June 30, 2007, we were in compliance with all of our restrictive covenants
      and
      we project that our compliance will remain intact during 2007. Due to the net
      loss in the first half of 2007, we have amended our debt agreement in order
      to
      continue paying cash dividends and repurchasing our stock.




***Cash
      Flows*** :
      During
      the six-month period ended June 30, 2007, cash provided by operating activities
      was $12.0 million as compared to $11.9 million during the same period of
      2006.  Operating cash flows were positively impacted during the first six
      months of 2007 as compared to the same period of 2006 by, among other things,
      changes in other current assets, 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 half 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 $12.5 million while the reduction in net income caused
      a decline of $4.9 million.




The
      total
      of depreciation and amortization expense for both of the six-month periods
      ended
      June 30, 2007 and 2006 was $12.8 million.




Cash
      flows involving investing activities changed from $14.9 million in cash used
      during the first six months of 2006 to $0.9 million in cash provided 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 $0.9
      million.




Cash
      flows involving financing activities changed from $1.3 million in cash provided
      for the six months ended June 30, 2006 to $7.5 million in cash used for the
      six
      months ended June 30, 2007. In the first half of 2007, the company purchased
      289,300 shares of our common stock on the open market and 92,500 shares of
      common stock from current and former employees in simultaneous transactions
      with
      the exercise of the same number of options. There were no similar transactions
      during the same six-month period of 2006. Other significant changes in cash
      flows involving financing activities included the net repayment of borrowings
      of
      $4.9 million during the six-month period of 2007 compared to none for the same
      period of 2006.





Page
          17




***Obligations
      and Commitments*** *:* As of
      June 30, 2007, we had no debt and we had issued letters of credit for insurance
      purposes in the amount of $6.0 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
            
            $
            6.0
            
            $
            --
            
            $
            --
            
            $
            --
            
            $
            6.0
            
            $
            --
            
            $
            --Purchase
                obligations
            
            
            13.8
            
            
            13.8
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Operating
                leases forRentals
            
            
            90.2
            
            
            15.6
            
            
            28.3
            
            
            22.0
            
            
            11.7
            
            
            6.1
            
            
            6.5Residual
                guarantees
            
            
            3.6
            
            
            --
            
            
            1.0
            
            
            1.1
            
            
            1.5
            
            
            --
            
            
            --Accounts
                payable
            
            
            23.8
            
            
            23.8
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Accrued
                payroll
            
            
            4.6
            
            
            4.6
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --142.0
            
            $
            57.8
            
            $
            29.3
            
            $
            23.1
            
            $
            19.2
            
            $
            6.1
            
            $
            6.5Deferred
                compensationPhantom
                stock(2)
            
            
            1.1Rabbi
                trust(3)
            
            
            1.6Total
            
            $
            144.7




(1)
            Represents
                amounts due between July 1, 2007 and December 31, 2007.(2)
            Represents
                the current 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 with the payout amount with respect to each
                phantom stock unit being generally equal to the greater of (i) the
                actual
                price of our common stock on December 31 of the year of an officer's
                election to cash out the unit or (ii) the average of the 12 month-end
                values of our stock during the year in which an officer elects to
                cash
                out. Accordingly, we are unable to anticipate the year this currently
                unfunded obligation will be paid in cash or the amount of cash ultimately
                payable.(3)
            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 81,000 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.




As
      of
      June 30, 2007, we had contracts to purchase tractors and trailers totaling
      $13.8
      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
      June
      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
      99 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.





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          18


**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 that 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.




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.




Page
          19





**OFF-BALANCE
      SHEET ARRANGEMENTS**




We
      utilize non-cancelable operating leases to finance a portion of our revenue
      equipment acquisitions. As of June 30, 2007, we leased 1,122 tractors and 2,118
      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 six months ended June 30,
      2006 and 2007 was $15.6 million and $15.2 million, respectively.




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




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




**Description**
            
            **Discussion**Rabbi
                Trust investment ($0.8 million) in 81,000 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.Cash
                surrender value of life insurance policies, $1.6 million.
            
            The
                cash surrender value of our life insurance policies is a function
                of the
                amounts we pay to the insurance companies, the insurance charges
                taken by
                the insurance companies and the investment returns earned, or losses
                incurred, by the insurance company. Changes in any of these factors
                will
                impact the cash surrender value of our life insurance policies. Insurance
                charges and investment performance have a proximate effect on the
                value of
                our life insurance assets and on our net
                income.




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 not effective
      as of June 30, 2007, because of the material weaknesses 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
          20




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 the material weakness in internal control over financial reporting
      described in the preceding paragraph, management has concluded that as of June
      30, 2007, the Company's internal control over financial reporting was not
      effective to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with accounting principles generally accepted in the United States
      of
      America.




**(c)
      Changes in Internal Control over Financial Reporting:** There
      were no changes in the Company's internal control over financial reporting
      during the quarter ended June 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
      first quarter of 2007, the Company began developing and implementing
      improved controls to remediate the conditions described in Item 4 (b)
      above.  The Company plans to improve 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 has plans to implement 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. Additionally, the Company will
      evaluate and improve the controls surrounding its reporting for incurred but
      not
      yet reported claims.




Page
          21


**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 June 30, 2007, the aggregate amount of reserves for such claims on our
      consolidated condensed balance sheet was $18.2 million. We maintain excess
      insurance programs and accrue for expected losses in amounts designed to cover
      liability resulting from such claims.




On
      January 4, 2006, the Owner Operator Independent Drivers Association, Inc. and
      three independent contractors with trucks formerly contracted to one of our
      operating subsidiaries filed a putative class action complaint against the
      subsidiary in the United States District Court for the Northern District of
      Texas. The complaint alleged that parts of the subsidiary's independent
      contractor agreements violated the federal Truth-in-Leasing regulations at
      49
      CFR Part 376. The complaint sought to certify a class comprised of all
      independent contractors of motor vehicle equipment who have been party to a
      federally-regulated lease with the subsidiary during the time period beginning
      January 4, 2002 and continuing to the date of the complaint, and sought
      injunctive relief, an unspecified amount of damages, and legal costs. The
      subsidiary's response to the complaint was filed during March
      2006.  The plaintiffs submitted a motion for class certification on
      September 15, 2006, and the subsidiary's response was filed in December 2006.
      In
      June, 2007, the Court denied the plaintiffs’ request for class status. The
      plaintiffs may continue as individuals. We do not believe we are in a position
      to conclude whether or not there is a reasonable possibility of an adverse
      outcome in these individual cases or what damages, if any, the plaintiffs would
      be awarded should they prevail on all or any part of their claims. We believe
      the subsidiary has meritorious defenses, which it intends to assert
      vigorously.




**Item
      1A.** **Risk
      Factors**




There
      are
      many factors that affect our business and the results of our operations, many
      of
      which are beyond our control. In this regard, "Item 1A. Risk Factors" of Part
      I
      of our Annual Report on Form 10-K for the year ended December 31, 2006, which
      was filed with the SEC on March 16, 2007, contains a description of significant
      factors and risks that may affect our business.




**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 June 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)**April
                1 to April 30, 2007
            
            
            2,200
            
            $
            8.30
            
            
            2,200
            
            
            907,400May
                1 to May 31, 2007
            
            
            92,600
            
            
            9.16
            
            
            92,600
            
            
            814,800June
                1 to June 30, 2007
            
            
            --
            (2)
            
            --
            
            
            --
            
            
            814,800**Total**
            
            
            94,800
            
            $
            9.14
            
            
            94,800




(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
                June 2007, current and former employees exchanged 58,300 shares they
                owned
                for more than one year as consideration for the exercise of stock
                options,
                as permitted by our stock option plans. Such transactions are not
                deemed
                as having been purchased as part of our publicly announced plans
                or
                programs.




Page
          22




**Item
      3.** **Defaults
      Upon Senior Securities**




None.





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




Our
      Annual Meeting of Shareholders was held on May 24, 2007. Of the 17,402,711
      shares eligible to vote, 15,950,357 shares were represented at the meeting.
      The
      following table summarizes the results of voting held during the Annual
      Meeting.





**Election
      of Directors**




Each
      of
      management’s nominees for Class III directors, as listed in the proxy statement,
      was elected with the number of votes set forth below:





**Director**
            
            **For**
            
            **Against**
            
            **Abstain**
            
            **Results**Stoney
                M. Stubbs, Jr.
              T.
                Michael O’Connor
              Jerry
                T. Armstrong
            
            13,293,212
              15,524,447
              15,524,322
            
            2,238,158
              197,844
              219,892
            
            418,987
              228,066
              206,143
            
            Approved
              Approved
              Approved





In
      addition to the directors listed above whose terms will expire in 2010,
      continuing as directors with terms expiring in 2008 are Leroy Hallman and S.
      Russell Stubbs, and continuing as directors with terms expiring in 2009 are
      Brian R. Blackmarr, W. Mike Baggett and Thomas G. Yetter.





**Management
      Proposals**





**Subject
                of Proposal**
            
            **For**
            
            **Against**
            
            **Abstain**
            
            **Broker**
              **Withheld**
            
            **Results**To
                approve an amendment to
              The
                2005 Stock Incentive Plan.
            
            12,123,048
            
            871,796
            
            228,066
            
            2,727,447
            
            ApprovedTo
                approve an amendment and
              restatement
                of the Articles of
              Incorporation.
            
            13,257,107
            
            2,246,771
            
            446,479
            
            --
            
            Approved





**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)





Page
          23




**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:
                August 8, 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:
                August 8, 2007
            By
            /s/
                Thomas G. YetterThomas
                G. Yetter
              Senior
                Vice President and Chief Financial Officer
              (Principal
                Financial and Accounting Officer)





Page
          24





**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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      25