Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2015
Commission File Number 001-34734
 
ROADRUNNER TRANSPORTATION SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
20-2454942
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
1431 Opus Place, Suite 530
Downers Grove, Illinois
 
60515
(Address of Principal Executive Offices)
 
(Zip Code)
(414) 615-1500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share
 
The New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  o   No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o   No  x
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  o    No  x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of 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.    o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
  
Accelerated filer
 
o
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
 
 
 
 
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  ý
As of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting common stock held by non-affiliates of the registrant was approximately $728.9 million based on the closing price of such stock as reported on The New York Stock Exchange on such date. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.
As of January 26, 2018, there were outstanding 38,423,391 shares of the registrant’s Common Stock, par value $.01 per share.




Documents Incorporated by Reference
Portions of the registrant’s definitive Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K/A where indicated. Such Proxy Statement was filed with the Securities and Exchange Commission on April 6, 2016.
 
 
 
 
 




EXPLANATORY NOTE
We are filing this Amendment No. 1 on Form 10-K/A (the “Amendment” or “Form 10-K/A”) to amend our Annual Report on Form
10-K for the year ended December 31, 2015, which was originally filed with the Securities and Exchange Commission (“SEC”) on March 1, 2016 (the “Original Form 10-K”). The purpose of this Amendment is to restate our previously issued consolidated financial statements and related financial information in the Original Form 10-K. This Form 10-K/A also revises our previous conclusion with respect to the effectiveness of our internal control over financial reporting.
Restatement Background
In November 2016, we commenced an internal investigation into certain accounting discrepancies at our Morgan Southern and Bruenger operating companies. Subsequently, an independent internal investigation was undertaken by the Audit Committee of our Board of Directors (the “Audit Committee”), with assistance from outside counsel and outside consultants to provide forensic and investigative support (the “Audit Committee Investigation”). The expanded Audit Committee Investigation included detailed reviews of financial records at other operating companies and at our corporate headquarters. The Audit Committee Investigation identified material accounting errors that impacted substantially all financial statement line items and disclosures.
On January 27, 2017, the Audit Committee, as a result of the information obtained in connection with the ongoing internal investigation and after considering the recommendation of management, determined that previously issued (1) consolidated financial statements as of December 31, 2015 and 2014 and for the three years in the period ended December 31, 2015; (2) unaudited condensed consolidated financial statements for the quarterly periods in the years ended December 31, 2015 and 2014; and (3) the unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2016, June 30, 2016, and September 30, 2016, should no longer be relied upon due to the identification of material accounting errors.
Based on the Audit Committee Investigation, current management determined that there were deficiencies in the design and/or execution of internal controls that constituted material weaknesses. Current management determined that structural and environmental factors, including the increased size and complexity arising from the acquisition of 25 non-public companies between February 2011 and September 2015, the inconsistency of our accounting systems, policies and procedures, and management override of internal controls contributed to the material weaknesses and resulting material accounting errors. Our internal controls failed to prevent or were overridden by management in certain instances to allow recording accounting entries without appropriate support, recording accounting entries that were inconsistent with information known by management at the time, not communicating relevant information within our organization and, in some cases, withholding information from our independent directors, our Audit Committee, and our independent auditors, which resulted in material accounting errors.
As a result of these errors, we have restated the audited consolidated financial statements as of December 31, 2015 and 2014 and for each of the three years in the period ended December 31, 2015. We have also revised the unaudited results of operations data for each of the quarters presented in Part II. Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” for the effects of the restatement.
Other Amended Filings
In addition to this Form 10-K/A, we are concurrently filing amendments to our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016 (the “Forms 10-Q/A”) to restate our previously issued condensed consolidated financial statements and related financial information presented therein and to revise our previous conclusion with respect to the effectiveness of our disclosure controls and procedures.
Internal Control Consideration
Management has determined that the material accounting errors resulted from deficiencies in our internal control over financial reporting that constitute material weaknesses, as described in more detail in Part II, Item 9A. “Controls and Procedures”.
Items Amended in this Form 10-K/A
For the convenience of the reader, this Form 10-K/A amends and restates the Original Form 10-K in its entirety. As a result, it includes both items that have been changed as a result of the restatement and items that are unchanged from the Original Form 10-K. This Form 10-K/A speaks as of the date of the Original Form 10-K and has not been updated to reflect events occurring subsequent to the filing of the Original Form 10-K other than those associated with the restatement of our consolidated financial statements. Additionally, we have updated certain disclosures with respect to the change in segments and change in accounting for debt issuance costs, which were adopted retrospectively effective January 1, 2016. The following items in the Original Form 10-K have been amended as a result of, and to reflect, the restatement, the change in segments, and the change in accounting for debt issuance costs:
Part I. Item 1. “Business”
Part I. Item 1A. “Risk Factors”
Part I. Item 3. “Legal Proceedings”
Part II. Item 6. “Selected Financial Data”
Part II. Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations”
Part II. Item 8. “Financial Statements and Supplementary Data”




Part II. Item 9A. “Controls and Procedures”
Part IV. Item 15. “Exhibits and Financial Statement Schedules”
In accordance with applicable SEC rules, this Form 10-K/A includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 from our Chief Executive Officer (as Principal Executive Officer and Principal Financial Officer) dated as of the filing date of this Form 10-K/A.




ROADRUNNER TRANSPORTATION SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K/A
TABLE OF CONTENTS
 
PART I
 
ITEM 1.
BUSINESS
ITEM 1A.
RISK FACTORS
ITEM 1B.
UNRESOLVED STAFF COMMENTS
ITEM 2.
PROPERTIES
ITEM 3.
LEGAL PROCEEDINGS
ITEM 4.
MINE SAFETY DISCLOSURES
 
 
 
 
PART II
 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.
SELECTED FINANCIAL DATA
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A.
CONTROLS AND PROCEDURES
ITEM 9B.
OTHER INFORMATION
 
 
 
 
PART III
 
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 
 
 
PART IV
 
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES














SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K/A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, contained in this Form 10-K/A are forward-looking statements, including, but not limited to, statements regarding our strategy, prospects, plans, objectives, future operations, future revenue and earnings, projected margins and expenses, markets for our services, potential acquisitions or strategic alliances, financial position, and liquidity and anticipated cash needs and availability. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions or the negatives thereof are intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements represent our current reasonable expectations and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors including, but not limited to, those described in the section entitled “Risk Factors” included in this Form 10-K/A. Furthermore, such forward-looking statements speak only as of the date of this Form 10-K/A. Except as required by law, we do not undertake publicly to update or revise these statements, even if experience or future changes make it clear that any projected results expressed in this Form 10-K/A or future quarterly reports, press releases or company statements will not be realized. In addition, the inclusion of any statement in this Form 10-K/A does not constitute an admission by us that the events or circumstances described in such statement are material. We qualify all of our forward-looking statements by these cautionary statements. In addition, the industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors including those described in the section entitled “Risk Factors.” These and other factors could cause our results to differ materially from those expressed in this Form 10-K/A.
Unless otherwise indicated, information contained in this Form 10-K/A concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity, and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources, and on our knowledge of the markets for our services. This information includes a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors” and elsewhere in this Form 10-K/A. These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us.
Unless otherwise indicated or unless the context requires otherwise, all references in this document to “RRTS,” “our company,” “we,” “us,” “our,” and similar names refer to Roadrunner Transportation Systems, Inc. and, where appropriate, its subsidiaries.
“Roadrunner Transportation Systems,” our logo, and other trade names, trademarks, and service marks of Roadrunner Transportation Systems appearing in this Form 10-K/A are the property of Roadrunner Transportation Systems. Other trade names, trademarks, and service marks appearing in this Form 10-K/A are the property of their respective holders.





PART I 
ITEM 1.
BUSINESS
Overview
We are a leading asset-light transportation and logistics service provider offering a comprehensive suite of global supply chain solutions, including truckload logistics (“TL”), customized and expedited less-than-truckload (“LTL”), intermodal solutions (transporting a shipment by more than one mode, primarily via rail and truck), freight consolidation, inventory management, expedited services, air freight, international freight forwarding, customs brokerage, and transportation management solutions. We utilize a broad third-party network of transportation providers, comprised of independent contractors (“ICs”) and purchased power providers, to serve a diverse customer base in terms of end-market focus and annual freight expenditures. Purchased power providers are unrelated asset-based over-the-road transportation companies that provide us with freight capacity under non-exclusive contractual arrangements. Although we service large national accounts, we primarily focus on small to mid-size shippers, which we believe represent an expansive and underserved market.
We have three segments:
Truckload Logistics. Within our TL business, we arrange the pickup and delivery of truckload, intermodal, and ground and air expedited freight through our network of 49 TL service centers, 24 company dispatch offices, and over 100 independent brokerage agents located throughout the United States, Mexico, and Canada. We offer temperature-controlled, dry van, intermodal drayage, and flatbed services and specialize in the transport of automotive parts, refrigerated foods, poultry, and beverages. Our on-demand ground and air expedited services feature proprietary bid technology supported by our fleets of ground and air assets. We believe this array of services and specialization provides our customers with full-service options and provides us with more consistent shipping volumes in any given year.
Less-than-Truckload. Our LTL business involves the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments throughout the United States and into Mexico, Puerto Rico, and Canada. With a network of 47 LTL service centers and over 180 third-party delivery agents, we employ a point-to-point LTL model that we believe serves as a competitive advantage over the traditional hub and spoke LTL model in terms of a balance of competitive pricing and transit times, lower incidence of damage, and reduced fuel consumption.
Global Solutions. Within our Global Solutions business, we offer a full portfolio of domestic and international transportation and logistics solution, including access to cost-effective and time-sensitive modes of transportation within our broad network. Specifically, our Global Solutions offering includes pricing, contract management, transportation mode and carrier selection, freight tracking, freight bill payment and audit, cost reporting and analysis, dispatch, and freight consolidation and warehousing. Our customized Global Solutions offering is designed to allow our customers to reduce operating costs, redirect resources to core competencies, improve supply chain efficiency, and enhance customer service. Our Global Solutions business also includes domestic and international air and ocean transportation services and customs brokerage.
Our Industry
Over-the-Road Freight
The over-the-road freight sector includes both private fleets (company drivers) and “for-hire” carriers (ICs and purchased power providers). According to the American Trucking Associations (“ATA”), the U.S. freight sector represented revenue of approximately $872.1 billion in 2014 and accounted for approximately 80% of domestic freight transportation spend. The ATA estimates that U.S. freight transportation will increase to over $1.5 trillion by 2026. Private fleets consist of tractors and trailers owned and operated by shippers that move their own goods and, according to the ATA, accounted for revenue of approximately $324.6 billion in 2014. For-hire carriers transport TL and LTL freight belonging to others and, according to the ATA, accounted for revenue of approximately $375.8 billion in 2014.
TL carriers dedicate an entire trailer to one shipper from origin to destination and are categorized by the type of equipment they use to haul a shipper’s freight, such as temperature-controlled, dry van, tank, or flatbed trailers. According to the ATA, excluding private fleets, revenue in the U.S. TL segment was approximately $319.1 billion in 2014.
LTL carriers specialize in consolidating shipments from multiple shippers into truckload quantities for delivery to multiple destinations. LTL carriers are traditionally divided into two categories — national and regional. National carriers typically focus on two-day or longer service across distances greater than 1,000 miles and often operate without time-definite delivery, while regional carriers typically offer time-definite delivery in less than two days. According to the ATA, the U.S. LTL market generated revenue of approximately $56.7 billion in 2014.

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Third-Party Logistics
Third-party logistics (“3PL”) providers offer transportation management solutions and distribution services, including the movement and storage of freight and the assembly of inventory. The U.S. 3PL sector revenue increased from approximately $76.9 billion in 2003 to approximately $157.2 billion in 2014 (and experienced growth each year during such period other than from 2008 to 2009), according to Armstrong & Associates, Inc., a leading supply chain market research firm. In addition, only 10.9% of logistics expenditures by U.S. businesses were outsourced in 2014, according to Armstrong & Associates. We believe that the market penetration of 3PL providers will expand in the future as companies increasingly redirect their resources to core competencies and outsource their transportation and logistics requirements as they realize the cost-effectiveness of 3PL providers.
Factors Important to Our Business
Our success principally depends on our ability to generate revenues through our network of sales personnel, proprietary bid technology, and independent brokerage agents and to deliver freight in all modes safely, on time, and cost-effectively through a suite of solutions tailored to the needs of each customer. Customer shipping demand, over-the-road freight tonnage levels, events leading to expedited shipping requirements, and equipment capacity ultimately drive increases or decreases in our revenues. Our ability to operate profitably and generate cash is also impacted by purchased transportation costs, personnel and related benefits, fuel costs, pricing dynamics, customer mix, and our ability to manage costs effectively.
Agent Network and Sales Personnel.  In our TL business, we arrange the pickup and delivery of freight either through our growing sales force of over 200 dispatchers in 24 offices or through our network of over 100 independent brokerage agents. Brokerage agents complement our network of dispatch offices by bringing pre-existing customer relationships, new customer prospects, and/or access to new geographic markets. Furthermore, brokerage agents typically provide immediate revenue and do not require us to invest in incremental overhead. Brokerage agents own or lease their own office space and pay for other costs associated with running their operations.
In our LTL business, while many national asset-based LTL providers are encumbered by the fixed overhead costs associated with owning or leasing most or all of their de-consolidation and delivery facilities, we maintain our variable cost structure through the extensive use of delivery agents. We have a network of over 180 third-party LTL delivery agents that provide cost-effective delivery coverage throughout North America. In addition to our agent network, we market and sell our LTL services through a sales force of over 100 people, consisting of account executives, sales managers, inside sales representatives, and commissioned sales representatives.
In our Global Solutions business, we have over 70 salespeople and commissioned sales representatives. Additionally, we have a growing integrated solutions team that cross sells all of our services.
Tonnage Levels and Capacity. Competition intensifies in the transportation industry as tonnage levels decrease and equipment capacity increases. Our ability to maintain or grow existing tonnage levels is impacted by overall economic conditions, shipping demand, over-the-road freight capacity in North America, and capacity in domestic air freight, as well as by our ability to compete effectively in terms of pricing, safety, and on-time delivery. We do business with a broad base of third-party carriers, including ICs and purchased power providers, together with a blend of our own ground and air capacity, which reduces the impact of tightening capacity on our business.
Purchased Transportation Costs.  Purchased transportation costs within our TL business are generally based either on negotiated rates for each load hauled or spot market rates for ground and air services. Purchased transportation costs within our LTL business represent amounts we pay to ICs or purchased power providers and are generally contractually agreed-upon rates. Within our Global Solutions business, purchased transportation costs represent payments made to our purchased power providers, which are generally contractually agreed-upon rates. Purchased transportation costs are the largest component of our cost structure. Our purchased transportation costs typically increase or decrease in proportion to revenues.
Fuel. The transportation industry is dependent upon the availability of adequate fuel supplies and the price of fuel. Fuel prices have fluctuated dramatically over recent years. Within our TL and Global Solutions businesses, we generally pass fuel costs through to our customers. As a result, our operating income in these businesses is less impacted by changes in fuel prices. Within our LTL business, our ICs and purchased power providers pass along the cost of diesel fuel to us, and we in turn attempt to pass along some or all of these costs to our customers through fuel surcharge revenue programs. Although revenues from fuel surcharges generally offset increases in fuel costs, other operating costs have been, and may continue to be, impacted by fluctuating fuel prices. The total impact of higher energy prices on other nonfuel-related expenses is difficult to ascertain. We cannot predict future fuel price fluctuations, the impact of higher energy prices on other cost elements, recoverability of higher fuel costs through fuel surcharges, and the effect of fuel surcharges on our overall rate structure or the total price that we will receive from our customers. Depending on the changes in the fuel rates and the impact on costs in other fuel- and energy-related areas, our operating margins could be impacted.

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Pricing. The pricing environment in the transportation industry also impacts our operating performance. Within our TL business, we typically charge a flat rate negotiated on each load hauled. Pricing within our TL business is typically driven by shipment frequency and consistency, length of haul, and customer and geographic mix, but generally has fewer influential factors than pricing within our LTL business. Within our LTL business, we typically generate revenues by charging our customers a rate based on shipment weight, distance hauled, and commodity type. This amount is comprised of a base rate, a fuel surcharge, and any applicable service fees. Our LTL pricing is typically measured by billed revenue per hundredweight, which is often referred to as “yield.” Our LTL pricing is dictated primarily by factors such as shipment size, shipment frequency and consistency, length of haul, freight density, and customer and geographic mix. Within our Global Solutions business, we typically charge a variable rate on each shipment in addition to transaction or service fees appropriate for the solution we have provided to meet a specific customer’s needs. Since we offer both TL and LTL shipping as part of our Global Solutions offering, pricing within our Global Solutions business is impacted by similar factors. The pricing environment for all of our operations generally becomes more competitive during periods of lower industry tonnage levels and increased capacity within the over-the-road freight sector. In addition, when we provide international freight forwarding services in our Global Solutions business, we also contract with airlines, ocean carriers, and agents as needed. The international markets are very dynamic and we must therefore adjust rates regularly based on market conditions.
Our Strategy
Our goal is to be the leading asset-light transportation and logistics service provider in North America. Our strategy includes continuing to:
Continue Generating Free Cash Flows. Our scalable business model and low capital expenditures (as a percentage of our revenues) enhance our ability to generate strong free cash flows and returns on our invested capital and assets. We believe an escalation in shipment and tonnage levels as well as continued expansion of our customer base will drive increased revenues and greater density throughout our network, thereby positively affecting our free cash flow generation.
Gain New Customers. We continue to expand our customer base, and we will continue to pursue increased market share in the TL, LTL, and Global Solutions markets. Our expansive geographic reach, increased with our 2015 acquisition of Stagecoach Cartage and Distribution LP (“Stagecoach”) and our 2014 acquisitions of Rich Logistics, Unitrans, ISI, and Active Aero, and broad service offering provides us with the ability to add new customers seeking “one-stop” and expedited transportation and logistics solutions. We also believe the pool of potential new customers will grow as the benefits of third-party transportation management solutions continue to be embraced.
Increase Penetration with Existing Customers. With our comprehensive service offering and large global network, we have substantial cross-selling opportunities and the potential to capture a greater share of each customer’s annual transportation and logistics expenditures. We believe that macroeconomic factors will provide us with opportunities to further penetrate existing customers. We believe that the acquisitions of Stagecoach, Rich Logistics, Unitrans, and Active Aero will provide us with more cross-selling opportunities as our customers are increasingly seeking a service provider who can provide complete, full service solutions, including a strong suite of international ocean and air freight management, customs brokerage capabilities, and expedited freight solutions.
Pursue Selective Acquisitions. The transportation and logistics industry is highly fragmented, consisting of many smaller, regional service providers covering particular shipping lanes and providing niche services. We built our TL, LTL, and Global Solutions platforms in part by successfully completing and integrating a number of acquisitions. We intend to continue to pursue acquisitions that, under our asset-light model, will complement our existing suite of services, and extend our geographic reach.
Expand Capacity. The current regulatory environment may put a constraint on the current driver base, which could result in a shortage of drivers. As capacity tightens, we plan to maintain or expand our driver base to ensure we meet the demands of our existing customer base. We will continue our efforts to recruit and retain additional ICs and expand our carrier base in order to reduce the impact of potential further tightening of industry truckload capacity. In addition, while we plan to maintain minimum asset intensity, we continue to consider investing in transportation equipment to service select lanes with consistent density if we believe we can achieve an attractive return on investment.
Our Services
We are a leading asset-light transportation and logistics service provider offering a comprehensive suite of global supply chain solutions. In each of our service offerings, we utilize a blend of company-owned and third-party owned equipment to provide the most cost effective service for our customers. Because of this blend, we are able to focus primarily on providing quality service rather than on asset utilization. Our customers generally communicate their freight needs to one of our transportation specialists on a shipment-by-shipment basis via telephone, fax, Internet, e-mail, or electronic data interchange. We leverage a diverse group of third-party carriers and ICs to provide scalable capacity and reliable service to our extensive customer base in North America.

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Truckload Logistics
We are a leading TL business operation in North America in terms of revenue. We provide a comprehensive range of TL solutions for our customers by leveraging our broad base of third-party carriers who operate temperature-controlled, dry van, and/or flatbed capacity. Although we specialize in the transport of refrigerated foods, poultry, and beverages, we also provide a variety of TL transportation solutions for dry goods ranging from paper products to steel, as well as flatbed service for larger industrial load requirements. Our intermodal capabilities include drayage, which is the transport of freight between ocean ports or rail ramps and shipping docks. Our 2015 acquisition of Stagecoach and our 2014 acquisitions of Rich Logistics, ISI, and Active Aero expanded our presence in the TL market and expedited service offerings for our customers with time critical transportation needs. Expedited offerings include ground and air services. We arrange the pickup and delivery of TL freight through our 49 TL service centers, 24 company dispatch offices (operated by our employees), or through our network of over 100 independent brokerage agents. Our dispatch offices and brokerage agents are located throughout the United States and Canada.  
Company Dispatchers and Inside Sales. We have over 200 company brokers, whom we refer to as dispatchers that not only engage in the routing and selection of our transportation providers, but also supplement our growing internal TL sales force. Inside sales personnel and company dispatchers are responsible for managing existing customer relationships and generating new customer relationships. Because the performance of these individuals is essential to our success, we offer attractive incentive-based compensation packages that we believe keep our dispatchers and sales force motivated, focused, and service-oriented.
Dispatch Office Expansion. We have traditionally expanded our dispatch operations based upon the needs of our customers. Going forward, we plan to open new dispatch offices, particularly in geographic areas where we lack coverage of the local freight market. Importantly, opening a new dispatch office requires only a modest amount of capital — it usually involves leasing a small amount of office space and purchasing communication and information technology equipment. Typically the largest investment required is in working capital as we generate revenue from new customers. While the majority of growth within our dispatch operations has been organic, we will continue to evaluate selective acquisitions that would allow us to quickly penetrate new customers and geographic markets.
Independent Brokerage Agents. In addition to our dispatchers, we also maintain a network of independent brokerage agents that have partnered with us for a number of years. Brokerage agents complement our network of dispatch offices by bringing pre-existing customer relationships, new customer prospects, and/or access to new geographic markets. Furthermore, they typically provide immediate revenue and do not require us to invest in incremental overhead. Brokerage agents own or lease their own office space and pay for their own communications equipment, insurance, and any other costs associated with running their operation. We only invest in the working capital required to execute our quick pay strategy and generally pay a commission to our brokerage agents ranging from 40-70% of the margin we earn on a TL shipment. Similar to our dispatchers, our brokerage agents engage in the routing and selection of transportation providers for our customer base and perform sales and customer service functions on our behalf.
Brokerage Agent Expansion. We believe we offer brokerage agents a very attractive partnership opportunity. We offer access to our reliable network of over 3,900 ICs and company drivers and broad base of purchased power providers, and we invest in the working capital required to pay these carriers promptly and assume collection responsibility. We believe this has contributed to our reputation for quality and reliable service, as well as to the consistent growth of our brokerage agent network. As of December 31, 2015, our TL brokerage agent network consisted of over 100 agents. Additionally, 32 of our brokerage agents each generated more than $1 million in revenue in 2015. We believe our increased development efforts and attractive value proposition will allow us to further expand our brokerage agent network and enhance the growth of our TL business.
Less-than-Truckload
Based on our industry knowledge, we believe we are the largest asset-light provider of LTL transportation services in North America in terms of revenue. We provide LTL service originating from points within approximately 150 miles of our service centers to most destinations throughout the United States and into Mexico, Puerto Rico, and Canada. Within the United States, we offer national, long-haul service (1,000 miles or greater), inter-regional service (between 500 and 1,000 miles), and regional service (500 miles or less). We serve a diverse group of customers within a variety of industries, including retail, industrial, paper goods, manufacturing, food and beverage, health care, chemicals, computer hardware, and general commodities.
We use over 180 third-party LTL delivery agents to complement our service center footprint and to provide cost-effective full state, national, and North American delivery coverage. Delivery agents also enhance our ability to handle special needs of the final consignee, such as scheduled deliveries and specialized delivery equipment.
We utilize a point-to-point LTL model that is differentiated from the traditional, asset-based hub and spoke LTL model. Our model does not require intermediate handling at a break-bulk hub (a large terminal where freight is offloaded, sorted, and reloaded), which we believe represents a competitive advantage in terms of timeliness, lower incidence of damage, and reduced fuel consumption.

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For example, we can transport LTL freight from Cleveland, Ohio to Los Angeles, California without stopping at a break-bulk hub, while the same shipment traveling through a traditional hub and spoke LTL model would likely be unloaded and reloaded at break-bulk hubs in Akron, Ohio and Adelanto, California prior to reaching its destination.
Key aspects of our LTL service offering include the following: 
Pickup. In order to stay as close as possible to our customers, we prefer to handle customer pickups whenever cost-effective. We generally pick up freight within 150 miles of one of our service centers, primarily utilizing local ICs. Although we generally do not own the tractors or other powered transportation equipment used to transport our customers’ freight, we own or lease trailers for use in local city pickup and delivery. In 2015, we picked up approximately 79% of our customers’ LTL shipments. The remainder was handled by agents with whom we generally have long-standing relationships.
Consolidation at Service Centers. Key to our model is a network of 47 LTL service centers that we lease in strategic markets throughout the United States. At these service centers, numerous smaller LTL shipments are unloaded, consolidated into truckload shipments, and loaded onto a linehaul unit scheduled for a destination city. In order to continuously emphasize optimal load building and enhance operating margins, dock managers review every load before it is dispatched from one of our service centers.
Linehaul. Linehaul is the longest leg of the LTL shipment process. In dispatching a load, a linehaul coordinator at one of our service centers uses our technology system to optimize cost-efficiency and service by assigning the load to the appropriate IC, company driver, or purchased power. In 2015, approximately 36% of our linehaul shipments were handled by over 600 dedicated LTL ICs. As industry-wide freight capacity tightens, we believe our recruitment and retention efforts will allow us to increase IC utilization in order to maintain service and cost stability.
De-consolidation and Delivery. Within our unique model, linehaul shipments are transported to our service centers, delivery agents, or direct to end users without stopping at a break-bulk hub, as is often necessary under the traditional, asset-based hub and spoke LTL model. This generally reduces physical handling and damage claims, and reduces delivery times by one to three days on average. In 2015, we delivered approximately 29% of LTL shipments through our service centers and 71% through our delivery agents.
Benefits of a Delivery Agent Network. While many national asset-based LTL providers are encumbered by the fixed overhead associated with owning or leasing most or all of their de-consolidation and delivery facilities, we maintain our variable cost structure through the extensive use of delivery agents.
Global Solutions
Our Global Solutions offering is designed to provide comprehensive or à la carte 3PL services and domestic and international transportation and container management, and freight consolidation and warehousing. We provide the necessary operational expertise, information technology capabilities, and relationships with third-party transportation providers to meet the unique needs of our customers. For customers that require the most comprehensive service plans, we complement their internal logistics and transportation management personnel and operations, enabling them to redirect resources to core competencies, reduce internal transportation management personnel costs, and, in many cases, achieve substantial annual freight savings. Key aspects of our Global Solutions capabilities include the following: 
Procurement. After an in-depth consultation and analysis with our customer to identify cost savings opportunities, we develop an estimate of our customer’s potential savings and design a plan for implementation. If necessary, we manage a targeted bid process based on the customer’s traffic lanes, shipment volumes, and product characteristics, and negotiate rates with reputable carriers. In addition to a cost-efficient rate, the customer receives a summary of projected savings as well as our carrier recommendation.
Shipment Planning. Utilizing our technology systems and an expansive multi-modal network of third-party transportation providers, we determine the appropriate mode of transportation and select the ideal provider. In addition, we provide load optimization services based on freight patterns and consolidation opportunities. We also provide rating and routing services, either on-site with one of our transportation specialists, off-site through our centralized call center, or online through our website. Finally, we offer merge-in-transit coordination to synchronize the arrival and pre-consolidation of high-value components integral to a customer’s production process, enabling them to achieve reduced cycle times, lower inventory holding costs, and improved supply chain visibility.
Customs Brokerage Services. We provide customs brokerage services to customers importing goods. We remove the burden on completing potentially complex customs documentation and paperwork and charge our customers a small fee for completing such work. In addition to processing documents for clearance, our knowledgeable staff can assist with customs compliance issues and remote location filing, and provide information on C-TPAT certification.

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International Freight Forwarding. We provide comprehensive air and ocean freight forwarding solutions. For customers requiring ocean freight solutions, we provide full-container-load, less-than-container-load, charters, bulk, refrigerated service or other unique solutions based on our customers' requirements. For customers requiring air freight solutions, we provide express service, temperature control, monitored door-to-door service, consolidated services or aircraft charters, and onboard couriers. We are well-versed in the many technical aspects of government regulations, state and commerce department licensing requirements, foreign government forms, transportation documents, and international collection and banking procedures. We are an authorized International Air Transport Association (“IATA”) agent and also an Indirect Air Carrier authorized by the Transportation Security Administration (“TSA”). Some of our locations are also authorized cargo screening locations.
Shipment Execution. Our transportation specialists are adept at managing time-critical shipments. Our technology system prompts a specialist to hold less time-sensitive shipments until other complementary freight can be found to complete the shipping process in the most cost-effective manner. We maintain constant communication with third-party transportation providers from dispatch through final delivery. As a result, our expedited services are capable of meeting virtually any customer transit or delivery requirement. Finally, we provide the ability to track and trace shipments either online or by phone through one of our transportation specialists.
Audit and Payment Services. We capture and consolidate our customers’ entire shipping activity and offer weekly electronic billing. We also provide freight bill audit and payment services designed to eliminate excessive or incorrect charges from our customers’ bills.
Performance Reporting and Improvement Analysis. Customers utilizing our web reporting system have the ability to review freight bills, develop customized reports online, and access data to assist in financial and operational reporting and planning. Our specialists are also actively driving process improvement by continuously using our technology to identify incremental savings opportunities and efficiencies for our customers.
Freight Consolidation and Warehousing. We have 2.5 million square feet of warehousing space strategically located throughout the United States, which includes temperature controlled areas and food-grade sections. We provide access to our state-of-the-art warehouse management system, which provides customers with complete inventory visibility and a robust tool for inventory management.
With a broad Global Solutions offering, we believe we can accommodate a shipper’s unique needs with any combination of services along our entire spectrum, and cater to their preferred means of shipment processing and communication.
We believe our comprehensive service approach and focus on building long-term customer relationships lead to greater retention of existing business compared to a more short-term gain sharing model employed by many 3PL providers. We believe our approach is more sustainable in the event freight capacity tightens and it becomes more difficult for 3PL providers employing the gain sharing model to generate substantial incremental savings for shippers after the first year of implementation. Before becoming fully operational with a customer, we conduct thorough feasibility and cost savings analyses and collaborate with the customer to create a project scope and timeline with measurable milestones. We believe this approach enables us to identify any potential issues, ensure a smooth integration process, and set the stage for long-term customer satisfaction. Within our Global Solutions operation, we have consistently met customer implementation deadlines and achieved anticipated levels of freight savings.
Capacity
We offer scalable capacity and reliable service to our extensive customer base in North America through a diverse third-party network of transportation providers and company drivers. Our various transportation modes include TL, LTL intermodal, and domestic and international air. No single carrier accounted for more than 2% of our 2015 purchased transportation costs. We ensure that each carrier is properly licensed and we regularly monitor each carrier's capacity, reliability, and pricing trends. Enhanced visibility provided by our technology systems allows us to leverage the competitive dynamics within our network to renegotiate freight rates and provide our customers with more cost-effective transportation solutions while enhancing our operating margins.
We continuously focus on building and enhancing our relationships with reliable transportation providers to ensure that we not only secure competitive rates, but that we also gain access to consistent capacity. These relationships are critical to our success based on our asset-light business model. We typically pay our third-party carriers either a contracted per mile rate or the cost of a shipment less our contractually agreed-upon commission, and generally pay within seven to ten days from the date the shipment is delivered. We pay our third-party carriers promptly in order to drive loyalty and reliable capacity.
Our network of transportation providers can be divided into the following groups:
Independent Contractors. ICs are a key part of our long-term strategy to maintain service and provide cost stability. As of December 31, 2015, we had over 3,000 ICs, which consisted of approximately 2,500 linehaul, truckload, and intermodal services

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ICs and approximately 500 local delivery ICs. In selecting our ICs, we adhere to specific screening guidelines in terms of safety records, length of driving experience, and evaluations. In the event of tightening of over-the-road freight capacity, we believe we are well positioned to increase our utilization of ICs as a cost-effective and reliable solution.
To enhance our relationship with our ICs, we offer per mile rates that we believe are highly competitive and often above prevailing market rates. In addition, we focus on keeping our ICs fully utilized in order to limit the number of “empty” miles they drive. We regularly communicate with our ICs and seek new ways to enhance their quality of life. We believe our efforts increase IC retention, which we believe ultimately leads to better service for our customers.
Purchased Power Providers. In addition to our large base of ICs, we have access to a broad base of purchased power providers. We have established relationships with carriers of all sizes, including large national trucking companies and small to mid-size regional fleets. With the exception of safety incentives, purchased power providers are generally paid under a similar structure as ICs within our LTL and TL businesses. In contrast to contracts established with our ICs, however, we do not cover the cost of liability insurance for our purchased power providers.
Company Drivers. We employ over 1,400 drivers across our businesses.
Delivery Agents. For the de-consolidation and delivery stages of our LTL shipment process, our network of 47 LTL service centers is complemented by over 180 third-party delivery agents. The use of delivery agents is also a key part of our long-term strategy to maintain a variable cost and scalable operating model with minimal overhead.
Intermodal Capabilities. We maintain intermodal capability within our TL segment and through relationships with third-party carriers who rent capacity on Class 1 railroads throughout North America. Intermodal transportation rates are typically negotiated between us and the capacity provider on a customer-specific basis.
Flight Operations. We support expedited delivery with over 190 flight operations personnel, including pilots, ground crew, and flight coordinators.
Ground Expedite. We utilize proprietary bid technology supported by our logistics personnel and our network of over-the-road equipment.
Customers
Our goal is to establish long-term customer relationships and achieve year-over-year growth in recurring business by providing reliable, timely, and cost-effective transportation and logistics solutions. We possess the scale, operational expertise, and capabilities to serve shippers of all sizes. We serve an extensive customer base within a variety of end markets, with no customer accounting for more than 8% of 2015 revenue and no industry sector accounting for more than 18% of 2015 revenue. Our customer growth was primarily driven by our sales team and a focus on shippers seeking to reduce their exposure to asset-based logistics providers. We believe this reduces our exposure to a decline in shipping demand from any one customer and a cyclical downturn within any particular end market.
Sales and Marketing
In addition to over 100 independent brokerage agents and over 200 dispatchers, we currently market and sell our transportation and logistics solutions through sales personnel located throughout the United States and Canada. We are focused on actively expanding our sales force to new geographic markets where we lack a strong presence. Our objective is to leverage our collective, national sales force to sell our full suite of transportation services. We believe this will allow us to capture a greater share of a shipper’s annual transportation and logistics expenditures.
As of December 31, 2015, our sales force extends into each service offering as follows: 
Truckload Logistics. We had over 200 dispatchers and over 100 independent brokerage agents located throughout the United States and Canada. Additionally, we had a sales force of 20 people consisting of sales managers and inside sales representatives. We believe that this sales structure enables our salespeople to better serve our customers by developing an understanding of local and regional market conditions, as well as the specific transportation and logistics issues facing individual customers. Our dispatchers, brokerage agents, and sales force seek additional business from existing customers and pursue new customers based on this knowledge and an understanding of the value proposition we can provide.
Less-than-Truckload. Our LTL sales force of over 100 people consisted of account executives, sales managers, inside sales representatives, and commissioned sales representatives.

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Global Solutions. We had over 70 Global Solutions salespeople, commissioned sales representatives, and agents. We also utilize our LTL sales force to enhance the market reach and penetration of our Global Solutions offering and to capitalize on the opportunity to cross-sell a broader menu of services to new and existing customers.
Competition
We compete in the North American transportation and logistics services sector. Our marketplace is extremely competitive and highly fragmented. We compete with a large number of other asset-light logistics companies, asset-based carriers, integrated logistics companies, and third-party freight brokers, many of whom have larger customer bases and more resources than we do.
In our markets, we compete with global asset-based integrated logistics companies such as FedEx Corporation and United Parcel Service, Inc., against whom we compete in all of our service lines; asset-based freight haulers, such as Arkansas Best Corporation, XPO Logistics, Inc., Old Dominion Freight Line Inc., and YRC Worldwide, Inc., against whom we compete in our core TL and LTL service offerings; non-asset based and asset-light freight brokerage companies, such as C.H. Robinson Worldwide, Inc. and Landstar System, Inc., against whom we compete in our core TL and LTL service offerings; 3PL providers that offer comprehensive transportation management solutions, such as Schneider Logistics, Inc. and Transplace, Inc., against whom we compete in our Global Solutions offering; and smaller, niche transportation and logistics companies that provide services within a specific geographic region or end market. In our international freight forwarding business, we compete with a large number of service providers. Depending on the trade lane and solution, these competitors include large multi-national, regional, local, or niche providers. As a result, our focus remains on continuing to provide our customers with exceptional service.
We believe we compete favorably by offering shippers attractive transportation and logistics solutions designed to deliver the optimal combination of cost and service. To that end, we believe our most significant competitive advantages include: 
our comprehensive suite of transportation and logistics services, which allows us to offer à la carte or a “one-stop” value proposition to shippers of varying sizes and to accommodate their diverse needs and preferred means of processing and communication;
our asset-light, variable cost business model, which allows us to generate strong free cash flows and focus greater attention on providing optimal customer service than on asset utilization;
our technology systems, which allow us to provide scalable capacity and a high level of customer service across a variety of transportation modes; and
our knowledgeable management team with experience leading high-growth logistics companies and/or business units, which allows us to benefit from a collective entrepreneurial culture focused on growth.
Seasonality
Our operations are subject to seasonal trends that have been common in the North American over-the-road freight sector for many years. Our results of operations for the quarter ending in March are on average lower than the quarters ending in June, September, and December. Typically, this pattern has been the result of factors such as inclement weather, national holidays, customer demand, and economic conditions. The impact of seasonality was less apparent due to fuel surcharges in 2015 and our organic growth and acquisitions in 2014.
Technology
We believe the continued development and innovation of our technology systems is important to providing our customers with the most cost-effective, timely, and reliable transportation and logistics solutions. Our objective is to allow our customers and vendors to easily do business with us via the Internet. Our customers have the ability, through a paperless process, to receive immediate pricing, place orders, track shipments, process remittance, receive updates on arising issues, and review historical shipping data through a variety of reports over the Internet.
Our TL operation uses a customized technology system to broker our customers’ freight. Our software enhances our ability to track our third-party drivers, tractors, and trailers, which provides customers with visibility into their supply chains. Additionally, our systems allow us to operate as a paperless operation through electronic order entry, resource planning, and dispatch. Our TL operations also utilize spot bid technology to manage expedited customers' logistics needs.
Our LTL operation utilizes a combination of web-based systems and customized software applications. Additionally, we make use of electronic data interchange (“EDI”) to allow our service centers to communicate electronically with our carriers’ and customers’ internal systems. We offer our EDI-capable customers a paperless process, including document imaging and shipment tracking and tracing.

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Our Global Solutions operation uses a variety of software applications and systems customized to meet the unique needs of our customers. We continuously enhance our applications and systems to help improve our productivity, increase customer visibility, and improve collaboration with our service providers, all while offering customizable content for our customers. Our web-based technology approach allows our Global Solutions operation to process and service customer orders, track shipments in real time, select optimal modes of transportation, execute customer billing, provide carrier rates, establish customer-specific profiles, and retain critical information for analysis while providing a company branded solution.  We utilize this approach to maximize supply chain efficiency through mode, carrier, and route optimization.
Employees
As of December 31, 2015, we employed 4,502 personnel, which included 61 management personnel, 163 sales and marketing personnel, 2,164 operations and other personnel, 1,429 company drivers, and 685 dock personnel. None of our employees are covered by a collective bargaining agreement and we consider relations with our employees to be good.
Regulation
The federal government substantially deregulated the provision of ground transportation and logistics services via the enactment of the Motor Carrier Act of 1980, the Trucking Industry Regulatory Reform Act of 1994, the Federal Aviation Administration Authorization Act of 1994, and the ICC Termination Act of 1995. Prices and services are now largely free of regulatory controls, although states have the right to require compliance with safety and insurance requirements, and interstate motor carriers remain subject to regulatory controls imposed by the U.S. Department of Transportation (“DOT”) and its agencies, such as the Federal Motor Carrier Safety Administration (“FMCSA”). Motor carrier, freight forwarding, and freight brokerage operations are subject to safety, insurance, and bonding requirements prescribed by the DOT and various state agencies. Any air freight business is subject to commercial standards set forth by the IATA and federal regulations issued by the TSA.
We are also subject to the Compliance, Safety, and Accountability Program (“CSA”), which is the FMCSA safety program designed to improve large truck and bus safety and ultimately reduce crashes. CSA is an enforcement and compliance model that involves assessments of a motor carrier's on-road performance and investigation results for a 24-month period using roadside stops and inspections, resulting in safety performance in the following categories: unsafe driving; hours-of-service compliance; driver fitness; controlled substances/alcohol; vehicle maintenance; hazardous material compliance; and crash indicator. The evaluations are then used by the FMCSA to select carriers for audit and other interventions.
As part of our acquisition of Active Aero, we acquired USA Jet Airlines (“USA Jet”), which holds certificates of public convenience and necessity issued by the DOT pursuant to 49 U.S.C. § 41102 and an air carrier certificate granted by the Federal Aviation Administration (“FAA”) pursuant to Part 119 of the federal aviation regulations. The DOT, the FAA, and the U.S. Department of Homeland Security (“DHS”), through the TSA, have regulatory authority over USA Jet’s air transportation services. The Federal Aviation Act of 1958, as amended, is the statutory basis for DOT and the FAA authority and the Aviation and Transportation Security Act of 2001, as amended, is the basis for TSA aviation security authority.
The FAA’s authority relates primarily to operational aspects of air transportation, including aircraft standards and maintenance, as well as personnel and ground facilities, which may from time to time affect the ability of USA Jet to operate its aircraft in the most efficient manner. The air carrier certificate granted to USA Jet by the FAA remains in effect so long as we meet the safety and operational requirements of the applicable FAA regulations.
The DOT’s authority relates primarily to economic licensing aspects of air transportation. The DOT’s jurisdiction extends to authorized types of operations and aviation route authority and to other regulatory matters, including the transfer of route authority between carriers. USA Jet holds various certificates issued by the DOT, including a domestic certificate authorizing USA Jet to engage in U.S. air transportation and a foreign certificate authorizing international air transportation of property. In addition, USA Jet is subject to non-U.S. government regulation of aviation rights involving non-U.S. jurisdictions, and non-U.S. customs regulation.
The TSA has responsibility for aviation security. The TSA continues to require USA Jet to comply with a Full All-Cargo Aircraft Operator Standard Security Program and the Twelve-Five Standard Security Program, which contain evolving and strict security requirements. These requirements are not static, but change periodically as the result of regulatory and legislative requirements, imposing additional security costs and creating a level of uncertainty for our operations.
We are also subject to various environmental and safety requirements, including those governing the handling, disposal, and release of hazardous materials, which we may be asked to transport in the course of our operations. If hazardous materials are released into the environment while being transported, we may be required to participate in, or may have liability for response costs and the remediation of such a release. In such a case, we also may be subject to claims for personal injury, property damage, and damage to natural resources. Our business is also subject to changes in legislation and regulations, which can affect our operations and those of our competitors. For example, new laws and initiatives to reduce and mitigate the effects of greenhouse gas emissions could

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significantly impact the transportation industry. Future environmental laws in this area could adversely affect our ICs’ costs and practices and consequently, our operations.
We are also subject to regulations to combat terrorism that the DHS and other agencies impose.
The international freight forwarding and customs brokerage services provided by our Global Solutions business are regulated by a variety of regulatory agencies and bodies including, but not limited to: the U.S. Federal Maritime Commission (“FMC”), the Bureau of Customs and Border Protection (“CBP”) and the TSA within the DHS (customs brokerage and security issues); the IATA; the DOT; the U.S. Food and Drug Administration (“FDA”); the U.S. Department of Agriculture (“USDA”); the U.S. Fish and Wildlife Service (“FWS”); the Bureau of Alcohol, Tobacco Products and Firearms (“BATF”); the U.S. Census Bureau; and other agencies or world governing bodies regulating international trade and compliance. Regulations and requirements must be strictly adhered to and can change periodically. Additionally, our Global Solutions business manages customer activities in numerous countries. As such, there may be risk associated with sudden fluctuations in currency, changes in economic policy, political unrest, changes to tariffs and trade policies/restrictions that are all outside of our control. Compliance with these changes may have a material impact on our operations and may increase our costs to service our customers.
Insurance
We insure our ICs and company drivers against third-party claims for accidents or damaged shipments and we bear the risk of such claims. We maintain insurance for vehicle liability, general liability, and cargo damage claims. We maintain an aggregate of $100 million of vehicle liability and general liability insurance. The vehicle liability insurance has a $500,000 deductible. We carry aggregate insurance against the first $1.0 million of cargo claims, with a $100,000 deductible. Because we maintain insurance for our ICs, if our insurance does not cover all or any portion of the claim amount, we may be forced to bear the financial loss. We attempt to mitigate this risk by carefully selecting carriers with quality control procedures and safety ratings.
In addition to vehicle liability, general liability, and cargo claim coverage, our insurance policies also cover other standard industry risks related to workers’ compensation and other property and casualty risks. We believe our insurance coverage is comparable in terms and amount of coverage to other companies in our industry. We establish insurance reserves for anticipated losses and expenses and periodically evaluate and adjust the reserves to reflect our experience.
Financial Information About Segments
See Note 14 “Segment Reporting” to the consolidated financial statements in this Form 10-K/A for financial information about our segments.
Available Information
Our principal executive offices are currently located at 1431 Opus Place, Suite 530, Downers Grove, Illinois 60515, and our telephone number is (414) 615-1500. Prior to May 2017, our corporate headquarters was in Cudahy, Wisconsin. Our website address is www.rrts.com. The information on our website is not incorporated by reference into this Form 10-K/A or in any other report or document we file with the Securities and Exchange Commission (“SEC”).
We file reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any other filings required by the SEC. Through our website, we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
The public may read and copy any materials we file with, or furnish to, the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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ITEM 1A.
RISK FACTORS
You should carefully consider the risk factors set forth below as well as the other information contained in this Form 10-K/A, including our consolidated financial statements and related notes. Any of the following risks could materially and adversely affect our business, financial condition, or results of operations. In such a case, you may lose all or part of your investment. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially adversely affect our business, financial condition, or results of operations.
The restatement of our previously issued financial statements has been time-consuming and expensive and could expose us to additional risks that could adversely affect our financial position, results of operations, and cash flows.
As described in the section entitled “Explanatory Note” and in Note 15 “Restatement of Previously Issued Financial Statements” to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Form 10-K/A, we have restated our previously issued consolidated financial statements for the fiscal years ended December 31, 2015, 2014, and 2013, as well as each of the quarters in the years ended December 31, 2015 and 2014. We have also revised our unaudited selected financial data for the fiscal years ended December 31, 2012 and 2011, as summarized in Item 6. “Selected Financial and Operating Data.” The restatement has been time-consuming and expensive and could expose us to a number of additional risks that could adversely affect our financial position, results of operations, and cash flows.
In particular, subsequent to 2016, we have incurred significant expense, including audit, legal, consulting, and other professional fees, as well as fees related to amendments to our sixth amended and restated credit agreement, in connection with the restatement of our previously issued consolidated financial statements and the ongoing remediation of material weaknesses in our internal control over financial reporting. We have taken a number of steps, including both adding internal personnel and hiring outside consultants, and intend to continue to take appropriate and reasonable steps to strengthen our accounting function and reduce the risk of additional misstatements in our financial statements. For more details about our remediation plan, see Item 9A. “Controls and Procedures.” To the extent these steps are not successful, we may have to incur additional time and expense. Our management’s attention has also been, and may further be, diverted from the operation of our business in connection with the restatement and ongoing remediation of material weaknesses in our internal controls.
We are also subject to claims, investigations, and proceedings arising out of the errors in our previously issued financial statements, including securities class action litigation, derivative lawsuits, and government agency investigations.
We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our company, and the value of our common stock.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act and based upon the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and preparation of our financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). Management is also responsible for reporting on the effectiveness of internal control over financial reporting.
We did not maintain an effective control environment based on the criteria established in the COSO framework. We have identified deficiencies in the principles associated with the control environment of the COSO framework. Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to: (i) our commitment to integrity and ethical values, (ii) the ability of our board of directors to effectively exercise oversight of the development and performance of internal control, as a result of failure to communicate relevant information within our organization and, in some cases, withholding information, (iii) appropriate organizational structure, reporting lines, and authority and responsibilities in pursuit of objectives, (iv) our commitment to attract, develop, and retain competent individuals, and (v) holding individuals accountable for their internal control related responsibilities. As disclosed in the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data,” these material weaknesses resulted in material accounting errors.
We did not maintain an effective control environment to enable the identification and mitigation of risks of material accounting errors based on the contributing factors to material weakness in the control environment, including:
The tone from former executive management was insufficient to create the proper environment for effective internal control over financial reporting and to ensure that (i) there were adequate processes for oversight, (ii) there was accountability for the performance of internal control over financial reporting responsibilities, (iii) identified issues and concerns were raised to appropriate levels within our organization, (iv) corrective activities were appropriately applied, prioritized, and implemented in a timely manner, and (v) relevant information was communicated within our organization and not withheld from our independent directors, our Audit Committee, and our independent auditors.

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In certain operating companies and at our corporate headquarters there were inconsistent accounting systems, policies, and procedures. Additionally, in certain locations we did not attract, develop, and retain competent management, accounting, financial reporting, internal audit, and information systems personnel or resources to ensure that internal control responsibilities were performed and that information systems were aligned with internal control objectives.
Our oversight processes and procedures that guide individuals in applying internal control over financial reporting were not adequate in preventing or detecting material accounting errors, or omissions due to inadequate information and, in certain instances, management override of internal controls, including recording improper accounting entries, recording accounting entries that were inconsistent with information known by management at the time, not communicating relevant information within our organization and, in some cases, withholding information from our independent directors, our Audit Committee, and our independent auditors.
Additionally, we have identified control deficiencies that constituted material weaknesses in the principles associated with the risk assessment, control activities, information and communication and monitoring activities components of the COSO framework. Refer to Item 9A. “Controls and Procedures” of this Form 10-K/A for more information.
As a result of such material weaknesses, our management concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2015.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We are actively engaged in developing and implementing a remediation plan designed to address these material weaknesses, but our remediation efforts are not complete and are ongoing. Although we are working to remedy the ineffectiveness of our internal control over financial reporting, there can be no assurance as to when the remediation plan will be fully developed, when it will be fully implemented, or the aggregate cost of implementation. Until our remediation plan is fully implemented, our management will continue to devote significant time and attention to these efforts. If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk that we will be unable to timely file future periodic reports with the SEC and that our future consolidated financial statements could contain errors that will be undetected. If we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our financing arrangements, and may be required to seek additional amendments or waivers under these financing arrangements, which could adversely impact our liquidity and financial condition. Further and continued determinations that there are material weaknesses in the effectiveness of our internal control over financial reporting could reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures of both money and our management’s time to comply with applicable requirements.
Any failure to implement or maintain required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses or material misstatements in our consolidated financial statements. Any new misstatement could result in a further restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing, or cause investors to lose confidence in our reported financial information, leading to a decline in our stock price. We cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting.
Further, we may be the subject of negative publicity focusing on the restatement of our previously issued financial results and related matters, and may be adversely impacted by negative reactions from our stockholders, creditors, or others with which we do business. This negative publicity may impact our ability to attract and retain customers, employees, drivers, and vendors. The occurrence of any of the foregoing could harm our business and reputation and cause the price of our securities to decline.
The restatement of our previously issued financial results has resulted in private litigation, derivative lawsuits, and government agency investigations and could result in additional litigation, government agency investigations, and enforcement actions.
Following our press release on January 30, 2017, three putative class actions were filed in the United States District Court for the Eastern District of Wisconsin on behalf of a class of persons who acquired our common stock between May 8, 2014 and January 30, 2017, inclusive. The Complaints allege that we, Mark A. DiBlasi, and Peter R. Armbruster violated Section 10(b) of the Exchange Act, and Messrs. DiBlasi and Armbruster violated Section 20(a) of the Exchange Act, by making materially false or misleading statements, or failing to disclose material facts, regarding our internal control over financial reporting and our financial statements. The Complaints seek certification as a class action, compensatory damages, and attorney’s fees and costs. On May 19, 2017, the Court consolidated the actions under the caption In re Roadrunner Transportation Systems, Inc. Securities Litigation, and appointed Public Employees’ Retirement System as lead plaintiff. Counsel for lead plaintiff has advised us of their intent to file a consolidated Amended Complaint after we issue our restated financial statements.
On May 25, 2017, Richard Flanagan filed a complaint alleging derivative claims on our behalf in the Circuit Court of Milwaukee County, State of Wisconsin (Case No. 17-cv-004401) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III,

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Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, and Brian van Helden. Count I of the Complaint alleges the Director Defendants breached their fiduciary duties by “knowingly failing to ensure that the Company implemented and maintained adequate internal controls over its accounting and financial reporting functions,” and seeks unspecified damages. Count II of the Complaint alleges the Officer Defendants DiBlasi, Armbruster, and van Helden received substantial performance-based compensation and bonuses for fiscal year 2014 that should be disgorged. The action has been stayed by agreement pending a decision on an anticipated motion to dismiss the Amended Complaint to be filed in the securities class action described above.
On June 28, 2017, Jesse Kent filed a complaint alleging derivative claims on our behalf and class action claims in the United States District Court for the Eastern District of Wisconsin (Case No. 17-cv-00893-PP) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, Brian van Helden, Scott Dobak, and Ralph Kittle. Count I of the Complaint alleges the Individual Defendants other than Armbruster, Dobak, Evans, Kittle, and van Helden, violated Section 14(a) of the Exchange Act by making false and misleading statements in proxies concerning our financial statements and internal controls. Count II of the Complaint alleges: (i) all the Individual Defendants breached their fiduciary duties of good faith, candor, and loyalty by creating a culture of lawlessness; (ii) the Officer Defendants knew, were reckless, or were grossly negligent in not knowing that we lacked effective internal controls and our financial statements were inaccurate; (iii) the Director Defendants other than Dobak and Kittle breached their duty of loyalty by recklessly permitting the improper statements concerning our internal controls and financial statements; (iv) the Director Defendants other than Dobak and Kittle breached their fiduciary duty and committed the ultra vires act of appointing the interlocking director defendant Dobak to the Board in violation of Section 8 of the Clayton Act; and (v) the Audit Committee Defendants breached their fiduciary duty of loyalty by approving the statements concerning our internal controls and financial statements. Count III of the Complaint alleges all the Individual Defendants wasted corporate assets by: (i) spending hundreds of millions of dollars to purchase various companies in connection with our alleged reckless growth-through-acquisition strategy; (ii) forcing us to have to defend ourselves in the securities fraud lawsuits; and (iii) paying improper compensation and bonuses to certain of our executive officers and directors who breached their fiduciary duty. Count IV of the Complaint alleges all the Individual Defendants were unjustly enriched as a result of the compensation and director remuneration they received while breaching their fiduciary duties. Count V of the Complaint alleges a direct claim against our current directors based on our failure to hold an annual meeting of stockholders by June 18, 2017 (13 months after our previous annual meeting of stockholders). The Complaint seeks judgment awarding unspecified damages, directing us to make certain corporate governance changes, awarding restitution, ordering disgorgement, directing us to hold our annual meeting of stockholders, and directing the Board to remove Dobak from the Board. On September 29, 2017, all the Defendants filed a motion to dismiss the Complaint. The motion is being held in abeyance pending our filing of our restated consolidated financial statements.
On December 22, 2017, Chester County Employees Retirement Fund filed a Complaint alleging derivative claims on our behalf in the United States District Court for the Eastern District of Wisconsin (Case No. 2:17-cv-01788-NJ) against the same defendants as those named in the Kent action. The allegations are substantially the same as those in the Kent Complaint.
In addition, subsequent to our announcement that certain previously filed financial statements should not be relied upon, we were contacted by the SEC, FINRA, and the Department of Justice. The Department of Justice and Division of Enforcement of the SEC have commenced investigations into the events giving rise to the restatement. We have received formal requests for documents and other information. We are cooperating fully with all of these agencies.
We cannot predict the outcome of these matters, or whether any other actions or proceedings will be filed against us in the future, and the cost of defending such actions or proceedings could be material. Furthermore, defending such actions or proceedings could divert our management and key personnel from our business operations. If we are found liable in any actions or proceedings, we may have to pay substantial damages or change the way we conduct our business, either of which may have a material adverse effect on our business, operating results, financial condition, and prospects. There may also be negative publicity associated with litigation or regulatory proceedings that could harm our business and reputation and cause the price of our securities to decline.
One or more significant claims or the cost of maintaining our insurance could have an adverse effect on our results of operations.
We employ approximately 1,400 drivers and use the services of thousands of ICs and transportation companies and their drivers in connection with our transportation operations. From time to time, these drivers are involved in accidents which may cause injuries and in which goods carried by these drivers are lost or damaged. Such accidents usually result in equipment damage and, unfortunately, can also result in injuries or death. Our involvement in the transportation of certain goods, including, but not limited to, hazardous materials, could also increase our exposure in the event of an accident resulting in injuries or contamination. The resulting types and/or amounts of damages may under any of these circumstances be excluded by or exceed the amount of our insurance coverage or the insurance coverage maintained by the contracted carrier. Although most of these drivers are ICs or work for third-party carriers, from time to time claims may be asserted against us for their actions or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. A material increase in the frequency or severity of accidents, claims for lost or damaged goods, liability claims, workers' compensation claims, or

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unfavorable resolutions of any such claims could adversely affect our results of operations to the extent claims are not covered by our insurance or such losses exceed our reserves. Significant increases in insurance costs or the inability to purchase insurance as a result of these claims could also reduce our profitability and have an adverse effect on our results of operations. The timing of the incurrence of these costs could also significantly and adversely impact our operating results compared to prior periods.
Increased insurance premium costs could have an adverse effect on our results of operations.
Insurance carriers may increase premiums for transportation companies generally. We could also experience additional increases in our insurance premiums in the future if our claims experience worsens. If our insurance or claims expense increases and we are unable to offset the increase with higher freight rates, our results of operations could be adversely affected. Furthermore, we may not be able to maintain or obtain sufficient or desired levels of insurance at reasonable rates. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have an adverse effect on our results of operations and financial position.
The cost of compliance with, liability for violations of, or modifications to existing or future governmental laws and regulations could adversely affect our business and results of operations.
Our operations are regulated and licensed by various federal and state agencies in the United States and similar governmental agencies in foreign countries in which we operate. These regulatory agencies have authority and oversight of domestic and international transportation services and related activities, licensure, motor carrier operations, safety and security, and other matters. We must comply with various insurance and surety bond requirements to act in the capacities for which we are licensed. Our subsidiaries and ICs must also comply with applicable regulations and requirements of such agencies.
Through our subsidiaries, we hold various licenses required to carry out our domestic and international services. These licenses permit us to provide services as a motor carrier, property broker, air carrier, indirect air carrier, ocean transportation intermediary, non-vessel operating common carrier, freight forwarder, and ocean freight forwarder. We also are subject to regulations and requirements promulgated by, among others, the DOT, FMCSA, DHS, CBP, TSA, FMC, IATA, FDA, USDA, FWS, BATF and various other international, domestic, state, and local agencies and port authorities. Our failure to maintain our required licenses, or to comply with applicable regulations, could materially and adversely affect our business, results of operations, or financial condition. See the section entitled “Regulation” in Item 1 of this Form 10-K/A for more information.
In addition, DHS regulations applicable to our customers who import goods into the United States and our contracted ocean carriers may impact our ability to provide and/or receive services with and from these parties. Enforcement measures related to violations of these regulations can slow and/or prevent the delivery of shipments, which may negatively impact our operations.
We incur significant costs to operate our business and monitor our compliance with applicable laws and regulations. The regulatory requirements governing our operations are subject to change based on new legislation and regulatory initiatives, which could affect the economics of the transportation industry by requiring changes in operating practices or influencing the demand for, and the cost of providing, transportation services. We cannot predict what impact future regulations may have on our business. Compliance with existing, new, or more stringent measures could disrupt or impede the timing of our deliveries and our ability to satisfy the needs of our customers. In addition, we may experience an increase in operating costs, such as security costs, as a result of governmental regulations that have been and will be adopted in response to terrorist activities and potential terrorist activities. The cost of compliance with existing or future measures could adversely affect our results of operations. Further, we could become subject to liabilities as a result of a failure to comply with applicable regulations.
In addition to the legal claims for property damage or personal injury described in the risk factor entitled “One or more significant claims or the cost of maintaining our insurance could have an adverse effect on our results of operations,” like many others in the transportation services industry, we are a defendant in five purported class-action lawsuits in California alleging violations of various California labor laws and one purported class-action lawsuit in Illinois alleging violations of the Illinois Wage Payment and Collection Act. The plaintiffs in each of these lawsuits seek to recover unspecified monetary damages and other items. In addition, the California Division of Labor Standards and Enforcement has brought administrative actions against us on behalf of seven individuals alleging that we violated California labor laws. Given the early stage of all of the proceedings described in this paragraph, we are not able to assess with certainty the outcome of these proceedings or the amount or range of potential damages or future payments associated with these proceedings at this time. We believe we have meritorious defenses to these actions and intend to defend these proceedings vigorously. However, any legal proceeding is subject to inherent uncertainties, and we cannot assure you that the expenses associated with defending these actions or their resolution will not have a material adverse effect on our business, operating results, or financial condition.

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Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.
From time to time, we arrange for the movement of hazardous materials at the request of our customers. As a result, we are subject to various environmental laws and regulations relating to the handling, transport, and disposal of hazardous materials. If our customers or carriers are involved in an accident involving hazardous materials, or if we are found to be in violation of applicable laws or regulations, we could be subject to substantial fines or penalties, remediation costs, or civil and criminal liability, any of which could have an adverse effect on our business and results of operations. In addition, current and future laws and regulations relating to carbon emissions and the effects of global warming can be expected to have a significant impact on the transportation sector generally and the operations and profitability of some of our carriers in particular, which could adversely affect our business and results of operations.
A decrease in levels of capacity in the over-the-road freight sector could have an adverse impact on our business.
The current operating environment in the over-the-road freight sector resulting from fluctuating fuel costs, industry-specific regulations (such as the CSA and hours-of-service rules and the proposed but not yet finalized changes implemented under Moving Ahead for Progress in the 21st Century (MAP-21)), a shortage of qualified drivers, and other economic factors are causing a tightening of capacity in the sector generally, and in our carrier network specifically, which could have an adverse impact on our ability to execute our business strategy and on our business.
We may not be able to successfully execute our acquisition strategy, and any acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value, and adversely affect our results of operations.
We plan to increase our revenue and expand our offerings in the market regions that we serve through the acquisition of complementary businesses. We cannot guarantee that we will be able to identify suitable acquisitions or investment candidates. Even if we identify suitable candidates, we cannot guarantee that we will make acquisitions or investments on commercially acceptable terms, if at all. In addition, we may incur debt or be required to issue equity securities to pay for future acquisitions or investments. The issuance of any equity securities could be dilutive to our stockholders.
Strategic acquisitions involve numerous risks, including the following:
failure of the acquired company to achieve anticipated revenues, earnings, or cash flows;
assumption of liabilities that were not disclosed to us or that exceed our estimates;
problems integrating the purchased operations with our own, which could result in substantial costs and delays or other operational, technical, or financial problems;
potential compliance issues with regard to acquired companies that did not have adequate internal controls;
diversion of management's attention or other resources from our existing business;
risks associated with entering markets in which we have limited prior experience; and
potential loss of key employees and customers of the acquired company.
We have had, and may have in the future, difficulties integrating acquired companies.
For acquisitions, success is also dependent upon efficiently integrating the acquired business into our existing operations. We are required to integrate these businesses into our internal control environment, which may present challenges that are different than those presented by organic growth and that may be difficult to manage. For example, as described in Part II, Item 9A. “Controls and Procedures” of this Form 10-K/A, based on the Audit Committee Investigation, current management determined that there were deficiencies in the design and/or execution of internal controls that constituted material weaknesses, with one of the contributing factors being the increased size and complexity of our company arising from the acquisition of 25 non-public companies between February 2011 and September 2015. The possible difficulties of integration include, among others: retention of customers and key employees; unanticipated issues in the assimilation and consolidation of information, communications, and other systems; inefficiencies and difficulties that arise because of unfamiliarity with potentially new geographic areas and new assets and the businesses associated with them; consolidation of corporate and administrative infrastructures; the diversion of management's attention from ongoing business concerns; the effect on internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and unanticipated issues, expenses, and liabilities. The diversion of management's attention from our current operations to the acquired operations and any difficulties encountered in combining operations has prevented us, and could in the future prevent us, from realizing the full benefits anticipated to result from the acquisitions and has adversely impacted, and could in the future adversely impact, our results of operations and financial condition. Also, following an acquisition, we may discover previously unknown liabilities associated with the acquired business for which we have no recourse under applicable

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indemnification provisions. If we are unable to successfully integrate and grow these acquisitions and to realize contemplated revenue synergies and cost savings, our business, prospects, results of operations, financial position, and cash flows could be materially and adversely affected.
We have not successfully managed, and may not in the future manage, our growth.
We intend to continue to grow rapidly and substantially, including by expanding our internal resources, making acquisitions, and entering into new markets. We have experienced, and may in the future experience, difficulties and higher-than-expected expenses in executing this strategy as a result of unfamiliarity with new markets, change in revenue and business models, and entering into new geographic areas. For example, as described in Part II, Item 9A. “Controls and Procedures” of this Form 10-K/A, based on the Audit Committee Investigation, current management determined that there were deficiencies in the design and/or execution of internal controls that constituted material weaknesses, with one of the contributing factors being the increased size and complexity of our company arising from the acquisition of 25 non-public companies between February 2011 and September 2015.
Our growth has placed, and will in the future place, a significant strain on our management and our operational and financial resources. We will need to continually improve existing procedures and controls as well as implement new transaction processing, operational and financial systems, and procedures and controls to expand, train, and manage our employee base. Our working capital needs will increase substantially as our operations grow. Failure to manage growth effectively, or obtain necessary working capital, has in the past had, and could in the future have, a material adverse effect on our business, results of operations, financial position, and cash flows.
Our international operations subject us to operational and financial risks.
We provide transportation and logistics services to and from international locations and are, therefore, subject to risks of international business, including, but not limited to, the following:
changes in tariffs, trade restrictions, trade agreements, and taxations;
difficulties in managing or overseeing foreign operations and agents;
limitations on the repatriation of funds because of foreign exchange controls;
different liability standards; and
intellectual property laws of countries which do not protect our rights in our intellectual property, including, but not limited to, our proprietary information systems, to the same extent as the laws of the United States.
We are also subject to compliance with the Foreign Corrupt Practices Act (“FCPA”). Failure to comply with the FCPA and local regulations in the conduct of our international business operations may result in legal claims against us.
The occurrence or consequences of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our operations in that region.
As we expand our business in foreign countries, we will be exposed to increased risk of loss from foreign currency fluctuations and exchange controls as well as longer accounts receivable payment cycles. We have limited control over these risks, and if we do not correctly anticipate changes in international economic and political conditions, we may not alter our business practices in time to avoid adverse effects.
Our indebtedness could adversely affect our business and limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy our debt service obligations.
As of December 31, 2015, we had indebtedness of $439.4 million offset by $6.6 million of debt issuance cost. We may incur additional indebtedness in the future, including any additional borrowings available under our senior credit facility. Any substantial indebtedness and the fact that a substantial portion of our cash flow from operating activities could be needed to make payments on this indebtedness could have adverse consequences, including the following:
reducing the availability of our cash flow for our operations, capital expenditures, future business opportunities, and other purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, which would place us at a competitive disadvantage compared to our competitors that may have less debt;
limiting our ability to borrow additional funds; and

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increasing our vulnerability to general adverse economic and industry conditions.
Our ability to borrow any funds needed to operate and expand our business will depend in part on our ability to generate cash. Our ability to generate cash is subject to the performance of our business as well as general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. If our business does not generate sufficient cash flow from operating activities or if future borrowings are not available to us under our senior credit facility or otherwise in amounts sufficient to enable us to fund our liquidity needs, our operating results, financial condition, and ability to maintain or expand our business may be adversely affected. Moreover, our inability to make scheduled payments on our debt obligations in the future would require us to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures, or seek additional equity.
Additionally, we have exposure to changes in interest rates on our revolving credit facility and term loan. The interest rates on our revolving credit facility and term loan fluctuate based on the prime rate or LIBOR plus an applicable margin. Assuming our $400.0 million revolving credit facility was fully drawn and taking into consideration the outstanding term loan of $296.3 million as of December 31, 2015, a 1.0% increase in the borrowing rate would increase our annual interest expense by $7.0 million.
Our senior credit facility contains financial and other restrictive covenants with which we may be unable to comply. A default under these financing arrangements could cause a material adverse effect on our liquidity, financial condition, and results of operations.
The loans outstanding under our senior credit facility are secured by a first priority lien on certain real property owned by our domestic subsidiaries and substantially all of our and our domestic subsidiaries' tangible and intangible personal property, including a pledge of the capital stock of certain of our direct and indirect subsidiaries. Our senior credit facility contains conditions, representations and warranties, events of default, and indemnification provisions that are customary for financings of this type, including, but not limited to, a minimum fixed charge coverage ratio, a maximum adjusted leverage ratio, and limitations on incurrence of debt, investments, liens on assets, transactions with affiliates, mergers, consolidations, and purchases and sales of assets.
If we default under the terms of this facility and fail to obtain appropriate amendments to or waivers under the applicable financing arrangement, our borrowings against the facility could be immediately declared due and payable. If we fail to pay the amount due, the lenders could proceed against the collateral by which our loans are secured, our borrowing capacity may be limited, or the facility could be terminated. If acceleration of outstanding borrowings occurs or if the facilities are terminated, we may have difficulty borrowing additional funds sufficient to refinance the accelerated debt or entering into new credit or debt arrangements, and, if available, the terms of the financing may not be acceptable. A default under our senior credit facility could have a material adverse effect on our liquidity and financial condition.
Fluctuations in the price or availability of fuel and limitations on our ability to collect fuel surcharges may adversely affect our results of operations.
We are subject to risks associated with fuel charges from our ICs, purchased power providers, and aircraft in our LTL and TL businesses. The availability and price of fuel are subject to political, economic, and market factors that are outside of our control.  Fuel prices have fluctuated dramatically over recent years. Over time we have been able to mitigate the impact of the fluctuations through our fuel surcharges which are closely linked to the market price for fuel.  There can be no assurance that our fuel surcharge revenue programs will be effective in the future. Market pressures may limit our ability to assess our fuel surcharges. At the request of our customers, we have at times temporarily capped the fuel surcharges at a fixed percentage pursuant to contractual arrangements that vary by customer. Currently, a minimal number of our customers have contractual arrangements with varying levels of capped fuel surcharges. If fuel surcharge revenue programs, base freight rate increases, or other cost-recovery mechanisms do not offset our exposure to rising fuel costs, our results of operations could be adversely affected.
A significant or prolonged economic downturn in the over-the-road freight sector, or a substantial downturn in our customers' business, could adversely affect our revenue and results of operations.
The over-the-road freight sector has historically experienced cyclical fluctuations in financial results due to, among other things, economic recession, downturns in business cycles, increasing costs and taxes, fluctuations in energy prices, price increases by carriers, changes in regulatory standards, license and registration fees, interest rate fluctuations, and other economic factors beyond our control. All of these factors could increase the operating costs of a vehicle and impact capacity levels in the over-the-road freight sector. Our ICs or purchased power providers may charge higher prices to cover higher operating expenses, and our operating income may decrease if we are unable to pass through to our customers the full amount of higher purchased transportation costs. Additionally, economic conditions may adversely affect our customers, their need for our services, or their ability to pay for our services.

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We operate in a highly competitive industry and, if we are unable to adequately address factors that may adversely affect our revenue and costs, our business could suffer.
Competition in the transportation services industry is intense. We face significant competition in local, regional, national, and international markets. Increased competition may lead to revenue reductions, reduced profit margins, or a loss of market share, any one of which could harm our business. There are many factors that could impair our ability to maintain our current profitability, including the following:
competition with other transportation services companies, some of which have a broader coverage network, a wider range of services, and greater capital resources than we do;
reduction by our competitors of their freight rates to gain business, especially during times of declining growth rates in the economy, which reductions may limit our ability to maintain or increase freight rates, maintain our operating margins, or maintain significant growth in our business;
solicitation by shippers of bids from multiple carriers for their shipping needs and the resulting depression of freight rates or loss of business to competitors;
development of a technology system similar to ours by a competitor with sufficient financial resources and comparable experience in the transportation services industry; and
establishment by our competitors of cooperative relationships to increase their ability to address shipper needs.
Our executive officers and key personnel are important to our business, and these officers and personnel may not remain with us in the future.
We depend substantially on the efforts and abilities of our senior management. Our success will depend, in part, on our ability to retain our current management team and to attract and retain qualified personnel in the future. Competition for senior management is intense, and we may not be able to retain our management team or attract additional qualified personnel. The loss of a member of senior management would require our remaining executive officers to divert immediate and substantial attention to fulfilling the duties of the departing executive and to seeking a replacement. The inability to adequately fill vacancies in our senior executive positions on a timely basis could negatively affect our ability to implement our business strategy, which could adversely impact our results of operations.
Our reliance on ICs to provide transportation services to our customers could limit our expansion.
Our transportation services are conducted in part by ICs, who are generally responsible for paying for their own equipment, fuel, and other operating costs. Our ICs are responsible for providing the tractors and generally the trailers they use related to our business. Certain factors such as increases in fuel costs, insurance costs and the cost of new and used tractors, reduced financing sources available to ICs for the purchase of equipment, or the impact of CSA and hours-of-service rules could create a difficult operating environment for ICs. Turnover and bankruptcy among ICs in the over-the-road freight sector often limit the pool of qualified ICs and increase the competition among carriers for their services. If we are required to increase the amounts paid to ICs in order to obtain their services, our results of operations could be adversely affected to the extent increased expenses are not offset by higher freight rates. Additionally, our agreements with our ICs are terminable by either party upon short notice and without penalty. Consequently, we regularly need to recruit qualified ICs to replace those who have left our pool. If we are unable to retain our existing ICs or recruit new ICs, our results of operations and ability to expand our business could be adversely affected.
Our third-party carriers must meet our needs and expectations, and those of our customers, and their inability to do so could adversely affect our results of operations.
Our business depends to a large extent on our ability to provide consistent, high quality, technology-enabled transportation and logistics solutions. We generally do not own or control the transportation assets that deliver our customers' freight, and we generally do not employ the people directly involved in delivering the freight. We rely on third parties to provide less-than-truckload, truckload and intermodal brokerage, and domestic and international air services and to report certain information to us, including information relating to delivery status and freight claims. This reliance could cause delays in providing our customers with timely delivery of freight and important service data, as well as in the financial reporting of certain events, including recognizing revenue and recording claims. If we are unable to secure sufficient transportation services to meet our customer commitments, or if any of the third parties we rely on do not meet our needs or expectations, or those of our customers, our results of operations could be adversely affected, and our customers could switch to our competitors temporarily or permanently.

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If our ICs are deemed to be employees, our business and results of operations could be adversely affected.
We are a defendant in a purported class-action lawsuit in California that alleges, among other claims, that the plaintiffs were misclassified as independent contractors. Given the early stage of this proceeding, we are not able to assess with certainty the outcome of this proceeding or the amount or range of potential damages or future payments associated with this proceeding at this time. In addition, tax and other regulatory authorities have in the past sought to assert that independent contractors in the trucking industry are employees rather than independent contractors. There can be no assurance that these authorities will not successfully assert this position against us or that tax and other laws that currently consider these persons ICs will not change. If our ICs are determined to be our employees, we would incur additional exposure under federal and state tax, workers' compensation, unemployment benefits, labor, employment, and tort laws, including for prior periods, as well as potential liability for employee benefits, tax withholdings, and penalties and interest. Our business model relies on the fact that our ICs are independent contractors and not deemed to be our employees, and exposure to any of the above factors could have an adverse effect on our business and results of operations.
Our financial results may be adversely impacted by potential future changes in accounting practices.
Future changes in accounting standards or practices, and related legal and regulatory interpretations of those changes, may adversely impact public companies in general, the transportation industry, or our operations specifically. New accounting standards or requirements, such as a conversion from GAAP to International Financial Reporting Standards, could change the way we record revenues, expenses, assets, and/or liabilities or could be costly to implement. These types of regulations could have a negative impact on our financial position, liquidity, results of operations, and/or access to capital.
We rely heavily on information and technology to operate our transportation and business networks, and any disruption to our technology infrastructure or the Internet could harm our operations and our reputation among customers.
Our ability to attract and retain customers and to compete effectively depends in part upon the sophistication and reliability of our technology network, including our ability to provide features of service that are important to our customers.  To keep pace with changing technologies and customer demands in the future, we must correctly interpret and address market trends and enhance the features and functionality of our technology system.  We may be unable to implement the appropriate features and functionality in a timely manner, which could result in decreased demand for our services and a corresponding decrease in revenue. 
In addition, we have become increasingly reliant on our technology systems for our operations as well as providing services to our customers.  External and internal risks, such as malware, code anomalies, “Acts of God,” attempts to penetrate our networks, transitional challenges in migrating operating company functionality to a centralized automation platform, data leakage, and human error pose a direct threat to our services and data. Any disruption to the Internet or our complex technology infrastructure, including those impacting our computer systems, could adversely impact our customer service, volumes, and revenues and result in increased costs. These types of adverse impacts could also occur in the event the confidentiality, integrity, or availability of company and customer information is compromised due to a data loss by us or a trusted third party. While we have invested and continue to invest in technology security initiatives, information technology risk management, and disaster recovery plans, these measures cannot fully insulate us from technology disruptions or data loss and the resulting adverse effect on our operations and financial results. Additionally, the cost and operational consequences of implementing further data or system protection measures could be significant.
Seasonal sales fluctuations and weather conditions could have an adverse impact on our results of operations.
The transportation industry is subject to seasonal sales fluctuations as shipments are generally lower during and after the winter holiday season. The productivity of our carriers historically decreases during the winter season because companies have the tendency to reduce their shipments during that time and inclement weather can impede operations. At the same time, our operating expenses could increase because harsh weather can lead to increased accident frequency rates and increased claims, as well as reduced commodity production (i.e. poultry, beef, fruit, produce). These commodities and other products we transport are also subject to disease, crop failure, reduction in production quantities or adjustments to automotive model changeovers. Any of the fluctuations could have an adverse effect on revenues. If we were to experience lower-than-expected revenue during any such period, our expenses may not be offset, which could have an adverse impact on our results of operations.
Terrorist attacks, anti-terrorism measures, and war could have broad detrimental effects on our business operations.
As a result of the potential for terrorist attacks, federal, state, and municipal authorities have implemented and continue to follow various security measures, including checkpoints and travel restrictions on large trucks. Such measures may reduce the productivity of our ICs or increase the costs associated with their operations, which we could be forced to bear. For example, security measures imposed at bridges, tunnels, border crossings, and other points on key trucking routes may cause delays and increase the non-driving time of our ICs, which could have an adverse effect on our results of operations. War, risk of war, or a terrorist attack also may have an adverse effect on the economy. A decline in economic activity could adversely affect our revenues or restrict our

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future growth. Instability in the financial markets as a result of terrorism or war also could impact our ability to raise capital. In addition, the insurance premiums charged for some or all of the coverage currently maintained by us could increase dramatically or such coverage could be unavailable in the future.
Our Global Solutions business derives a portion of its revenues from inventory management, the loss of which could have a negative impact on our financial condition, results of operations, and cash flows.
A portion of our Global Solutions business is involved with inventory and freight management for customers whose products are shipped to a limited number of big box retailers. Should these big box retailers change their supply chain practices and direct our customers to deliver product via another source, such change could have a negative impact on our Global Solutions business.
Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from achieving our growth objectives.
We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Additional equity financing may dilute the interests of our stockholders, and debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.
Our total assets include goodwill and intangibles. If we determine that these items have become impaired in the future, our earnings could be adversely affected.
As of December 31, 2015, we had recorded goodwill of $682.8 million and other intangible assets, net of accumulated amortization, of $75.7 million. Goodwill represents the excess of purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets of a business acquired. Goodwill and other intangible assets are evaluated for impairment annually or more frequently, if indicators of impairment exist. If the impairment evaluations for goodwill and intangible assets indicate the carrying amount exceeds the estimated fair value, an impairment loss is recognized in an amount equal to that excess. Our annual impairment evaluations of goodwill are performed as of July 1.
Subsequent to our annual impairment analysis as of July 1, 2015, a decline in revenues during the quarter ended September 30, 2015 resulted in a triggering event that required us to perform an interim goodwill impairment analysis of all reporting units as of September 30, 2015. We completed our interim impairment analysis and determined no impairment had occurred, as each reporting unit's calculated fair value exceeded the carrying value. As a result, there is no goodwill impairment for any of the periods presented in our consolidated financial statements included in this Form 10-K/A.
If we are unable to expand the number of our sales representatives, or if a significant number of our existing sales representatives leave us, our ability to increase our revenue could be negatively impacted.
Our ability to expand our business will depend, in part, on our ability to attract additional sales representatives and brokerage agents. Competition for qualified sales representatives can be intense, and we may be unable to attract such persons. Any difficulties we experience in expanding the number of our sales representatives could have a negative impact on our ability to expand our customer base, increase our revenue, and continue our growth.
In addition, we must retain our current sales representatives and properly incentivize them to obtain new customers and maintain existing customer relationships. If a significant number of our sales representatives leave us, our revenue could be negatively impacted. A significant increase in the turnover rate among our current sales representatives could also increase our recruiting costs and decrease our operating efficiency.
Changes in our relationships with our significant customers, including the loss or reduction in business from one or more of them, could have an adverse impact on us.
No single customer accounted for more than 8% of our 2015 revenue. Our contractual relationships with customers generally are terminable at will by the customers on short notice and do not require the customer to provide any minimum commitment. Our customers could choose to divert all or a portion of their business with us to one of our competitors, demand rate reductions for our services, require us to assume greater liability that increases our costs, or develop their own logistics capabilities. Failure to retain our existing customers or enter into relationships with new customers could materially impact the growth in our business and the ability to meet our current and long-term financial forecasts.

20



The market value of our common stock may fluctuate and could be substantially affected by various factors.
The price of our common stock on the New York Stock Exchange (“NYSE”) constantly changes. We expect that the market price of our common stock will continue to fluctuate. Our share price may fluctuate as a result of a variety of factors, many of which are beyond our control. These factors include, among others:
actual or anticipated variations in earnings, financial or operating performance, or liquidity;
changes in analysts' recommendations or projections;
failure to meet analysts' projections;
general economic and capital market conditions;
announcements of developments related to our business;
operating and stock performance of other companies deemed to be peers;
actions by government regulators;
news reports of trends, concerns, and other issues related to us or our industry, including changes in regulations; and
other factors described in this “Risk Factors” section.
Our common stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance. General market price declines or market volatility in the future could adversely affect the price of our common stock, and the current market price of our common stock may not be indicative of future market prices.
The New York Stock Exchange could commence procedures to delist our common stock, in the event we do not timely file all required periodic reports with the SEC, in which case the market price of our shares might decline and become more volatile and our stockholders’ ability to trade in our stock could be adversely affected.
As a result of our failure to timely file our Annual Report on Form 10-K for the year ended December 31, 2016 with the SEC, as previously disclosed, on April 4, 2017 we received a notice from the New York Stock Exchange (the “NYSE”) informing us that we were not in compliance with the NYSE’s continued listing requirements under the timely filing criteria set forth in Section 802.01E of the NYSE Listed Company Manual and that we were subject to the procedures set forth in the NYSE’s listing standards related to late filings. Under the NYSE rules, we were provided with six months from April 4, 2017 to file the delinquent 2016 Annual Report on Form 10-K. In the event that we did not file the delinquent 2016 Annual Report on Form 10-K and the required 2017 Quarterly Reports on Form 10-Q by the end of that six-month period, we could receive up to an additional six-month extension at the discretion of the NYSE. On October 5, 2017, the NYSE granted us an extension to December 15, 2017 to file our delinquent 2016 Annual Report on Form 10-K and the required 2017 Quarterly Reports on Form 10-Q. On December 18, 2017, the NYSE granted us an extension to April 4, 2018 to file our delinquent 2016 Annual Report on Form 10-K and the required 2017 Quarterly Reports on Form 10-Q. While we are filing this Form 10-K/A and concurrently filing the Quarterly Reports on Form 10-Q/A for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016 and our Annual Report on Form 10-K for the year ended December 31, 2016, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017 have not been filed and we remain subject to the procedures set forth in the NYSE’s listing standards related to late filings and subject to the risk of delisting.
If our common stock were delisted, there could be no assurance whether or when it would again be listed for trading on NYSE or any other exchange. Further, the market price of our shares might decline and become more volatile, and our stockholders may find that their ability to trade in our stock would be adversely affected. Furthermore, institutions whose charters do not allow them to hold securities in unlisted companies might sell our shares, perhaps very promptly, which could have a further adverse effect on the price of our stock.
Our current principal stockholders continue to have significant influence over us, and they could delay, deter, or prevent a change of control or other business combination or otherwise cause us to take action with which you might not agree.
Investment funds affiliated with HCI Equity Partners, L.L.C. together owned approximately 20.4% of our outstanding common stock as of December 31, 2015. In addition, two of our directors are affiliated with HCI Equity Partners, L.L.C. As a result, these stockholders will have significant influence over the election of our board of directors and our decision to enter into any corporate transaction and may have the ability to prevent any transaction that requires the approval of stockholders, regardless of whether or not other stockholders believe that such a transaction is in their own best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders or could limit the price that some investors might be willing to pay in the future for shares of our common stock.

21



The interests of these stockholders may not always coincide with our interests as a company or the interests of our other stockholders. Accordingly, these stockholders could cause us to enter into transactions or agreements that you would not approve or make decisions with which you may disagree.
Provisions in our certificate of incorporation, our bylaws, and Delaware law could make it more difficult for a third party to acquire us, discourage a takeover, and adversely affect existing stockholders.
Our certificate of incorporation, our bylaws, and the Delaware General Corporation Law contain provisions that may make it more difficult or delay attempts by others to obtain control of our company, even when these attempts may be in the best interests of our stockholders. These include provisions limiting the stockholders' powers to remove directors or take action by written consent instead of at a stockholders' meeting. Our certificate of incorporation also authorizes our board of directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. In addition, our certificate of incorporation provides for our board to be divided into three classes, serving staggered terms. The classified board provision could have the effect of discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. Delaware law also imposes conditions on the voting of “control shares” and on certain business combination transactions with “interested stockholders.”
These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Prior to May 2017, our corporate, TL, LTL, and Global Solutions headquarters, where senior management resides, was located in Cudahy, Wisconsin, where we lease 28,824 square feet of space under a lease that expires in 2020. The primary functions performed at this location are accounting, treasury, marketing, human resources, linehaul support, claims, safety, and information technology support.
For our TL business, we own three and lease 15 company dispatch offices and lease eight cross-dock and drop yard locations throughout the United States and Canada. We own seven and lease 41 TL service centers, lease five warehouses, and lease five freight consolidation and inventory management centers throughout the United States. For our LTL business, we lease 28 service centers throughout the United States, each of which is interactively connected. Each service center manages and is responsible for the freight that originates in its service area. The typical service center is configured to perform cross-dock and limited short-term warehouse operations. For our Global Solutions business, we own one and lease ten service centers, lease eight dispatch offices, and lease two storage facilities throughout the United States.
We believe that our current facilities are in good working order and are capable of supporting our operations for the foreseeable future; however, we will continue to evaluate leasing additional space as needed to accommodate our growth.
ITEM 3.
LEGAL PROCEEDINGS
In the ordinary course of business, we are a defendant in several legal proceedings arising out of the conduct of our business. These proceedings include claims for property damage or personal injury incurred in connection with our services. Although there can be no assurance as to the ultimate disposition of these proceedings, we do not believe, based upon the information available at this time, that these property damage or personal injury claims, in the aggregate, will have a material impact on our consolidated financial statements. We are self-insured up to $1,000,000 for workers compensation claims. We maintain liability insurance coverage for claims in excess of $500,000 per occurrence and cargo coverage for claims in excess of $100,000 per occurrence. We believe we have adequate insurance to cover losses in excess of the deductible amount. As of December 31, 2015 and 2014, we had reserves for estimated uninsured losses for auto liability, cargo, and workers compensation of $25.9 million and $18.9 million, respectively.
In addition to the legal proceedings described above we are a defendant in five purported class-action lawsuits in California alleging violations of various California labor laws and one purported class-action lawsuit in Illinois alleging violations of the Illinois Wage Payment and Collection Act. The plaintiffs in each of these lawsuits seek to recover unspecified monetary damages and other items. In addition, the California Division of Labor Standards and Enforcement has brought administrative actions against us on behalf of seven individuals alleging that we violated California labor laws. Given the early stage of all of the proceedings described

22



in this paragraph, we are not able to assess with certainty the outcome of these proceedings or the amount or range of potential damages or future payments associated with these proceedings at this time. We believe we have meritorious defenses to these actions and intend to defend these proceedings vigorously. However, any legal proceeding is subject to inherent uncertainties, and we cannot assure that the expenses associated with defending these actions or their resolution will not have a material adverse effect on our business, operating results, or financial condition.
Following our press release on January 30, 2017, three putative class actions were filed in the United States District Court for the Eastern District of Wisconsin on behalf of a class of persons who acquired our common stock between May 8, 2014 and January 30, 2017, inclusive. The Complaints allege that we, Mark A. DiBlasi, and Peter R. Armbruster violated Section 10(b) of the Exchange Act, and Messrs. DiBlasi and Armbruster violated Section 20(a) of the Exchange Act, by making materially false or misleading statements, or failing to disclose material facts, regarding our internal control over financial reporting and our financial statements. The Complaints seek certification as a class action, compensatory damages, and attorney’s fees and costs. On May 19, 2017, the Court consolidated the actions under the caption In re Roadrunner Transportation Systems, Inc. Securities Litigation, and appointed Public Employees’ Retirement System as lead plaintiff. Counsel for lead plaintiff has advised us of their intent to file a consolidated Amended Complaint after we issue our restated financial statements.
On May 25, 2017, Richard Flanagan filed a complaint alleging derivative claims on our behalf in the Circuit Court of Milwaukee County, State of Wisconsin (Case No. 17-cv-004401) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, and Brian van Helden. Count I of the Complaint alleges the Director Defendants breached their fiduciary duties by “knowingly failing to ensure that the Company implemented and maintained adequate internal controls over its accounting and financial reporting functions,” and seeks unspecified damages. Count II of the Complaint alleges the Officer Defendants DiBlasi, Armbruster, and van Helden received substantial performance-based compensation and bonuses for fiscal year 2014 that should be disgorged. The action has been stayed by agreement pending a decision on an anticipated motion to dismiss the Amended Complaint to be filed in the securities class action described above.
On June 28, 2017, Jesse Kent filed a complaint alleging derivative claims on our behalf and class action claims in the United States District Court for the Eastern District of Wisconsin (Case No. 17-cv-00893-PP) against Scott Rued, Mark DiBlasi, Christopher Doerr, John Kennedy, III, Brian Murray, James Staley, Curtis Stoelting, William Urkiel, Judith Vijums, Michael Ward, Chad Utrup, Ivor Evans, Peter Armbruster, Brian van Helden, Scott Dobak, and Ralph Kittle. Count I of the Complaint alleges the Individual Defendants other than Armbruster, Dobak, Evans, Kittle, and van Helden, violated Section 14(a) of the Exchange Act by making false and misleading statements in proxies concerning our financial statements and internal controls. Count II of the Complaint alleges: (i) all the Individual Defendants breached their fiduciary duties of good faith, candor, and loyalty by creating a culture of lawlessness; (ii) the Officer Defendants knew, were reckless, or were grossly negligent in not knowing that we lacked effective internal controls and our financial statements were inaccurate; (iii) the Director Defendants other than Dobak and Kittle breached their duty of loyalty by recklessly permitting the improper statements concerning our internal controls and financial statements; (iv) the Director Defendants other than Dobak and Kittle breached their fiduciary duty and committed the ultra vires act of appointing the interlocking director defendant Dobak to the Board in violation of Section 8 of the Clayton Act; and (v) the Audit Committee Defendants breached their fiduciary duty of loyalty by approving the statements concerning our internal controls and financial statements. Count III of the Complaint alleges all the Individual Defendants wasted corporate assets by: (i) spending hundreds of millions of dollars to purchase various companies in connection with our alleged reckless growth-through-acquisition strategy; (ii) forcing us to have to defend ourselves in the securities fraud lawsuits; and (iii) paying improper compensation and bonuses to certain of our executive officers and directors who breached their fiduciary duty. Count IV of the Complaint alleges all the Individual Defendants were unjustly enriched as a result of the compensation and director remuneration they received while breaching their fiduciary duties. Count V of the Complaint alleges a direct claim against our current directors based on our failure to hold an annual meeting of stockholders by June 18, 2017 (13 months after our previous annual meeting of stockholders). The Complaint seeks judgment awarding unspecified damages, directing us to make certain corporate governance changes, awarding restitution, ordering disgorgement, directing us to hold our annual meeting of stockholders, and directing the Board to remove Dobak from the Board. On September 29, 2017, all the Defendants filed a motion to dismiss the complaint. The motion is being held in abeyance pending our filing of our restated consolidated financial statements.
On December 22, 2017, Chester County Employees Retirement Fund filed a Complaint alleging derivative claims on our behalf in the United States District Court for the Eastern District of Wisconsin (Case No. 2:17-cv-01788-NJ) against the same defendants as those named in the Kent action. The allegations are substantially the same as those in the Kent Complaint.
In addition, subsequent to our announcement that certain previously filed financial statements should not be relied upon, we were contacted by the SEC, FINRA, and the Department of Justice. The Department of Justice and Division of Enforcement of the SEC have commenced investigations into the events giving rise to the restatement. We have received formal requests for documents and other information. We are cooperating fully with all of these agencies.

23



ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.

24



PART II 
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information on Common Stock
Our common stock has been trading on the NYSE under the symbol “RRTS” since May 13, 2010. Prior to that time, there was no public market for our common stock. The following table sets forth, for the periods indicated, the high and low sales prices of our common stock as quoted on the NYSE.
 
 
High
 
Low
Fiscal 2015:
 
 
 
First quarter
$
26.73

 
$
20.20

Second quarter
$
28.51

 
$
23.43

Third quarter
$
26.95

 
$
18.24

Fourth quarter
$
19.22

 
$
8.91

Fiscal 2014:
 
 
 
First quarter
$
29.82

 
$
21.17

Second quarter
$
28.82

 
$
23.79

Third quarter
$
29.02

 
$
22.72

Fourth quarter
$
23.96

 
$
19.57

Fiscal 2013:
 
 
 
First quarter
$
23.71

 
$
17.63

Second quarter
$
29.52

 
$
21.52

Third quarter
$
30.98

 
$
26.38

Fourth quarter
$
28.70

 
$
23.84

Stockholders
As of February 25, 2016, there were 58 holders of record of our common stock. On February 25, 2016, the closing price of our common stock as reported on the NYSE was $11.72 per share.
Dividends
We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements, as well as other factors deemed relevant by our board of directors. Our current debt agreement prohibits us from paying dividends without the consent of our lenders.
Equity Compensation Plan Information
For equity compensation plan information, refer to Item 12 in Part III of this Form 10-K/A.
Performance Graph
The following line graph compares cumulative total shareholder returns for the period from December 31, 2010 through December 31, 2015 for (1) our common stock; (2) the Nasdaq Composite Index; and (3) the Nasdaq Transportation Index. The graph assumes an investment of $100 on December 31, 2010. The calculations of cumulative stockholder return on the Nasdaq Composite Index and the Nasdaq Transportation Index include reinvestment of dividends. The calculation of cumulative stockholder return on our common stock does not include reinvestment of dividends because we did not pay any dividends during the measurement period. The historical performance shown is not necessarily indicative of future performance.

25



The performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. The performance graph shall not be deemed to be incorporated by reference into any filing of our company under the Exchange Act or the Securities Act.

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12011764&doc=10
*
$100 invested on December 31, 2010 in stock or in index, including reinvestment of dividends. Fiscal year ending December 31.

26



ITEM 6.
SELECTED FINANCIAL DATA
The following presents selected financial data, as revised, for each fiscal year in the five-year period ended December 31, 2015. Our past operating results are not necessarily indicative of our future operating results as the consolidated statement of operations includes the results of operations of our acquired companies since the date of their acquisition. The selected financial data below should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes contained elsewhere in this Form 10-K/A, including Note 3 “Acquisitions” thereto.
We have derived the consolidated statements of operations data for the years ended December 31, 2015, 2014, and 2013 and the consolidated balance sheet data as of December 31, 2015 and 2014 from our restated audited consolidated financial statements included in Part II. Item 8. “Financial Statements and Supplementary Data” of this Form 10-K/A. Similarly, the consolidated statement of operations data and other data for the years ended December 31, 2012 and 2011 and the consolidated balance sheet data as of December 31, 2013, 2012, and 2011 have been revised for the effects of the restatement; however, such periods are no longer subject to audit. Our historical results are not necessarily indicative of the results that should be expected in the future and the selected financial data is not intended to replace the consolidated financial statements and related notes included elsewhere in this Form 10-K/A.

CONSOLIDATED STATEMENT OF OPERATIONS DATA
(In thousands, except per share amounts)
 
 Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
As Revised (1)
 
As Revised (1)
 
As Revised (1)
 
As Revised (2)
 
As Revised (2)
Revenues
$
1,992,166

 
$
1,872,470

 
$
1,361,410

 
$
1,073,354

 
$
843,627

Purchased transportation costs
1,310,396

 
1,294,724

 
944,275

 
753,459

 
620,343

Personnel and related benefits
263,254

 
213,661

 
151,935

 
120,366

 
87,446

Other operating expenses
323,955

 
271,210

 
170,053

 
128,763

 
90,848

Depreciation and amortization
31,626

 
24,254

 
15,444

 
9,064

 
4,755

Acquisition transaction expenses
564

 
2,305

 
851

 
773

 
1,368

Operating income
62,371

 
66,316

 
78,852

 
60,929

 
38,867

Interest on debt
19,439

 
13,363

 
7,883

 
7,981

 
4,135

Dividends on preferred stock subject to mandatory redemption

 

 

 
49

 
200

Income before provision for income taxes
42,932

 
52,953

 
70,969

 
52,899

 
34,532

Provision for income taxes
17,312

 
20,243

 
25,049

 
21,204

 
14,974

Net income
25,620

 
32,710

 
45,920

 
31,695

 
19,558

Net income
$
25,620

 
$
32,710

 
$
45,920

 
$
31,695

 
$
19,558

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.67

 
$
0.86

 
$
1.27

 
$
1.02

 
$
0.64

Diluted
$
0.65

 
$
0.83

 
$
1.21

 
$
0.98

 
$
0.62

Weighted average common stock outstanding:
 
 
 
 
 
 
 
 
 
Basic
38,179

 
37,852

 
36,133

 
31,040

 
30,432

Diluted
39,180

 
39,259

 
37,913

 
32,425

 
31,545

(1) See Note 15 “Restatement of Previously Issued Financial Statements” to the consolidated financial statements in this Form 10-K/A.











27



(2) Selected financial data has been revised for the effects of the restatement; however, such periods are no longer subject to audit. The effects of the restatement were as follows:
 
 Year Ended December 31,
 
2012
 
2011
 
As Previously Reported
Adjustments
As Revised
 
As Previously Reported
Adjustments
As Revised
Revenues
$
1,073,354

$

$
1,073,354

 
$
843,627

$

$
843,627

Purchased transportation costs
753,459


753,459

 
620,343


620,343

Personnel and related benefits
119,955

411

120,366

 
87,178

268

87,446

Other operating expenses
120,718

8,045

128,763

 
83,625

7,223

90,848

Depreciation and amortization
9,499

(435
)
9,064

 
4,978

(223
)
4,755

Acquisition transaction expenses
773


773

 
1,368


1,368

Operating income
68,950

(8,021
)
60,929


46,135

(7,268
)
38,867

Interest on long-term debt
7,981


7,981

 
4,135


4,135

Dividends on preferred stock subject to mandatory redemption
49


49

 
200


200

Income before provision for income taxes
60,920

(8,021
)
52,899

 
41,800

(7,268
)
34,532

Provision for income taxes
23,390

(2,186
)
21,204

 
15,929

(955
)
14,974

Net income
$
37,530

$
(5,835
)
$
31,695


$
25,871

$
(6,313
)
$
19,558

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.21

 
$
1.02

 
$
0.85

 
$
0.64

Diluted
$
1.16

 
$
0.98

 
$
0.82

 
$
0.62

Weighted average common stock outstanding:
 
 
 
 
 
 
 
Basic
31,040

 
31,040

 
30,432

 
30,432

Diluted
32,425

 
32,425

 
31,545

 
31,545


CONSOLIDATED BALANCE SHEET DATA
(In thousands)
 
December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
As Revised (1)
 
As Revised (1)
 
As Revised (2)
 
As Revised (2)
 
As Revised (2)
Total assets (3)
$
1,307,753

 
$
1,250,638

 
$
859,492

 
$
688,041

 
$
535,018

Adjusted working capital(4)
153,626

 
155,950

 
98,256

 
71,058

 
51,526

Total debt (including current maturities) (3)
432,830

 
423,945

 
187,165

 
155,992

 
132,043

Capital lease obligation
12,464

 
1,730

 
1,934

 
2,145

 
1,365

Series A preferred stock subject to mandatory redemption

 

 

 

 
5,000

Total stockholders’ investment
556,439

 
524,287

 
485,141

 
379,931

 
289,640

(1) See Note 15 “Restatement of Previously Issued Financial Statements” to the consolidated financial statements in this Form 10-K/A.















28



(2) Selected financial data has been revised for the effects of the restatement; however, such periods are no longer subject to audit. The effects of the restatement were as follows:
 
December 31,
 
2013
 
2012
 
2011
 
As Previously Reported
Adjustments
As Revised
 
As Previously Reported
Adjustments
As Revised
 
As Previously Reported
Adjustments
As Revised
Total assets (3)
$
871,880

$
(12,388
)
$
859,492

 
$
700,808

$
(12,767
)
$
688,041

 
$
543,718

$
(8,700
)
$
535,018

Adjusted working capital (4)
102,110

(3,854
)
98,256

 
64,097

6,961

71,058

 
42,845

8,681

51,526

Total debt (including current maturities) (3)
192,640

(5,475
)
187,165

 
161,500

(5,508
)
155,992

 
136,500

(4,457
)
132,043

Capital lease obligation
1,058

876

1,934

 
1,138

1,007

2,145

 
1,365


1,365

Series A preferred stock subject to mandatory redemption



 



 
5,000


5,000

Total stockholders’ investment
500,365

(15,224
)
485,141

 
392,079

(12,148
)
379,931

 
295,953

(6,313
)
289,640

(3) Adjustments to total assets and debt balances include effects of reclassification of debt issuance costs resulting from the adoption of new accounting methodology as disclosed in Note 1 “Organization, Nature of Business and Significant Accounting Policies” to the consolidated financial statements in this Form 10-K/A.
(4) Adjusted working capital, calculated as current assets less current liabilities, excluding current maturities of debt and short-term capital lease obligations, is not a financial measure presented in accordance with GAAP. The following is a reconciliation of Adjusted working capital from current assets (in thousands):
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
As Revised
 
As Revised
 
As Revised
 
As Revised
 
As Revised
Current assets
$
346,564

 
$
349,139

 
$
211,115

 
$
160,330

 
$
128,094

Less: Current liabilities
630,918

 
617,367

 
124,001

 
106,483

 
90,795

Plus: Short-term capital lease obligation
5,150

 
233

 
204

 
211

 
227

Plus: Current maturities of debt
432,830

 
423,945

 
10,938

 
17,000

 
14,000

Adjusted working capital
$
153,626

 
$
155,950

 
$
98,256

 
$
71,058

 
$
51,526


OTHER DATA
(In thousands)
 
 Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
As Revised
 
As Revised
 
As Revised
 
As Revised (2)
 
As Revised (2)
EBITDA(3)
$
93,997

 
$
90,570

 
$
94,296

 
$
69,993

 
$
43,622

Adjusted EBITDA (3)
$
93,566

 
$
91,103

 
$
85,356

 
$
70,652

 
$
44,146

Net cash provided by operating activities (1)
68,214

 
37,228

 
33,644

 
34,879

 
32,190

Net cash used in investing activities (1)
(76,671
)
 
(265,842
)
 
(124,894
)
 
(101,742
)
 
(139,556
)
Net cash provided by financing activities (1)
5,578

 
233,985

 
84,780

 
75,456

 
109,685

(1) See Note 15 “Restatement of Previously Issued Financial Statements” to the consolidated financial statements in this Form 10-K/A.
(2) Selected financial data has been revised for the effects of the restatement. The effects of the restatement were as follows:

29



 
 Year Ended December 31,
 
2015
 
2014
 
2013
 
As Previously Reported
Adjustments
As Revised
 
As Previously Reported
Adjustments
As Revised
 
As Previously Reported
Adjustments
As Revised
EBITDA (3)
$
128,996

$
(34,999
)
$
93,997

 
$
120,764

$
(30,194
)
$
90,570

 
$
101,674

$
(7,378
)
$
94,296

Net cash provided by operating activities
73,362

(5,147
)
68,215

 
40,630

(3,402
)
37,228

 
36,123

(2,479
)
33,644

Net cash used in investing activities
(81,544
)
4,872

(76,672
)
 
(268,844
)
3,002

(265,842
)
 
(127,073
)
2,179

(124,894
)
Net cash provided by financing activities
5,501

77

5,578

 
234,121

(136
)
233,985

 
84,480

300

84,780

 
 
 
 
2012
 
2011
 
 
As Previously Reported
Adjustments
As Revised
 
As Previously Reported
Adjustments
As Revised
EBITDA (3)
 
$
78,449

$
(8,456
)
$
69,993

 
$
51,113

$
(7,491
)
$
43,622

Net cash provided by operating activities
 
36,723

(1,844
)
34,879

 
33,164

(974
)
32,190

Net cash used in investing activities
 
(103,607
)
1,865

(101,742
)
 
(140,530
)
974

(139,556
)
Net cash provided by financing activities
 
75,477

(21
)
75,456

 
109,685


109,685

(3) EBITDA represents earnings before interest, taxes, depreciation, and amortization. We use Adjusted EBITDA, which excludes impairment and other non-cash gains and losses, adjustments to contingent purchase obligations, and share-based compensation expenses, as a supplemental measure in evaluating our operating performance and when determining executive incentive compensation. We believe Adjusted EBITDA is useful to investors in evaluating our performance compared to other companies in our industry because it assists in analyzing and benchmarking the performance and value of a business. The calculation of EBITDA and Adjusted EBITDA eliminates the effects of financing, income taxes, and the accounting effects of capital spending. These items may vary for different companies for reasons unrelated to the overall operating performance of a company’s business. EBITDA and Adjusted EBITDA are not financial measures presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Although our management uses Adjusted EBITDA as a financial measure to assess the performance of our business compared to that of others in our industry, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
EBITDA and Adjusted EBITDA do not reflect our cash expenditures, future requirements for capital expenditures, or contractual commitments;
EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
EBITDA and Adjusted EBITDA do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and
other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our results of operations under GAAP. See the consolidated statements of operations included in our consolidated financial statements included elsewhere in this Form 10-K/A.
The following is a reconciliation of EBITDA and Adjusted EBITDA from net income (in thousands): 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
As Revised
 
As Revised
 
As Revised
 
As Revised
 
As Revised
Net income
$
25,620

 
$
32,710

 
$
45,920

 
$
31,695

 
$
19,558

Plus: Total interest expense
19,439

 
13,363

 
7,883

 
8,030

 
4,335

Plus: Provision for income taxes
17,312

 
20,243

 
25,049

 
21,204

 
14,974

Plus: Depreciation and amortization
31,626

 
24,254

 
15,444

 
9,064

 
4,755

EBITDA
$
93,997

 
$
90,570

 
$
94,296

 
$
69,993

 
$
43,622

Plus: Adjustments to contingent purchase obligations
(2,931
)
 
(1,722
)
 
(10,443
)
 

 

Plus: Share-based compensation expense
2,500

 
2,255

 
1,503

 
659

 
524

Adjusted EBITDA
$
93,566

 
$
91,103

 
$
85,356

 
$
70,652

 
$
44,146


30



ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis has been revised for the effects of the restatement disclosed in Note 15 “Restatement of Previously Issued Financial Statements” in Part II. Item 8. “Financial Statements and Supplementary Data” of this Form 10-K/A. You should read the following discussion and analysis in conjunction with “Selected Financial Data” and our consolidated financial statements and related notes contained in Part II. Item 8. “Financial Statements and Supplementary Data” of this Form 10-K/A. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth under Item 1A. “Risk Factors.”
Overview
We are a leading asset-light transportation and logistics service provider offering a comprehensive suite of global supply chain solutions, including truckload logistics, customized and expedited less-than-truckload, intermodal solutions (transporting a shipment by more than one mode, primarily via rail and truck), freight consolidation, inventory management, expedited services, air freight, international freight forwarding, customs brokerage, and transportation management solutions. We utilize a broad third-party network of transportation providers, comprised of ICs and purchased power providers, to serve a diverse customer base in terms of end-market focus and annual freight expenditures. Although we service large national accounts, we primarily focus on small to mid-size shippers, which we believe represent an expansive and underserved market.
We have three segments:
Truckload Logistics. Within our TL business, we arrange the pickup and delivery of truckload, intermodal, and ground and air expedited freight through our network of 49 TL service centers, 24 company dispatch offices, and over 100 independent brokerage agents located throughout the United States, Mexico, and Canada. We offer temperature-controlled, dry van, intermodal drayage, and flatbed services and specialize in the transport of automotive parts, refrigerated foods, poultry, and beverages. Our on-demand ground and air expedited services feature proprietary bid technology supported by our fleets of ground and air assets. We believe this array of services and specialization provides our customers with full-service options and provides us with more consistent shipping volumes in any given year.
Less-than-Truckload. Our LTL business involves the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments throughout the United States and into Mexico, Puerto Rico, and Canada. With a network of 47 LTL service centers and over 180 third-party delivery agents, we employ a point-to-point LTL model that we believe serves as a competitive advantage over the traditional hub and spoke LTL model in terms of a balance of competitive pricing and transit times, lower incidence of damage, and reduced fuel consumption.
Global Solutions. Within our Global Solutions business, we offer a full portfolio domestic and international transportation and logistics solution, including access to cost-effective and time-sensitive modes of transportation within our broad network. Specifically, our Global Solutions offering includes pricing, contract management, transportation mode and carrier selection, freight tracking, freight bill payment and audit, cost reporting and analysis, dispatch, and freight consolidation and warehousing. Our customized Global Solutions offering is designed to allow our customers to reduce operating costs, redirect resources to core competencies, improve supply chain efficiency, and enhance customer service. Our Global Solutions business also includes domestic and international air and ocean transportation services and customs brokerage.
Recent Acquisitions
On July 28, 2015, we acquired all of the outstanding partnership interests of Stagecoach for the purpose of expanding our presence within the TL segment. Headquartered in Texas, Stagecoach provides regional, intermodal, and over-the-road truckload services throughout the southwestern United States and Mexico. Stagecoach also provides warehousing and transloading solutions to customers through its network of strategically located facilities in southcentral and west Texas.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions. In certain circumstances, those estimates and assumptions can affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing our financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. Application of the accounting policies described below involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. The following is a brief discussion of our critical accounting policies and estimates.

31



Goodwill and Other Intangibles
Goodwill represents the excess of purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets of a business acquired. Goodwill is tested for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the asset may be impaired, or in the case of goodwill, the fair value of the reporting unit is below its carrying amount. The analysis of potential impairment of goodwill requires a two-step approach that begins with an estimation of the fair value at the “reporting unit” level. We have four reporting units for our three segments. We have one reporting unit for our LTL segment, one reporting unit for our TL segment, and two reporting units for our Global Solutions segment, as this is the lowest level for which discrete financial information is prepared and regularly reviewed by segment management. The impairment test for goodwill involves comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. The second step includes valuing all the tangible and intangible assets of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying amount.
For purposes of our impairment analysis, the fair value of our reporting units are estimated based upon an average of an income fair value approach and a market fair value approach, both of which incorporate numerous assumptions and estimates such as company forecasts, discount rates, and growth rates, among others. The determination of fair value requires considerable judgment and is highly sensitive to changes in the underlying assumptions. Based on the tests performed in 2015, we concluded that the fair value for each reporting unit was in excess of the respective reporting unit’s carrying value, and therefore no impairment adjustments were required.
Other intangible assets recorded consists primarily of definite-lived customer lists. We evaluate our other intangible assets for impairment when current facts or circumstances indicate that the carrying value of the assets to be held and used may not be recoverable.
Revenue Recognition
TL revenue is recorded when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; delivery has occurred; our obligation to fulfill a transaction is complete; and collection of revenue is reasonably assured. This occurs when we complete the delivery of a shipment or the service has been fulfilled.
LTL revenue is recorded when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; and collection of revenue is reasonably assured. We use a percentage of services completed method to recognize revenue, which results in an allocation of revenue between reporting periods based on the distinctive phases of each LTL transaction completed in each reporting period, with expenses recognized as incurred. We believe that this is the most appropriate method for LTL revenue recognition based on the multiple distinct phases of a typical LTL transaction, which is in contrast to the single phase of a typical TL transaction.
Global Solutions revenue is recorded when the shipment has been delivered by a third-party carrier. Fees for services revenue is recognized when the services have been rendered. At the time of delivery or rendering of services, as applicable, our obligation to fulfill a transaction is complete and collection of revenue is reasonably assured. We offer volume discounts to certain customers. Revenue is reduced as discounts are earned. In some instances, we perform multiple services. Typically separate fees are quoted and recognized as revenue when services are rendered. Occasionally, customers request an all-inclusive “door-to-door” fee for a set of services and revenue is allocated to each element of the service package and recognized as each service is completed.
We typically recognize revenue on a gross basis, as opposed to a net basis, because we bear the risks and benefits associated with revenue-generated activities by, among other things, (1) acting as a principal in the transaction, (2) establishing prices, (3) managing all aspects of the shipping process, and (4) taking the risk of loss for collection, delivery, and returns. Certain Global Solutions transactions to provide specific services are recorded at the net amount charged to the client due to the following factors: (A) we do not have latitude in establishing pricing, and (B) we do not bear the risk of loss for delivery and returns; these items are the risk of the carrier.

32



Results of Operations
The following table sets forth, for the periods indicated, summary TL, LTL, Global Solutions, corporate, and consolidated statement of operations data. Such revenue data for our TL, LTL, and Global Solutions segments is expressed as a percentage of consolidated revenues. Other statement of operations data for our TL, LTL, and Global Solutions segments is expressed as a percentage of segment revenues. Total statement of operations and corporate and eliminations data is expressed as a percentage of consolidated revenues. In 2016, we realigned two of our operating companies into different segments and retrospectively adjusted prior periods for comparability. The change in segments did not have any impact on the consolidated financial statements, but segment data for 2015, 2014, and 2013 has been revised to retrospectively reflect the change in segments.
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Dollars in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
TL
$
1,128,390

 
56.6
 %
 
$
943,055

 
50.4
 %
 
$
587,371

 
43.1
 %
LTL
515,328

 
25.9
 %
 
577,175

 
30.8
 %
 
558,971

 
41.1
 %
Global Solutions
377,137

 
18.9
 %
 
367,423

 
19.6
 %
 
224,831

 
16.5
 %
Eliminations
(28,689
)
 
(1.4
)%
 
(15,183
)
 
(0.8
)%
 
(9,763
)
 
(0.7
)%
Total
1,992,166

 
100.0
 %
 
1,872,470

 
100.0
 %
 
1,361,410

 
100.0
 %
Purchased transportation costs:
 
 
 
 
 
 
 
 
 
 
 
TL
716,518

 
63.5
 %
 
631,932

 
67.0
 %
 
411,937

 
70.1
 %
LTL
357,124

 
69.3
 %
 
421,556

 
73.0
 %
 
400,299

 
71.6
 %
Global Solutions
265,443

 
70.4
 %
 
256,419

 
69.8
 %
 
141,802

 
63.1
 %
Eliminations
(28,689
)
 
(1.4
)%
 
(15,183
)
 
(0.8
)%
 
(9,763
)
 
(0.7
)%
Total
1,310,396

 
65.8
 %
 
1,294,724

 
69.1
 %
 
944,275

 
69.4
 %
Other operating expenses (1):
 
 
 
 
 
 
 
 
 
 
 
TL
340,568

 
30.2
 %
 
253,651

 
26.9
 %
 
134,874

 
23.0
 %
LTL
139,965

 
27.2
 %
 
134,726

 
23.3
 %
 
121,441

 
21.7
 %
Global Solutions
78,523

 
20.8
 %
 
79,894

 
21.7
 %
 
54,464

 
24.2
 %
Corporate
28,717

 
1.4
 %
 
18,905

 
1.0
 %
 
12,060

 
0.9
 %
Total
587,773

 
29.5
 %
 
487,176

 
26.0
 %
 
322,839

 
23.7
 %
Depreciation and amortization:
 
 
 
 
 
 
 
 
 
 
 
TL
22,587

 
2.0
 %
 
15,285

 
1.6
 %
 
9,074

 
1.5
 %
LTL
2,801

 
0.5
 %
 
2,964

 
0.5
 %
 
3,009

 
0.5
 %
Global Solutions
4,903

 
1.3
 %
 
4,868

 
1.3
 %
 
3,115

 
1.4
 %
Corporate
1,335

 
0.1
 %
 
1,137

 
0.1
 %
 
246

 
 %
Total
31,626

 
1.6
 %
 
24,254

 
1.3
 %
 
15,444

 
1.1
 %
Operating income:
 
 
 
 
 
 
 
 
 
 
 
TL
48,717

 
4.3
 %
 
42,187

 
4.5
 %
 
31,486

 
5.4
 %
LTL
15,438

 
3.0
 %
 
17,929

 
3.1
 %
 
34,222

 
6.1
 %
Global Solutions
28,268

 
7.5
 %
 
26,242

 
7.1
 %
 
25,450

 
11.3
 %
Corporate
(30,052
)
 
(1.5
)%
 
(20,042
)
 
(1.1
)%
 
(12,306
)
 
(0.9
)%
Total
62,371

 
3.1
 %
 
66,316

 
3.5
 %
 
78,852

 
5.8
 %
Total interest expense
19,439

 
1.0
 %
 
13,363

 
0.7
 %
 
7,883

 
0.6
 %
Income before provision for income taxes
42,932

 
2.2
 %
 
52,953

 
2.8
 %
 
70,969

 
5.2
 %
Provision for income taxes
17,312

 
0.9
 %
 
20,243

 
1.1
 %
 
25,049

 
1.8
 %
Net income
$
25,620

 
1.3
 %
 
$
32,710

 
1.7
 %
 
$
45,920

 
3.4
 %
(1) Reflects the sum of personnel and related benefits, other operating expenses, and acquisition transaction expenses.

33



Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Revenues
Consolidated revenues increased by $119.7 million, or 6.4%, to $1,992.2 million in 2015 from $1,872.5 million in 2014, primarily as a result of the companies we acquired in 2014 and 2015, which were offset by a decrease in fuel surcharge revenues and volume.
TL revenues increased by $185.3 million, or 19.7%, to $1,128.4 million in 2015 from $943.1 million in 2014, primarily as a result of our acquisitions of Rich Logistics, ISI, Active Aero, and Stagecoach, which had incremental revenues of $216.6 million. The increase associated with the acquisitions was primarily offset by the decrease in fuel surcharge revenues.
LTL revenues decreased by $61.9 million, or 10.7%, to $515.3 million in 2015 from $577.2 million in 2014. LTL revenues were impacted year-over-year by a drop in fuel prices that resulted in a $35.7 million, or 35.7%, decrease in fuel surcharge revenue and a 13.5% decrease in LTL tonnage, primarily due to weak freight demand and changes in freight mix. These decreases were partially offset by a 10.1% increase in revenue per hundredweight, excluding fuel surcharges, primarily driven by improved pricing and positive freight mix changes resulting from our pricing initiatives.
Global Solutions revenues increased by $9.7 million, or 2.6%, to $377.1 million in 2015 from $367.4 million in 2014. This growth was primarily driven by our 2014 acquisition of Unitrans, which increased $14.2 million from the prior year. The increase at Unitrans was offset by a decrease in volume at other Global Solutions companies.
Purchased Transportation Costs
Purchased transportation costs increased by $15.7 million, or 1.2%, to $1,310.4 million in 2015 from $1,294.7 million in 2014. Purchased transportation costs as a percent of revenue decreased to 65.8% in 2015 from 69.1% in 2014.
TL purchased transportation costs increased by $84.6 million, or 13.4%, to $716.5 million in 2015 from $631.9 million in 2014, primarily as a result of our acquisitions of Rich Logistics, ISI, and Active Aero, which had incremental purchased transportation costs of $137.5 million. This increase was offset by decreases in our other business primarily related to the lower revenues at our other operating companies. TL purchased transportation costs as a percentage of TL revenues decreased to 63.5% in 2015 from 67.0% in 2014, primarily due to higher use of employee drivers at recently acquired companies, which are reported in other operating expenses.
LTL purchased transportation costs decreased by $64.5 million, or 15.3%, to $357.1 million in 2015 from $421.6 million in 2014, and decreased as a percentage of LTL revenues to 69.3% in 2015 from 73.0% in 2014. Excluding fuel surcharges, our average linehaul cost per mile decreased to $1.25 in 2015 from $1.28 in 2014.
Global Solutions purchased transportation costs increased by $9.0 million, or 3.5%, to $265.4 million in 2015 from $256.4 million in 2014, and increased as a percentage of Global Solutions revenues to 70.4% in 2015 from 69.8% in 2014. The increase was primarily due to our 2014 acquisition of Unitrans, which had increased purchased transportation costs of $9.2 million.
Other Operating Expenses
Other operating expenses, which reflect the sum of personnel and related benefits, other operating expenses, and acquisition transaction expenses shown in our consolidated statements of operations, increased by $100.6 million, or 20.6%, to $587.8 million in 2015 from $487.2 million in 2014.
Within our TL business, other operating expenses increased by $86.9 million, or 34.3%, to $340.6 million in 2015 from $253.7 million in 2014, primarily as a result of our acquisitions of Rich Logistics, ISI, Active Aero, and Stagecoach, which accounted for incremental costs of $60.3 million. Additionally, we incurred increased leased equipment and maintenance costs of $7.0 million primarily due to the declining quality and performance of lease purchase units, and increased insurance claims expense of $5.4 million primarily due to an increase in severe accidents in the latter half of 2015. These cost increases were offset by contingent consideration obligation adjustments related to downward changes to the operating results forecasts for certain acquisitions with contingent consideration thresholds. The value of the expected contingent purchase obligation decreased resulting in a reduction in expenses of $2.9 million in 2015 and $1.7 million in 2014. As a percentage of TL revenues, other operating expenses increased to 30.2% in 2015 from 26.9% in 2014.
Within our LTL business, other operating expenses increased by $5.3 million, or 3.9%, to $140.0 million in 2015 from $134.7 million in 2014, primarily due to increased insurance and claims expense of $4.2 million, and increased contractor receivable reserves of $0.3 million. As a percentage of LTL revenues, other operating expenses increased to 27.2% in 2015 from 23.3% in 2014.

34



Within our Global Solutions business, other operating expenses decreased by $1.4 million, or 1.7%, to $78.5 million in 2015 from $79.9 million in 2014, primarily due to a decrease in temporary labor costs of $2.0 million, which was partially offset by an increase in salaries and benefits of $0.5 million. As a percentage of Global Solutions revenues, other operating expenses decreased to 20.8% in 2015 from 21.7% in 2014.
Other operating expenses that were not allocated to our TL, LTL, or Global Solutions businesses increased $9.8 million, or 51.9%, to $28.7 million in 2015 from $18.9 million in 2014, primarily as a result of the $5.0 million charge that we recorded in connection with the termination of certain IC lease purchase guarantee programs, $1.2 million of severance expenses related to the separation agreement with a former company executive officer, increased amortization of the lease purchase guarantee unit of $0.9 million related to increased number of units compared to the prior year, and increased compensation costs of $0.7 million.
Depreciation and Amortization
Depreciation and amortization increased to $31.6 million in 2015 from $24.3 million in 2014, reflecting increases in property, plant, and equipment attributable to our acquisitions and continued revenue growth, as well as increased amortization of customer relationship intangibles of $2.5 million in connection with our 2014 and 2015 acquisitions.
Operating Income
Operating income decreased by $3.9 million, or 5.9%, to $62.4 million in 2015 from $66.3 million in 2014. As a percentage of revenues, operating income decreased to 3.1% in 2015 from 3.5% in 2014.
Within our TL business, operating income increased by $6.5 million, or 15.5%, to $48.7 million in 2015 from $42.2 million in 2014. Operating income as a percentage of TL revenues decreased to 4.3% in 2015 from 4.5% in 2014.
Within our LTL business, operating income decreased by $2.5 million, or 13.9%, to $15.4 million in 2015 from $17.9 million in 2014, and decreased as a percentage of LTL revenues to 3.0% in 2015 from 3.1% in 2014.
Within our Global Solutions business, operating income increased by $2.1 million, or 7.7%, to $28.3 million in 2015 from $26.2 million in 2014, and increased as a percentage of Global Solutions revenues to 7.5% in 2015 from 7.1% in 2014.
Other operating loss that was not allocated to TL, LTL, or Global Solutions businesses increased $10.1 million, or 49.9%, to $30.1 million in 2015 from $20.0 million in 2014, primarily as a result of higher other operating expenses described above.
Interest Expense
Interest expense increased to $19.4 million in 2015 from $13.4 million in 2014, primarily as a result of the increased debt related to our 2014 acquisitions and our 2015 acquisition of Stagecoach, as well as the increased interest rate year-over-year.
Income Tax
Income tax provision was $17.3 million in 2015 compared with $20.2 million in 2014. The effective tax rate was 40.3% in 2015 compared to 38.2% in 2014. The effective tax rates were impacted by the contingent consideration adjustments in 2015 and 2014. The effective income tax rate varies from the federal statutory rate of 35.0% primarily due to state income taxes as well as the impact of items causing permanent differences.
Net Income
Net income was $25.6 million in 2015 compared with $32.7 million in 2014.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Revenues
Consolidated revenues increased by $511.1 million, or 37.5%, to $1,872.5 million in 2014 from $1,361.4 million in 2013. Revenues increased primarily as a result of the companies we acquired in 2013 and 2014.
TL revenues increased by $355.7 million, or 60.6%, to $943.1 million in 2014 from $587.4 million in 2013. The 2013 acquisitions of Adrian Carriers, Wando Trucking, TA Drayage, G.W. Palmer, and YES Trans and the 2014 acquisitions of Rich Logistics, ISI, and Active Aero contributed $297.0 million of the revenue increase. The remaining $58.7 million of the revenue increase was driven by load growth due to the expansion of our IC network, as well as the continued increase in the utilization of our TL brokerage agent network.
LTL revenues increased by $18.2 million, or 3.3%, to $577.2 million in 2014 from $559.0 million in 2013. This reflected year-over-year LTL tonnage growth of 1.0%, driven by a 2.2% increase in the number of LTL shipments. These increases were slightly

35



offset by a 1.2% decline in weight per shipment. Revenue per hundredweight, excluding fuel surcharges, increased 3.1% year-over-year.
Global Solutions revenues increased by $142.6 million, or 63.4%, to $367.4 million in 2014 from $224.8 million in 2013. This growth was primarily driven by the 2013 acquisition of Marisol and the 2014 acquisition of Unitrans.
Purchased Transportation Costs
Purchased transportation costs increased by $350.4 million, or 37.1%, to $1,294.7 million in 2014 from $944.3 million in 2013. Purchased transportation costs as a percent of revenue decreased to 69.1% in 2014 from 69.4% in 2013.
TL purchased transportation costs increased by $220.0 million, or 53.4%, to $631.9 million in 2014 from $411.9 million in 2013, primarily as a result of our 2013 and 2014 acquisitions, which contributed $169.2 million of the increase. The remaining increase was due to the expansion of our IC network and increased utilization of our TL brokerage agent network. TL purchased transportation costs as a percentage of TL revenues decreased to 67.0% in 2014 from 70.1% in 2013, primarily due to an increase in employee drivers which are reported in other operating expenses.
LTL purchased transportation costs increased by $21.3 million, or 5.3%, to $421.6 million in 2014 from $400.3 million in 2013, and increased as a percentage of LTL revenues to 73.0% in 2014 from 71.6% in 2013. Excluding fuel surcharges, our average linehaul cost per mile increased to $1.28 in 2014 from $1.24 in 2013. Overall, the LTL purchased transportation cost was impacted by a shift in freight mix resulting in an increase in non-metro delivery zones with higher delivery costs and an increase in purchased power rates.
Global Solutions purchased transportation costs increased by $114.6 million, or 80.8%, to $256.4 million in 2014 from $141.8 million in 2013, and increased as a percentage of Global Solutions revenue to 69.8% in 2014 from 63.1% in 2013. The increase was primarily due to the 2013 acquisition of Marisol and the 2014 acquisition of Unitrans.
Other Operating Expenses
Other operating expenses, which reflect the sum of personnel and related benefits, other operating expenses, and acquisition transaction expenses shown in our consolidated statements of operations, increased by $164.3 million, or 50.9%, to $487.2 million in 2014 from $322.8 million in 2013.
Within our TL business, other operating expenses increased by $118.8 million, or 88.1%, to $253.7 million in 2014 from $134.9 million in 2013, primarily due to the 2013 and 2014 TL acquisitions, which accounted for an aggregate of $88.8 million of the total increase and adjustments to the contingent consideration reserve related to downward changes to the operating results forecasts for certain acquisitions with contingent consideration thresholds. The value of the expected contingent consideration decreased resulting in a reduction of expenses of $1.7 million in 2014 and $6.5 million in 2013. Additionally, we incurred additional insurance and claims expenses, leased equipment expenses, and commission costs associated with the increase in revenue. As a percentage of TL revenues, other operating expenses increased to 26.9% in 2014 from 23.0% in 2013.
Within our LTL business, other operating expenses increased by $13.3 million, or 10.9%, to $134.7 million in 2014 from $121.4 million in 2013, primarily as a result of increased insurance and claims expenses, increased bad debt expense reserve against contractor receivables, and increased lease equipment expenses. Additionally, 2013 was impacted by adjustments to a contingent consideration reserve related to downward changes to the operating results forecasts for certain acquisitions with contingent consideration thresholds. The value of the expected contingent consideration decreased resulting in a benefit to expenses of $3.2 million in 2013. As a percentage of LTL revenues, other operating expenses increased to 23.3% in 2014 from 21.7% in 2013.
Within our Global Solutions business, other operating expenses increased by $25.4 million, or 46.7% to $79.9 million in 2014 from $54.5 million in 2013, primarily as a result of the 2013 acquisition of Marisol and the 2014 acquisition of Unitrans, increased bad debt expenses and increased temporary labor costs. As a percentage of Global Solutions revenues, other operating expenses decreased to 21.7% in 2014 from 24.2% in 2013.
Other operating expenses that were not allocated to our TL, LTL, or Global Solutions businesses increased to $18.9 million in 2014 from $12.1 million in 2013, primarily due to additions to our corporate wide integrated sales team, IT costs to further develop our IT platforms, and the addition of key management personnel to execute our overall integrated growth strategy. Additionally, acquisition transaction expenses increased to $2.3 million in 2014 from $0.9 million in 2013, primarily due to the Active Aero acquisition.

36



Depreciation and Amortization
Depreciation and amortization increased to $24.3 million in 2014 from $15.4 million in 2013, reflecting increases in property, plant, and equipment attributable to our acquisitions and continued revenue growth along with increased customer relationship intangibles of $2.8 million in connection with our 2013 and 2014 acquisitions.
Operating Income
Operating income decreased by $12.5 million, or 15.9%, to $66.3 million in 2014 from $78.9 million in 2013. As a percentage of revenues, operating income decreased to 3.5% in 2014 from 5.8% in 2013.
Within our TL business, operating income increased by $10.7 million, or 34.0%, to $42.2 million in 2014 from $31.5 million in 2013. Operating income as a percentage of TL revenues decreased to 4.5% in 2014 from 5.4% in 2013.
Within our LTL business, operating income decreased by $16.3 million, or 47.6%, to $17.9 million in 2014 from $34.2 million in 2013, and also decreased as a percentage of LTL revenues to 3.1% in 2014 from 6.1% in 2013.
Within our Global Solutions business, operating income increased by $0.7 million, or 3.1%, to $26.2 million in 2014 from $25.5 million in 2013, and decreased as a percentage of Global Solutions revenues to 7.1% in 2014 from 11.3% in 2013.
Other operating loss that was not allocated to TL, LTL, or Global Solutions businesses increased $7.7 million, or 62.9%, to $20.0 million in 2014 from $12.3 million in 2013, primarily as a result of higher other operating expenses described above.
Interest Expense
Interest expense increased to $13.4 million in 2014 from $7.9 million in 2013, primarily as a result of increased debt resulting from our 2013 and 2014 acquisitions.
Income Tax
Income tax provision was $20.2 million in 2014 compared to $25.0 million in 2013. The effective tax rate was 38.2% in 2014 compared to 35.3% in 2013. The effective tax rates were impacted by the contingent consideration adjustments in 2014 and 2013. The effective income tax rate varies from the federal statutory rate of 35.0% primarily due to state income taxes as well as the impact of items causing permanent differences.
Net Income
Net income was $32.7 million in 2014 compared to $45.9 million in 2013.
Liquidity and Capital Resources
Our primary sources of cash have been borrowings under our revolving credit facility, cash flows from operations, and proceeds from the sale of our common stock. Our primary cash needs are and have been to execute our acquisition strategy, fund normal working capital requirements, finance capital expenditures, and repay our indebtedness. As of December 31, 2015, we had $7.9 million in cash and cash equivalents and $234.3 million of availability under our revolving credit facility. As we continue to execute on our acquisition and growth strategy, additional financing may be necessary within the next 12 months.
Although we can provide no assurances, amounts available under our revolving credit facility, net cash provided by operating activities, and available cash and cash equivalents should be adequate to finance working capital and planned capital expenditures for at least the next 12 months. Thereafter, we may find it necessary to obtain additional equity or debt financing as we continue to execute our business strategy.
Our credit facility consists of a $300.0 million term loan and a revolving credit facility up to a maximum aggregate amount of $400.0 million, of which $10.0 million may be used for swing line loans (as defined in the credit agreement) and up to $40.0 million may be used for letters of credit. The credit facility matures on July 9, 2019.
Advances under our credit facility bear interest at either (a) the Eurocurrency Rate (as defined in the credit agreement), plus an applicable margin in the range of 2.0% to 3.3%, or (b) the Base Rate (as defined in the credit agreement), plus an applicable margin in the range of 1.0% to 2.3%. In 2015, the weighted average interest rate on our credit facility was 3.5%.
Our credit agreement contains certain financial covenants, including a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. In addition, our credit agreement contains negative covenants limiting, among other things, additional indebtedness, capital expenditures, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. As of and during the year ended December 31, 2015, after considering the impact of restatement adjustments, we were not in compliance with the financial

37



covenants contained in the credit agreement. Our credit agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the credit agreement to be in full force and effect, and a change of control of our business.
Cash Flows
A summary of operating, investing, and financing activities are shown in the following table (in thousands):
 
Year Ended December 31,
 
2015
 
2014
 
2013
Net cash provided by (used in):
 
 
 
 
 
Operating activities
$
68,214

 
$
37,228

 
$
33,644

Investing activities
(76,671
)
 
(265,842
)
 
(124,894
)
Financing activities
5,578

 
233,985

 
84,780

Net change in cash and cash equivalents
$
(2,879
)
 
$
5,371

 
$
(6,470
)
Cash Flows from Operating Activities
Cash provided by operating activities was $68.2 million. The difference between our $25.6 million net income and the $68.2 million cash provided by operating activities during 2015 was primarily attributable to $33.9 million of depreciation and amortization expense with the remainder primarily attributable to a net decrease in working capital accounts.
Cash Flows from Investing Activities
Cash used in investing activities was $76.7 million during 2015, which reflects $50.0 million of capital expenditures used to support our operations and $32.8 million primarily used for our acquisition of Stagecoach. These payments were partially offset by the proceeds from the sale of equipment of $6.1 million. We expect capital expenditures in fiscal 2016 to be between $15.0 million and $20.0 million.
Cash Flows from Financing Activities
Cash provided by financing activities was $5.6 million during 2015, which primarily reflects net borrowings of $9.4 million under our credit facility, proceeds from the issuance of common stock upon the exercise of stock options of $3.8 million, and excess tax benefits on share-based compensation of $1.2 million, partially offset by the payment of contingent purchase obligations of $3.3 million, debt issuance costs of $2.8 million associated with the sixth amended and restated credit agreement, and the reduction of our capital lease obligation of $1.7 million.


38



Quarterly Results of Operations
The following table presents unaudited consolidated statement of operations data for each of the four quarters ended December 31, 2015 and 2014, as revised for the effects of the restatement disclosed in Note 15 “Restatement of Previously Issued Financial Statements” in Part II. Item 8. “Financial Statements and Supplementary Data” of this Form 10-K/A. We believe that all necessary adjustments have been included to fairly present the quarterly information when read in conjunction with our annual consolidated financial statements and related notes. The operating results for any quarter are not necessarily indicative of the results for any subsequent quarter.
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
As Previously Reported
Adjustments
As Restated
 
As Previously Reported
Adjustments
As Restated
 
 
(In thousands, except per share data)
Total revenues
 
$
488,970

$
(136
)
$
488,834

 
$
382,031

$
(40
)
$
381,991

Net revenues (total revenues less purchased transportation costs)
 
160,479

978

161,457

 
118,012

(419
)
117,593

Income before income taxes
 
22,193

(6,328
)
15,865

 
16,989

(3,910
)
13,079

Net income
 
13,604

(3,784
)
9,820

 
10,414

(2,384
)
8,030

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.36

 
$
0.26

 
$
0.28

 
$
0.21

Diluted
 
$
0.35

 
$
0.25

 
$
0.27

 
$
0.20

 
 
Three Months Ended June 30,
 
 
2015
 
2014
 
 
As Previously Reported
Adjustments
As Restated
 
As Previously Reported
Adjustments
As Restated
 
 
(In thousands, except per share data)
Total revenues
 
$
517,930

$
(307
)
$
517,623

 
$
460,181

$
(54
)
$
460,127

Net revenues (total revenues less purchased transportation costs)
 
171,857

341

172,198

 
144,847

(1,728
)
143,119

Income before income taxes
 
26,869

(9,591
)
17,278

 
24,094

(4,588
)
19,506

Net income
 
16,471

(5,900
)
10,571

 
14,768

(3,105
)
11,663

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.43

 
$
0.28

 
$
0.39

 
$
0.31

Diluted
 
$
0.42

 
$
0.27

 
$
0.38

 
$
0.30


39



 
 
Three Months Ended September 30,
 
 
2015
 
2014
 
 
As Previously Reported
Adjustments
As Restated
 
As Previously Reported
Adjustments
As Restated
 
 
(In thousands, except per share data)
Total revenues
 
$
497,173

$
(409
)
$
496,764

 
$
498,086

$
(102
)
$
497,984

Net revenues (total revenues less purchased transportation costs)
 
170,922

1,030

171,952

 
150,839

124

150,963

Income before income taxes
 
9,446

(6,665
)
2,781

 
21,453

(8,805
)
12,648

Net income
 
5,791

(4,086
)
1,705

 
14,413

(6,115
)
8,298

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.15

 
$
0.04

 
$
0.38

 
$
0.22

Diluted
 
$
0.15

 
$
0.04

 
$
0.37

 
$
0.21

 
 
Three Months Ended December 31,
 
 
2015
 
2014
 
 
As Previously Reported
Adjustments
As Restated
 
As Previously Reported
Adjustments
As Restated
 
 
(In thousands, except per share data)
Total revenues
 
$
490,946

$
(2,001
)
$
488,945

 
$
532,518

$
(150
)
$
532,368

Net revenues (total revenues less purchased transportation costs)
 
176,267

(104
)
176,163

 
166,112

(41
)
166,071

Income before income taxes
 
18,726

(11,718
)
7,008

 
19,787

(12,067
)
7,720

Net income
 
12,134

(8,610
)
3,524

 
12,379

(7,660
)
4,719

Earnings per share: