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, 2011. 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 for the year ended December 31, 2011. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

OVERVIEW

The Company generated operating income of $1.6 million and net income of $1.1 million in the second quarter of 2012, the Company's first quarterly profit since the third quarter of 2008. The improvement in profitability remains consistent with our expectations and is attributable to improved yields in both truckload and less-than-truckload ("LTL") services, increased shipment counts in LTL services, increased revenue in our brokerage/logistics services, which contains our growing water transport services and air freight offerings, and a $10.9 million reduction in operating expenses when compared to the second quarter of 2011. The overall operating ratio improved to 98.4% for the quarter ended June 30, 2012 compared to 103.7% for the same period in 2011. Compared to the second quarter ended June 30, 2011, most major categories of expense were lower in the second quarter ended June 30, 2012, led by decreases in fuel costs, supplies and expenses, salaries and related expenses and purchased transportation. For the three month period ended June 30, 2012, an increase in revenue equipment rental expense was offset with a decrease in depreciation.

As we work to sustain profitability, our focus continues on maintaining improved pricing yields in truckload, LTL and other service offerings. We continue to develop our water transport services, which support crude oil drilling operations, and have completed our third complete quarter of this operation.
Though a driver shortage continues, our FFE Driver Academy is providing us with available drivers and has supported our growth in the water transport services portion of our business. We remain steadfast in providing an excellent service product and investing in technology that we anticipate will improve our customer service and shipping efficiencies. Due to continuing capacity shortage and increasing shipping requirements, pricing continues to improve. Fuel surcharges are used to offset the higher cost of tractor fuel and are not contributing to other escalating costs related to equipment, government regulations such as the Compliance Safety Accountability ("CSA") program, or higher driver recruiting and retention costs; however, fuel surcharges do not serve to totally offset whatever increase in fuel prices we might experience. Fuel surcharges also do not offset the fuel price impact on fuel to operate the refrigeration units.
Due to declining fuel prices in the second quarter, fuel surcharge revenue declined $3.3 million compared to the second quarter of 2011.

We generate our revenue from truckload, LTL, dedicated and brokerage services provided 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 service charges, 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 United States 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.

Improving demand for truckload services supported rates in 2011 and has continued into 2012 with overall higher rates per mile compared to the same period last year. Compared to the quarter ended June 30, 2011, truckload revenue per loaded mile improved 6.8% for the quarter ended June 30, 2012. LTL rates have improved 5.2% over the same period. Revenues from water transport services improved our brokerage and logistics revenues as the amount of equipment operating increased during the latter part of the first quarter of 2012 and as a result, overall brokerage and logistic revenues increased $5.0 million for the quarter ended June 30, 2012. The shortage of drivers continues to be of concern in our industry; however our FFE Driving Academy, which has now been operating for over a year, has significantly improved our ability to offset driver turnover and to support growth.

Results of Operations

Our revenue results were consistent with our stated plans to improve our revenue yields through appropriate pricing decisions, eliminate revenue profiles that were not profitable, increase our truck utility to gain more revenue and enhance our margin profile through focused offerings such as our logistics water transport services provided to oil field drilling companies. For the second quarter of 2012, our total operating revenue was $5.6 million, or 5.6%, less than during the same period of 2011. Most of this decrease is as a result of the decision to exit our dry van services in the fourth quarter of 2011 which had an impact of reducing our dry freight revenue by $6.1 million in the second quarter of 2012. During the three months ended June 30, 2012, our total operating revenue, net of fuel surcharges, decreased $2.3 million, or 2.9%, to $76.3 million from $78.6 million for the same period in 2011. Excluding fuel surcharges, our average revenue per tractor per week increased 6.7% to $3,559, as a result of a 5.6% increase in revenue per total mile as well as a 5.2% increase in LTL rates over the same period last year.

Truckload revenue decreased $9.6 million in the second quarter of 2012, or 20.3%, primarily as a result of our decisions to exit certain dry van related services in the fourth quarter of 2011, which reduced dry freight revenue by $6.1 million in the second quarter of 2012, and to provide linehaul support to our growing refrigerated LTL operations. We continued to handle a limited amount of dry freight on our temperature controlled trailers during the second quarter of 2012 to fill backhaul lanes and provide requested services if capacity was available. The Company's ongoing focus on improving truckload service rates was reflected in truckload revenue per loaded mile, which grew to $1.72 per mile compared to $1.61 over the same period in 2011, an increase of 6.8%. LTL rates also improved during the second quarter of 2012, with revenue per hundredweight increasing 5.2% to $14.29 from $13.58 in the same period of 2011. LTL shipments and tonnage levels improved 7.0% and 2.2%, respectively, during the second quarter of 2012 compared to the second quarter in 2011.
During the three months ended June 30, 2012, brokerage and logistic revenue increased by $5.0 million or 326.1% compared to the same period in 2011, driven largely by growth in our oil field water transport services. Water transport services revenue grew approximately 60% compared to the first quarter of 2012 and 290% compared to the fourth quarter of 2011, which was the first full quarter of operation. Excluding the revenues from dry van services and fuel surcharges, our revenues increased 5.7% during the second quarter of 2012.

The impact on our profitability attributable to operating expense is primarily influenced by variable costs associated with transporting freight for our customers and fixed costs largely related to salaried operations personnel, facilities and equipment. Costs that are more variable in nature include fuel expense, driver-related expenses such as wages, benefits, recruitment and training, and owner-operator costs. Expenses that have both fixed and variable components include maintenance, 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 relate 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 to help us manage our business. For example, fuel prices fluctuated dramatically and quickly 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 idle management technology, which monitors the temperature of the cab and allows the engine to operate more efficiently while not on the road. In addition, new technology currently being deployed will contribute to improved management of out of route miles and other factors that influence fuel costs, such as the number of hours of refrigeration activity.

Our operating expense as a percentage of operating revenue, or "operating ratio," was 98.4% for the second quarter of 2012 compared to 103.7% over the same period in 2011. The improvement in operating ratio was driven by strategic decisions made by the Company to: renew the fleet, which reduced our average tractor age to 2.1 years versus 2.8 years in June of 2011, reduced supplies and maintenance expenses by $1.9 million versus the second quarter of 2011 and contributed to reductions in fuel cost through improved miles per gallon; exit unprofitable business segments which served to reduce expenses more than the reduction in revenue through reductions in equipment depreciation, salaries and wages as we became more efficient, and purchased transportation. In dollar terms, almost all categories of expense declined. The most significant expense increase was a result of our revenue equipment rentals. This increased revenue equipment rental expense was offset by a decrease in depreciation. The Company earned net income of $0.06 per basic and diluted share during the second quarter of 2012 compared to net loss of $0.19 over the same period in 2011.

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 six month periods ended June 30:

                                                Three Months                 Six Months
Revenue from (a)                             2012          2011          2012          2011
Temperature-controlled services            $  27,320     $  30,940     $  51,822     $  60,356
Dry-freight services                           5,617        11,703        11,062        23,123
Total truckload linehaul services             32,937        42,643        62,884        83,479
Dedicated services                             4,719         4,606         9,555         8,911
Total truckload                               37,656        47,249        72,439        92,390
Less-than-truckload linehaul services         31,148        28,967        59,454        55,168
Fuel surcharges                               19,362        22,702        37,156        41,385
Brokerage and logistics services               6,588         1,546        12,704         2,684
Equipment rental                                 951           865         1,887         1,809
Total operating revenue                       95,705       101,329       183,640       193,436

Operating expenses                            94,148       105,096       187,296       205,985
Income (loss) from operations              $   1,557     $  (3,767 )   $  (3,656 )   $ (12,549 )
Operating ratio (b)                             98.4 %       103.7 %       102.0 %       106.5 %

Total truckload revenue                    $  37,656     $  47,249     $  72,439     $  92,390
Less-than-truckload  linehaul revenue         31,148        28,967        59,454        55,168
Total linehaul and dedicated services
revenue                                    $  68,804     $  76,216     $ 131,893     $ 147,558

Weekly average trucks in service               1,487         1,758         1,487         1,765
Revenue per truck per week (c)             $   3,559     $   3,335     $   3,411     $   3,233

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.

                                                  Three Months                     Six Months
Truckload                                     2012            2011            2012            2011
  Total linehaul miles (a)                      21,792          29,863          42,342          59,754
  Loaded miles (a)                              19,185          26,444          37,341          53,080
  Empty mile ratio (b)                            12.0 %          11.4 %          11.8 %          11.2 %
  Linehaul revenue per total mile (c)      $      1.51     $      1.43     $      1.49     $      1.40
  Linehaul revenue per loaded mile (d)     $      1.72     $      1.61     $      1.68     $      1.57
  Linehaul shipments (a)                          21.0            29.3            40.6            58.5
  Loaded miles per shipment (e)                    913             902             920             907
LTL
  Hundredweight                              2,179,967       2,132,554       4,183,502       4,066,405
  Shipments (a)                                   71.7            67.0           138.8           128.0
  Linehaul revenue per hundredweight (f)   $     14.29     $     13.58     $     14.21     $     13.57
  Linehaul revenue per shipment (g)        $       434     $       432     $       428     $       431
  Average weight per shipment (h)                3,040           3,182           3,014           3,177

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 owner-operators as of June 30:

                                                                  2012        2011
Total company tractors available for freight operations            1,348       1,576
Total owner-operator tractors available for freight operations       260         264
Total tractors available for freight operations                    1,608       1,840
Total trailers available for freight operations                    2,968       3,516

Comparison of Three Months Ended June 30, 2012 to Three Months Ended June 30, 2011

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

                                                                                          Percentage
                                                                                            Change
                                                                         Dollar Change     2012 vs.
Revenue from (a)                            2012           2011          2012 vs. 2011       2011
Temperature-controlled services          $   27,320     $   30,940       $       (3,620 )      (11.7 ) %
Dry-freight services                          5,617         11,703               (6,086 )      (52.0 )
Total truckload linehaul services            32,937         42,643               (9,706 )      (22.8 )
Dedicated services                            4,719          4,606                  113          2.5
Total truckload                              37,656         47,249               (9,593 )      (20.3 )
Less-than-truckload linehaul services        31,148         28,967                2,181          7.5
Fuel surcharges                              19,362         22,702               (3,340 )      (14.7 )
Brokerage and logistics services              6,588          1,546                5,042        326.1
Equipment rental                                951            865                   86          9.9
Total operating revenue                      95,705        101,329               (5,624 )       (5.6 )

Operating expenses                           94,148        105,096              (10,948 )      (10.4 )
Income (loss) from operations            $    1,557     $   (3,767 )     $        5,324       (141.3 ) %
Operating ratio (b)                            98.4 %        103.7 %

Total truckload revenue                  $   37,656     $   47,249       $       (9,593 )      (20.3 ) %
Less-than-truckload linehaul revenue         31,148         28,967                2,181          7.5
Total linehaul and dedicated services
revenue                                  $   68,804     $   76,216       $       (7,412 )       (9.7 ) %

Weekly average trucks in service              1,487          1,758                 (271 )      (15.4 ) %
Revenue per truck per week (c)           $    3,559     $    3,335       $          224          6.7   %

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

Total operating revenue for the second quarter of 2012 was $5.6 million, or 5.6%, less than the same period of 2011. Driven by a reduction in dry freight revenue as a result of exiting dry van services, total truckload linehaul services revenue decreased $9.7 million, or 22.8%, to $32.9 million in 2012 from $42.6 million over the same period in 2011. Our total operating revenue excluding both total truckload linehaul services and fuel surcharge increased $7.4 million, or 20.6%, in the second quarter of 2012 versus the same period in 2011.

The sale of the dry van services related equipment in the fourth quarter of 2011 is the primary reason for a reduction in average weekly trucks in service with 1,487 in the second quarter of 2012 compared to 1,758 the same period in 2011. The number of truckload shipments decreased 28.3% to 21,020 in the second quarter of 2012 from 29,302 in 2011. Truckload revenue, excluding fuel surcharges, decreased $9.6 million, or 20.3%, to $37.7 million from $47.2 million in 2011. Truckload revenues decreased primarily as a result of the sale of 228 trucks and 415 trailers in the fourth quarter of 2011. This reduction in revenue equipment was partially offset by improved revenue per loaded mile of $1.72 for the second quarter of 2012 compared to $1.61 for the same quarter last year. The sale of the dry van services revenue equipment served to reduce our loaded miles 27.5%, to 19.2 million from 26.4 million in the same period in 2011, while the empty mile ratio increased slightly to 12.0% in the second quarter of 2012 compared to 11.4% in the same period in 2011.

LTL revenue improved during the second quarter of 2012 due to increasing customer demand for LTL services, which resulted in a 7.0 % increase in shipment count. The increased shipment count more than offset a 4.5% decrease in weight per shipment, resulting in a 2.2% increase in tonnage to 218.0 million pounds in the second quarter of 2012 compared to 213.3 million pounds for the same period in 2011. The LTL revenue per hundredweight increased 5.2% to $14.29 in the second quarter of 2012 from $13.58 per hundredweight in the same period of 2011.
As a result, LTL revenue grew $2.2 million, or 7.5%, to $31.1 million in the second quarter of 2012 compared to $29.0 million in the same period of 2011.

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)    Percentage
                                       Dollar Change       Change        Percentage of Revenue
                                                           2012 vs
                                        2012 vs 2011        2011           2012          2011
Total operating revenue               $         (5,624 )        (5.6 )%      100.0 %       100.0 %

Operating Expenses
   Salaries, wages and related
expenses                                        (1,564 )        (5.3 )        29.3          29.3
   Purchased transportation                       (796 )        (4.6 )        17.2          17.1
   Fuel                                         (5,581 )       (22.0 )        20.6          25.0
   Supplies and maintenance                     (1,867 )       (13.1 )        12.9          14.0
   Revenue equipment rent                        1,553          17.8          10.8           8.6
   Depreciation                                 (1,644 )       (36.1 )         3.0           4.5
   Communications and utilities                    195          18.6           1.3           1.0
   Claims and insurance                           (555 )       (22.9 )         1.9           2.4
   Operating taxes and licenses                     (4 )        (0.4 )         1.1           1.1
   Gain on sale of property and
equipment                                         (203 )        35.4          (0.8 )        (0.6 )
   Miscellaneous                                  (482 )       (35.8 )         0.9           1.3
Total Operating Expenses              $        (10,948 )       (10.4 )%       98.4 %       103.7 %

Total operating expenses for the second quarter of 2012 decreased $10.9 million, or 10.4%, to $94.1 million from $105.1 million in 2011. The operating ratio decreased to 98.4% from 103.7% in the second quarter 2011 as our operating expenses decreased at a higher rate than our revenue. Contributing to the decrease in operating expenses were lower costs attributable to fuel, supplies and maintenance, depreciation, and salaries, wages and related expenses. In addition to fuel price per gallon decreasing approximately 2.9% in the second quarter of 2012 compared to the same period last year, we also experienced improved fuel efficiency due to the replacement of old tractors with new, more fuel efficient tractors in the first and second quarters of 2012. Revenue equipment rent expense increased by 17.8% in the second quarter of 2012, which was attributable to our use of new tractors under operating leases to replace tractors we began selling in the fourth quarter of 2011. The increase in revenue equipment rent expense was offset by a reduction in depreciation. Even though overall operating costs declined 10.4%, we continue to maintain a strict cost control program as commodity costs such as rubber, steel and other metals continue to drive up the cost of equipment and tires. Our wage rates remain at previous levels, and we continue to monitor and control discretionary expenditures.

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 the salary, wage and related expenses is driver pay, which is affected by the mix of company drivers and owner-operators in our fleet as well as in the efficiency of our over-the-road operations. Overall salaries, wages and related expenses declined $1.6 million, or 5.3%. Driver salaries, including per diem costs, decreased $1.1 million, or 6.1%, primarily due to a decrease in our fleet size.
Non-driver salaries decreased $0.6 million due to the reduction in force that was implemented in the fourth quarter of 2011. Our overall non-driving employee count was 681 at the end of the second quarter of 2012 compared to 716 at the end of the same period in 2011 and compared to 779 for the third quarter of 2011 which was just prior to the reduction in force.

Purchased transportation expense consists of payments to owner-operators for the equipment and services they provide, payments to other motor carriers who handle our brokerage and logistics services and to various railroads for intermodal services. It also includes fuel surcharges paid to our owner-operators for which we charge our customers. These expenses are highly variable with revenue and/or the mix of Company drivers versus owner-operators. Purchased transportation expense decreased $0.8 million, or 4.6%, in 2012 compared to the same period in 2011. The portion of our purchased transportation connected with our truckload and LTL services decreased $0.6 million, excluding fuel surcharges, primarily reflecting a 7.5% decrease in the number of owner-operators utilized during the second quarter of 2012 in our LTL services compared to the same period in 2011. Fuel payments to our owner-operators increased $0.9 million in the second quarter of 2012 to $4.4 million.