form10q.htm

The following discussion and analysis of our financial condition and results of operations 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, 2009. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those included in our Form 10-K, ”Part I, Item 1A . Risk Factors” for the year ended December 31, 2009. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

OVERVIEW

After experiencing improved operating trends in June 2010, a number of events significantly impacted our operating results in the third quarter of 2010. The current driver shortage is proving costly to both shippers and transportation companies. In the third quarter expenses related to driver recruiting increased by $0.3 million. Driver concerns related to Comprehensive Safety Analysis 2010 initiative (“CSA 2010”) compliance has increased the number of drivers leaving the profession, the amount of downtime related to equipment inspections, and maintenance expense due to unscheduled and non-safety related items. Due to the inability to fully staff our driver needs, we have averaged 20 tractors parked during the third quarter of 2010. This has resulted in lost revenue of approximately $0.8 million. Additionally, Hurricane Alex struck June 30th near the Texas, Mexico border disrupting all key long-haul shipping lanes in the area as a result of the extensive flooding from Mexico through Texas and the Midwest as it moved northward. This curtailed rail and truckload activity throughout the month of July 2010. As the storm progressed through the Midwest, rail and truckload schedules were delayed resulting in decreased revenue per truck per week in the first half of the quarter. Revenue per truck per week was also negatively impacted when a key, large customer in the Southeast failed to maintain expected high volume, high margin shipments they had initially forecasted for the third quarter. This required a redeployment of assets, increasing empty miles and reducing revenue per total mile. Despite increases in tonnage and shipmen t count, less-than-truckload (“LTL”) revenue per hundred pounds remains below 2009 levels. We are experiencing improvement in this area but not as rapidly as improvement in revenue per mile in the truckload services. Additionally, when developing our profit plan for the third quarter of 2010, we had planned to be further along in our implementation of mobilcom technology that we anticipate will result in reduced empty miles, improve fuel efficiency, and reduce administrative costs. However, due to manufacturing constraints, our mobilecom equipment supplier has been unable to supply the number of units originally planned for installation and implementation in the third quarter of 2010, resulting in an inability to achieve many of our goals.

We continue to progress in improving and maintaining our pricing programs as revenue per mile in truckload services improved during the third quarter of 2010 as compared to the prior year. LTL yield continued to run below prior year levels, but increases in weight per shipment and shipment count provided double digit growth in hundredweight and high single digit growth in revenue during the third quarter of 2010 compared to the third quarter of 2009. During the quarter our increased emphasis on LTL pricing programs allowed us to achieve a 4.8% improvement in pricing yield in September 2010 as compared to the prior quarter. We expect this improvement to be maintained in the fourth quarter.

Even though tonnage levels remain above 2009, the month to month growth trends experienced earlier during the first half of 2010 dissipated during the third quarter of 2010. The biggest challenge to growing revenue is the industry wide shortage of qualified drivers, as a result we will continue an aggressive campaign to source new drivers and devote resources as the requirements of CSA 2010 are expected to trim the ranks of available drivers and competition for existing qualified drivers increases. We continue to increase our emphasis on driver retention, and have maintained the driver recruitment bonuses and training incentives that were renewed early in the second quarter of 2010 after being suspended in 2009. In the current supply and demand environment, carriers with the ability to hire, train, and retain quality drivers will enjoy a significant opportunity to grow and improve profitability.

We generate our revenue from truckload, LTL, dedicated and brokerage services we provide to our customers. Generally, we are paid by the mile, the weight or the number of trucks being utilized by our dedicated service customers. We also derive revenue from fuel surcharges, loading and unloading activities, equipment detention and other ancillary services. The main factors that affect our revenue are the rate per mile we receive from our customers, the percentage of miles for which we are compensated and the number of miles we generate with our equipment. These factors relate to, among other things, the overall state of the economy, inventory levels, the level of truck capacity in the transportation industry and specific customer demand. We monitor our revenue production primarily through average revenue per truck per week, net of fuel surcharges, revenue-per-hundredweight for our LTL services, empty mile ratio, revenue per loaded (and total) miles, the number of linehaul shipments, loaded miles per shipment and the average weight per shipment. The economic conditions of 2009 had a negative impact on virtually all metrics that affect profitability, and while those conditions have not rebounded to pre-2009 levels, we experienced improvement in certain metrics during the second quarter of 2010.Those improvements carried into the third quarter. We continue to see positive results from our initiatives to manage overhead expense, improve capacity utilization and support pricing initiatives.

For the third quarter of 2010, our total operating revenue decreased by $0.6 million, or 0.7%, compared to the third quarter of 2009. Our total operating revenue, net of fuel surcharges, decreased $2.5 million, or 3.1%, to $79.5 million from $82.0 million in 2009, which was a direct result of our reduced capacity in 2010, driven by our inability to hire drivers and return our driver force to the higher levels available in 2009. In the third quarter of 2010, excluding fuel surcharges, our average revenue per tractor per week increased 4.1% versus 2009 levels due to an improvement in revenue per mile, which was partially offset by an increase in our empty mile ratio to 11.7% from 11.2%. This was caused, in part by the driver shortage discussed above .

Our truckload revenue for the three months ended September 30, 2010, decreased $4.6 million, or 9.0%, primarily due to fewer trucks in service This created a decline in loaded miles somewhat offset by an increase in revenue per loaded mile. We finished the third quarter of 2010 with an average of 141 fewer trucks in our truckload operation, or 7.2% versus the same quarter last year, of which approximately 86 were independent contractors. As a result of tightened capacity, targeted price increases, and our focus on service, our truckload revenue per loaded mile improved to $1.56 in the third quarter of 2010 compared to $1.41 in 2009, an increase of 10.6%. In the third quarter of 2010, LTL tonnage levels increased 12.5% as a result of increased shipment activity, while revenue-per-hundredweight decreased 4. 7% to $13.83 from $14.51 in the same period of 2009 due to continued pricing competition for the available tonnage in the market, an increase in shorter haul LTL shipments in the northeast and some targeted pricing actions in certain lanes where capacity was available on dedicated LTL service routes. Dedicated revenue represented 4.7% of our revenue in the third quarter of 2010 versus 5.0% in the same period of 2009, while brokerage revenue decreased to 1.7% of our revenues in the third quarter of 2010 compared to 1.8% in the same period of 2009.

The impact of operating expense on our profitability is primarily influenced by variable costs associated with transporting freight for our customers, fixed costs, and expenses with both variable and fixed components. Variable costs include fuel expense, driver-related expenses such as wages, benefits, training, and recruitment, other hourly wages related to the production of revenue, and independent contractor costs, which are recorded under purchased transportation. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we drive but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs rel ate to the acquisition and financing of long-term assets, such as revenue equipment and service centers. Although certain factors affecting our expenses are beyond our control, we monitor them closely and attempt to anticipate changes in these factors in managing our business. For example, fuel prices fluctuated dramatically at various times during the last several years. We manage our exposure to changes in fuel prices primarily through fuel surcharge programs with our customers, as well as through volume fuel purchasing arrangements with national fuel centers and bulk purchases of fuel at our service centers. To help further reduce fuel expense, we manage the maximum rate of speed and purchase certain tractors with opti-idle technology, which monitors the temperature of the cab and allows the engine to operate more efficiently while not on the road.

Our total operating expenses as a percentage of total operating revenue, or “operating ratio,” was 107.3% for the third quarter of 2010 compared to 105.1% for the same period in 2009. Our operating expenses increased in the categories of supplies and expenses, fuel and insurance, while purchased transportation decreased and other expense categories remained flat. Our loss per basic and diluted share improved in the third quarter of 2010 to $0.13 compared to $0.15 for the same period in 2009. Due to the deterioration of our operating ratio in the third quarter of 2010, we implemented various cost control plans to further reduce our operating costs. These initiatives ranged from a reduction in salaried work force that will reduce annual payroll related expenses by over $1.0 million to reductions in o ffice supply related purchases.

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. At September 30, 2010, we had no outstanding borrowings under our Credit Facility and $80.4 million in shareholders’ equity. In the third quarter of 2010, we added approximately $11.6 million of property and equipment, had $2.5 million of sales proceeds from dispositions. The capital expenditures were funded with cash flows from operations. We estimate capital expenditures, net of proceeds from dispositions, will range from $12.0 to $13.0 million for the twelve months ending December 31, 2010. The intent to grow the fleet size contributed to a decisio n to purchase certain lower mileage tractors off lease rather than disposing of them which increased capital expenditures approximately $3 million.

The following table summarizes and compares the significant components of revenue and presents our operating ratio and revenue per truck per week for each of the three- and nine-month periods ended September 30:

	Three Months						Nine Months
Revenue from: (a)	2010			2009			2010			2009
Temperature-controlled fleet	$	29,776		$	34,684		$	85,935		$	103,630
Dry-freight fleet		12,906			12,269			42,197			40,805
Total truckload linehaul services		42,682			46,953			128,132			144,435
Dedicated fleets		4,374			4,749			12,985			14,970
Total truckload		47,056			51,702			141,117			159,405
Less-than-truckload linehaul services		29,408			27,429			82,412			81,105
Fuel surcharges		14,382			12,492			41,886			32,065
Brokerage		1,623			1,657			5,388			5,415
Equipment rental		1,401			1,220			3,866			3,612
Total operating revenue		93,870			94,500			274,669			281,602

Operating expenses		100,733			99,333			290,422			301,454
Income (loss) from operations	$	(6,863	)	$	(4,833	)	$	(15,753	)	$	(19,852	)
Operating ratio (b)		107.3	%		105.1	%		105.7	%		107.0	%

Total truckload revenue	$	47,056		$	51,702		$	141,117		$	159,405
Less-than-truckload revenue		29,408			27,429			82,412			81,105
Total linehaul and dedicated fleet revenue	$	76,464		$	79,131		$	223,529		$	240,510

Weekly average trucks		1,813			1,954			1,779			1,978
Revenue per truck per week (c)	$	3,209		$	3,081		$	3,222		$	3,118

Computational notes:
(a)	Revenue and expense amounts are stated in thousands of dollars.
(b)	Operating expenses divided by total operating revenue.
(c)	Average daily revenue, times seven, divided by weekly average trucks.

The following table summarizes and compares selected statistical data relating to our freight operations for each of the three- and nine-month periods ended September 30:

	Three Months						Nine Months
Truckload	2010			2009			2010			2009
Total linehaul miles (a)		30,923			37,549			94,843			115,628
Loaded miles (a)		27,294			33,352			83,805			104,040
Empty mile ratio (b)		11.7	%		11.2	%		11.6	%		10.0	%
Linehaul revenue per total mile (c)	$	1.38		$	1.25		$	1.35		$	1.25
Linehaul revenue per loaded mile (d)	$	1.56		$	1.41		$	1.53		$	1.39
Linehaul shipments (a)		31.0			39.8			93.5			117.4
Loaded miles per shipment (e)		882			838			896			886
LTL
Hundredweight		2,126,278			1,890,510			5,990,371			5,630,191
Shipments (a)		68.6			62.3			191.6			184.0
Linehaul revenue per hundredweight (f)	$	13.83		$	14.51		$	13.76		$	14.41
Linehaul revenue per shipment (g)	$	429		$	440		$	430		$	441
Average weight per shipment (h)		3,098			3,035			3,126			3,060

Computational notes:
(a)	Amounts are stated in thousands.
(b)	Total truckload linehaul miles less truckload loaded miles, divided by total truckload linehaul miles.
(c)	Revenue from truckload linehaul services divided by total truckload linehaul miles.
(d)	Revenue from truckload linehaul services divided by truckload loaded miles.
(e)	Total truckload loaded miles divided by number of truckload linehaul shipments.
(f)	LTL revenue divided by LTL hundredweight.
(g)	LTL revenue divided by number of LTL shipments.
(h)	LTL hundredweight times one hundred divided by number of shipments.

The following table summarizes and compares the makeup of our fleets between company-provided tractors and tractors provided by independent contractors as of September 30:

	2010		2009
Total company tractors available		1,507		1,591
Total independent contractor tractors available		312		409
Total tractors available		1,819		2,000
Total trailers available		3,600		3,780

Comparison of Three Months Ended September 30, 2010 to Three Months Ended September 30, 2009

The following table sets forth revenue, operating income, operating ratios and revenue per truck per week and the dollar and percentage changes of each:

Revenue from (a)	2010			2009			Dollar Change 2010 vs. 2009			Percentage Change 2010 vs. 2009
Temperature-controlled fleet	$	29,776		$	34,684		$	(4,908	)	(14.2	)	%
Dry-freight fleet		12,906			12,269			637		5.2
Total truckload linehaul services		42,682			46,953			(4,271	)	(9.1	)
Dedicated fleets		4,374			4,749			(375	)	(7.9	)
Total truckload		47,056			51,702			(4,646	)	(9.0	)
Less-than-truckload linehaul services		29,408			27,429			1,979		7.2
Fuel surcharges		14,382			12,492			1,890		15.1
Brokerage		1,623			1,657			(34	)	(2.1	)
Equipment rental		1,401			1,220			181		14.8
Total operating revenue		93,870			94,500			(630	)	(0.7	)

Operating expenses		100,733			99,333			1,400		1.4
Income (loss) income from operations	$	(6,863	)	$	(4,833	)	$	(2,030	)	42.0		%
Operating ratio (b)		107.3	%		105.1	%

Total truckload revenue	$	47,056		$	51,702		$	(4,646	)	(9.0	)	%
Less-than-truckload revenue		29,408			27,429			1,979		7.2
Total linehaul and dedicated fleet revenue	$	76,464		$	79,131		$	(2,667	)	(3.4	)	%

Weekly average trucks		1,813			1,954			(141	)	(7.2	)	%
Revenue per truck per week (c)	$	3,209		$	3,081		$	128		4.1		%

Computational notes:
(a)	Revenue and expense amounts are stated in thousands of dollars.
(b)	Operating expenses divided by total operating revenue.
(c)	Average daily revenue, times seven, divided by weekly average trucks in service.

Total operating revenue decreased $0.6 million, or 0.7%, to $93.9 million in 2010 from $94.5 million in 2009. Excluding fuel surcharges, our total operating revenue decreased $2.5 million, or 3.1%, to $79.5 million from $82.0 million in 2009.

Truckload revenue, excluding fuel surcharges, decreased $4.6 million, or 9.0%, to $47.1 million from $51.7 million in 2009. Truckload revenues declined primarily due to a reduction in the average number of trucks in service partially offset by an increase in revenue per loaded mile and loaded miles per shipment. Loaded miles declined 18.2% to 27.3 million from 33.4 million in 2009. As a result, our empty mile ratio increased from 11.2% in 2009 to 11.7% in 2010. Our focus on targeted pricing improvement, combined with reduced industry capacity, resulted in improved truckload rates throughout the third quarter. Our revenue per loaded mile increased 10.6% to $1.56 in 2010 from $1.41 in 2009.

LTL revenue increased $2.0 million, or 7.2%, to $29.4 million from $27.4 million. The increase in revenue was primarily driven by an increase in the number of shipments combined with higher weight per shipment. Total weight shipped for the quarter increased 12.5% to 212.6 million pounds from 189.1 million pounds in the same period of 2009. Revenue-per-hundredweight decreased to $13.83 in the third quarter of 2010 from $14.51 in the third quarter of 2009, driven by an increase in shorter haul service in the northeast and a continuation of the extremely competitive LTL pricing atmosphere that began in 2009.

Fuel surcharges represent the cost of fuel that we are able to pass along to our customers based upon changes in the Department of Energy’s weekly indices. The cost of fuel has increased from the third quarter of 2009, resulting in increased fuel surcharges of $1.9 million, or 15.1% for the quarter. The higher fuel surcharges are offset by higher fuel costs to the Company within fuel and purchased transportation expenses.

The following table sets forth for the periods indicated the dollar and percentage increase or decrease of the items in our consolidated condensed statements of operations and those items as a percentage of revenue:

	(in thousands) Dollar Change			Percentage Change		Percentage of Revenue
	2010 vs. 2009			2010 vs. 2009		2010		2009
Total operating revenue	$	(630	)	(0.7	)%	100.0	%	100.0	%

Operating Expenses
Salaries, wages and related expenses		(63	)	(0.2	)	32.2		32.1
Purchased transportation		(2,114	)	(10.4	)	19.3		21.4
Fuel		1,337		7.8		19.7		18.1
Supplies and maintenance		1,961		17.1		14.3		12.2
Revenue equipment rent		(78	)	(0.8	)	10.0		10.0
Depreciation		(87	)	(2.0	)	4.5		4.6
Claims and insurance		271		8.4		3.7		3.4
Communications and utilities		(36	)	(2.7	)	1.4		1.4
Operating taxes and licenses		(73	)	(6.8	)	1.1		1.1
Gain on sale of property and equipment		(189	)	(106.8	)	0.0		0.2
Miscellaneous		471		73.8		1.1		0.6
Total Operating Expenses	$	1,400		1.4	%	107.3	%	105.1	%

Total operating expenses for 2010 increased $1.4 million, or 1.4%, to $100.7 million from $99.3 million in 2009. Combined with the slight increase in revenue and the increase in operating expenses, the operating ratio increased 2.2% to 107.3% from 105.1% in 2009.

Salaries, wages and related expenses consist of compensation for our employees, including drivers and non-drivers. It also includes employee-related costs, including the costs of payroll taxes, work-related injuries, group health insurance and other fringe benefits. The most variable of these salary, wage and related expenses is driver pay, which is affected by the mix of company drivers and independent contractors in our fleets as well as efficiencies in our over-the-road operations. Driver salaries including per diem costs decreased to $17.4 million from $17.6 million in 2009, primarily as a result of a decrease in miles driven. Non-driver salaries increased $0.6 million primarily as a result of an increase in severance pay due to the salaried staff reductions and increased headcount in custo mer service related areas as compared to the prior year. Group health insurance costs decreased by $0.3 million as a result of the plan carrying fewer participants and a reduction in the quantity and severity of claims. Work related injuries decreased as a result of a decline in large claims for the quarter and fewer claims being filed this quarter compared to the same quarter last year.

Purchased transportation expense consists of payments to independent contractors for the equipment and services they provide, payments to other motor carriers who handle our brokerage services and to various railroads for intermodal services. It also includes fuel surcharges paid to our independent contractors for which we charge our customers. These expenses are highly variable with revenue and/or the mix of company drivers versus independent contractors. Purchased transportation expense decreased $2.1 million, or 10.4%, in 2010 from 2009. Intermodal purchased transportation expense increased $0.3 million, or 8.2%, compared to 2009 as our intermodal shipments increased. The portion of our purchased transportation connected with our truckload and LTL services decreased $2.3 million, exclu ding fuel surcharges, primarily reflecting a decrease in the number of independent contractors utilized during the third quarter of 2010. Purchased transportation associated with our brokerage services remained flat compared to 2009. Fuel payments to our independent contractors decreased from $2.7 million in the third quarter of 2009 to $2.6 million in the third quarter of 2010.

Fuel expense and fuel taxes increased by $1.3 million, or 7.8%, to $18.4 million from $17.1 million in 2009. The increase was primarily due to an increase in fuel prices as reflected in a 13.0% increase in the Department of Energy’s Fuel Index, and a small decline in our mileage per gallon as a result of higher idling associated with unusually high temperatures during the quarter. We have fuel surcharge provisions in substantially all of our transportation contracts and attempt to recover a portion of increasing fuel prices through fuel surcharges and rates passed on to our customers.

Supplies and maintenance expenses primarily consist of repairs, maintenance and tires along with load specific expenses including loading/unloading, tolls, pallets, pickup and delivery and recruiting. Supplies and maintenance costs increased $2.0 million, or 17.1%, from 2009. The increase in expense was a result of higher fleet repairs and maintenance of $1.4 million and driver travel expenses of $0.4 million partially offset by a decrease in tire expense of $0.3 million. Contributing to the increased fleet repair and maintenance expense was trailer repair activity resulting from higher temperatures in certain regions of the country as well as unscheduled repairs resulting from Company inspections related to CSA 2010 requirements. Significant repairs to our equipment are generally covered by ma nufacturers’ warranties.

Total revenue equipment rent expense remained flat at $9.4 million quarter over quarter. The average number of tractors under lease at the end of September 2010 was 1,147 compared to 1,240 at the end of September 2009. We expect equipment rent expense to increase in future periods as a result of higher prices of new equipment and as a result of an expected increase in equipment to coincide with expected demand.

Depreciation expense relates to owned tractors, trailers, communications units, service centers and other assets. Gains or losses on dispositions of revenue equipment are set forth in a separate line item within our statements of operations. Depreciation expense decreased $0.1 million, or 2.0%, as older equipment was disposed and replaced with newer leased equipment. Depreciation expense is also dependent upon the mix of company-owned equipment versus leased equipment. Future depreciation expense will also be impacted by our leasing decisions.

Claims and insurance expense consists of the costs of premiums, as well as reserves we make within our self-insured retention program, primarily for personal injury, property damage, physical damage and cargo claims. These expenses vary and are dependent on the frequency and severity of accidents, our self-insured retention amounts and the insurance market. Claims and insurance costs increased by $0.3 million, or 8.4%, to $3.5 million from $3.2 million in 2009. The increase was primarily due to unfavorable developments of certain existing claims during the quarter. The Company is responsible for the first $4.0 million on personal injury and property damage claims. The Company has excess coverage from $4.0 million to $50.0 million. Our self-insured retention, although reduced whe n compared to prior coverage levels, exposes us to the possibility of significant fluctuations in claims expense between periods depending on the frequency, severity and timing of claims and to adverse financial results if we incur large or numerous losses. In the event of an uninsured claim above our insurance coverage, a claim that approaches the maximum self-insured retention level or an increase in the frequency or severity of claims within our self-insured retention, our financial condition and results of operations could be materially and adversely affected.

The Company’s effective tax benefit rate was 65.8% for the three months ended September 30, 2010 versus 44.7% for the three months ended September 30, 2009. The Company updated its expected tax rate for the year due to our operating results as well as the impact of our tax provision analysis. Our expected tax benefit for the year is 33.4%.

As a result of factors described above, our net loss decreased by 10.9% to $2.3 million compared to a net loss of $2.6 million in 2009. Our net loss per share decreased to $0.13 per diluted share from a net loss of $0.15 per diluted share in 2009.

Comparison of Nine Months Ended September 30, 2010 to Nine Months Ended September 30, 2009

The following table sets forth revenue, operating income, operating ratios and revenue per truck per week and the dollar and percentage changes of each:

Revenue from (a)	2010			2009			Dollar Change 2010 vs. 2009			Percentage Change 2010 vs. 2009
Temperature-controlled fleet	$	85,935		$	103,630		$	(17,695	)	(17.1	)	%
Dry-freight fleet		42,197			40,805			1,392		3.4
Total truckload linehaul services		128,132			144,435			(16,303	)	(11.3	)
Dedicated fleets		12,985			14,970			(1,985	)	(13.3	)
Total truckload		141,117			159,405			(18,288	)	(11.5	)
Less-than-truckload linehaul services		82,412			81,105			1,307		1.6
Fuel surcharges		41,886			32,065			9,821		30.6
Brokerage		5,388			5,415			(27	)	(0.5	)
Equipment rental		3,866			3,612			254		7.0
Total operating revenue		274,669			281,602			(6,933	)	(2.5	)

Operating expenses		290,422			301,454			(11,032	)	(3.7	)
Loss from operations	$	(15,753	)	$	(19,852	)	$	4,099		(20.6	)	%
Operating ratio (b)		105.7	%		107.0	%

Total truckload revenue	$	141,117		$	159,405		$	(18,288	)	(11.5	)	%
Less-than-truckload revenue		82,412			81,105			1,307		1.6
Total linehaul and dedicated fleet revenue	$	223,529		$	240,510		$	(16,981	)	(7.1	)	%

Weekly average trucks		1,779			1,978			(199	)	(10.1	)	%
Revenue per truck per week (c)	$	3,222		$	3,118		$	104		3.3		%

Computational notes:
(a)	Revenue and expense amounts are stated in thousands of dollars.
(b)	Operating expenses divided by total operating revenue.
(c)	Average daily revenue, times seven, divided by weekly average trucks.

Total operating revenue decreased $6.9 million, or 2.5%, to $274.7 million in 2010 from $281.6 million in 2009. Excluding fuel surcharges, our total operating revenue decreased $16.7 million, or 6.7%, to $232.8 million from $249.5 million in 2009.

Truckload revenue, excluding fuel surcharges, decreased $18.3 million, or 11.5%, to $141.1 million from $159.4 million in 2009. Although partially offset with increased rates, per mile truckload revenues declined primarily due to a 10.1% reduction in the average number of trucks in service, resulting in loaded miles decreasing 19.4% to 83.8 million from 104.0 million in 2009. Our empty mile ratio increased from 10.0% in 2009 to 11.6% in 2010. Our targeted approach to pricing, coupled with reduced industry capacity, improved our ability to increase rates at the end of the first quarter and throughout the second quarter. The improved year over year rate trend continued into the third quarter as our revenue per loaded mile increased to $1.53 in 2010 from $1.39 in 2009. The last year we achieved this level of revenue per loaded mile was 2006.

LTL revenue increased $1.3 million, or 1.6%, to $82.4 million from $81.1 million. The increase in revenue was driven by increased shipment count and weight per shipment, which was offset by reduced yield. The reduced yield was caused by an increase in shorter haul freight in the northeast and continued pricing pressure in certain portions of the market. Total weight shipped for 2010 increased 6.4% to 599.0 million pounds from 563.0 million pounds in 2009. The overcapacity in 2009 in the truckload market drove truckload carriers to handle multi-stop freight, traditionally handled by LTL service providers, which resulted in additional pressure on pricing. This pricing pressure continues driving our revenue-per-hundredweight to $13.76 in 2010 from $14.41 in 2009. We expect p ricing to improve in the fourth quarter consistent with improvement we experienced in September 2010.

Fuel surcharges represent the cost of fuel that we are able to pass along to our customers based upon changes in the Department of Energy’s weekly indices. The cost of fuel has increased from 2009, resulting in increased fuel surcharges of $9.8 million, or 30.6% for the nine months in 2010. The higher fuel surcharge is largely offset by higher fuel costs to the Company within fuel and purchased transportation expenses.

	(in thousands) Dollar Change			Percentage Change		Percentage of Revenue
	2010 vs. 2009			2010 vs. 2009		2010		2009
Total operating revenue	$	(6,933	)	(2.5	)%	100.0	%	100.0	%

Operating Expenses
Salaries, wages and related expenses		(6,827	)	(7.3	)	31.8		33.4
Purchased transportation		(5,780	)	(9.4	)	20.4		21.9
Fuel		5,531		12.0		18.9		16.4
Supplies and maintenance		136		0.4		13.1		12.7
Revenue equipment rent		(2,270	)	(7.7	)	9.9		10.4
Depreciation		(1,182	)	(8.9	)	4.4		4.7
Claims and insurance		(170	)	(1.6	)	3.9		3.9
Communications and utilities		(240	)	(6.2	)	1.3		1.4
Operating taxes and licenses		(447	)	(12.2	)	1.2		1.3
Gain on sale of property and equipment		(517	)	689.3		(0.2	)	0.0
Miscellaneous		734		31.0		1.0		0.9
Total Operating Expenses	$	(11,032	)	(3.7	)%	105.7	%	107.0	%

Total operating expenses for 2010 decreased $11.0 million, or 3.7%, to $290.4 million from $301.4 million in 2009. The operating ratio improved 1.3% to 105.7% from 107.0% in 2009 as operating expenses declined at a greater rate than did revenue.

Salaries, wages and related expenses consist of compensation for our employees, including drivers and non-drivers. It also includes employee-related costs, including the costs of payroll taxes, work-related injuries, group health insurance and other fringe benefits. The most variable of these salary, wage and related expenses is driver pay, which is affected by the mix of company drivers and owner-operators in our fleets as well as our efficiencies in our over-the-road operations. Driver salaries including per diem costs decreased $3.7 million, or 6.8%, from 2009 primarily as a result of fewer miles driven. Non-driver salaries decreased $0.1 million primarily as a result of lower supervisory headcount compared to the prior year. Grou p health insurance costs decreased by $1.9 million due to a decrease in headcount insured and quantity and severity of claims incurred in 2010 versus the prior year.

Purchased transportation expense consists of payments to independent contractors for the equipment and services they provide, payments to other motor carriers who handle our brokerage services and to various railroads for intermodal services. It also includes fuel surcharges paid to our independent contractors for which we charge our customers. These expenses are highly variable with revenue and/or the mix of company drivers versus independent contractors. Purchased transportation expense decreased $5.8 million, or 9.4%, in 2010 from 2009. Purchased transportation expense related to our intermodal service decreased by $0.2 million excluding fuel surcharges, or 2.2%, compared to 2009. The portion of our purchased transportation connected with our truckload and LTL services decreased $ 6.9 million, excluding fuel surcharges, primarily reflecting a decrease in the number of independent contractors utilized during 2010 versus last year. Purchased transportation associated with our brokerage services remained flat at $4.5 million for 2010 and 2009. Fuel payments to our independent contractors increased from $7.2 million in 2009 to $8.3 million in 2010 due to an increase in fuel surcharges somewhat offset by a decrease in our utilization of independent contractors.

Fuel expense and fuel taxes increased by $5.5 million, or 12.0%, to $51.8 million from $46.3 million in 2009. The increase was primarily due to an increase in fuel prices as reflected in a 23.8% increase in the Department of Energy’s Fuel Index and was somewhat offset by an improvement in our mileage per gallon. We have fuel surcharge provisions in substantially all of our transportation contracts and attempt to recover a portion of increasing fuel prices through fuel surcharges and rates passed on to our customers.

Supplies and maintenance expenses primarily consist of repairs, maintenance and tires along with load specific expenses including loading/unloading, tolls, pallets, pickup and delivery and recruiting. Supplies and maintenance costs remained flat year over year. Significant repairs to our equipment are generally covered by manufacturers’ warranties.

Total revenue equipment rent decreased $2.3 million, or 7.8%, to $27.1 million from $29.4 million in 2009. The lower costs are primarily due to a decrease in the average number of tractors under lease at the end of September 2010 of 1,145 compared to 1,272 at the end of September 2009, which was somewhat offset by the increase in the average cost of equipment as we replace older equipment with new equipment. We expect equipment rent expense to increase in future periods as a result of higher prices of new equipment.

Depreciation expense relates to owned tractors, trailers, communications units, service centers and other assets. Gains or losses on dispositions of revenue equipment are set forth in a separate line item within our statements of operations. Depreciation expense decreased $1.2 million, or 8.9%, as older equipment was disposed and replaced with newer leased equipment. Depreciation expense is also dependent upon the mix of company-owned equipment versus leased equipment. Future depreciation expense will be impacted by our leasing decisions.

Claims and insurance expense consists of the costs of premiums, as well as reserves we make within our self-insured retention program, primarily for personal injury, property damage, physical damage and cargo claims. These expenses vary and are dependent on the frequency and severity of accidents, our self-insured retention amounts and the insurance market. Claims and insurance costs decreased by $0.2 million, or 1.8%, to $10.7 million from $10.9 million in 2009. The decrease was primarily due to a decrease in the severity of claims incurred. The Company is responsible for the first $4.0 million on personal injury and property damage claims. 60;The Company has excess coverage from $4.0 million to $50.0 million. Our self-insured retention, although reduced when compared to prior coverage levels, exposes us to the possibility of significant fluctuations in claims expense between periods depending on the frequency, severity and timing of claims and to adverse financial results if we incur large or numerous losses. In the event of an uninsured claim above our insurance coverage, a claim that approaches the maximum self-insured retention level or an increase in the frequency or severity of claims within our self-insured retention, our financial condition and results of operations could be materially and adversely affected.

The Company’s effective tax benefit rate moved to 33.4% in 2010 from 30.7% in 2009 due to the improved operating results for the nine months of 2010 as well as the impact of our tax provision analysis; in other words, as our net loss decreases, the impact of our permanent items becomes greater and reduces our expected benefit. This rate approximates our expected tax benefit rate for the entire year and has been applied to year-to-date results from operations.

As a result of factors described above, our net loss declined 24.7% to $10.4 million compared to a net loss of $13.8 million in 2009. Our net loss per share declined 24.7% to $0.61 per diluted share from a loss of $0.81 per diluted share in 2009.

LIQUIDITY AND CAPITAL RESOURCES

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. Our primary sources of liquidity are funds provided by operations, our secured revolving credit facility and our ability to enter into equipment leases with various financing institutions. A portion of our tractor fleet is provided by independent contractors who own and operate their own equipment. We have no capital expenditure requirements relating to those drivers who own their tractors or obtain financing through third parties. However, to the extent we purchase tractors and extend financing to the independent contractors through our tractor purchase program, we have an associated capital expenditure requirement.

In November 2007, our Board of Directors approved a share repurchase program to repurchase an additional one million shares of our common stock. This program is intended to be implemented through purchases made in either the open market or through private transactions. The timing and extent to which we will repurchase shares depends on market conditions and other corporate considerations. We made no share repurchases in 2009 or 2010 and have approximately 917,000 shares available that can be repurchased under the November 2007 and previous authorizations. The repurchase program does not have an expiration date.

The table below reflects our net cash flows provided by (used in) operating activities, investing activities and financing activities and outstanding debt, including current maturities, for the periods indicated.

	(in thousands)
	Nine Months Ended September 30,
	2010			2009
Net cash flows provided by operating activities	$	6,993		$	5,834
Net cash flows used in investing activities		(9,096	)		(3,855	)
Net cash flows provided by (used in) financing activities		594			(617	)
Debt at September 30		-			-

For the nine months ended September 30, 2010, we purchased property and equipment of $16.7 million, and recognized a gain of $0.6 million on the disposition of used equipment. We generated $7.0 million of cash flows from operating activities primarily driven by depreciation and amortization, an increase in accounts payable, and a decrease in other current assets, which was partially offset by a decline in insurance reserves and increased expenditures for tires on equipment in use. Our net capital expenditures were primarily funded with cash flows from operations. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. Based upon anticipated cash flows, current borrowing availability and sources of financing we expect to be available to us , we do not anticipate any significant liquidity constraints in the foreseeable future. We estimate that capital expenditures, net of proceeds from dispositions, will range from $12.0 to $13.0 million for the twelve months ended December 31, 2010.

We establish credit terms with our customers based upon their financial strength and their historical payment pattern. Many of our largest customers are Fortune 500 companies. Given the current economic conditions, we have placed additional emphasis on our review of significant outstanding receivable balances. Accounts receivable are recorded at the invoiced amounts, net of an allowance for doubtful accounts. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectability of these receivables, we perform ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation in which a customer may not be able to meet its financial obligations due to deterioration of its financial viability, downgrade in credit ratings or bankruptcy. Our allowance for doubtful accounts is based on the best information available to us and is reevaluated and adjusted as additional information is received. We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall state of the economy. Invoice balances outstanding over 30 days after the contractual due date are considered past due per our policy and are reviewed individually for collectability. During 2010, we decreased our allowance for doubtful accounts by $158,000 from December 31, 2009 as our past due receivables declined as a percentage of outstanding balances and the risk of bad debts was reduced as the aging improved. Initial payments by new customers are monitored fo r compliance with contractual terms. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential recovery is considered remote.

The amended Credit Facility provides for a secured, committed credit facility maturing in September 2011, with an aggregate availability of $20.0 million. Subsequent to September 30, 2010, the Company and the administrative agent agreed to an amendment to the Credit Facility. Under the terms of the amendment, we may borrow an amount not to exceed the lesser of $20.0 million, the approved accounts receivable borrowing base, as defined by the amended Credit Facility, adjusted for letters of credit and other debt (as defined in the Credit Facility), or a multiple of a measurement of cash flow. Per the Credit Facility, as agreed to be amended, the borrowing base is limited to 85% of the eligible accounts receivable balance, which excludes amounts past due beyond 90 days, accrued revenue for undelivered shipme nts and the current portion of freight claims and incorporates a $5.0 million reserve through maturity. At September 30, 2010, there were no amounts borrowed under the Credit Facility; however, we had $3.2 million of standby letters of credit primarily for our self-insurance programs, which reduced the availability to $16.8 million. We expect to borrow in the range of $3.0 to $5.0 million against our line of credit during the 4th Quarter due to a planned purchase of revenue equipment. The amended Credit Facility bears interest at a spread over the London Interbank Offered Rate (“LIBOR”).

The Credit Facility as amended contains several covenants, which include the following:

The ratio of our annual earnings before interest, taxes, depreciation, amortization and lease and rental (as defined in the Credit Facility, “EBITDAR”) to the amount of our annual fixed charges, also referred to as the fixed charge coverage ratio, may not be less than 1.15:1.0 at September 30, 2010. Fixed charges generally include interest payments, rental expense, taxes paid, dividends paid and payments due on outstanding debt.

The ratio of our funded debt to EBITDAR may not exceed 2.75:1.0 at September 30, 2010. Funded debt generally includes the amount borrowed under the Credit Facility or similar arrangements, letters of credit and the aggregate minimum amount of operating lease payments we are obligated to pay in the future.

Our tangible net worth must be no less than $75.0 million at September 30, 2010 and remain an amount no less than $75.0 million. Tangible net worth is generally defined as our net shareholders' equity minus intangible and certain other assets plus 100% of any cash we receive from the issuance of equity securities.

·	The annual amount of our net expenditures for property and equipment during the most recently ended twelve month period may not be more than $20.0 million.

·	The amount available for acquisitions may not exceed $3.5 million in any fiscal year.

·	The interest rate spread over LIBOR changes based upon achieving various EBITDAR to fixed charge ratios.

·	Payments of dividends are generally limited by the ratio of our EBITDAR to fixed charges and the profitability of the previous quarter.

At September 30, 2010, our EBITDAR was $37.9 million. Our fixed charges were $30.3 million, resulting in a fixed charge coverage ratio of 1.25. Our funded debt as defined in the Credit Facility was $93.7 million, resulting in funded debt to EBITDAR ratio of 2.47. Our tangible net worth as defined by the agreement was $78.9 million, keeping in compliance with the agreement. Maintaining the Credit Facility is imperative for us to continue our operations by allowing us to manage our working capital and acquire revenue-generating equipment that is essential to our operations. Should we not be able to meet these covenants, amounts outstanding may become payable immediately and our ability to make future draws on the Credit Facility may be limited. We are in complian ce with all of the covenants under the Credit Facility, as amended, as of September 30, 2010 and anticipate our compliance will continue for the foreseeable future, assuming current economic conditions remain relatively unchanged.

The following is a summary of our contractual obligations as of September 30, 2010:

	(in thousands)
	Total		2010			2011-2012		2013-2014	After 2014
Letters of credit	$	3,181	$	-	$	3,181	$	-	$	-
Purchase obligations		18,523		18,523		-		-		-
Operating leases obligations
Rentals		90,508		8,479		52,518		18,223		11,288
Residual guarantees		13,568		-		7,142		6,426		-
	$	125,780	$	27,002	$	62,841	$	24,649	$	11,288

Off-Balance Sheet Arrangements

As of September 30, 2010, we had 1,159 tractors and 1,809 trailers under operating leases with varying termination dates ranging from December 2010 through July 2017 with rental obligations of $90.5 million. Rent expense related to operating leases involving vehicles during the nine months ended September 30, 2010 and 2009 was $27.1 million and $29.4 million, respectively. We maintain standby letters of credit related to self-insured programs in the amount of $3.2 million. These standby letters of credit allow the Company to self-insure a portion of its insurance exposure.

Inflation and Fuel Costs

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the past three years, the most significant effects of inflation have been on revenue-generating equipment prices, accident claims, health insurance, employee compensation and fuel. We attempt to limit the effects of inflation through increases in freight rates and cost control efforts.

In addition to inflation, fluctuations in fuel prices can affect our profitability. We require substantial amounts of fuel to operate our tractors and power the temperature-control units on our trailers. Substantially all of our contracts with customers contain fuel surcharge provisions. Although we historically have been able to pass through most long-term increases in fuel prices and related taxes to our customers in the form of surcharges and higher rates, such increases usually are not fully recovered. We do not currently hedge our exposure to fuel prices through financial derivatives.

Seasonality

Our temperature-controlled truckload operations are affected by seasonal changes. The growing seasons for fruits and vegetables in Florida, California and Texas typically create increased demand for trailers equipped to transport cargo requiring refrigeration. Our LTL operations are also impacted by the seasonality of certain commodities. LTL shipment volume during the winter months is normally lower than other months. Shipping volumes of LTL freight are usually highest from July through October. LTL volumes also tend to increase in the weeks before holidays such as Easter, Thanksgiving and Christmas when significant volumes of food and candy are transported.

Our tractor productivity generally decreases during the winter season as inclement weather impedes operations and some shippers typically reduce their shipments as there is less need for temperature control during colder months than warmer months. At the same time, operating expenses generally increase with harsh weather creating higher accident frequency, increased claims and more equipment repairs. To the extent that extreme weather patterns increase in severity or frequency due to climate changes, we would expect to see an increase in the effect of inclement or extreme weather patterns. We do not have the ability to forecast these potential changes or impact of these changes.

Effects of Climate Change and Climate Change Regulation

Greenhouse gas emissions have increasingly become the subject of a large amount of international, national, regional, state and local attention. Cap and trade initiatives to limit greenhouse gas emissions have been introduced in the European Union “EU.” Similarly, numerous bills related to climate change have been introduced in the United States Congress, which could adversely impact all industries. In addition, future regulation of greenhouse gases could occur pursuant to future U.S. treaty obligations, statutory or regulatory changes under the Clean Air Act or new climate change legislation. It is uncertain whether any of these initiatives will be implemented, although, based on published media reports, we believe it is not likely the current proposed initiatives wi ll be implemented without substantial modification. If such initiatives are implemented, restrictions, caps, taxes, or other controls on emissions of greenhouse gases, including diesel exhaust, could significantly increase our operating costs. Restrictions on emissions could also affect our customers that use significant amounts of energy or burn fossil fuels in producing or delivering the products we carry including, but not limited to, food producers and distributors. Although significant cost increases, government regulation, and changes of consumer needs or preferences for goods or services relating to alternative sources of energy or emissions reductions or changes in our customers' shipping needs could materially affect the markets for the products we carry, which in turn could have a material adverse effect on our results of operations, financial condition, and liquidity, or, in the alternative, could result in increased demand for our transportation services, we are currently unable to predict the ma nner or extent of such effect.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated financial statements and related notes. We base our estimates, assumptions and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated financial statements are prepared. However, because future events and their effects cannot be determined with certainty, actual results could differ from our estimates and assumptions, and such differences could be material. We believe the following critical accounting policies affect our more significant estimates, assumptions and judgments used in the preparation of our consolidated financial statements.

Accounts Receivable. We are dependent upon contracts with significant customers that generate a large portion of our revenue. Accounts receivable are recorded at the invoiced amounts, net of an allowance for doubtful accounts. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectability of these receivables, we perform ongoing credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of a situation in which a customer may not be able to meet its financial obligations due to deterioration of its financial viability, downgrade in credit ratings or bankruptcy. The allowance for doubtful accounts is based on the best information available to us and is reevaluated and adjusted as additional information is received. We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall state of the economy. We perform ongoing reviews of the adequacy of our allowance for doubtful accounts. Invoice balances outstanding past the contractual due date are considered past due per our policy and the customer balances are reviewed for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential recovery is considered remote.

Revenue Recognition. The Company recognizes revenue and the related direct costs on the date the freight is picked up from the shipper. One of the preferable methods under US GAAP provides the recognition of revenue and direct costs when the shipment is completed. Changing to this method would not have a material impact on the quarterly financial results or operations of the Company.

Property and Equipment. The transportation industry is capital intensive. Our net property and equipment, including property held for sale, was $73.6 million as of September 30, 2010 and $75.9 million as of December 31, 2009. Our depreciation expense was $12.1 million for the nine months ended September 30, 2010 and $13.3 million for the nine months ended September 30, 2009. Depreciation is computed based on the cost of the asset, reduced by its estimated residual value, using the straight-line method for financial reporting purposes. Accelerated methods are used for income tax reporting purposes. Additions and improvements to property and equipment are capitalized at cost. Maintenance and repair expenditures are charged to operations as incurred. Gains and losses on disposals of revenue equipment are included in operations as they are a normal, recurring component of our operations. We have minimal risk to the used equipment market as the majority of our tractors have a pre-arranged trade-in value at the end of 42 months, which is utilized as the residual value in computing depreciation expense.

Impairment of Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the costs to sell.

Insurance and claims. We are self-insured for a portion of losses relating to workers’ compensation, auto liability, general liability, cargo and property damage claims, along with employees’ health insurance with varying risk retention levels. We maintain insurance coverage for per-incident occurrences and in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review. We reserve currently for the estimated cost of the uninsured portion of pending claims. These reserves are periodically evaluated and adjusted based on our evaluation of the nature and severity of outstanding individual claims and an estimate of future claims development based on historical claims development factors . The Company accrues for the anticipated legal and other costs to settle the claims currently. The Company is responsible for the first $4.0 million on each personal injury and property damage claim. The Company has excess coverage for claims between $4.0 million and $50.0 million. The Company utilizes an independent actuary to assist in establishing its accruals. Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods depending on the frequency, severity and timing of claims and to adverse financial results if we incur large or numerous losses. In the event of an uninsured claim above our insurance coverage, a claim that approaches the maximum self-insured retention level or an increase in the frequency or severity of claims within our self-insured retention, our financial condition and results of operations could be materially and adversely affected.

Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities, which are included in our accompanying consolidated balance sheets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. To the extent it is determined it is not likely that our deferred tax assets will be recovered, a valuation allowance must be established for the amount of the deferred tax assets determined not to be realizable. We believe the deferred tax assets will be principally realized through future reversals of existing temporary differences (deferred tax liabilities) and future taxable income. Based upon our recent operating history, we will continue to assess whether we will realize all, or part, of the deferred tax assets. We will apply judgment to determine the amount of valuation allowance, if any, that would be required in any given period.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2010, the FASB issued ASU 2010-20, Receivables (“Topic 310”) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 requires a company to disclose information that provides financial statement users more information about the credit quality of a creditor’s financing receivables and the adequacy of its allowance for credit losses. Short-term accounts receivable, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from the ASU 2010-20. For public companies, the amendments that require disclosures as of the end of a reporting period and the amendments that requires disclosures for activity that occurs du ring a reporting period are effective for periods ending on or after December 15, 2010. Management does not believe that the adoption of this ASU will have a material impact on the Company’s financial position, results of operation, or cash flows.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to a variety of market risks, primarily from fuel prices and interest rates. These risks have not materially changed between December 31, 2009 and September 30, 2010.

Commodity Price Risk

Our operations are heavily dependent upon fuel prices. The price and availability can vary and are subject to political, economic and market factors that are beyond our control. Significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition; however, historically, we’ve been able to recover the majority of diesel fuel price increases from customers in the form of fuel surcharges. Fuel prices have fluctuated greatly in recent years. In some periods, our operating performance was adversely affected because we were not able to fully offset the impact of higher diesel fuel prices through increased freight rates and fuel surcharges. We cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases. We do not currently enter into derivative hedging arrangements that protect us against fuel price increases. Given the volatility in fuel prices and the impact fuel surcharge revenues have on total operating revenue, we often make reference to total operating revenue excluding fuel surcharges to provide a more consistent basis for comparison of operating revenue without the impact of fluctuating fuel prices. A 5% increase in the average fuel cost per gallon would result in annual increased fuel costs of approximately $3.5 million that would be substantially offset by fuel surcharges.

Interest Rate Risk

Our market risk is also affected by changes in interest rates. We have historically maintained a combination of fixed rate and variable rate obligations to manage our interest rate exposure. Fixed rates are generally maintained within our lease obligations while variable rates are contained within our amended and restated credit agreement.

We are exposed to interest rate risk primarily from our amended and restated credit agreement. Our credit agreement, as amended, provides for borrowings that bear interest based on the LIBOR plus a certain percentage. At September 30, 2010 and December 31, 2009, there were no borrowings outstanding under our Credit Facility.

As of September 30, 2010, we held no market-risk-sensitive instruments for trading purposes. For purposes other than trading, we held approximately 78,000 shares of our common stock at a value of $0.2 million in a Rabbi Trust investment. Our consolidated financial statements include the assets and liabilities of the 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. To the extent the trust assets are invested in our stock, our future compensation expense and income will be impacted by fluctuations in the market price of our stock.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2010. There were no changes in our internal control over fi nancial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We intend to periodically evaluate our disclosure controls and procedures as required by the Exchange Act Rules.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in litigation incidental to our operations, primarily involving claims for personal injury, property damage, work-related injuries and cargo losses incurred in the ordinary and routine transportation of freight. Although the outcomes of any such litigation cannot be predicted, in the opinion of management, the resolution of any currently pending or threatened actions will not have a material adverse effect upon our financial position or results of operations.

Item 1A. Risk Factors

Certain risks associated with our operations are discussed in our Annual Report on Form 10-K for the year ended December 31, 2009, under the heading “Risk Factors” in Item 1A of that report. We do not believe there has been any material changes in these risks during the nine months ended September 30, 2010.

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

On November 9, 2007, our Board of Directors renewed our authorization to purchase up to 1,263,900 shares of our common stock. At September 30, 2010, there were a total of 917,000 remaining shares authorized for repurchase under the November 2007 and previous authorizations. No shares have been repurchased during 2010. The authorization did not specify an expiration date. Shares may be purchased from time to time on the open market or through private transactions at such times as management deems appropriate. Purchases may be discontinued by our Board of Directors at any time.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

Item 5. Other Information

None.

Item 6. Exhibits

3.1	Restated Articles of Incorporation of Frozen Food Express Industries, Inc. (filed as Exhibit 3(i) to the Company’s Current Report on Form 8-K on May 29, 2007 and incorporated herein by reference).

3.2	Amended and Restated Bylaws of Frozen Food Express Industries, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 3, 3009 and incorporated herein by reference).

10.1	FFE Transportation Services, Inc. Second Amendment to Second Amended and Restated Credit Agreement dated October 27, 2010 (filed herewith).

10.2	Form of Performance Based Restricted Stock Award for use with the Frozen Food Express Industries, Inc. Amended and Restated 2005 Stock Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 20, 2010 and incorporated herein by reference).

10.3	FFE Transportation Services, Inc. Amended 2005 Executive Bonus Plan, dated as of January 1, 2005, as amended as of July 1, 2010 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 20, 2010 and incorporated herein by reference).

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

SIGNATURES

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

	FROZEN FOOD EXPRESS INDUSTRIES, INC.
	(Registrant)

Dated: November 2, 2010	By	/s/ Stoney M. Stubbs, Jr.
		Stoney M. Stubbs, Jr. Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Dated: November 2, 2010	By	/s/ John R. McManama
		John R. McManama Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

3.1	Restated Articles of Incorporation of Frozen Food Express Industries, Inc. (filed as Exhibit 3(i) to the Company’s Current Report on Form 8-K on May 29, 2007 and incorporated herein by reference).

3.2	Amended and Restated Bylaws of Frozen Food Express Industries, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 3, 3009 and incorporated herein by reference).

10.1	FFE Transportation Services, Inc. Second Amendment to Second Amended and Restated Credit Agreement dated October 27, 2010 (filed herewith).

10.2	Form of Performance Based Restricted Stock Award for use with the Frozen Food Express Industries, Inc. Amended and Restated 2005 Stock Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 20, 2010 and incorporated herein by reference).

10.3	FFE Transportation Services, Inc. Amended 2005 Executive Bonus Plan, dated as of January 1, 2005, as amended as of July 1, 2010 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 20, 2010 and incorporated herein by reference).

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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EXHIBIT 10.1

SECOND AMENDMENT TO SECOND AMENDED AND RESTATED

CREDIT AGREEMENT

THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (herein called this “Amendment”) made as of October 27, 2010 by and among FFE TRANSPORTATION SERVICES, a Delaware corporation (“Borrower”), FROZEN FOOD EXPRESS INDUSTRIES, INC., a Texas corporation (“Parent”), CONWELL CORPORATION, a Delaware corporation, FX HOLDINGS, INC., a Delaware corporation, LISA MOTOR LINES, INC., a Delaware corporation, COMPRESSORS PLUS, INC., a Texas corporation, FFE LOGISTICS, INC., a Delaware corporation, CONWELL LLC, a Delaware limited liability company, and COMERICA BANK, as Administrative Agent, Collateral Agent, Issuing Bank and Bank.

W I T N E S S E T H:

WHEREAS, Borrower, the Companies, Administrative Agent and Banks have entered into that certain Second Amended and Restated Credit Agreement dated as of September 2, 2009 (as amended, supplemented, or restated from time to time prior to the date hereof, the “Original Credit Agreement”), for the purposes and consideration therein expressed, pursuant to which Banks became obligated to make loans to Borrower as therein provided; and

WHEREAS, Borrower, the Companies, Administrative Agent and Banks desire to amend the Original Credit Agreement as provided herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Credit Agreement, in consideration of the loans which may hereafter be made by Banks to Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I.

Definitions and References

§ 1.1. Terms Defined in the Original Credit Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Credit Agreement shall have the same meanings whenever used in this Amendment.

§ 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this § 1.2.

“Amendment” means this Second Amendment to Credit Agreement.

“Amendment Documents” means, collectively, this Amendment, the Renewal Note, the Consent and Agreement by the Companies (other than Borrower) with respect to this Amendment, and any other document required to be delivered by the Companies pursuant to Article III hereof.

“Credit Agreement” means the Original Credit Agreement as amended hereby.

“Original Omnibus Certificate” means the Omnibus Certificate dated September 2, 2009 executed and delivered by officers of Borrower pursuant to the Original Credit Agreement.

“Renewal Note” means a promissory note in the form attached hereto as Exhibit A.

ARTICLE II.

Amendments to Original Credit Agreement

§ 2.1. Definitions.

(a) The following new definition is hereby added to Section 1.1 of the Original Credit Agreement in appropriate alphabetical order to read as follows:

“Second Amendment” means that certain Second Amendment to Second Amended and Restated Credit Agreement dated as of October 27, 2010 among Borrower, Parent, the other Companies, Administrative Agent and the Banks party thereto.

(b) The definition of Borrowing Base in Section 1.1 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

“Borrowing Base” means an amount equal to (i) eighty-five percent (85%) of the aggregate Eligible Accounts, calculated in accordance with GAAP based upon consolidated financial information of Parent and the Subsidiaries (ii) less a reserve of $5,000,000. The Borrowing Base shall be determined by Administrative Agent from time to time in its good faith judgment.

(c) The final sentence of the definition of Base Rate Margin in Section 1.1 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

Notwithstanding anything to the contrary contained in this definition, (i) the Tier I Base Rate Margin shall be in effect from the date of the Second Amendment through the first date after December 31, 2010 on which Parent and Borrower delivers a Compliance Certificate evidencing a Fixed Charge Coverage Ratio greater than 1.25 to 1.00 and (ii) the determination of the Applicable Rate for any period shall be subject to the last sentence of Section 5.1(f).

(d) The final sentence of the definition of Facility Fee Rate in Section 1.1 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

Notwithstanding anything to the contrary contained in this definition, (i) the Tier I Facility Fee Rate shall be in effect from the date of the Second Amendment through the first date after December 31, 2010 on which Parent and Borrower delivers a Compliance Certificate evidencing a Fixed Charge Coverage Ratio greater than 1.25 to 1.00 and (ii) the determination of the Applicable Rate for any period shall be subject to the last sentence of Section 5.1(f).

§ 2.2. Affirmative Covenants.

(a) Subsection (a) of Section 5.1 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

(a) Compliance Certificate. On or before the thirtieth (30th) day after the end of each calendar month, deliver to each Bank a Compliance Certificate.

(b) The first sentence of subsection (f) of Section 5.1 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

Maintain during each period set forth below a Fixed Charge Coverage Ratio equal to or greater than the ratio set forth below with respect to such period:

From and including September 30, 2010 until and including March 30, 2011 1.15 to 1.00

From and including March 31, 2011 and thereafter 1.25 to 1.00

(c) The first sentence of subsection (k) of Section 5.1 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

Maintain during each period set forth below a Leverage Ratio equal to or less than the ratio setforth below with respect to such period:

From and including September 30, 2010 until and including March 30, 2011 2.75 to 1.00

From and including March 31, 2011 and thereafter 2.50 to 1.00

(d) A new subsection (u) is hereby added to Section 5.1 of the Original Credit Agreement immediately after the existing subsection (t) to read as follows:

(u) Engagement of Consultant. No later than December 15, 2010, the Companies will engage a consultant to conduct a comprehensive review of the business and operations of the Companies and will, promptly after receipt thereof, deliver the report of such consultant to the Banks.

§ 2.3. Negative Covenants. Section (h) of Section 5.2 of the Original Credit Agreement is hereby amended in its entirety to read as follows:

(h) Capital Expenditures. Permit the aggregate amount of all Capital Expenditures made by the Companies, during the most recently ended twelve (12) month period (net of the proceeds of the sale or exchange of any fixed assets), to exceed $20,000,000.

§ 2.4. Schedules and Exhibits. Schedule 1.1, Commitments, and Exhibit C, Promissory Note, to this Amendment are hereby substituted for Schedule 1.1 and Exhibit C, respectively, to the Original Credit Agreement.

ARTICLE III.

Conditions of Effectiveness

§ 3.1. Effective Date. This Amendment shall become effective as of the date first above written when and only when Administrative Agent shall have received, at Administrative Agent’s office,

(a) a duly executed counterpart of this Amendment,

(b) the duly executed Renewal Note,

(d) a duly executed certificate of the secretary and chief financial officer of Borrower certifying that (i) resolutions of its board of directors attached to the Original Omnibus Certificate authorizing the execution, delivery, and performance of this Amendment and identifying the officers authorized to sign such instrument are in full force and effect, (ii) the specimen signatures of the officers so authorized which were attached to the Original Omnibus Certificate are true and correct, and (iii) the certificate of incorporation and all amendments thereto and the bylaws and all amendments thereto of Borrower attached to the Original Omnibus Certificate are in full force and effect,

(e) a payment of an amendment fee by Borrower to Comerica in the amount of $50,000, and

(f) each other document to be executed and delivered by Borrower pursuant hereto or thereto.

ARTICLE IV.

Representations and Warranties

§ 4.1. Representations and Warranties. In order to induce Administrative Agent and Banks to enter into this Amendment, Borrower and each other Company represents and warrants to Administrative Agent and Banks that:

(a) The representations and warranties contained in Article IV of the Original Credit Agreement are true and correct at and as of the time of the effectiveness hereof;

(b) Each Company is duly authorized to execute and deliver the Amendment Documents to which it is a party and is and will continue to be duly authorized to borrow and to perform its obligations under the Credit Agreement and the other Loan Papers. Each Company has duly taken all corporate action necessary to authorize the execution and delivery of the Amendment Documents to which it is a party and to authorize the performance of the obligations of such Company hereunder and thereunder;

(c) The execution and delivery by each Company of the Amendment Documents to which it is a party, the performance by such Company of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby do not and will not conflict with any provision of law, statute, rule or regulation or of the certificate of incorporation and bylaws of such Company, or of any material agreement, judgment, license, order or permit applicable to or binding upon such Company, or result in the creation of any lien, charge or encumbrance upon any assets or properties of such Company. Except for those which have been duly obtained, no consent, approval, authorization or order of any court or governmental authorit y or third party is required in connection with the execution and delivery by any Company of the Amendment Documents to which it is a party or to consummate the transactions contemplated hereby and thereby;

(d) When duly executed and delivered, each of the Amendment Documents to which it is a party will be a legal and binding instrument and agreement of each Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency and similar laws applying to creditors’ rights generally and by principles of equity applying to creditors’ rights generally; and

(e) The audited annual consolidated financial statements of Parent dated as of December 31, 2009 and the unaudited quarterly consolidated financial statements of Parent dated as of June 30, 2010 fairly present the consolidated financial position at such dates and the consolidated statement of operations and the changes in consolidated financial position for the periods ending on such dates for the Companies. Copies of such financial statements have heretofore been delivered to Banks. Since such dates no material adverse change has occurred in the financial condition or businesses or in the consolidated financial condition or businesses of the Companies.

ARTICLE V.

Miscellaneous

§ 5.1. Ratification of Agreement. The Original Credit Agreement as hereby amended is hereby ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan Document shall be deemed to refer to this Amendment also. Any reference to the Note in any other Loan Document shall be deemed to be a reference to the Renewal Note issued and delivered pursuant to this Amendment. The execution, delivery and effectiveness of this Amendment and the other Amendment Documents shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Administrative Agent or Banks under the Credit Agreement or any other Loan Document nor constitute a waiver of any provi sion of the Credit Agreement or any other Loan Document.

§ 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of Borrower herein shall survive the execution and delivery of this Amendment and the performance hereof, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by any Company hereunder or under the Credit Agreement to Banks shall be deemed to constitute representations and warranties by, or agreements and covenants of, the Companies under this Amendment and under the Credit Agreement.

§ 5.3. Loan Papers. This Amendment and the other Amendment Documents are each a Loan Paper, and all provisions in the Credit Agreement pertaining to Loan Papers apply hereto and thereto.

§ 5.4. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance.

§ 5.5. Counterparts; Fax. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. This Amendment may be duly executed by facsimile or other electronic transmission.

THIS AMENDMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, this Amendment is executed as of the date first above written.

	FFE TRANSPORTATION SERVICES, INC


	By: /s/ John R. McManama
	John R. McManama
	Senior Vice President, Treasurer and Chief
	Financial Officer




	COMERICA BANK


	By: /s/ David Milton
	Name: David Milton
	Title: Senior Vice President

ANNEX I

CONSENT AND AGREEMENT

Each of the undersigned Guarantors hereby (i) consents to the provisions of this Amendment and the transactions contemplated herein, (ii) ratifies and confirms the Second Amended and Restated Guaranty and Second Amended and Restated Security Agreement, each dated as of September 2, 2009, made by it for the benefit of Banks pursuant to the Credit Agreement, (iii) ratifies and confirms all other Loan Papers made by it for the benefit of Banks, (iv) agrees that all of its respective obligations and covenants thereunder shall remain unimpaired by the execution and delivery of this Amendment and the other documents and instruments executed in connection herewith, and (v) agrees that such Guaranty, such Security Agreement and such other Loan Papers shall remain in full force and effect.

	FROZEN FOOD EXPRESS INDUSTRIES, INC.


	By: /s/ John R. McManama
	John R. McManama
	Senior Vice President, Treasurer and Chief
	Financial Officer


	CONWELL CORPORATION


	By: /s/ Leonard W. Bartholomew
	Leonard W. Bartholomew
	Secretary


	FX HOLDINGS, INC.


	By: /s/ Leonard W. Bartholomew
	Leonard W. Bartholomew
	Secretary

	LISA MOTOR LINES, INC.


	By: /s/ Leonard W. Bartholomew
	Leonard W. Bartholomew
	Secretary


	COMPRESSORS PLUS, INC.


	By: /s/ Leonard W. Bartholomew
	Leonard W. Bartholomew
	Secretary


	FFE LOGISTICS, INC.


	By: /s/ Leonard W. Bartholomew
	Leonard W. Bartholomew
	Secretary


	CONWELL, LLC


	By: /s/ Leonard W. Bartholomew
	Leonard W. Bartholomew
	Secretary

SCHEDULE 1.1

CREDIT AGREEMENT

FFE TRANSPORTATION SERVICES, INC.

Commitments

Comerica Bank $20,000,000

Total $20,000,000

EXHIBIT A

REVOLVING NOTE

EXHIBIT C

REVOLVING CREDIT NOTE

$20,000,000 Dallas, Texas October 27, 2010

FOR VALUE RECEIVED, the undersigned, FFE TRANSPORTATION SERVICES, INC. (“Borrower”), a Delaware corporation, hereby unconditionally promises to pay to the order of COMERICA BANK (“Bank”), at the principal offices of Comerica Bank, in Dallas, Texas or at such other address in Dallas County, Texas, as may be designated by Administrative Agent from time to time, the lesser of (i) the principal sum of TWENTY MILLION AND 00/100 Dollars ($20,000,000), or (ii) the aggregate unpaid principal amount of all Loans made by Bank to Borrower pursuant to Article II of the Agreement (as such term is defined below), together with interest on the unpaid principal balance from the date hereof until maturity at such varying rates per annum (but in no event in excess of the Highest Lawful Rate) as determined in accordance with the prov isions of Article II of the Agreement. Borrower promises to pay such principal of, and interest on, this Note on the dates and in the manner provided in the Agreement. If not sooner paid, the unpaid principal balance of this Note and all accrued interest hereon shall be due and payable in full on the Termination Date. All such payments of both principal and interest shall be made in lawful money of the United States of America and in immediately available funds.

All Loans made by Bank to Borrower pursuant to the Agreement and all payments of the principal thereof may be noted by Bank on schedules from time to time attached hereto, or on a continuation of such schedules or otherwise recorded in Bank’s records; provided, however, that the failure of Bank to make any such notation shall not limit or otherwise affect the obligations of Borrower hereunder or under the Agreement.

This Note has been executed and delivered pursuant to the terms of that certain Second Amended and Restated Credit Agreement dated as of September 2, 2009, among Comerica Bank, as Administrative Agent and as Collateral Agent, Borrower, Frozen Food Express Industries, Inc., Conwell Corporation, FX Holdings, Inc., Lisa Motor Lines, Inc., Compressors Plus, Inc., FFE Logistics, Inc., and Conwell LLC (as the same may be renewed, extended, amended, modified and/or restated from time to time, the “Agreement”), and is one of the “Revolving Credit Notes” referred to therein. The holder of this Note is entitled to the benefits of the Agreement and may enforce the agreements contained therein and exercise the remedies provided for thereby, and reference is hereby made to the Agreement for a statement of the payment and prepay ment rights and obligations of Borrower and for a statement of the events upon which and the terms and conditions under which the maturity of this Note may be accelerated.

All defined terms used herein shall have the meanings respectively assigned to them in the Agreement.

If this Note is placed in the hands of an attorney for collection, or if it is collected through any legal proceedings, at law or in equity, or in bankruptcy, receivership or other court proceedings, Borrower agrees to pay all costs of collection, including, but not limited to, court costs and reasonable attorneys’ fees.

Borrower and each surety, endorser, guarantor and other party ever liable for payment of any sums of money payable on this Note, jointly and severally waive presentment and demand for payment, protest, notice of protest, intention to accelerate, acceleration and nonpayment, or other notice of default, and all other notices other than as expressly provided in the Agreement, and agree that their liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, or by any indulgences, or by any release or change in any security for the payment of this Note, and each such Borrower, surety, endorser, guarantor and other party hereby consents to any and all renewals, extensions, indulgences, releases or changes directly affecting any such party other than itself, regardless of the number of such renewals, extensions, indulgences, releases or changes.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE

WITH APPLICABLE FEDERAL LAW AND THE LAWS OF THE STATE OF TEXAS.

It is the intention of the parties hereto to conform strictly to usury laws applicable to Bank. Accordingly, if the transactions contemplated hereby would be usurious under applicable law (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable notwithstanding the provisions of the Agreement), then in the event, notwithstanding anything to the contrary in this Note, the Agreement or in any agreement entered into in connection with or as security for this Note, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to Bank that is contracted for, taken, reserved, charged or received under this Note, the Agreement or under any of the other aforesaid agreements or otherwise in connection with this Note shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be credited by Bank on the principal amount of the Obligations (or, if the principal amount of the Obligations shall have been paid in full, refunded to Borrower); and (ii) in the event that the maturity of this Note is accelerated by reason of an election of Administrative Agent or any Bank resulting from any Default under the Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to Bank may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Note, the Agreement or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by Bank on the principal amount of the Obligations (or, if the principal amount of the obligations shall have been paid in full, refunde d by Bank to Borrower).

The indebtedness evidenced by this Note is in renewal and modification, but not in extinguishment or novation, of the principal indebtedness evidenced by that certain promissory note dated November 4, 2009, in the original principal amount of $25,000,000 executed by the undersigned payable to the order of the Bank.

	FFE TRANSPORTATION SERVICES, INC.


	By: /s/ John R. McManama
	John R. McManama
	Senior Vice President, Treasurer and Chief
	Financial Officer

EX-31.1 4 exh31_1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER SECTION 302 exh31_1.htm

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stoney M. Stubbs, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2010 of Frozen Food Express Industries, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

		a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

		b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

		c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

		d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: November 2, 2010			/s/ Stoney M. Stubbs, Jr.
			Stoney M. Stubbs, Jr. Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

EX-31.2 5 exh31_2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER SECTION 302 exh31_2.htm

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. McManama, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2010 of Frozen Food Express Industries, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

		a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

		b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

		c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

		d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: November 2, 2010			/s/ John R. McManama
			John R. McManama Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1 6 exh32_1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER SECTION 906 exh32_1.htm

EXHIBIT 32.1

FROZEN FOOD EXPRESS INDUSTRIES, INC.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Frozen Food Express Industries, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned certifies, pursuant to 18 U.S.C. Section §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best knowledge of the undersigned:

(a)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: November 2, 2010		/s/ Stoney M. Stubbs, Jr.
		Stoney M. Stubbs, Jr. Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

Dated: November 2, 2010		/s/ John R. McManama
		John R. McManama Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

-----END PRIVACY-ENHANCED MESSAGE-----

Texas (State or other jurisdiction of incorporation or organization)		75-1301831 (IRS Employer Identification No.)
1145 Empire Central Place Dallas, Texas 75247-4305 (Address of principal executive offices)		(214) 630-8090 (Registrant's telephone number, including area code)

	Class		Number of Shares Outstanding
	Common stock, $1.50 par value		17,506,703 at October 27, 2010

Assets	September 30, 2010			December 31, 2009
Current assets
Cash and cash equivalents	$	2,158		$	3,667
Accounts receivable, net		42,494			41,318
Tires on equipment in use, net		5,685			5,592
Deferred income taxes		2,169			1,532
Property held for sale		1,019			1,019
Other current assets		5,784			12,706
Total current assets		59,309			65,834

Property and equipment, net		72,627			74,845
Other assets		4,858			5,121
Total assets	$	136,794		$	145,800

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	29,739		$	23,773
Insurance and claims accruals		9,816			10,119
Accrued payroll and deferred compensation		5,685			3,837
Accrued liabilities		1,907			1,953
Total current liabilities		47,147			39,682

Deferred income taxes		4,027			9,009
Insurance and claims accruals		5,236			7,374
Total liabilities		56,410			56,065

Shareholders’ equity
Common stock, $1.50 par value per share; 75,000 shares authorized;
18,572 shares issued		27,858			27,858
Additional paid-in capital		1,412			2,923
Retained earnings		59,741			70,172
		89,011			100,953
Treasury stock (1,143 and 1,477 shares), at cost		(8,627	)		(11,218	)
Total shareholders’ equity		80,384			89,735
Total liabilities and shareholders’ equity	$	136,794		$	145,800

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Total operating revenue	$	93,870		$	94,500		$	274,669		$	281,602
Operating expenses
Salaries, wages and related expenses		30,243			30,306			87,288			94,115
Purchased transportation		18,132			20,246			55,972			61,752
Fuel		18,469			17,132			51,782			46,251
Supplies and maintenance		13,447			11,486			36,010			35,874
Revenue equipment rent		9,353			9,431			27,116			29,386
Depreciation		4,216			4,303			12,114			13,296
Communications and utilities		1,287			1,323			3,658			3,898
Claims and insurance		3,486			3,215			10,764			10,934
Operating taxes and licenses		1,003			1,076			3,209			3,656
(Gain) loss on sale of property and equipment		(12	)		177			(592	)		(75	)
Miscellaneous		1,109			638			3,101			2,367
Total operating expenses		100,733			99,333			290,422			301,454
Loss from operations		(6,863	)		(4,833	)		(15,753	)		(19,852	)
Interest and other (income) expense
Interest income		(15	)		(1	)		(30	)		(5	)
Interest expense		105			5			308			9
Equity in earnings of limited partnership		(246	)		(313	)		(443	)		(472	)
Life insurance and other		(43	)		106			84			591
Total interest and other (income) expense		(199	)		(203	)		(81	)		123
Loss before income taxes		(6,664	)		(4,630	)		(15,672	)		(19,975	)
Income tax benefit		(4,383	)		(2,070	)		(5,241	)		(6,126	)
Net loss	$	(2,281	)	$	(2,560	)	$	(10,431	)	$	(13,849	)

Net loss per share of common stock
Basic	$	(0.13	)	$	(0.15	)	$	(0.61	)	$	(0.81	)
Diluted	$	(0.13	)	$	(0.15	)	$	(0.61	)	$	(0.81	)
Weighted average shares outstanding
Basic		17,384			17,149			17,223			17,069
Diluted		17,384			17,149			17,223			17,069
Dividends declared per common share	$	-		$	-		$	-		$	0.03

	Nine Months Ended September 30,
	2010			2009
Cash flows from operating activities
Net loss	$	(10,431	)	$	(13,849	)
Non-cash items included in net loss
Gain on sale of property and equipment		(592	)		(75	)
Depreciation and amortization		14,963			16,831
Provision for losses on accounts receivable		678			216
Deferred income tax		(5,619	)		(6,475	)
Deferred compensation		492			172
Investment income		(443	)		(472	)
Changes in operating assets and liabilities
Accounts receivable		(1,854	)		9,195
Tires on equipment in use		(2,861	)		(3,112	)
Other current assets		6,521			1,636
Accounts payable		7,251			(1,617	)
Other assets		(467	)		-
Insurance and claims accruals		(2,441	)		2,608
Accrued liabilities, payroll and other		1,796			776
Net cash provided by operating activities		6,993			5,834

Cash flows from investing activities
Expenditures for property and equipment		(16,719	)		(12,395	)
Proceeds from sale of property and equipment		6,531			7,952
Cash distributions from investment		1,016			682
Other		76			(94	)
Net cash used in investing activities		(9,096	)		(3,855	)

Cash flows from financing activities
Proceeds from borrowings		15,272			21,100
Payments against borrowings		(15,272	)		(21,100	)
Dividends paid		-			(515	)
Income tax expense of stock options and restricted stock		(6	)		(41	)
Proceeds from capital stock transactions, net		671			96
Purchases of treasury stock		(71	)		(157	)
Net cash provided by (used in) financing activities		594			(617	)

Net (decrease) increase in cash and cash equivalents		(1,509	)		1,362
Cash and cash equivalents at beginning of period		3,667			1,308
Cash and cash equivalents at end of period	$	2,158		$	2,670

	PART I Financial Information	Page No.

Item 1	Financial Statements
	Consolidated Condensed Balance Sheets (unaudited) September 30, 2010 and December 31, 2009	1

	Consolidated Condensed Statements of Operations (unaudited) Three and nine months ended September 30, 2010 and 2009	2

	Consolidated Condensed Statements of Cash Flows (unaudited) Nine months ended September 30, 2010 and 2009	3

	Consolidated Condensed Statements of Shareholders’ Equity (unaudited)	4

	Notes to Consolidated Condensed Financial Statements (unaudited)	5

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	7

Item 3	Quantitative and Qualitative Disclosures about Market Risk	24

Item 4	Controls and Procedures	24

	PART IIOther Information

Item 1	Legal Proceedings	25

Item 1A	Risk Factors	25

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3	Defaults Upon Senior Securities	25

Item 4	Reserved	25

Item 5	Other Information	25

Item 6	Exhibits	26

	Signatures	27

	Exhibit Index	28

	Common Stock				Additional
	Shares		Par		Paid-in			Retained			Treasury Stock
	Issued		Value		Capital			Earnings			Shares			Cost			Total
January 1, 2009		18,572	$	27,858	$	5,412		$	87,103			1,813		$	(13,922	)	$	106,451
Net loss		-		-		-			(16,415	)		-			-			(16,415	)
Treasury stock reacquired		-		-		-			-			39			(161	)		(161	)
Retirement plans		-		-		(15	)		-			4			(25	)		(40	)
Exercise of stock options		-		-		(171	)		-			(35	)		267			96
Restricted stock		-		-		(2,270	)		-			(344	)		2,623			353
Dividends		-		-		-			(516	)		-			-			(516	)
Tax expense of stock options		-		-		(33	)		-			-			-			(33	)
December 31, 2009		18,572		27,858		2,923			70,172			1,477			(11,218	)		89,735
Net loss		-		-		-			(10,431	)		-			-			(10,431	)
Treasury stock reacquired		-		-		-			-			19			(71	)		(71	)
Retirement plans		-		-		(38	)		-			(7	)		53			15
Exercise of stock options		-		-		(1,146	)		-			(241	)		1,817			671
Restricted stock		-		-		(321	)		-			(105	)		792			471
Tax expense of stock options		-		-		(6	)		-			-			-			(6	)
September 30, 2010		18,572	$	27,858	$	1,412		$	59,741			1,143		$	(8,627	)	$	80,384

	(in thousands, except per share amounts)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Numerator:
Net loss	$	(2,281	)	$	(2,560	)	$	(10,431	)	$	(13,849	)

Denominator:
Basic-weighted average shares		17,384			17,149			17,223			17,069
Effect of dilutive stock options		-			-			-			-
Diluted-weighted average shares		17,384			17,149			17,223			17,069

Basic loss per common share	$	(0.13	)	$	(0.15	)	$	(0.61	)	$	(0.81	)
Diluted loss per common share	$	(0.13	)	$	(0.15	)	$	(0.61	)	$	(0.81	)