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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

COMMISSION FILE NO. 0-15057

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




Delaware 71-0633135
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)



Highway 412 West
P.O. Box 188
Tontitown, Arkansas 72770
(501) 361-9111
(Address of principal executive offices, including zip code,
and telephone number, including area code)


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

Securities registered pursuant to section 12(g) of the Act: Common Stock, $.01
par value

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

Yes X No
---- ----

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

The aggregate market value of the common stock of the registrant held by
non-affiliates of the registrant on March 21, 1996 was $14,545,223. Solely for
the purposes of this response, executive officers, directors and beneficial
owners of more than five percent of the Company's common stock are considered
the affiliates of the Company at that date.

The number of shares outstanding of the issuer's common stock, as of March 21,
1996: 5,008,357 shares of $.01 par value common stock.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held in 1996 is incorporated by reference in answer to Part
III of this report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.


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PART I


ITEM 1. BUSINESS.

P.A.M. Transportation Services, Inc. (the "Company"), operating through
its wholly-owned subsidiaries, is an irregular route, common and contract motor
carrier authorized to transport general commodities throughout the continental
United States and the Canadian provinces of Ontario and Quebec, pursuant to
operating authorities granted by the former Interstate Commerce Commission
("ICC"), various state regulatory agencies and Canadian regulatory agencies.
Under its operating authorities, the Company may transport all types of freight
(except household goods, commodities in bulk and certain explosives) intrastate
within any state, and from any point in the continental United States, Ontario
or Quebec to any other point in the continental United States or in Ontario or
Quebec over any route selected by the Company. The Company transports dry
freight commodities ("freight") in 48-foot and 53-foot long, high cube
conventional and specialized freight vans ("trailers"). The freight consists
primarily of automotive parts, consumer goods, such as general retail store
merchandise and products from the manufacturing sector, such as heating and air
conditioning units, and industrial glass. All freight is transported as
truckload quantities.

The Company is a holding company organized under the laws of the State of
Delaware in June 1986 and conducts its operations through its wholly-owned
subsidiaries, P.A.M. Transport, Inc. ("P.A.M. Transport"), P.A.M. Special
Services, Inc., T.T.X., Inc., P.A.M. Dedicated Services, Inc., Choctaw Express,
Inc., Choctaw Brokerage, Inc. and Allen Freight Services, Inc. (see below).
The Company's operating authorities are held by P.A.M. Transport, Choctaw
Express, Inc., Choctaw Brokerage, Inc. and Allen Freight Services, Inc.
Although not organized until June 1986, the Company is, for financial
accounting purposes, the successor to P.A.M. Transport, which was organized
under the laws of the State of Arkansas in 1980. Unless the context otherwise
requires, all references to the Company in this Annual Report on Form 10-K
include P.A.M. Transportation Services, Inc. and its subsidiaries. At December
31, 1995, the Company operated a transport fleet consisting of 716
over-the-road tractors ("tractors") and 1,638 trailers.

The Company is headquartered and maintains its primary terminal,
maintenance facilities and corporate and administrative offices in Tontitown in
the northwest corner of Arkansas, a major center for the trucking industry and
where the support services (including warranty repair services) of most major
tractor and trailer equipment manufacturers are readily available.

RECENT ACQUISITIONS

On March 11, 1996, the Company closed the purchase of all of the
outstanding capital stock (the "Shares") of Allen Freight Services, Inc., a
Missouri corporation ("AFS"). The total purchase price for the Shares was
$200,000, which was negotiated by the parties at arms-length. The Company paid
the purchase price by utilizing its existing line of credit.

In connection with the transaction, Haddon N. Allen, William Kirk Allen,
Keith R. Kraegel and G.J. "Jack" Geis (formerly stockholders and
officers/employees of AFS) entered into three-year Non-Competition Agreements
with the Company and Employment Agreements with AFS. Haddon N. Allen will serve
as President and Chief Operating Officer of AFS.

AFS expects to report approximately $16 million in revenues in 1995.


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AFS is engaged in the truckload common and contract motor carrier business, and
is and is headquartered in Jacksonville, Florida. AFS's operations consist
primarily of providing over-the-road trucking services, contract loading
services and dedicated regional distribution services, using 53-foot
conventional trailer equipment. AFS operated a fleet of 160 tractors and 373
trailers at December 31, 1995.

MARKETING/MAJOR CUSTOMERS

The Company's marketing emphasis is directed to that segment of the
truckload market which is generally service-sensitive, as opposed to being
solely price competitive. Since 1990, the Company has diversified its
marketing efforts to gain access to non-traditional freight traffic, including
international (Mexico and Canada), domestic regional short-haul, dedicated
fleet services and intermodal transportation. The Company also participates in
various "core carrier" partnerships with its larger customers. The Company
estimates that approximately 60% of its deliveries to customers are made on a
JIT ("just in time") basis, whereby products and raw materials are scheduled
for delivery as they are needed on the retail customer's shelves or in the
manufacturing customer's production line. Such requirements place a premium on
the freight carrier's delivery performance and reliability. With respect to
these JIT deliveries, approximately 80% require the use of two-man driver teams
to meet the customer's schedule. The need for this service is a product of
modern manufacturing and assembly methods which are designed to drastically
decrease inventory levels and handling costs.

The Company's marketing efforts are conducted by six outside sales persons
domiciled within the Company's major markets. Field personnel are supervised
from Company headquarters, emphasizing an even flow of freight traffic (balance
between originations and destinations in a given geographical area) and
minimization of movement of empty equipment.

During 1995, the Company's five largest customers, for which the Company
provides carrier services covering a number of geographic locations, accounted
for approximately 43% of total revenues. General Motors Corporation accounted
for approximately 19% of 1995 revenues and Packard Electric accounted for
approximately 12% of 1995 revenues. A total loss of General Motors or Packard
Electric business, however unlikely, would have an adverse impact on the
Company's operations, at least over the short term.

The Company also provides transportation services to other manufacturers
who are suppliers for automobile manufacturers including General Motors. As a
result, concentration of the Company's business within the automobile industry
is greater than the concentration in a single customer. Of the Company's total
revenues for 1995, 39.8% were derived from transportation services provided to
the automobile manufacturing industry.

The Company is no longer required to file tariffs with the Interstate
Commerce Commission ("ICC") or any successor agency. See "Regulation" section.

OPERATIONS

The Company's operations department is generally divided into two groups -
fleet operations and customer service. Fleet operations personnel maintain
daily contact with drivers and dispatch the predesignated computerized load
assignments to the drivers. Dispatchers also control and oversee the movement
of equipment and drivers and update the computer system as to their location
and status

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after each contact. Customer service personnel handle day-to-day
solicitation of freight from the Company's customers.

The Company maintains a 24-hour dispatch office at its headquarters, with
a toll free WATS line to facilitate communications with both customers and
drivers. The location, status and contact assignment of all of the Company's
equipment are available on an up-to-date basis through the Company's computer
system, which permits the Company to better meet delivery schedules, respond to
customer inquiries and match equipment with the next available load.

The Company recently began installing Qualcomm Omnitracs(TM) display units
in its tractors. The Omnitracs system is a satellite-based positioning and
communications system that allows fleet managers to communicate directly with
drivers. This direct communication creates operating efficiencies in the
dispatch of customer loads. The addition of these units will improve customer
service by simplifying the location of equipment. The Omnitracs system updates
the tractor's position every 30 minutes to permit customers to locate freight
and more precisely estimate pick-up and delivery times. During 1996, the
Company plans to install display units in all tractors involved in JIT service.

Each Customer Service Representative ("CSR") has an assigned geographic
region for which he or she has responsibility for efficiently matching the
customer's freight pickup origins with available equipment in the area. The
CSR obtains all relevant information from the customer regarding the service
needs of the freight shipment and enters the data into the Company's computer,
assigning the most practical tractor to the load and scheduling the delivery
appointment. A substantial majority of customers' orders require freight
pickup within 24 hours of such order, making responsiveness and availability of
equipment another major component of customer service.

The Company communicates through electronic data interchange with many of
its customers, providing live status reports of freight shipments and arrival
time information. This system provides the Company's customers flexibility and
convenience by allowing the customer to tender freight electronically.

DEDICATED SERVICE

The Company has contractual arrangements with customers to move freight in
dedicated lanes within the United States, primarily in the Midwest and between
the Midwest and Southwest. A majority of this freight is moved on a round-trip
basis, and due to the volume involved, the Company agreed to dedicate equipment
and personnel to handle this part of its business. At December 31, 1995, 342
tractors, 238 of which are manned with two-man driver teams, and approximately
786 trailers were dedicated to this service. The Company has found that
dedicated service promotes increased utilization of equipment and greater
driver satisfaction due to the greater regularity of the routes and schedules,
which allows the drivers to be at home more often.

The dedicated services business amounted to approximately 58% of 1995
revenues, 44% of 1994 revenues, and 32% of 1993 revenues. There exists a large
volume of dedicated-type business throughout the continental United States.
The Company has enjoyed considerable success in entering this market, and is
aggressively seeking to expand its share of the dedicated services market.

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INTERMODAL SERVICE

The Company entered the intermodal transportation business in early 1992,
and has contractual arrangements with Consolidated Rail Corporation (Conrail),
Norfolk Southern, the Atchison, Topeka and Santa Fe Railway Company (Santa Fe),
Burlington Northern, Union Pacific and CSX Intermodal ("CSX"). Intermodal
service provides customers with an alternative to highway long-hauls.
Management expects to take advantage of opportunities to expand this business
and views the intermodal market as a mechanism to realize non-asset based
revenue growth.

OVER-THE-ROAD EQUIPMENT

The Company operated a fleet of 716 tractors and 1,638 trailers at
December 31, 1995. All of the trailers and all except 45 tractors are owned or
leased by the Company. The trailer fleet is made up of 838 48' by 102" dry
vans and 800 53' by 102" dry vans. In 1993, the Company began its trailer
fleet conversion to air ride equipment and the Company intends to purchase only
air ride trailers in the future. The Company also has certain specialized
drop-frame trailers. The 45 tractors that are not Company owned are utilized
in the dedicated service operations and are leased from owner/operators on a
per mile basis.

The average age of the Company's tractors decreased from 3.04 years in
1993, to 1.70 in 1994 and to 1.26 by the end of 1995. The average age of the
Company's trailer fleet was 3.84, 2.09 and 2.34 by the end of the years 1993,
1994 and 1995, respectively.

During 1995, the Company purchased 306 new tractors and 200 new trailers
and sold 240 tractors and 55 trailers. During 1996, the Company expects to
purchase 200 new tractors and 200 new trailers while continuing to sell older
equipment.

MAINTENANCE

The Company has a strictly enforced comprehensive preventive maintenance
program for the tractors and trailers it operates. Inspections and various
levels of repair and preventive maintenance are performed at set mileage
intervals on both tractors and trailers. Although the majority of maintenance
is performed at the Company's maintenance facility in Tontitown, Arkansas, the
Company's subsidiaries have additional maintenance facilities in Warren, Ohio;
Springfield, Missouri; Dallas, Laredo and El Paso, Texas; Oklahoma City,
Oklahoma; and Columbia, Mississippi. These facilities enhance the Company's
preventive and routine maintenance operations and are strategically located on
major transportation routes where a majority of the Company's freight
originates and terminates. A maintenance and safety inspection is performed on
all vehicles each time they return to a terminal. The Company's primary
maintenance facilities consist of thirteen mechanical repair bays, four
bodyshop bays and three safety and maintenance inspection bays. The Company
believes that its current maintenance facilities will be adequate to
accommodate its fleet for the foreseeable future.

The Company's tractors carry full warranty coverages of at least 100,000
miles. Extended warranties are negotiated with the manufacturer and major
component manufacturer (i.e., engine, transmission, differential) for up to
1,000,000 miles. Trailers are also warranted by the manufacturer and major
component manufacturer for up to five years.


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Manufacturers of tractors are required to certify that new tractors meet
federal emission standards and the Company receives such certifications on each
new tractor it acquires. Certain governmental regulations require the Company
to adhere to a fuel and oil spillage prevention plan and to comply with
regulations concerning the discharge and disposal of waste oil. The Company
believes it is in compliance with applicable waste disposal and emission
regulations. The Company also maintains insurance to cover clean up expense in
the event of a spill.

DRIVERS

At December 31, 1995, the Company utilized 972 drivers in its operations.
All drivers are recruited, screened, drug tested and trained and are subject to
the control and supervision of the Company's operations and safety departments.
The Company's driver training program stresses the importance of reliable,
on-time delivery. Drivers are required to report to their dispatchers daily
and at the earliest possible moment when any condition en route occurs which
might delay their scheduled delivery time.

The Company has established a relationship with a recruiting and training
school in Indiana to enhance its ability to secure the services of qualified
drivers. The Company agrees to pay a student's costs for attending the
training school so long as the student fulfills a commitment to work for the
Company for at least nine months. Drivers who fail to complete their nine
month commitment are required to reimburse all or a portion of the Company's
costs in training the driver, depending upon the date of termination of
employment.

The Company's drivers are selected only after strict application
screening and drug testing. Before being permitted to operate a vehicle for the
Company, drivers must undergo classroom instruction on Company policies and
procedures, safety techniques and proper operation of equipment and then must
pass both written and road tests. Instruction in defensive driving and safety
techniques continues after hiring, with the Company holding seminars at its
terminal in Tontitown. The Company currently employs approximately 28 persons
on a full-time basis in its driver recruiting, training and safety instruction
programs.

The Company's drivers are compensated on the basis of miles driven,
loading and unloading, extra stop pay and layovers in transit. Drivers can
earn bonuses by recruiting other qualified drivers who are employed by the
Company and both cash and non-cash prizes are awarded for consecutive periods
of safe, accident-free driving.

Intense competition in the trucking industry for qualified drivers over
the last several years, along with difficulties and added expense in recruiting
and retaining qualified drivers, has had a negative impact on the industry.
The Company's operations have also been impacted and from time to time the
Company has experienced under-utilization and increased expenses due to a
shortage of qualified drivers. Management places the highest of priorities on
the recruitment and retention of an adequate supply of qualified drivers.

EMPLOYEES

At December 31, 1995, the Company employed 1,192 persons, of which 972 are
drivers, 55 are maintenance personnel, 72 are employed in operations, 30 are
employed in marketing, 28 are employed in safety and personnel, and 35 are
employed in general administration and accounting. Of the total number of
employees, 144 of the Company's employees are salaried, and the remainder are

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employed on an hourly or mileage basis. The Company also has 45
owner/operators under contract who are compensated on a per mile basis. None
of these employees are represented by a collective bargaining unit and the
Company believes that its employee relations are good.

REGULATION

The Company is a common and contract motor carrier that is regulated by
certain state and Canadian regulatory agencies. Prior to January 1, 1996, the
Company was also regulated by the ICC. The ICC governed such activities as the
authority to engage in motor carrier operations, rates and charges, accounting
systems, certain mergers, consolidations, acquisitions and periodic financial
reporting. On January 1, 1996, however, the ICC Termination Act of 1995 (the
"Termination Act") was enacted, terminating the ICC and substantially
deregulating the rail and motor carrier industries.

The Termination Act substantially revises the Motor Carrier Act of 1980,
eliminating numerous unnecessary provisions and streamlining many of the ICC's
functions regarding the regulation of the motor carrier industry. The majority
of the remaining ICC functions are transferred to the Department of
Transportation ("DOT"), with limited responsibilities transferred to a newly
formed Surface Transportation Board. Some of the ICC functions that have been
eliminated include: tariff filings, except for non-contiguous domestic trade;
rate regulation, except for non-contiguous domestic trade and individual
household goods movements; federal grants of operating authority; price
regulation and tariff filing requirements for office and exhibit moves; the
possibility of future undercharge claims; restrictions on intermodal ownership;
review of motor carrier mergers; and state regulation of transportation
intermediaries. In addition, registration and insurance filings under the
Motor Carrier Act are streamlined into a single federal registration and
insurance system to eliminate duplicative and burdensome filing requirements.
Exemption authority to permit administrative deregulation has also been
substantially broadened, with restrictions remaining on only cargo loss and
damage, insurance, safety fitness and antitrust immunity.

Prior to the enactment of the Termination Act, most of the ICC's authority
to oversee the commercial operation of the motor carrier industry had already
been transferred to the DOT. The primary remaining functions which are
transferred to the DOT by the Termination Act are motor carrier registration
and the setting and maintenance of minimum levels of liability insurance. In
addition, the maintenance of nationwide motor carrier industry commercial rules
(such as leasing rules, uniform cargo loss and damage rules, rules for shipper
payment, and perfecting security interests) are transferred to the DOT.

Currently, the ICC and the DOT operate separate registration systems. The
ICC requires that interstate, for hire carriers receive a license (operating
authority) with the standards for granting of authority limited to a showing of
safety and fitness and insurance coverage at a specified level. The DOT
registration system extends to all carriers, including private and exempt
carriers not regulated by the ICC. DOT assigns each carrier an identification
number. Carriers are not required to show proof of insurance at the time of
DOT registration, nor is any fee currently charged. The Termination Act
continues the two registration systems for a period of twenty-four months,
during which time the Secretary of Transportation shall conduct a rule-making
and implement changes to consolidate these two registration systems into one
system. The new system will serve as a clearing house and depository of
information on and identification of all domestic and foreign motor carriers,
brokers, freight forwarders and others required to register. The DOT will
utilize the information in overseeing

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safety fitness and compliance with required levels of insurance.
Registrations will be renewed periodically and the on-line system will be
available to state authorities and the public.

The Termination Act also continues antitrust immunity granted by the ICC
but contains reforms intended to prevent any potential market abuses.

On January 1, 1995, federal legislation went into effect eliminating
intrastate regulation of motor carrier operations. This action will allow the
Company to better compete for intrastate business, possibly reducing empty
miles, and should result in more comprehensive service to the Company's
existing customers.

Motor carrier operations are also subject to safety requirements
prescribed by the United States Department of Transportation governing
interstate operation. Such matters as weight and dimensions of equipment are
also subject to federal and state regulations.

The Company believes that it is in compliance in all material respects
with applicable regulatory requirements relating to its trucking business and
operates with a satisfactory rating from the United States Department of
Transportation.

COMPETITION

The trucking industry is highly competitive. The Company competes
primarily with other irregular route long-haul truckload carriers, with private
carriage conducted by its existing and potential customers, and, to a lesser
extent, with the railroads. Increased competition has resulted from
deregulation of the trucking industry and has generally exerted downward
pressure on prices. The Company competes on the basis of its quality of
service and delivery performance as well as price. Many of the other irregular
route long-haul truckload carriers have substantially greater financial
resources, own more equipment or carry a larger total volume of freight than
the Company.

EXECUTIVE OFFICERS

The executive officers of the Company are as follows:


Name Position with Company
---------------- -------------------------------------

Robert W. Weaver President and Chief Executive Officer

W. Clif Lawson Executive Vice President and Chief
Operating Officer

Larry J. Goddard Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer

ROBERT W. WEAVER, age 46, is a co-founder of the Company and served as its
Vice President from March 1980 to June 1986. He was President and Chief
Operating Officer from June 1986 until he resigned in February 1987. Between
February 1987 and September 1989, he was self-employed as a transportation
consultant. In September 1989, Mr. Weaver returned to the Company as President
and Chief Operating Officer and a director. On February 22, 1990, he was
appointed Chief Executive Officer.

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W. CLIF LAWSON, age 42, has been Executive Vice President of the Company
since August 1989 and Chief Operating Officer since March 1992. He joined the
Company in June 1984 and served in various operations and sales capacities
until August 1989.

LARRY J. GODDARD, age 37, has been Vice President-Finance and Chief
Financial Officer since January 1991 and served as Controller of the Company
from May 1989 to January 1991. In addition, he has served as Secretary since
September 1989, and Treasurer since May 1991. From November 1987 to May 1989,
he served as General Accounting Manager of the Company.

ITEM 2. PROPERTIES.

The Company's executive offices and primary terminal facilities are
located in Tontitown, Arkansas. The Company's facilities are located on
approximately 45 acres and consist of 79,193 square feet of office space and
maintenance and storage facilities. The Company's facilities in Tontitown are
owned by the Company.

The Company's subsidiaries also lease terminal facilities in Warren, Ohio;
Springfield, Missouri; Laredo, El Paso, and Dallas, Texas; Oklahoma City,
Oklahoma; Kansas City, Missouri; Topeka, Kansas; and Columbia, Mississippi.
These facilities are leased primarily on a month-to-month basis.

The Company has access to trailer drop and relay stations in various
locations across the country. Each of these facilities is leased by the
Company on a month-to-month basis from an affiliate of its majority
shareholder.

ITEM 3. LEGAL PROCEEDINGS.

The nature of the Company's business routinely results in litigation,
primarily involving claims for personal injuries and property damage incurred
in the transportation of freight, and management of the Company believes all
such litigation is adequately covered by insurance and that adverse results in
one or more of those cases would not have a material adverse effect on the
Company's financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders of the Company
during the fourth quarter ended December 31, 1995.

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PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


The Company's Common Stock is traded on the Nasdaq National Market System
under the Nasdaq symbol PTSI. The following table sets forth, for the fiscal
quarters indicated, the range of the high and low sales price per share for the
Common Stock as quoted on the Nasdaq National Market System.





Fiscal Year Ended December 31, 1995 High Low
-------------------------------------- ---- ----

First Quarter $ 7 1/2 $ 5 1/2

Second Quarter 6 5/8 5 1/2

Third Quarter 8 1/4 5 3/4

Fourth Quarter 8 3/4 6 3/4



Fiscal Year Ended December 31, 1994 High Low
-------------------------------------- ---- ---



First Quarter $ 6 7/8 $ 5 3/4

Second Quarter 6 1/4 4 7/8

Third Quarter 5 5/8 4 1/4

Fourth Quarter 6 1/2 4 5/8




As of March 21, 1996, the number of common shareholders of record was
approximately 517. The Company has not declared or paid any cash dividend on
its common stock. The policy of the Board of Directors of the Company is to
retain earnings for the expansion and development of the Company's business.
Future dividend policy and the payment of dividends, if any, will be determined
by the Board of Directors in light of circumstances then existing, including
the Company's earnings, financial condition and other factors deemed relevant
by the Board.

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ITEM 6. SELECTED FINANCIAL DATA.

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



Years ended December 31,

1995 1994 1993 1992 1991
-------------------------------------------
(in thousands, except per share amounts)


Statements of Operations:

Operating revenues $91,595 $76,147 $70,238 $66,687 $65,722
------- ------- ------- ------- -------
Operating Expenses:
Salaries, wages and benefits 40,020 33,647 31,850 30,745 29,232
Operating supplies 16,719 14,688 16,393 16,248 16,795
Rent and purchased transportation 1,538 991 1,599 3,409 3,286
Depreciation and amortization 9,428 7,142 4,683 3,131 6,030
Operating taxes and licenses 5,608 5,078 4,680 4,410 4,891
Insurance and claims 4,163 3,816 3,686 3,822 4,115
Communications and utilities 852 868 864 914 987
Other 1,666 1,279 1,430 1,168 1,551
(Gain) loss on sale or disposal of
property and equipment 159 (334) (246) (87) (7)
------- ------- ------- ------- -------
Total operating expenses 80,153 67,175 64,939 63,760 66,880
------- ------- ------- ------- -------

Operating income (loss) 11,442 8,972 5,299 2,927 (1,158)
Interest expense (3,521) (2,926) (1,972) (985) (1,430)
Other 166 217 122 (70) 0
------- ------- ------- ------- -------
Income (loss) before income taxes and
dividends on redeemable preferred stock 8,087 6,263 3,449 1,872 (2,588)
Income taxes 3,073 2,493 321 70 0
------- ------- ------- ------- -------
Income (loss) before dividends on
redeemable preferred stock 5,014 3,770 3,128 1,802 (2,588)

Accrued dividends on redeemable
preferred stock 0 30 360 360 360
------- ------- ------- ------- -------
Net income (loss) $ 5,014 $ 3,740 $ 2,768 $ 1,442 $(2,948)
======= ======= ======= ======= =======

Earnings per common share
Primary:
Net income (loss) per share $ .65 $ .50 $ .39 $ .23 $ (.61)
======= ======= ======= ======= =======
Average common and common
equivalent shares outstanding 7,661 7,520 7,335 7,020 4,868
======= ======= ======= ======= =======

Fully diluted:
Net income (loss) per share $ .65 $ .50 $ .37 $ .23 $ (.61)
======= ======= ======= ======= =======

Average common and common
equivalent shares outstanding 7,684(1) 7,522(1) 7,559(1) 7,020(1) 4,868
======= ======= ======= ======= =======


(1) Income per share for 1995, 1994, 1993 and 1992 assumes the exercise of
stock purchase warrants and stock options to purchase an aggregate of
3,529,278, 3,454,549, 3,434,429 and 3,125,250 shares of Common Stock,
respectively. Such warrants and options were antidilutive in 1991.


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Balance Sheet Data
At December 31,

1995 1994 1993 1992 1991
-------------------------------------------
(in thousands)

Total assets $86,808 $65,324 $56,140 $30,676 $29,193
Long-term debt, excluding
current maturities 37,966 32,206 28,650 4,068 2,169
Redeemable preferred stock 0 0 4,397 4,037 3,677
Shareholders' equity 18,232 13,034 9,155 6,312 4,869




Operating Data
For the year ended December 31,

1995 1994 1993 1992 1991
----------------------------------------------

Operating ratio(1) 87.5% 88.2% 92.5% 95.6% 101.8%
Average number of
truckloads per week 1,913 1,617 1,633 1,555 1,328
Average miles per trip 899 859 794 809 968
Total miles traveled (in thousands) 85,588 69,128 64,879 63,423 64,766
Average miles per tractor 118,424 116,181 114,830 110,879 106,523
Average revenue per
tractor per week $ 2,711 $ 2,668 $ 2,462 $ 2,313 $ 2,131
Average revenue per loaded mile $ 1.14 $ 1.18 $ 1.16 $ 1.13 $ 1.09
Empty mile factor 6.2% 6.8% 6.9% 7.3% 6.9%
AT END OF PERIOD:
Total Company-owned/leased tractors 716(2) 595(3) 565(4) 572(5) 608
Average age of all tractors (in years) 1.26 1.70 3.04 3.66 3.47
Total trailers 1,638(6) 1,434(7) 1,512(8) 1,519(9) 1,592
Average age of trailers (in years) 2.34 2.09 3.84 5.28 4.24
Number of employees 1,192 859 945 927 902


(1) Total operating expenses as a percentage of total operating revenues.
(2) Includes 45 owner operator tractors.
(3) Includes 40 owner operator tractors.
(4) Includes 34 owner operator tractors.
(5) Includes 19 tractors leased to an affiliate of the Company's majority
shareholder and 40 owner operated tractors.
(6) Includes 82 trailers leased from an affiliate of the Company's majority
shareholder.
(7) Includes 74 trailers leased from an affiliate of the Company's majority
shareholder.
(8) Includes 266 trailers leased from an affiliate of the Company's majority
shareholder.
(9) Includes 493 trailers leased from an affiliate of the Company's majority
shareholder.

-11-

13


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


The following table sets forth the percentage relationship of revenue and
expense items to operating revenues for the periods indicated.



Percentage of Operating Revenues


Years ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------

Operating revenues 100.0% 100.0% 100.0%
-------- -------- --------
Operating expenses:
Salaries, wages and benefits 43.7 44.2 45.3
Operating supplies 18.3 19.3 23.4
Rent and purchased transportation 1.7 1.3 2.3
Depreciation and amortization 10.3 9.4 6.7
Operating taxes and licenses 6.1 6.7 6.7
Insurance and claims 4.5 5.0 5.2
Communications and utilities 0.9 1.1 1.2
Other 1.8 1.6 2.0
(Gain) loss on sale or disposal
of property and equipment 0.2 (.4) (.3)
-------- -------- --------
Total operating expenses 87.5 88.2 92.5
-------- -------- --------
Operating income 12.5 11.8 7.5
Interest expense (3.8) (3.8) (2.8)
Other, net .2 .2 .2
-------- -------- --------
Income before income taxes and dividends
on redeemable preferred stock 8.9 8.2 4.9
Federal and state income taxes (3.4) (3.3) (.5)
-------- -------- --------
Income before dividends on redeemable
preferred stock 5.5 4.9 4.4
Accrued dividends on redeemable preferred
stock -- -- (.5)
-------- -------- --------
Net income 5.5 4.9 3.9
======== ======== ========


RESULTS OF OPERATIONS

1995 COMPARED TO 1994

For the year ended December 31, 1995, revenues increased 20.3% to $91.6
million as compared to $76.1 million for the year ended December 31, 1994. The
Company's utilization (revenue per tractor per work day) increased 1.6% from
$534 in 1994 to $542 in 1995. The two main factors contributing to the
increase in utilization were (1) the continued replacement of a majority of
older equipment in 1995, reducing the down time related to maintenance problems
with older equipment, and (2) the increase in revenues in the dedicated services
division, due in part as a result of the acquisition of Choctaw Express, Inc.
on January 31, 1995. Choctaw Express, Inc. produced revenues of $8.1 million
in 1995.

-12-

14


The Company's operating ratio improved from 88.2% in 1994 to 87.5% in
1995.

Salaries, wages and benefits increased in absolute dollars, but decreased
as a percentage of revenues from 44.2% in 1994 to 43.7% in 1995. The largest
savings were realized in the areas of maintenance wages where a decrease of .6%
was recorded.

Operating supplies and expenses decreased from 19.3% of revenues in 1994
to 18.3% of revenues in 1995, as the Company continues to modernize its fleet.
The largest savings were realized in the area of equipment maintenance where a
1.0% reduction was realized.

Operating taxes and licenses expenses decreased from 6.7% of revenues in
1994 to 6.1% of revenues in 1995. The .4% decrease was attributable to lower
accruals of state fuel tax expenses.

The Company incurred an increase in depreciation expense of .9% as a
result of new equipment being placed into service in 1995. For the period, as
a percentage of revenues, depreciation expense increased from 9.4% in 1994 to
10.3% in 1995. This increase in depreciation expense was offset by reductions
in operating costs combined with increased utilization of equipment.

Interest expense as a percentage of revenues in 1995 remained consistent
with 1994. Interest expense increased in absolute dollars by $.6 million,
which is attributable to additional long-term debt incurred on equipment
purchased during 1995.

The Company's effective tax rate decreased slightly from 40% in 1994 to
38% in 1995. The Company's effective tax rate reflects the statutory federal
tax rate and the weighted average tax rate of the states in which the Company
conducts business. The 1995 tax rate is slightly lower than the effective tax
rate in 1994 due to a change in the Company's policy relating to driver per
diems in 1995.

In 1994, management concluded that the benefits of all net operating
losses and credits would be recorded and that no valuation allowance against
the deferred tax assets was necessary at December 31, 1994.

At December 31, 1995, the Company's deferred tax assets were $5.9 million
and deferred tax liabilities were $10.8 million. In assessing the need for a
valuation allowance against deferred tax assets at December 31, 1995, management
considered the following factors: 1) the Company has recorded $4.9 million of
deferred tax liabilities for future taxable temporary differences (primarily
depreciation related) which will result in additional taxable income in future
periods; 2) the Company's recent operating results have produced a total of more
than $17.4 million of pretax accounting income for 1995, 1994 and 1993 and net
operating loss carryovers have offset all taxable income (total of $4.6 million)
in these years; 3) the Company has various alternatives, such as equipment
leasing to utilize net operating losses, which might otherwise expire; and 4)
the Company's carryover periods for its deferred tax assets are extensive, with
expiration beginning in 2003 for net operating losses and 1999 for investment
credits.

-13-
15


1994 COMPARED TO 1993

For the year ended December 31, 1994, revenues increased 8.4% to $76.1
million as compared to $70.2 million for the year ended December 31, 1993. The
Company's utilization (revenue per tractor per work day) increased 8.5% from
$492 in 1993 to $534 in 1994. The two main factors contributing to the
increase in utilization were (1) the replacement of a majority of older
equipment in 1994, reducing the down time related to maintenance problems with
older equipment, and (2) the continued growth in the dedicated services
division.

The Company's operating ratio improved from 92.5% in 1993 to 88.2% in
1994.

Salaries, wages and benefits increased in absolute dollars, but decreased
as a percentage of revenues from 45.3% in 1993 to 44.2% in 1994. The largest
savings were in the areas of state unemployment taxes and workers' compensation
where 1.2% was realized due to a rate reduction received on Arkansas
unemployment taxes and the successful implementation of the Company's
self-insured program for workers' compensation in the third quarter of 1994.

Operating supplies and expenses decreased from 23.4% of revenues in 1993
to 19.3% of revenues in 1994, as the Company continues to modernize its fleet.
The largest savings were in the area of equipment maintenance where a $1.6
million reduction was realized.

The Company incurred a significant increase in depreciation expense as a
result of new equipment being placed into service. For the period, as a
percentage of revenues, depreciation expense increased from 6.7% in 1993 to
9.4% in 1994. This increase in depreciation expense was offset by reductions
in operating costs combined with increased utilization of equipment.

As a percentage of revenues, interest expense increased from 2.8% in 1993
to 3.8% in 1994. This increased expense resulted from additional debt
associated with new equipment being placed into service in 1994.

The Company's effective tax rate increased from 10.4% in 1993 to 40% in
1994, due to the Company's continued profitability and the fact that tax
benefits associated with net operating loss carryforwards were substantially
fully recorded as of December 31, 1993.

The availability of restricted net operating losses to offset future
taxable income has been increased in recent years by realization of tax gains
on equipment sales. Based on net operating losses available at December 31,
1994, management concluded that the benefits of all net operating losses and
credits could be recorded. Total deferred tax assets at December 31, 1994 were
$6.1 million and total deferred tax liabilities were $8.4 million.

In assessing the need for a valuation allowance against deferred tax
assets at December 31, 1994 management also considered the following factors:
1) the Company has recorded approximately $2.3 million of deferred tax
liabilities for future taxable temporary differences (primarily depreciation
related) which will result in additional taxable income in future periods; 2)
recent operating results have resulted in a total of more than $10.8 million of
pretax accounting income for 1994, 1993 and 1992 and net operating loss
carryforwards have offset all taxable income (total of $4.9 million) in these
years; 3) various alternatives, such as equipment leasing, are available to
utilize net operating losses, which might otherwise expire; and 4) carryover
periods are extensive, with expiration beginning in 2003 for net operating
losses and 1999 for investment tax credits.

-14-

16


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal subsidiary, P.A.M. Transport, Inc., has a $10.0
million secured line of credit from a bank subject to borrowing limitations.
Outstanding advances on this line of credit were approximately $8.6 million (at
an interest rate of 8.5%) at December 31, 1995, including $.7 million in
letters of credit. The Company's borrowing base limitation at December 31,
1995 was $9.3 million. The line of credit is guaranteed by the Company and
matures May 31, 1997.

P.A.M. Transport entered into installment obligations in 1995 for the
purchase of replacement revenue equipment for approximately $21.2 million.

During 1995, the Company disposed of certain revenue equipment for
approximately $3.8 million. The Company plans to replace 200 trailers and 90
tractors, and to add 110 additional new tractors, during 1996, incurring
additional debt of approximately $14 million.

At December 31, 1995, the Company had working capital of approximately
$1.0 million. Improved operating results provided net cash from operations of
approximately $15.2 million during 1995.

Management expects that the Company's existing working capital and its
available line of credit will be sufficient to meet the Company's commitments
as of December 31, 1995, and to fund its operating needs during fiscal 1996.
However, if additional financing were required, management believes that such
financing would be available from its existing lender.

RECENT DEVELOPMENTS

On March 21, 1996, the Company issued a press release to announce that it
expects the strike (which commenced on or about March 5, 1996) by the United
Auto Workers against General Motors Corporation to have a negative impact on
the Company's earnings for the first quarter ending March 31, 1996. The
Company expects earnings in the first quarter to remain unchanged as compared
to earnings reported in the first fiscal quarter of 1995. For the first
quarter ended March 31, 1995, the Company reported net income of $1 million, or
$.13 per share.

Although the Company has actively sought and obtained replacement freight
to keep utilization at normal levels, the continuance of the strike into the
week of March 18, 1996 began to impact utilization in the dedicated services
division.

SEASONALITY

The Company's revenues do not exhibit a seasonal pattern, due primarily to
its varied customer mix. Operating expenses are generally somewhat higher in
the winter months, primarily due to decreased fuel efficiency and increased
maintenance costs in cold weather.

OTHER MATTERS

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock Based Compensation, which becomes effective in
1996. The Company has disclosed in its 1995 financial statements that it
elects to continue following the existing accounting rules (the intrinsic value
method).


-15-
17



ENVIRONMENTAL

The Company has no outstanding inquiries with any federal or state
environmental agency at December 31, 1995.

INFLATION

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

Competition for drivers has increased in recent years, leading to
increased labor costs. While increases in fuel and driver costs affect the
Company's operating costs, the effects of such increases are not greater for
the Company than for other trucking concerns.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following statements are filed with this report:

Report of Independent Auditors

Consolidated Balance Sheets - December 31, 1995 and 1994

Consolidated Statements of Income - Years ended
December 31, 1995, 1994 and 1993

Consolidated Statements of Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993

Consolidated Statements of Cash Flows - Years
ended December 31, 1995, 1994 and 1993

Notes to Consolidated Financial Statements


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

-16-


18





CONSOLIDATED FINANCIAL STATEMENTS

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


Years ended December 31, 1995, 1994, and 1993
with Report of Independent Auditors



17

19

P.A.M. Transportation Services, Inc. and Subsidiaries

Consolidated Financial Statements

Years ended December 31, 1995, 1994, and 1993




CONTENTS



Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Audited Consolidated Financial Statements

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7






18
20





Report of Ernst & Young LLP, Independent Auditors

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

We have audited the accompanying consolidated balance sheets of P.A.M.
Transportation Services, Inc. and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of P.A.M.
Transportation Services, Inc. and subsidiaries at December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP


Little Rock, Arkansas
February 14, 1996





19
21

P.A.M. Transportation Services, Inc. and Subsidiaries

Consolidated Balance Sheets




DECEMBER 31
1995 1994
-------------------------------
(Thousands, except par values)

ASSETS
Current assets:
Cash and cash equivalents $ 7,629 $ 4,078
Accounts receivable (Note 4):
Trade, net of allowance for doubtful accounts
(1995--$324; 1994--$239) 12,517 8,498
Other 307 482
Operating supplies and inventories 468 579
Equipment held for sale (Note 1) 1,223 1,164
Prepaid expenses and deposits 3,341 2,870
Investment in direct financing lease (Note 8) 691 623
Income taxes refundable 95 154
----------------------------
Total current assets 26,271 18,448

Property and equipment (Notes 4, 8 and 9):
Land 956 956
Structures and improvements 2,395 2,240
Revenue equipment 71,885 57,063
Service vehicles 1,037 1,619
Office furniture and equipment 2,556 2,422
----------------------------
78,829 64,300
Allowances for depreciation and amortization (21,540) (19,316)
----------------------------
57,289 44,984
Other assets:
Investment in direct financing lease, less current portion
(Note 8) 548 1,240
Excess of cost over net assets acquired, net of accumulated
amortization (1995--$502;
1994--$440) (Notes 1 and 2) 1,140 602
Noncompetition agreement, net of accumulated amortization
(1995--$261) (Note 2) 1,059 -
Other 501 50
----------------------------
3,248 1,892
----------------------------
$ 86,808 $ 65,324
============================



20
22







DECEMBER 31
1995 1994
------------------------------
(Thousands, except par values)

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable (Note 8) $ 6,729 $ 4,382
Accrued expenses (Note 3) 3,048 3,059
Deferred income taxes (Note 5) 409 369
Current portion of long-term debt (Notes 4 and 9) 15,120 10,358
----------------------------
Total current liabilities 25,306 18,168


Long-term debt, less current portion (Notes 4 and 9) 37,966 32,206


Deferred income taxes (Note 5) 4,489 1,917


Noncompetition agreement (Note 2) 815 -


Shareholders' equity (Note 6):
Preferred stock, $.01 par value:
Authorized shares--10,000,000
Issued and outstanding--none - -
Common stock, $.01 par value:
Authorized shares--20,000,000
Issued and outstanding shares: 1995--4,990,968;
1994--4,937,857 50 49
Additional paid-in capital 13,307 13,123
Retained earnings (deficit) 4,875 (139)
----------------------------
Total shareholders' equity 18,232 13,033

Commitments
----------------------------
$ 86,808 $ 65,324
============================


See accompanying notes.





21
23

P.A.M. Transportation Services, Inc. and Subsidiaries

Consolidated Statements of Income




YEAR ENDED DECEMBER 31
1995 1994 1993
--------------------------------------
(Thousands, except per share data)

Operating revenues (Notes 1, 2, and 8) $ 91,595 $ 76,147 $ 70,238
Operating expenses and costs:
Salaries, wages and benefits 40,020 33,647 31,850
Operating supplies and expenses 16,719 14,688 16,393
Rents and purchased transportation 1,538 991 1,599
Depreciation and amortization 9,428 7,142 4,683
Operating taxes and licenses 5,608 5,078 4,680
Insurance and claims 4,163 3,816 3,686
Communications and utilities 852 868 864
Other 1,666 1,279 1,430
(Gain) loss on sale or disposal of property and equipment 159 (334) (246)
--------------------------------------
80,153 67,175 64,939
--------------------------------------
Operating income 11,442 8,972 5,299
Other income (expense):
Interest expense (3,521) (2,926) (1,972)
Other (Note 8) 166 217 122
--------------------------------------
(3,355) (2,709) (1,850)
--------------------------------------
Income before income taxes and dividends on redeemable
preferred stock 8,087 6,263 3,449
Federal and state income taxes:
Current 528 1,160 166
Deferred 2,545 1,333 155
--------------------------------------
3,073 2,493 321
--------------------------------------
Income before dividends on redeemable preferred stock 5,014 3,770 3,128
Accrued dividends on redeemable preferred stock - 30 360
--------------------------------------
Net income $ 5,014 $ 3,740 $ 2,768
======================================
Earnings per common share (Note 7)
Primary:
Net income per share $ .65 $ .50 $ .39
======================================
Average common and common equivalent shares outstanding 7,661 7,520 7,335
======================================
Fully diluted:
Net income per share $ .65 $ .50 $ .37
======================================
Average common and common equivalent shares outstanding 7,684 7,522 7,559
======================================



See accompanying notes.


22
24

P.A.M. Transportation Services, Inc. and Subsidiaries

Consolidated Statements of Shareholders' Equity





ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------------------------------------------------
(Thousands)

Balances at January 1, 1993 $ 49 $ 12,911 $ (6,647) $ 6,313
Net income - - 2,768 2,768
Exercise of stock options--27,300 shares
issued (Note 6) - 75 - 75
------------------------------------------------
Balances at December 31, 1993 49 12,986 (3,879) 9,156
Net income - - 3,740 3,740
Exercise of stock options--42,700 shares
issued (Note 6) - 101 - 101
Tax benefits of stock options (Note 6) - 36 - 36
------------------------------------------------
Balances at December 31, 1994 49 13,123 (139) 13,033
Net income - - 5,014 5,014
Exercise of stock options--56,700 shares
issued (Note 6) 1 142 - 143
Tax benefits of stock options (Note 6) - 42 - 42
------------------------------------------------
Balances at December 31,1995 $ 50 $ 13,307 $ 4,875 $ 18,232
================================================


See accompanying notes.





23
25

P.A.M. Transportation Services, Inc. and Subsidiaries

Consolidated Statements of Cash Flows




YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------
(Thousands)

OPERATING ACTIVITIES
Net income $ 5,014 $ 3,740 $ 2,768
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 9,428 7,142 4,683
Noncompetition agreement amortization (Note 2) 261 - -
Provision for doubtful accounts 89 113 51
Provision for deferred income taxes 2,545 1,333 155
(Gain) loss on sale or disposal of property and equipment 159 (334) (246)
Accrued dividends on redeemable preferred stock - 30 360
Changes in operating assets and liabilities:
Accounts receivable (3,013) (937) (749)
Prepaid expenses and other current assets (798) (452) (232)
Income taxes refundable 187 (154) -
Trade accounts payable 1,652 2,166 (981)
Accrued expenses (246) 241 430
-----------------------------------------
Net cash provided by operating activities 15,278 12,888 6,239
INVESTING ACTIVITIES
Purchases of property and equipment (25,307) (15,111) (28,670)
Proceeds from sale or disposal of property and equipment 3,841 4,224 2,886
Lease payments received on direct financing lease 624 561 283
Choctaw acquisition less cash acquired (Note 2) (1,323) - -
-----------------------------------------
Net cash used in investing activities (22,165) (10,326) (25,501)
FINANCING ACTIVITIES
Redemption of preferred stock - (4,426) -
Borrowings under line of credit 99,884 58,835 34,410
Repayments under line of credit (97,518) (59,920) (35,460)
Borrowings of long-term debt 21,239 14,835 28,181
Repayments of long-term debt (13,083) (11,566) (4,475)
Payments under noncompetition agreement (Note 2) (269) - -
Proceeds from exercise of stock options 143 101 75
Tax benefits of stock options 42 36 -
-----------------------------------------
Net cash (used in) provided by financing activities 10,438 (2,105) 22,731
-----------------------------------------
Net increase in cash and cash equivalents 3,551 457 3,469
Cash and cash equivalents at beginning of year 4,078 3,621 152
-----------------------------------------
Cash and cash equivalents at end of year $ 7,629 $ 4,078 $ 3,621
=========================================


See accompanying notes.





24
26

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 1995




1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND CONSOLIDATION

P.A.M. Transportation Services, Inc. (the "Company"), through its subsidiaries,
operates as a truckload motor carrier.

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.

Majority ownership in the Company is held by an affiliate of another
transportation company, with whom the Company has certain business
relationships. See Note 8.

CASH AND CASH EQUIVALENTS

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

TIRE PURCHASES

Tires purchased with revenue equipment are capitalized as a cost of the related
equipment. Replacement tires are included in other current assets and are
amortized over a 24-month period.

EXCESS OF COST OVER NET ASSETS ACQUIRED

The excess of cost over net assets acquired, or goodwill, is being amortized on
a straight-line basis over 25 years. The carrying value of goodwill will be
reviewed if the facts and circumstances suggest that it may be impaired. If
this review indicates that goodwill will not be recoverable, as determined
based on undiscounted cash flows acquired over the remaining amortization
period, the Company's carrying value of the goodwill would be reduced by the
estimated shortfall of cash flows. No reduction of goodwill was required as of
December 31, 1995.

INSURANCE

The Company maintains insurance policies covering cargo loss and damage and
liability claims. The Company maintains a deductible of $5,000 on cargo loss
claims. As of July 1, 1994, the Company became self-insured for worker's
compensation, with excess





25
27

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

coverage maintained for claims exceeding $250,000 (Arkansas and Oklahoma) and
$200,000 (Ohio). Prior to July 1, 1994, the Company maintained an insurance
policy for worker's compensation with a deductible of $350,000 per occurrence.
The Company has reserved for estimated losses for claims incurred.
Additionally, a reserve has been estimated for claims incurred but not
reported. Letters of credit in the amounts of $400,000 and $200,000 are held by
a bank as collateral for worker's compensation claims in Arkansas and Oklahoma,
respectively and a letter of credit in the amount of $100,000 is held by a bank
for auto liability claims.

REVENUE RECOGNITION POLICY

The Company recognizes revenue based upon relative transit time in each
reporting period with expenses recognized as incurred.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line
method. For tax reporting purposes, accelerated depreciation or applicable cost
recovery methods are used. Gains and losses are reflected in the year of
disposal.

RECLASSIFICATIONS

Certain reclassifications have been made in prior years' financial statements
to conform to the current year's presentation.

EQUIPMENT HELD FOR SALE

Equipment held for sale consists of revenue equipment no longer in service,
that is expected to be sold within the next year. This equipment is reflected
at the lower of net book value or its estimated net realizable value.

INCOME TAXES

In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). The Company adopted this statement in the first quarter of 1994. The
Company adopted





26
28

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

the liability method of accounting for income taxes under Financial Accounting
Standards No. 96 in its financial statements for the year ended December 31,
1987. Therefore, adoption of FAS 109 had no material effect on the Company's
financial position or results of operations.

BUSINESS SEGMENT AND CONCENTRATIONS

The Company operates in one business segment, motor carrier operations. The
Company provides transportation services to customers throughout the United
States and portions of Canada. The Company performs ongoing credit evaluations
and generally does not require collateral on its trade receivables. The Company
maintains reserves for potential credit losses and such losses have been within
management's expectations. At December 31, 1995, two separate customers
accounted for 14% and 12%, respectively of the consolidated trade accounts
receivable balances.

In 1995 and 1994, one customer accounted for 19% and 12% of revenues,
respectively. A second customer accounted for 12% of revenues in 1995 and 1993.
The Company's largest customer is an automobile manufacturer. The Company also
provides transportation services to other manufacturers who are suppliers for
automobile manufacturers including the Company's largest customer. As a result,
concentration of the Company's business within the automobile industry is
greater than the concentration in a single customer. Of the Company's revenues
for 1995, 39.8% were derived from transportation services provided to the
automobile manufacturing industry.

COMPENSATION TO EMPLOYEES

Stock based compensation to employees is accounted for based on the intrinsic
value method under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees. Management expects to continue this method.

RECENT ACCOUNTING PRONOUNCEMENTS

In 1995, the Financial Accounting Standards Board issued Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. This statement will be adopted in the first quarter of 1996.
The Company does not expect Statement No. 121 to have a significant impact on
the Company's financial position or results of operations.





27
29

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statement and accompanying
notes. Actual results could differ from those estimates.

2. ACQUISITION

On January 31, 1995, the Company acquired all the outstanding stock of Choctaw
Express, Inc., a truckload motor carrier, and Choctaw Brokerage, Inc., a
related company, based in Oklahoma, (collectively "Choctaw"). Assets of
approximately $2.7 million were acquired and liabilities of approximately
$800,000 were assumed. The total purchase price for Choctaw was approximately
$2.5 million.

The acquisition has been accounted for using the purchase method, with
operations included in the Company's financial statements beginning on the
acquisition date. The purchase price has been allocated to assets and
liabilities based on their estimated fair values as of the date of acquisition.
Goodwill in the amount of $600,000 was recorded as a result of the purchase
allocation and it is being amortized over a 25-year period. The Company also
entered into a five-year noncompete agreement with the former sole shareholder
of Choctaw which provides for payments of approximately $300,000 per year.

Pro forma unaudited financial information (as if the Choctaw acquisition was
completed at the beginning of the respective periods) for 1995 and 1994 is
provided below:


YEAR ENDED DECEMBER 31
1995 1994
------------------------
(Thousands, except per share data)
(Unaudited)

Operating revenues $ 92,462 $ 88,287
Operating expenses 80,917 78,797
------------------------
Operating income 11,545 9,490
Other expenses, net 3,373 2,890
Income taxes 3,105 2,624
------------------------
Income before dividends on preferred stock 5,067 3,976
Accrued dividends on preferred stock - 30
------------------------
Net income $ 5,067 $ 3,946
========================
Net income per common share (primary) $ .66 $ .53
========================
Average common and common equivalent shares outstanding 7,661 7,520
========================






28
30

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





2. ACQUISITION (CONTINUED)

The above pro forma unaudited financial information does not purport to be
indicative of the results which actually would have occurred had the
acquisition been made at the beginning of the respective periods.

3. ACCRUED EXPENSES



DECEMBER 31
1995 1994
---------------

(Thousands)
Payroll $1,051 $ 769
Taxes 613 663
Interest 207 199
Driver escrows 237 253
Current portion of noncompete agreement 236 -
Self insurance claims reserves 704 1,175
--------------
$3,048 $3,059
==============


4. LONG-TERM DEBT

Long-term debt consists of the following:



DECEMBER 31
1995 1994
----------------

(Thousands)
Equipment financings (1) $40,365 $32,730
Line of credit with a bank, with
interest at the LIBOR rate plus
2 1/2% (8.47% at December 31,
1995) due May 31, 1997 and
collateralized by accounts
receivable (2) 7,909 5,543
Note payable (3) 466 511
Capitalized lease obligations (4) 4,346 3,780
----------------
53,086 42,564
Less current maturities 15,120 10,358
----------------
$37,966 $32,206
================


(1) Equipment financings consist of installment obligations for revenue and
service equipment purchases, payable in various monthly installments
through 1999, at a weighted average interest rate of 7.9% and
collateralized by equipment with a net book value of $50.9 million at
December 31, 1995.


29

31

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)


4. LONG-TERM DEBT (CONTINUED)

Included in equipment financings is a note payable with an outstanding
balance of $1.5 million as of December 31, 1994 with an affiliate of the
majority shareholder for the purchase of revenue equipment previously
leased under an operating lease arrangement. This note had an interest rate
of 9.0% and was paid during 1995.

(2) The line of credit agreement with a bank provides for maximum borrowings
of $10.0 million and contains various restrictive covenants which require,
among other things, maintenance of certain financial and operating ratios,
and includes restrictions on dividend payments and certain corporate acts
such as mergers and consolidations. At December 31, 1995 drawings under
the line of credit amounted to $7.9 million. In addition letters of credit
of $700,000 were outstanding against the line of credit. The amount
available on the line of credit at December 31, 1995 was $1.4 million.

(3) The Company, prior to April 1993, leased certain real estate from the
former majority shareholder. Related lease expense totaled $26,600 in
1993. The real estate was purchased by the Company in April 1993, for
approximately $600,000, and financed through the former majority
shareholder, payable in monthly installments through March 2003, with an
interest rate of 8.0%.

(4) Capitalized lease obligations to a financial services organization for
revenue equipment are payable in various monthly installments through
October 1999 at rates of 8.15% and 8.49%, collateralized by equipment with
a net book value of $4.5 million and $3.7 million as of December 31, 1995
and December 31, 1994, respectively (See Note 9).

Scheduled annual maturities on long-term debt outstanding, excluding capital
lease obligations (see Note 9), at December 31, 1995 (in thousands) are:




1996 $14,152
1997 21,080
1998 9,369
1999 3,893
2000 67
Thereafter 179
-------
$48,740
=======


Interest payments of approximately $3.5 million, $2.9 million, and $1.9 million
were made during 1995, 1994, and 1993, respectively.



30
32

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)



5. FEDERAL AND STATE INCOME TAXES

Under FAS 109, deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company's deferred tax liabilities and assets are
as follows:




DECEMBER 31
1995 1994
---------------

(Thousands)
Deferred tax liabilities:
Property and equipment $ 9,766 $ 7,531
Prepaid expenses 1,072 893
---------------
Total deferred tax liabilities 10,838 8,424

Deferred tax assets:
Net operating loss carryover 2,440 3,261
Alternative minimum tax credit 1,672 1,276
Investment credit carryovers 1,095 1,096
Allowance for doubtful accounts 123 91
Vacation reserves 163 111
Self-insurance reserves 285 217
Noncompetition agreement 70 -
Revenue recognition 92 86
---------------
Total deferred tax assets 5,940 6,138
---------------
Net deferred tax liabilities $ 4,898 $ 2,286
===============


The reconciliation between the effective income tax rate and the statutory
Federal income tax rate is presented in the following table:




YEAR ENDED DECEMBER 31
1995 1994 1993
----------------------------------
(Thousands)

Income tax at the 34% statutory Federal rate $2,750 $2,130 $ 1,050
Nondeductible expenses 39 230 435
Decrease in valuation allowance - (96) (1,265)
State income taxes (167) (142) (17)
Other (41) (45) 68
----------------------------------
Federal income taxes 2,581 2,077 271
State income taxes 492 417 50
----------------------------------
Total income taxes $3,073 $2,494 $ 321
==================================
Effective tax rate 38.0% 40.0% 10.3%
==================================



31
33

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





5. FEDERAL AND STATE INCOME TAXES (CONTINUED)

As of December 31, 1995, the Company has Federal net operating loss and
investment tax credit carryovers of approximately $6.4 million and $1.1
million, respectively. The net operating loss carryovers expire beginning in
2003 and the investment credit carryovers begin to expire in 1999. Net
operating loss carryovers are available to offset 1994 and 1995 estimated
taxable income for regular income tax purposes. The current taxes provided in
1993, 1994 and 1995 result from alternative minimum taxable income which is
only partially offset by net operating loss carryovers in 1993 and 1994. All
net operating losses for alternative minimum taxes were fully utilized as of
December 31, 1994. The Company has alternative minimum tax credits of
approximately $1.7 million at December 31, 1995 which carry over indefinitely.

In February 1990, a stock transaction occurred whereby the Company's then
majority shareholder sold his stock to the current majority shareholder. This
transaction constituted an ownership change under Internal Revenue Code Section
382. As a result of the ownership change, the amount of Federal taxable income
which may be offset by net operating loss carryovers ("NOLs") which existed as
of the ownership change date (estimated at $10.4 million) was limited to
approximately $500,000 per year. The annual limitation could be increased,
under certain circumstances, by realization of tax "built-in gains" which
existed at the time of the ownership change. Substantial tax built-in gains
have been realized since the ownership change date including gains recognized
during 1993 and 1994. As a result, at December 31, 1995, all net operating loss
carryovers are available without annual limitation.

This reduction of the valuation allowance in 1993 and 1994 was due to changes
in expectations as to realization of net operating losses available to offset
future taxable income at December 31, 1993 and 1994. This was due to profitable
operating results, and significant tax built-in gains realized in 1993 and
1994, which increased the available net operating loss carryovers.

Taxes paid totaled approximately $400,000, $1.3 million and $100,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.

6. STOCKHOLDERS' EQUITY

On January 30, 1994, the Company redeemed 100% of the 12% Series A cumulative
redeemable preferred stock (Series A preferred stock) plus accrued dividends
for cash of $4,425,205. The redemption was funded through a combination of cash
on hand and borrowings under the Company's line of credit arrangements.


32
34

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





6. STOCKHOLDERS' EQUITY (CONTINUED)

The Company maintains an incentive stock option plan, a nonqualified stock
option plan, and an employee stock option plan for the issuance of options to
directors, officers, key employees and others. The option price under these
plans is the fair market value of the stock at the date the options were
granted, ranging from $2.375 to $6.75 as of December 31, 1995.

Outstanding incentive stock options and employee stock options at December 31,
1995 must be exercised within six years from the date of grant and vest in
increments of 20% each year. Outstanding nonqualified stock options at December
31, 1995 must be exercised within five to six years from the date of grant and
certain nonqualified options may not be exercised within one year of the date
of grant.

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




SHARES
UNDER PRICE
OPTION RANGE
----------------------

Outstanding at January 1, 1993 25,500 $3.75
Granted 416,500 $2.38-$5.50
Exercised (27,300) $2.38-$5.50
Canceled (26,000) $2.38-$5.50
----------------------
Outstanding at December 31, 1993 388,700 $2.38-$5.50
Granted 15,000 $4.38-$6.00
Exercised (42,700) $2.38-$6.00
Canceled (8,800) $2.38-$6.00
----------------------
Outstanding at December 31, 1994 352,200 $2.38-$6.00
Granted 260,000 $5.75-$6.75
Exercised (56,700) $2.38-$6.00
Canceled (23,400) $2.38-$6.75
----------------------
Outstanding at December 31, 1995 532,100 $2.38-$6.75
======================
Options exercisable at December 31, 1995 161,400
=========


The majority shareholder holds immediately exercisable stock warrants to
purchase an aggregate of 3.1 million shares of the Company's common stock. The
warrants are exercisable at $1.50 per share through 1997, when the warrants
expire.


33
35

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





7. EARNINGS PER SHARE

Earnings per share assumes the exercise of stock warrants and options to
purchase a total of 3.5 million, 3.4 million, and 3.4 million shares of common
stock, for 1995, 1994, and 1993, respectively. Under the treasury stock method
of computing earnings per share, the number of shares of treasury stock assumed
to be repurchased is limited to 20% of common stock outstanding, with the
remaining shares assumed to be newly issued, and the excess proceeds assumed to
have reduced long-term borrowings outstanding for the year.

The computation of earnings per common share is summarized as follows:




1995 1994 1993 1995 1994 1993
-------------------------- --------------------------

(Primary) (Fully Diluted)
(Thousands, except per share data) (Thousands, except per share data)
Primary:
Application of assumed proceeds:
Toward repurchase of outstanding common
shares at applicable market value
(average market value for primary
computation, year-end for fully diluted) $6,221 $4,780 $3,672 $6,221 $4,780 $4,699
Reduction of borrowings under line of
credit - - 1,027 - - -
---------------------------- ----------------------------
$6,221 $4,780 $4,699 $6,221 $4,780 $4,699
============================ ============================
Adjustments of net income:
Actual net income $5,014 $3,740 $2,768 $5,014 $3,740 $2,768
Interest expense reduction - - 71 - - -
---------------------------- ----------------------------
Adjusted net income (A) $5,014 $3,740 $2,839 $5,014 $3,740 $2,768
============================ ============================
Adjustment of common shares outstanding:
Actual average outstanding 4,971 4,921 4,876 4,971 4,921 4,876
Net additional shares issuable 2,690 2,599 2,459 2,713 2,601 2,683
---------------------------- ----------------------------
Adjusted average common shares
outstanding (B) 7,661 7,520 7,335 7,684 7,522 7,559
============================ ============================
Net income per common share
(A) / (B) $ .65 $ .50 $ .39 $ .65 $ .50 $ .37
============================ ============================


8. RELATED PARTY TRANSACTIONS

The Company provides motor carrier services to an affiliate of its majority
shareholder. Revenues from these transactions totaled approximately $5.3
million, $4.9 million, and $5.4 million for 1995, 1994, and 1993, respectively.


34
36

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





8. RELATED PARTY TRANSACTIONS (CONTINUED)

During 1993, the Company began leasing certain revenue equipment with an
original cost of $2.7 million to an affiliate of the majority shareholder under
a direct financing lease arrangement. The Company earned interest income of
$200,000, $200,000, and $100,000 in 1995, 1994 and 1993, respectively, relating
to this lease which is included in other income in the accompanying financial
statements. The aggregate future minimum lease payments to be received under
this lease are as follows (in thousands):




1996 $ 789
1997 571
------
1,360
Less unearned income 121
------
Present value of net minimum lease payment 1,239
Less current portion 691
------
$ 548
======


Payments made by the Company to an affiliate of the majority shareholder for
the reimbursement of operating and other expenses paid on behalf of the
Company, and debt repayments made on notes payable to the affiliate aggregated
approximately $6.8 million, $14.1 million, and $9.1 million in 1995, 1994, and
1993, respectively.

The Company has entered into noncancelable operating leases for revenue
equipment with an affiliate of the majority shareholder. The leases are payable
monthly and are currently under a month-to-month leasing arrangement. Rent
expense under these leases was $200,000, $400,000 and $900,000 in 1995, 1994
and 1993, respectively.

Trade accounts payable at December 31, 1995 includes a payable to an affiliate
of the majority shareholder of $1.1 million.



35
37

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





9. LEASES AND COMMITMENTS

The Company leases certain revenue equipment under capital leases.

The future minimum payments under capital (see Note 4) and operating leases at
December 31, 1995 with initial terms of one year or more consisted of the
following:




CAPITAL OPERATING
------- ---------

1996 $1,293 $195
1997 1,293 178
1998 1,293 -
1999 969 -
-----------------
Total minimum lease payments 4,848 373
Amounts representing interest 502 -
-----------------
Present value of net minimum lease payments $4,346 $373
=================


Assets held under capitalized leases are included in property, plant and
equipment (in thousands) as follows:




1995 1994
--------------

Revenue equipment $5,273 $3,779
Accumulated amortization (782) (44)
--------------
$4,491 $3,735
==============


Capital lease obligations incurred in 1995 and 1994 totaled $1.5 million and
$3.8 million, respectively. Lease amortization is included in depreciation
expense.

Rent expense on nonrelated party operating leases totaled approximately
$500,000 for 1995.

10. PROFIT SHARING PLAN

P.A.M. Transport, Inc. a subsidiary of the Company, sponsors a profit sharing
plan for the benefit of its eligible employees. The plan qualifies under
Section 401(k) of the Internal Revenue Code thereby allowing eligible employees
to make tax deductible contributions to the plan. The plan provides for annual
employer matching contributions of 25% of each participant's voluntary
contribution up to $400.


36
38

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





10. PROFIT SHARING PLAN (CONTINUED)

P.A.M. Transport, Inc.'s matching contributions to the plan totaled
approximately $46,000, $40,000, and $28,000 in 1995, 1994, and 1993,
respectively.

Choctaw Express, Inc., sponsors a profit sharing plan for the benefit of its
eligible employees. The plan qualifies under Section 401(k) of the Internal
Revenue Code thereby allowing all eligible employees to make tax deductible
contributions to the plan. The plan provides for employer matching
contributions of 50% of each participant's voluntary contribution up to 3% of
the participant's compensation. Choctaw Express, Inc.'s matching contribution
to its plan totaled approximately $14,000 in 1995.

The Choctaw Express, Inc. profit sharing plan was merged into the P.A.M.
Transport, Inc. profit sharing plan effective December 31, 1995.

11. LITIGATION

The Company is not a party to any pending legal proceedings which management
believes to be material to the financial condition of the Company. The Company
maintains liability insurance against risks arising out of the normal course of
its business, subject to retention amounts as provided by the specific policy.

12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The tables below presents quarterly financial information for 1995 and 1994:




THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-----------------------------------------------

(Thousands, except per share data)
1995
Operating revenues $22,084 $23,833 $22,241 $23,437
Operating expenses 19,713 20,421 19,365 20,654
---------------------------------------------
Operating income 2,371 3,412 2,876 2,783
Other expenses - net 740 828 882 905
Income taxes 620 982 758 713
---------------------------------------------
Net income $ 1,011 $ 1,602 $ 1,236 $ 1,165
=============================================
Net income per
common share
(primary) $ .13 $ .21 $ .16 $ .15
=============================================
Average common and
common equivalent
shares outstanding 7,648 7,605 7,674 7,708
=============================================




37
39

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)


12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)



THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-----------------------------------------------

(Thousands, except per share data)
1994
Operating revenues $18,846 $19,833 $18,508 $18,960
Operating expenses 16,982 17,148 16,251 16,794
---------------------------------------------
Operating income 1,864 2,685 2,257 2,166
Other expenses - net 697 688 680 673
Income taxes 408 799 689 598
---------------------------------------------
Net income $ 759 $ 1,198 $ 888 $ 895
=============================================
Net income per
common share
(primary) $ .10 $ .16 $ .12 $ .12
=============================================
Average common and
common equivalent
shares outstanding 7,612 7,493 7,490 7,584
=============================================


13. FAIR VALUES OF FINANCIAL INSTRUMENTS

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

Cash and cash equivalents--The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value.

Direct financing lease--The fair value of the Company's direct financing lease
is estimated using discounted cash flow analyses, based on the Company's
current incremental rate for similar types of investment arrangements.

Long-term debt--The fair values of the Company's long-term debt are estimated
using discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

Line of credit--The carrying amount for the line of credit approximates fair
value.


38
40

P.A.M. Transportation Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)





13. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The carrying amounts and fair values of the Company's financial instruments at
December 31 are as follows (in thousands):



CARRYING
AMOUNT FAIR VALUE
--------------------

1995
Cash and cash equivalents $ 7,629 $ 7,629
Direct financing lease 1,239 1,283
Long-term debt 45,177 46,257
Line of credit 7,909 7,909


14. SUBSEQUENT EVENT

On January 18, 1996, the Company reached an agreement in principle to acquire,
for approximately $200,000 cash, Allen Freight Services, Inc., a truckload
carrier based in Jacksonville, Florida. The Company anticipates closing the
purchase by the end of the first quarter of 1996. The transaction is subject to
completion of a due diligence investigation, execution of a definitive
agreement, and regulatory approvals. Allen Freight Services, Inc. generated
revenues of approximately $16 million in 1995.


39
41

PART III

Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G(3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's Annual
Meeting of Shareholders to be held on May 23, 1996. The Company will, within
120 days of the end of its fiscal year, file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information responsive to this item is incorporated by reference from
the section entitled "Election of Directors" contained in the proxy statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information responsive to this item is incorporated by reference from
the section entitled "Executive Compensation" contained in the proxy statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information responsive to this item is incorporated by reference from
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" contained in the proxy statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information responsive to this item is incorporated by reference from
the section entitled "Certain Relationships and Related Transactions" contained
in the proxy statement.

-40-


42




PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements and Auditors' Report.

The following financial statements and auditors' report have been filed as
Item 8 in Part II of this report:

Report of Independent Auditors

Consolidated Balance Sheets - December 31, 1995 and 1994

Consolidated Statements of Income - Years ended December 31,
1995, 1994 and 1993

Consolidated Statements of Shareholders' Equity - Years ended
December 31, 1995, 1994 and 1993

Consolidated Statements of Cash Flows - Years ended December 31,
1995, 1994 and 1993

Notes to Consolidated Financial Statements

(a) 2. Financial Statement Schedules.

The following supporting financial statement schedule is filed with this
report:


II - Valuation and Qualifying Accounts - Years Ended December 31,
1995, 1994 and 1993



All other schedules are omitted as the required information is
inapplicable, or the information is presented in the consolidated financial
statements or related notes.

-41-


43




(a) 3. Exhibits.

The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
either (i) the Form S-1 Registration Statement under the Securities Act of
1933, as filed with the Securities and Exchange Commission on July 30, 1986,
Registration No. 33-7618, as amended on August 8, 1986, September 3, 1986 and
September 10, 1986 ("1986 S-1"); (ii) the Annual Report on Form 10-K for the
year ended December 31, 1987 ("1987 10-K"); (iii) the Annual Report on Form
10-K for the year ended December 31, 1991 ("1991 10-K"); (iv) the Annual Report
on Form 10-K for the year ended December 31, 1992 ("1992 10-K"); (v) the Annual
Report on Form 10-K for the year ended December 31, 1993 ("1993 Form 10-K");
(vi) the Annual Report on Form 10-K for the year ended December 31, 1994 ("1994
Form 10-K"); (vii) the Quarterly Report on Form 10-Q for the quarter ended June
30, 1994 ("6/30/94 10-Q"); (viii) the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 ("6/30/95 10-Q"); or (ix) the Current Report on
Form 8-K dated January 31, 1995 ("1/31/95 8-K").






Exhibit # Description of Exhibit
- --------- ------------------------------------------------------------------------------------------------------------------

*2.1 - Stock Purchase Agreement dated January 31, 1995 by and among Registrant, Choctaw Express, Inc., Choctaw Brokerage,
Inc. and Joe M. Bussell (Exh. 2.1, 1/31/95 8-K)

*3.1 - Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 1986 S-1)

*3.1.1 - Amendment to Certificate of Incorporation dated June 24, 1987 (Exh. 3.1.1, 1987 10-K)

*3.2 - Amended and Restated By-Laws of the Registrant (Exh. 3.2, 1986 S-1)

*3.2.1 - Amendment to Article I, Section 3 of By-Laws of Registrant (Exh. 3.2.1, 1986 S-1)

*3.2.2 - Amendments to By-Laws of Registrant adopted May 7, 1987 (Exh. 3.2.2, 1987 10-K)

*3.2.3 - Amendments to By-Laws of Registrant adopted January 4, 1993 (Exh. 3.2.3, 1992 10-K)

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

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

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

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




-42-
44


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

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

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

- No other long-term debt instrument of the Registrant or its subsidiaries authorizes indebtedness exceeding 10% of the
total assets of the Registrant and its subsidiaries on a consolidated basis and the Registrant hereby undertakes to
provide the Commission upon request with any long-term debt instrument not filed herewith.

*10.1 - Incentive Stock Option Plan, dated July 25, 1986 (Exh. 10.2, 1986 S-1)

*10.1.1 - Amendment to 1986 Incentive Stock Option Plan, dated June 2, 1987 (Exh. 10.2.1, 1987 10-K)

*10.2 - Non-Qualified Stock Option Plan, dated July 25, 1986 (Exh. 10.3, 1986 S-1)

*10.2.1 - Amendment No. 1 to Non-Qualified Stock Option Plan (Exh. 10.2.1, 1993 10-K)

10.3 - Employment Agreement between the Registrant and Robert W. Weaver dated January 1, 1995

*10.4 - Incentive Compensation Plan of Registrant adopted January 10, 1995 for fiscal years 1994 and 1995 (Exh. 10.4, 1994
10-K).

*10.5 - Non-Competition Agreement dated January 31, 1995 between Registrant and Joe M. Bussell (Exh. 10.1, 1/31/95 8-K)

21.1 - Subsidiaries of the Registrant

23.1 - Consent of Ernst & Young LLP

27 - Financial Data Schedule




(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the fourth quarter ended December
31, 1995.

-43-

45




SCHEDULE II



P.A.M. TRANSPORTATION SERVICES, INC.

VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 1995, 1994 and 1993









ADDITIONS
---------

Charged to
Balance at Charged to Other Balance
Beginning Costs and Accounts Deductions at End
Description of Period Expenses (Describe) (Describe) of Period
----------- ---------- ---------- ---------- --------- ---------

1995 - Allowance for doubtful accounts $239,343 $88,692 $-- $4,148(A) $323,887

1994 - Allowance for doubtful accounts 135,275 114,014 -- 9,946(A) 239,343

1993 - Allowance for doubtful accounts 133,374 51,163 -- 49,262(A) 135,275





Note A - Accounts written off.









46




SIGNATURES

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

P.A.M. TRANSPORTATION SERVICES, INC.



Dated: March 25, 1996 By: /s/ Robert W. Weaver
------------------------------------------------
ROBERT W. WEAVER
President and Chief Executive Officer
(principal executive officer)

Dated: March 25, 1996 By: /s/ Larry J. Goddard
------------------------------------------------
LARRY J. GODDARD, Vice President - Finance,
Chief Financial Officer, Secretary and Treasurer
(principal financial and accounting officer)


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

P.A.M. TRANSPORTATION SERVICES, INC.



Dated: March 25, 1996 By: /s/ Robert W. Weaver
---------------------------------
ROBERT W. WEAVER, President and
Chief Executive Officer, Director


Dated: March 25, 1996 By: /s/ Matthew T. Moroun
---------------------------------
MATTHEW T. MOROUN, Director


Dated: March 25, 1996 By: /s/ William E. Morrissey
---------------------------------
WILLIAM E. MORRISSEY, Director


Dated: March 25, 1996 By:
---------------------------------
BERYL L. SHROYER, Director


Dated: March 25, 1996 By: /s/ Daniel C. Sullivan
---------------------------------
DANIEL C. SULLIVAN, Director


Dated: March 25, 1996 By: /s/ Charles F. Wilkins
---------------------------------
CHARLES F. WILKINS, Director