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EX-4.2 - EX-4.2 - New Century Transportation, Inc.y85994exv4w2.htm
EX-10.7 - EX-10.7 - New Century Transportation, Inc.y85994exv10w7.htm
EX-4.7 - EX-4.7 - New Century Transportation, Inc.y85994exv4w7.htm
EX-4.5 - EX-4.5 - New Century Transportation, Inc.y85994exv4w5.htm
EX-4.6 - EX-4.6 - New Century Transportation, Inc.y85994exv4w6.htm
EX-4.3 - EX-4.3 - New Century Transportation, Inc.y85994exv4w3.htm
EX-4.9 - EX-4.9 - New Century Transportation, Inc.y85994exv4w9.htm
EX-4.4 - EX-4.4 - New Century Transportation, Inc.y85994exv4w4.htm
EX-4.8 - EX-4.8 - New Century Transportation, Inc.y85994exv4w8.htm
EX-10.1 - EX-10.1 - New Century Transportation, Inc.y85994exv10w1.htm
EX-21.1 - EX-21.1 - New Century Transportation, Inc.y85994exv21w1.htm
EX-10.2 - EX-10.2 - New Century Transportation, Inc.y85994exv10w2.htm
EX-10.3 - EX-10.3 - New Century Transportation, Inc.y85994exv10w3.htm
EX-10.5 - EX-10.5 - New Century Transportation, Inc.y85994exv10w5.htm
EX-10.9 - EX-10.9 - New Century Transportation, Inc.y85994exv10w9.htm
EX-4.10 - EX-4.10 - New Century Transportation, Inc.y85994exv4w10.htm
EX-23.1 - EX-23.1 - New Century Transportation, Inc.y85994exv23w1.htm
EX-10.4 - EX-10.4 - New Century Transportation, Inc.y85994exv10w4.htm
EX-10.8 - EX-10.8 - New Century Transportation, Inc.y85994exv10w8.htm
EX-10.6 - EX-10.6 - New Century Transportation, Inc.y85994exv10w6.htm
EX-10.16 - EX-10.16 - New Century Transportation, Inc.y85994exv10w16.htm
EX-10.11 - EX-10.11 - New Century Transportation, Inc.y85994exv10w11.htm
Table of Contents

As filed with the Securities and Exchange Commission on August 11, 2010
Registration No. 333-      
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
 
 
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
NEW CENTURY TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)
 
         
New Jersey
  4213   22-3711933
(State or Other Jurisdiction
of Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)
 
 
 
 
45 East Park Drive
Westampton, New Jersey 08060
(609) 265-1110
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
 
 
Harry Muhlschlegel
Brian Fitzpatrick
45 East Park Drive
Westampton, New Jersey 08060
(609) 265-1110
(Name, address including zip code, and telephone number, including area code, of agent for service)
 
 
 
 
With copies to:
 
     
Carmen J. Romano, Esq.
Stephen M. Leitzell, Esq.
Dechert LLP
2929 Arch Street
Philadelphia, Pennsylvania 19104
(215) 994-4000
(215) 994-2222 — Facsimile
  Michael Kaplan, Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
(212) 701-5800 — Facsimile
 
 
 
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.
 
 
 
 
If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  o
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
                     
      Proposed Maximum
      Amount of
 
Title of Each Class of
    Aggregate
      Registration
 
Securities to be Registered     Offering Price(1)(2)       Fee  
Common Stock, par value $0.01 per share
    $ 120,000,000       $ 8,556  
                     
 
(1) Including shares of common stock which may be purchased by the underwriters to cover over-allotments, if any.
 
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
PROSPECTUS
SUBJECT TO COMPLETION, DATED AUGUST 11, 2010
           Shares
 
(NEW CENTURY TRANSPORTATION, INC LOGO)
Common Stock
 
This is an initial public offering of common stock of New Century Transportation, Inc. We are offering           shares of common stock. We currently estimate that the initial public offering price per share of our common stock will be between $      and $      per share.
 
Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock for quotation on the Nasdaq Global Market under the symbol “NCTX.”
 
 
 
Investing in our common stock involves risk. See “Risk Factors” beginning on page 14.
 
                 
    Per Share
  Total
   
 
Initial price to public
  $           $        
Underwriting discounts and commissions
  $       $    
Proceeds, before expenses, to New Century Transportation, Inc. 
  $       $    
Proceeds, before expenses, to the selling shareholders(1)
  $       $  
 
(1) Assumes full exercise of the underwriters’ over-allotment option.
 
 
The selling shareholders identified in this prospectus have granted the underwriters a 30-day option to purchase up to an additional           shares from the selling shareholders at the initial public offering price less the underwriting discounts and commissions if the underwriters sell more than           shares of common stock in this offering. We will not receive any of the proceeds from the sale of the shares by the selling shareholders.
 
None of the Securities and Exchange Commission, any state securities commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of the disclosures in this prospectus. Any representation to the contrary is a criminal offense.
 
The underwriters expect to deliver the shares on or about          , 2010.
 
 
Joint Book-Running Managers
 
Wells Fargo Securities Stifel Nicolaus Weisel
 
 
 
 
Joint-Lead Managers
 
BB&T Capital Markets RBC Capital Markets
 
 
 
 
Co-Managers
 
Stephens Inc. Dahlman Rose & Company
 
Prospectus dated          , 2010.
 


 

 
 
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 EX-21.1
 EX-23.1
 
Neither we nor any of the underwriters have authorized anyone to provide information different from that contained in this prospectus and any free writing prospectus we provide to you. If anyone provides you with different or inconsistent information, you should not assume we have authorized or verified it. Neither the delivery of this prospectus nor sale of common stock means that information contained in this prospectus is correct after the date of this prospectus or other date stated in this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. This prospectus is not an offer to sell or solicitation of an offer to buy these shares of common stock in any circumstances under which the offer or solicitation is unlawful.
 
 
 
 
This prospectus contains market data related to our business and industry and forecasts that we obtained from industry publications and surveys and our internal sources. ACT Research, Co., LLC, American Trucking Associations, Inc., or the ATA, the Council of Supply Chain Management Professionals, the Federal Reserve, the International Monetary Fund, Manufacturers Alliance/MAPI Inc., the Transportation Loss Prevention and Security Association, Transport Topics, Truckloadrate.com, the U.S. Bureau of Economic Analysis and the U.S. Energy Information Administration were the primary independent sources of industry and market data. We believe that data from these sources that are used in this prospectus reflect the most recently available information. All data provided by the Federal Reserve, the International Monetary Fund, Manufacturers Alliance/MAPI Inc., Transport Topics, the U.S. Bureau of Economic Analysis and the U.S. Energy Information Administration are publicly available, while data provided by ACT Research, Co., LLC, the ATA, the Council of Supply Chain Management Professionals,


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the Transportation Loss Prevention and Safety Association and Truckloadrate.com can be obtained by subscription. Although we believe that all industry publications and reports cited herein are reliable, neither we nor the underwriters have independently verified the data. Some data and other information also are based on our good faith estimates, which are derived from our review of internal surveys and independent sources. Our internal data and estimates are based upon information obtained from our customers, suppliers, trade and business organizations, contacts in the industry in which we operate, and management’s understanding of industry conditions.
 
As used in this prospectus, unless the context otherwise indicates, the references to “New Century” and “NCTX” refer to New Century Transportation, Inc. and references to “our company,” “us,” “we” and “our” refer to New Century together with its subsidiaries. Load-to-Deliver® is our registered servicemark.
 
Unless otherwise indicated or the context otherwise requires, financial data in this prospectus reflect the consolidated business and operations of New Century and its wholly-owned subsidiaries. Except where otherwise indicated, references to dollars and “$” are to U.S. dollars.
 


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PROSPECTUS SUMMARY
 
This summary highlights significant aspects of our business and this offering, but it is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the section entitled “Risk Factors” and the historical and pro forma financial data and related notes, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements as a result of certain factors, including those set forth in “Risk Factors” and “Forward-Looking Statements.” Unless otherwise indicated, numbers of shares give effect to the           for           stock split to be completed prior to this offering.
 
Overview
 
We are a growth-oriented motor carrier using a differentiated Load-to-Deliver operating model that combines the higher revenue per tractor characteristics of a less-than-truckload carrier with the operating flexibility and lower fixed costs of a service-sensitive truckload carrier. We offer a full range of over-the-road transportation solutions to our customers, including customized, expedited, time-definite, dedicated and specialized less-than-truckload and truckload services. Our specialized services include the transportation of temperature-controlled and hazardous, or Hazmat, freight. We believe our Load-to-Deliver operating model provides our customers with a compelling value proposition and gives us a competitive advantage in sourcing freight. Specifically, the flexibility of our Load-to-Deliver operating model allows us to accommodate a broad range of shipment sizes and freight for both regional and national accounts while providing shippers faster and more predictable transit times with reduced freight damage. As of March 31, 2010, our fleet consisted of 987 owned tractors and 2,141 owned or leased trailers, including 887 temperature-controlled trailers. Since 2002, we have grown total revenues and Adjusted EBITDA at compound annual growth rates of 21.7% and 19.3%, respectively. During the fiscal year ended December 31, 2009, we generated total revenues of $229.3 million, Adjusted EBITDA of $22.7 million and net loss of $5.1 million. We define Adjusted EBITDA to be earnings before interest, taxes, depreciation, amortization, changes in fair value of warrants and leveraged recapitalization expenses.
 
We serve shippers throughout the continental United States and parts of Canada but focus primarily on the attractive market for less-than-truckload freight originating in the Northeast and the much larger market of inbound truckload freight back into the region. Less-than-truckload, or LTL, services involve the consolidation and transport of freight from numerous shippers to multiple destinations on one vehicle and thus garner higher net revenue per tractor than truckload shipments. Truckload services involve the transport of a single shipper’s freight to a single destination. We manage our operations on a round-trip basis to maximize revenue per operating tractor by pursuing attractively priced, or headhaul, freight lanes for both our outbound and inbound trips. For the outbound portion of our round-trip, we generally deploy our local pickup fleet to gather LTL shipments throughout the Northeast that we build into linehaul loads at our Philadelphia metropolitan area LTL consolidation operations. The cornerstone of our Load-to-Deliver operating model consists of delivering LTL shipments directly from a linehaul trailer to the recipient, eliminating the need for a network of costly and labor-intensive destination and breakbulk terminals typical of traditional LTL carriers. For the inbound portion of our round-trip, we generally transport truckload freight back to the Northeast to reposition our tractors and trailers near our consolidation operations.


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The diagram below illustrates a hypothetical round-trip under our Load-to-Deliver operating model.
 
LOGO
 
We believe our Load-to-Deliver operating model offers a compelling value proposition to our customers. We provide our customers time-definite LTL services with lower cargo claims and fewer opportunities for delays because our Load-to-Deliver operating model requires fewer handlings per LTL shipment than a traditional LTL carrier. For example, for the year ended December 31, 2009, our net claims payout as a percentage of total revenue, or claims ratio, was 0.24% as compared to the average of 1.04% reported by the Transportation Loss Prevention and Security Association. We believe we can reduce a shipment’s transit time by up to 24 hours for every breakbulk terminal that our Load-to-Deliver operating model avoids while transporting our customers’ freight. In addition, we believe our customers value the ability to work with a flexible motor carrier that can service a broad spectrum of their transportation needs.
 
We believe our Load-to-Deliver operating model provides us with a competitive advantage in sourcing freight while enhancing utilization of our tractors and allowing us to operate more cost effectively. Our Load-to-Deliver operating model allows us to avoid the historically unfavorable pricing of truckload freight outbound from the Northeast and positions us to take advantage of higher priced truckload freight inbound to the Northeast, a densely populated, high consumption area. We believe our Load-to-Deliver operating model enables us to optimize the economics of a round-trip by combining two favorably priced headhauls (an outbound load of LTL shipments and an inbound truckload shipment) to maximize revenue per operating tractor. For example, in 2009 our net revenue per operating tractor per day of approximately $1,000 was significantly higher than the $500 to $700 per day that we believe to be


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the average for publicly traded truckload carriers over the same period. In addition, because we generally deliver LTL freight directly from the trailer to the recipient, we do not need the significant capital investment and high-fixed cost structure required to operate the numerous local delivery fleets, nationwide breakbulk and destination terminals and multiple staffs of freight handlers typically associated with our LTL competitors. We believe our customers recognize the importance of having access to our temperature-controlled and Hazmat services. As a result, they will often use our services to transport non-specialized freight to retain access to these services.
 
We have a large, stable and diverse base of customers built around our Load-to-Deliver operating model with whom we work closely to develop customized transportation solutions. In 2009, we served approximately 1,100 active customers for whom we transported at least 50 shipments. Of our top 200 customers by total revenue in 2007, we continued to provide services to approximately 90% in 2009. We believe this high level of retention throughout the economic downturn and the fact that we have increased our active customers by 17% from 963 in 2007 to 1,129 in 2009 exemplifies the compelling value proposition we provide to our customers and positions us for growth during an economic recovery. In 2009, our 25 largest customers accounted for 34.8% of our total revenues and included Air Products and Chemicals, Inc., Arkema Inc., Cardinal Health, Inc., Crayola LLC, The Dow Chemical Company, International Flavors and Fragrances, Inc., Leveraged Execution Providers, or LXP (a third party logistics provider to McDonald’s Corporation), Mercedes-Benz USA and Teva Pharmaceutical Industries Ltd. Our customer base is heavily weighted toward industrial, chemical, pharmaceutical, agricultural and food companies, unlike many other trucking companies for which retail customers are a large component. We specifically target these customers because they have less cyclical and more consistent shipping needs in the freight lanes we prefer and are willing to appropriately compensate us for the high level of service we provide. Further, we believe our customer base is well positioned for an industrial-led economic recovery. The following chart shows the breakdown of 2009 total revenues from our top 800 customers by the industry in which those customers operate.
 
(PIE CHART)
 
We believe our Load-to-Deliver operating model is management intensive and difficult to replicate. Successful implementation of our business model requires professionals with experience in a Load-to-Deliver or comparable operating model at multiple levels of the organization. In particular, our business model requires a strong focus on outbound logistics, load planning, proprietary technologies and operating and marketing objectives as well as an ability to identify strategically located properties for expansion. Our Load-to-Deliver operating model and marketing efforts emphasize customer satisfaction and strategic partnership while simultaneously focusing on a disciplined approach to pricing and selectively pursuing freight that fits within our operating system. As an example of our management’s ability to identify freight that fits our system and freight lanes, in 2009 the percentage of linehaul miles driven by our tractors on which they were not generating revenues, or empty miles, was less than 4%, compared to an average of 27.6% and 13.4% among truckload and LTL carriers, respectively, according to data from the ATA.


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Our management team, led by Harry Muhlschlegel, James Molinari and Brian Fitzpatrick, possesses extensive experience in the trucking industry, averaging over 27 years of transportation experience, virtually all of which has been within the Load-to-Deliver or a comparable operating model. This team has a proven track record of building a similar carrier, Jevic Transportation, Inc., or Jevic, which experienced success as both a private and public company, and developed a predecessor to the Load-to-Deliver operating model. From 1992 to 1998, Jevic’s revenues and earnings before interest, taxes, depreciation and amortization, or EBITDA, grew at compound annual rates of 24.6% and 31.2%, respectively. Following the sale of Jevic, Mr. Muhlschlegel founded New Century in 2000. Importantly, 23 of our top 34 senior managers have worked together for an average of over 20 years specifically within a Load-to-Deliver or similar operating model. We foster a culture of employee ownership; following this offering, our employees will own     % of our company’s common stock.
 
Industry Opportunity
 
The trucking industry is extremely sensitive to changes in economic conditions. Generally, given the dependence of North American shippers on trucking as a primary means of transportation, the amount of tonnage hauled by carriers, or truck tonnage, is considered a leading indicator of economic activity. The economic slowdown that began in 2007 created a difficult trucking environment characterized by a combination of significantly reduced truck tonnage, an excess supply of tractors and low freight rates. According to the ATA, between January 2007 and June 2009, total truck tonnage declined 9.9%. However, beginning in the third quarter of 2009, demand for trucking services has improved as U.S. manufacturing has gradually increased output and companies have begun to restock their inventories. According to the U.S. Bureau of Economic Analysis, U.S. real gross domestic product, or real GDP, increased at an annualized rate of 5.0% in the fourth quarter of 2009 and 3.7% in the first quarter of 2010. The International Monetary Fund expects real GDP to increase 3.3% in 2010. For the six months ended June 30, 2010, the ATA total truck tonnage index increased 6.5% year-over-year. The following chart illustrates the correlation of truck tonnage and real GDP:
 
Year-over-Year Change in Total Truck Tonnage and Real GDP
 
(LINE GRAPH)
 
Source: ATA, U.S. Bureau of Economic Analysis.
 
Many shippers have accelerated their focus on quality improvement, order cycle time reductions, just-in-time inventory management and regional assembly and distribution methods. We believe other emerging trends in the over-the-road transportation industry include the following:
 
  •  Continued constraints on increases in truck capacity is creating opportunities for safe and reliable carriers to capture additional freight.
 
  •  An increased reliance by shippers on a smaller base of core carriers.


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  •  A growing demand for customized services as more companies seek to reduce costs and improve returns without sacrificing service levels.
 
  •  Increased outsourcing of non-core functions by shippers in an effort to redeploy resources.
 
Operating and Growth Strategy
 
Since our inception in 2000, we have been successful in growing our business and attracting new customers. From 2002 to 2009, we have grown total revenues and Adjusted EBITDA at compound annual growth rates of 21.7% and 19.3%, respectively. For the three months ended March 31, 2010, our total revenues and Adjusted EBITDA were $61.8 million and $6.1 million, respectively, representing improvements of 11.6% and 31.9%, respectively, over the three months ended March 31, 2009. For the three months ended March 31, 2010, our net loss was $8.5 million, which includes a $7.5 million non-cash charge related to a change in the fair value of warrants. Over the same timeframe, our shipments per day and net revenue per operating tractor per day were 2,073 and $1,024, respectively, representing improvements of 13.0% and 9.1% over the three months ended March 31, 2009. We believe our experienced management team and our differentiated Load-to-Deliver operating model will allow us to capitalize on any volume growth from an economic recovery as well as key ongoing trends in the U.S. freight transportation industry. The following are the key components of our operating and growth strategy:
 
Build Freight Density in Existing System.
 
We believe we have significant growth opportunities in the attractive outbound Northeast LTL market and the much larger market of inbound truckload freight back into the region. The goal of our marketing and sales strategy is to increase our freight volumes and density in the Northeast by adding new customers and building new lanes with, and cross-selling our services to, existing customers. Despite the economic downturn, we have been able to grow our number of active customers 17% from 963 in 2007 to 1,129 in 2009. We believe we are well positioned to capture a greater percentage of our customers’ transportation spend. We offer a broad range of services to our customers, which gives us multiple opportunities to attract new customers and to cross-sell additional services to existing customers. During 2009, 23 of our top 25 customers by total revenue used both our LTL and truckload services, and more than half of our top 200 customers by total revenue have used our temperature-controlled services. For example, Crayola LLC, which started as a customer for our truckload services, has since expanded to use our LTL, temperature-controlled and expedited services. In addition, we believe that our operational flexibility positions us well to take advantage of the growing trend of shippers partnering with a small base of core carriers for all of their shipping needs. We have proactively prepared ourselves for increased freight volumes by leasing an approximately 170,000 square foot consolidation operation near our Westampton, New Jersey headquarters that will allow us to double the number of LTL shipments we can consolidate. As of March 31, 2010, we had 177 available tractors, or 17.9% of our current fleet, that we can place back into operation to meet growing demand for our services with no additional capital investment. Furthermore, any increase in our net revenue per shipment, which decreased 14.7% from $483 in 2008 to $412 in 2009, should improve our operating results.
 
Maintain Emphasis on Specialized Freight.
 
We have focused and intend to continue focusing on transporting specialized freight such as pharmaceuticals, chemicals and certain agricultural and horticultural products. For example, the percentage of our net revenues generated from pharmaceutical companies included among our 800 largest customers (excluding customers of our wholly-owned subsidiary Western Freightways, LLC) has more than doubled from 4.0% in 2006 to 9.5% in 2009. We believe that customers in these industries demand exceptional service and generally have less cyclical demands for freight delivery. In order to accommodate the needs of these customers, we will continue to emphasize the use of highly experienced drivers and specialized equipment. We believe that our 100% Hazmat certified driver workforce and ability to transport certain hazardous materials nationwide makes us a leading transportation provider for the


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chemical and pharmaceutical industries. Our fleet of temperature-controlled trailers has increased from 439 in 2005 to 887 as of March 31, 2010. Total revenues from the shipment of temperature-controlled freight have grown 52.3% annually from $9.6 million in 2005 to $51.9 million in 2009 and have increased from 6.9% of our total revenues in 2005 to 22.6% in 2009.
 
Focus on Tractor and Trailer Technology.
 
The technology programs for our tractors and trailers are key aspects of our operating model and our ability to deliver consistently high levels of customer service. Over the years, our management team has been an early adopter of technologies such as satellite tracking, self-lubricating chassis on both our tractors and trailers, auxiliary power units, automatic transmissions, vented mud flaps and super-single tires. We believe these technologies improve our fuel efficiency, extend the useful life of our tractors and enhance driver satisfaction. Most recently, in response to uncertainties in new engine designs, we have established a program to remanufacture existing engines. We have entered into this program with a major engine manufacturer who will provide a full warranty on the engine for unlimited miles for four years. We expect that remanufactured engines will add up to four years to the useful life of a tractor for approximately 25% of the cost of a new tractor, thereby enhancing free cash flow and improving our return on invested capital.
 
Continue to Focus on Operating Efficiency.
 
We are focused on driving operational and financial improvements to increase asset productivity, accelerate earnings growth, enhance returns and improve our competitive position. To achieve these goals, we have placed significant management emphasis on optimizing freight mix, controlling costs and tightly managing our revenue generating equipment. We employ management information systems, including messaging systems and freight optimization software, to improve shipment selection and maximize profitability. As an example of our management’s ability to identify freight that fits within our system and freight lanes, in 2009 our percentage of empty miles was less than 4.0%, compared to an average of 27.6% and 13.4% among truckload and LTL carriers, respectively, according to data from the ATA. In response to the industry-wide downturn in truck tonnage, we implemented initiatives that removed approximately $6.8 million of annual costs, including company-wide salary reductions, headcount reductions and terminating our 401(k) matching program. We implemented operating and load planning efficiency initiatives in the second half of 2009 that allowed us to transport 13.0% more shipments with 2.6% fewer operating tractors in the three months ended March 31, 2010 than in the three months ended March 31, 2009. Our cost saving initiatives and improved asset utilization, combined with an improving freight environment, contributed to the 150 basis point improvement in our Adjusted EBITDA as a percentage of total revenues in the first quarter of 2010 as compared to the first quarter of 2009. While certain of these cost saving initiatives will be reversed in an improving economic environment, we believe our less asset intensive operating model eliminates the need for a significant terminal network infrastructure and will allow us to continue to increase our Adjusted EBITDA margins with increasing truck tonnage and improvements in pricing.
 
Recruit and Retain Highly Experienced, Professional Drivers.
 
Our highly experienced, non-union drivers are critical to our operating model. The operational flexibility and safety track record of our drivers allow us to offer a variety of services and to compete for freight requiring premium service levels. Our driver turnover rate, which has ranged from 25% to 32% per year over the last four years, is significantly below the average turnover for truckload carriers of 83.9% during the same period, as estimated by the ATA. We believe that we will continue to be successful at recruiting and retaining skilled drivers because we promote a driver friendly environment. We provide attractive and comfortable equipment, direct communication with senior management and the flexibility to operate either as a single driver or as part of a two-person team. Our wages and benefits are based on an hourly rate or a rate per mile plus payments for completion of specific actions, such as each delivery stop made, and other incentives designed to encourage driver safety, retention and long-term employment. We


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believe that our drivers are compensated very competitively, allowing us to attract and retain qualified drivers who fit into our high service culture. We believe our driver friendly culture emanates from Mr. Muhlschlegel, our founder and Chief Executive Officer and a former driver, who has continually emphasized the importance of a stable, high quality driver force. We believe our driver friendly culture will be an increasing competitive advantage should the availability of drivers decrease in the future.
 
Pursue Selective Acquisitions.
 
The transportation and logistics industry is large and highly fragmented. Since our founding, we have acquired Edward M. Rude Carrier Corporation, Western Freightways, LLC, or Western Freightways, and P&P Transport, Inc. or P&P Transport, each of which complemented and expanded our service offerings and fit our operating strategy of maximizing revenue per tractor on a round-trip basis. We will continue to explore other opportunities to acquire motor carriers and logistics service providers that would increase our scale and efficiency, expand our premium service offerings or enhance our customer base.
 
Refinancing
 
In connection with this offering, we intend to enter into a new $60.0 million senior secured credit facility, which we refer to as our new revolving credit facility. We will repay amounts outstanding under our senior secured credit facility, which we refer to as our existing credit facility, and under three series of subordinated notes with the proceeds of this offering and drawings under our new facility. See “Description of Indebtedness.” This offering is conditioned upon the concurrent closing of the new revolving credit facility.
 
Risk Factors
 
An investment in our common stock is subject to risks, including the following:
 
  •  General economic conditions could have a material adverse effect on our business, financial condition and results of operations;
 
  •  We operate in a highly competitive industry;
 
  •  Excess capacity in the over-the-road freight sector has resulted in downward pricing pressure;
 
  •  We expect competition for qualified drivers to increase;
 
  •  Our operations depend significantly on our facilities in the Philadelphia metropolitan area; and
 
  •  Our executive officers and key personnel are important to our business, and these officers and personnel may not remain with us in the future.
 
These risks and the other risks described under “Risk Factors” could have a material affect on our business, financial condition and results of operations.
 
Company Information
 
We maintain our principal offices at 45 East Park Drive, Westampton, New Jersey 08060. Our telephone number is (609) 265-1110. Our website is www.nctrans.com. The information contained on our website or that can be accessed through our website does not constitute part of this prospectus.
 
About Jefferies Capital Partners
 
In June 2006, investment funds affiliated with Jefferies Capital Partners acquired a controlling interest in New Century from the then existing shareholders. We refer to these investment funds collectively as “JCP Fund IV.” Jefferies Capital Partners is a private equity investment firm with over $1.0 billion in equity funds under management. Jefferies Capital Partners focuses its investment activity on selected industries in which its professionals have established expertise, including the transportation industry.


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The Offering
 
Shares of Common Stock Offered by Us           shares.
 
Common Stock to be Outstanding After this Offering           shares.
 
Shares of Common Stock Offered by the Selling Shareholders Pursuant to the Over-Allotment Option The underwriters have a 30-day option to purchase from the selling shareholders up to an additional           shares of our common stock to cover over-allotments, if any. The selling shareholders are not offering any other shares in this offering other than those contemplated in the over-allotment option.
 
Use of Proceeds Assuming an offering price of $      per share (the midpoint of the range set forth on the cover page of this prospectus), we estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of $      million, after deducting underwriting discounts and commissions and estimated fees and expenses payable by us. We intend to use the net proceeds of this offering and an initial drawing under our new revolving credit facility to:
 
• repay $      million of outstanding indebtedness under the term loan portion of our existing credit facility, which bears interest at a rate of the London Inter-Bank Offered Rate, or LIBOR, plus 7.0%, and accrued but unpaid interest thereunder, following which such facility will be terminated;
 
• repay $      million aggregate principal amount of and accrued but unpaid interest under our 9% subordinated notes due 2012, which notes are held by certain of our shareholders;
 
• repay $      million aggregate principal amount of and accrued but unpaid interest under our 14% convertible subordinated notes due 2013; and
 
• repay $      million aggregate principal amount of and accrued but unpaid interest under our 7.5% senior subordinated notes due 2014, which notes are held by JCP Fund IV.
 
See “Description of Indebtedness.”
 
In the event any of our 14% convertible subordinated notes due 2013 are converted to common stock prior to the consummation of the offering, the amount of the initial drawing under our new revolving credit facility will be reduced.
 
An affiliate of Wells Fargo Securities, LLC, one of the joint book-running managers of this offering, is a lender under our existing credit facility and will receive a portion of the proceeds from this offering. See “Use of Proceeds” and “Underwriting.”
 
We will not receive any of the proceeds from the sale of shares by the selling shareholders but will pay all fees and expenses of


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the selling shareholders associated with this sale, other than underwriting discounts and commissions.
 
Dividend Policy We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any dividends in the foreseeable future. Any payment of dividends on our common stock in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our board of directors. In addition, our ability to declare and pay dividends is restricted by covenants in our existing credit facility, and we expect to be subject to similar restrictions under our new revolving credit facility.
 
Risk Factors Investment in our common stock involves substantial risks. You should read this prospectus carefully, including the section entitled “Risk Factors,” beginning on page 14 of this prospectus, before investing in our common stock.
 
Proposed Nasdaq Global Market Symbol NCTX
 
Conflicts of Interest From time to time, certain of the underwriters and/or their respective affiliates have directly and indirectly engaged in various financial advisory, investment banking and commercial banking services for us and our affiliates, for which they received customary compensation, fees and expense reimbursement. In particular, affiliates of Wells Fargo Securities, LLC, one of the joint book-running managers in this offering, are parties to our existing credit facility. Our existing credit facility was negotiated on an arms’ length basis and contains customary terms pursuant to which the lenders receive customary fees. We will use a portion of the net proceeds from this offering to repay amounts outstanding under this credit facility. See “Use of Proceeds.” More than 5% of the net proceeds of the offering are expected to be used to repay borrowings we have received from Wells Fargo Bank, N.A., an affiliate of Wells Fargo Securities, LLC. Because Wells Fargo Securities, LLC is a participating underwriter in this offering, a “conflict of interest” is deemed to exist under the applicable provisions of Rule 2720 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc., or FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 2720 of the Conduct Rules. Rule 2720 currently requires that a “qualified independent underwriter,” as defined by the FINRA rules, participate in the preparation of the registration statement and the prospectus and exercise the usual standards of due diligence in respect thereto. Stifel, Nicolaus & Company, Incorporated has agreed to act as qualified independent underwriter for the offering and to perform a due diligence investigation and review and participate in the preparation of the prospectus. An affiliate of Wells Fargo Securities, LLC is expected to be the arranger and a lender under our new revolving credit facility. In addition, from


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time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. See “Conflicts of Interest.”
 
The number of shares of our common stock to be outstanding after this offering gives effect to the           for           stock split to be completed prior to the completion of this offering and is based on           shares outstanding as of          , 2010. The number of shares of our common stock to be outstanding after this offering:
 
  •  includes           shares (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) to be issued concurrently with this offering upon exercise of           warrants held by JCP Fund IV on a cashless basis. A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) the number of shares issuable upon exercise of these warrants by     shares.
 
  •  excludes           shares of common stock issuable upon conversion of our 14% convertible subordinated notes due 2013, which we intend to retire with the net proceeds of this offering and an initial drawing under our new revolving credit facility.
 
  •  excludes           shares of our common stock that are issuable upon exercise of options granted to employees under the New Century Transportation Inc. Equity Incentive Plan, as amended in 2002, and the New Century Transportation, Inc. 2006 Stock Incentive Plan. See “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Equity Incentive Awards.”
 
  •  excludes           shares of our common stock that are available for future grant under the New Century Transportation, Inc. Stock Incentive Plan. See “Compensation Discussion and Analysis — Elements of Compensation — Long-Term Equity Incentive Awards.”


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Summary Historical Financial Data
 
The following table sets forth, for the periods and dates indicated, our summary historical financial data. The data as of and for the years ended December 31, 2005, 2006, 2007, 2008 and 2009 have been derived from consolidated financial statements audited by KPMG LLP, an independent registered public accounting firm. The historical consolidated financial data as of December 31, 2008 and 2009, and for the three years ended December 31, 2009, have been derived from our consolidated financial information included elsewhere in this prospectus. We derived the historical financial data as of and for the three months ended March 31, 2009 and 2010 from our unaudited interim consolidated financial statements, which are included elsewhere in this prospectus. The summary historical and other financial data presented below represent portions of our financial statements and are not complete. Our historical results are not necessarily indicative of the results that should be expected in the future and our interim results are not necessarily indicative of the results that should be expected for the full fiscal year. You should read this information in conjunction with “Use of Proceeds,” “Capitalization,” “Selected Historical Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.
 
                                                         
    Year Ended December 31,     Three Months Ended March 31,  
    2005     2006(1)     2007     2008     2009     2009     2010  
                                  (unaudited)  
    (in thousands, except share, per share and other data)  
 
Income Statement Data:
                                                       
Net revenues(2)
  $ 125,252     $ 149,629     $ 205,585     $ 228,966     $ 203,127     $ 50,123     $ 53,226  
Fuel surcharge(3)
    15,225       22,906       33,425       59,683       26,186       5,214       8,548  
                                                         
Total revenues
  $ 140,477     $ 172,535     $ 239,010     $ 288,649     $ 229,313     $ 55,337     $ 61,774  
Operating income/(loss)
  $ 13,525     $ (4,907 )   $ 4,916     $ 11,707     $ 1,809     $ (791 )   $ 1,028  
Net income/(loss)(4)
  $ 9,745     $ (25,522 )   $ (4,902 )   $ (1,198 )   $ (5,137 )   $ (1,996 )   $ (8,542 )
Weighted average common stock outstanding:
                                                       
Basic
                                                       
Diluted
                                                       
Earnings/(loss) per share available to common shareholders(4):
                                                       
Basic
  $       $       $       $       $       $       $    
Diluted
  $       $       $       $       $       $       $    
Pro forma diluted earnings per share (as adjusted)(5)
                                  $               $    
Other Data:
                                                       
Total shipments(6)
                447,926       474,421       493,186       115,554       130,603  
Net revenue per shipment
              $ 459     $ 483     $ 412     $ 434     $ 408  
Total miles
                100,342,554       110,943,067       89,506,703       22,193,387       23,481,516  
Empty miles (linehaul)(7)
                3.9 %     3.9 %     3.8 %     3.9 %     3.5 %
Average operating tractors(8)
                843       935       829       847       825  
Net revenue per operating tractor per day(8)
              $ 964     $ 964     $ 968     $ 939     $ 1,024  
Miles per operating tractor per day(8)
                470       467       427       416       452  
Operating ratio(9)
    90.4 %     102.8 %     97.9 %     95.9 %     99.2 %     101.4 %     98.3 %
Adjusted EBITDA (in thousands)(10)
  $ 23,832     $ 26,658     $ 26,004     $ 34,118     $ 22,684     $ 4,654     $ 6,139  
Adjusted EBITDA margin(11)
    17.0 %     15.5 %     10.9 %     11.8 %     9.9 %     8.4 %     9.9 %
Capital expenditures (in thousands), net of sales
  $ 32,979     $ 32,783     $ 17,097     $ 1,355     $ 1,405     $ 69     $ 1,508  
 


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    As of March 31, 2010  
                Pro Forma
 
    Actual     Pro Forma(12)     As Adjusted(13)  
    (in thousands)  
 
Balance Sheet Data (unaudited):
                       
Working capital
  $ 12,959     $ 12,959          
Total assets
    126,787       126,787          
Total debt
    117,459       117,459          
Shareholders’ equity/(deficit)
    (32,257 )     (24,195 )        
 
 
(1) Results of operations include expenses associated with our June 2006 leveraged recapitalization transaction. During the leveraged recapitalization transaction, we repurchased and retired 3,841 shares of Class B common stock for $3.6 million. In connection with the transaction, we were required to change our federal tax status to a C corporation from an S corporation. As a result of the transaction, we recorded a $28.6 million charge against current year operating results. This was primarily comprised of a $15.3 million expense to record the immediate vesting and payout of certain outstanding stock options, offset by $6.1 million of favorable tax effect of this expense, a charge against earnings of $17.1 million to record the tax effect of changing from an S corporation to a C corporation for federal tax purposes, primarily representing the recognition of deferred federal income tax liability, and other fees and expenses necessary to finance the transaction.
 
(2) We define net revenues to be total revenues less fuel surcharges.
 
(3) At the time of our acquisition of Western Freightways in December 2006, the accounting systems of Western Freightways did not permit for the recording of fuel surcharges. We upgraded their systems in February 2007. Accordingly, 2006 and 2007 fuel surcharges exclude surcharges imposed by Western Freightways from the date of acquisition to February 2007. Fuel surcharges imposed by Western Freightways during this period are included in net revenues.
 
(4) We were taxed under the U.S. Internal Revenue Code of 1986, as amended, or the Code, as a subchapter S corporation until June 23, 2006. Under subchapter S, we did not pay corporate income taxes on our taxable income. Instead, our shareholders were liable for federal and state income taxes on our taxable income. For comparison purposes, a pro forma income tax provision for corporate income taxes has been calculated as if we had been taxed as a subchapter C corporation for 2005 and January 1, 2006 through June 22, 2006. The following is a summary of the pro forma net income (loss) used in calculating the 2005 and 2006 earnings per share:
 
                 
    Year Ended December 31,  
    2005     2006  
 
Historical income/(loss) before taxes
  $ 10,352     $ (12,538 )
Pro forma income tax provision/(benefit)
    3,662       (4,388 )
                 
Pro forma net income/(loss)
  $ 6,690     $ (8,150 )
                 
 
(5) Pro forma diluted earnings per share (as adjusted) is computed by dividing net income, adjusted for the elimination of approximately $      million in interest expense and the related tax benefit of approximately $      million, assuming the retirement of approximately $      million of our outstanding debt and accrued but unpaid interest thereunder and the incurrence of approximately $      of debt under our new revolving credit facility, by the pro forma number of weighted average shares outstanding used in the calculation of diluted earnings per share, assuming the issuance of           shares (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) to be issued concurrently with this offering upon exercise of           warrants held by JCP Fund IV on a cashless basis and the issuance of           shares of common stock in this offering (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus).
 
(6) Number of shipments is equal to the number of freight bills invoiced to our customers.
 
(7) We compute empty miles (linehaul) percentage by dividing the number of empty miles traveled by our linehaul tractors by the total number of miles traveled by our linehaul tractors.
 
(8) We define operating tractors to be all tractors with current registrations and assigned drivers that are available for the transport of freight for our customers. We compute the number of operating tractors based on the average number of tractors in operation as of the end of each week during the period. Prior to February 16, 2007, we did not track the number of operating tractors, and the number of operating tractors in 2007 is based on the average number of tractors in operation as of the end of each week beginning February 17, 2007. Net revenue per operating tractor per day and miles per operating tractor per day are computed on the basis of a five-day work week, excluding holidays. As of December 31, 2009 and March 31, 2010 we had 155 and 177 tractors, respectively, designated as non-operating.
 
(9) We compute our operating ratio by dividing total operating expenses by total revenues.
 
(10) Adjusted EBITDA represents earnings before interest, income taxes, depreciation, amortization, changes in the fair value of warrants and leveraged recapitalization expenses. Adjusted EBITDA is a non-GAAP financial measure that we use to evaluate

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financial performance and determine resource allocation. We believe Adjusted EBITDA presents a view of our operating results that is important to prospective investors because it is commonly used as an analytical indicator of performance within the transportation services industry. By excluding interest, income taxes, depreciation, amortization, changes in the fair value of warrants and leveraged recapitalization expenses, we are able to evaluate performance without considering decisions that, in most cases, are not directly related to meeting our customers’ transportation requirements and were either made in prior periods or are related to the structure or financing of our business. These excluded items are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.
 
The following table provides a reconciliation of net income to Adjusted EBITDA:
 
                                                         
        Three Months Ended
    Year Ended December 31,   March 31,
    2005   2006   2007   2008   2009   2009   2010
                        (unaudited)
    (in thousands)
 
Net income/(loss)
  $ 9,745     $ (25,522 )   $ (4,902 )   $ (1,198 )   $ (5,137 )   $ (1,996 )   $ (8,542 )
Interest expense (net)
    3,173       7,631       12,547       13,535       9,631       2,314       3,089  
Income taxes/(benefit)
    607       12,984       (2,729 )     (630 )     (2,685 )     (1,109 )     (1,001 )
Depreciation and amortization
    10,307       13,948       21,088       22,411       20,875       5,445       5,111  
Change in fair value of warrants
                                        7,482  
Leveraged recapitalization expenses(14)
          17,617                                
                                                         
Adjusted EBITDA
  $ 23,832     $ 26,658     $ 26,004     $ 34,118     $ 22,684     $ 4,654     $ 6,139  
                                                         
 
(11) We compute our Adjusted EBITDA margin by dividing Adjusted EBITDA by total revenues.
 
(12) The pro forma column gives effect to the issuance of           shares (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) to be issued concurrently with this offering upon exercise of           warrants held by JCP Fund IV on a cashless basis.
 
(13) The pro forma as adjusted column gives further effect to:
 
  •  the issuance of           shares of common stock in this offering (assuming an initial public offering price of $           per share, the midpoint of the range set forth on the cover page of this prospectus); and
 
  •  application of the net proceeds of this offering and an initial drawing under our new revolving credit facility as described under “Use of Proceeds.”
 
(14) Leveraged recapitalization expenses include $15.3 million of expense to record the immediate vesting and payout of certain outstanding stock options and $2.3 million of professional fees and other expenses.


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RISK FACTORS
 
Investing in our common stock involves a high degree of risk. Before you invest in our common stock you should be aware that our business faces numerous financial and market risks, including those described below, as well as general economic and business risks. You should consider carefully the following risk factors and the other information in this prospectus, including our consolidated financial statements and related notes, before you decide to purchase our common stock. If any of the events described in the following risk factors actually occur, our business, financial condition and operating results could be adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.
 
Risks Relating to Our Business and Industry
 
General Economic Conditions could have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations.
 
Our performance is subject to general economic conditions and their impact on levels of manufacturing activity and consumer spending in the United States and Canada, which deteriorated throughout much of 2008 and 2009 and may deteriorate again in the future. Some of the factors having an impact on manufacturing activity and consumer spending include general economic conditions, unemployment, consumer debt, residential real estate and mortgage markets, taxation, energy prices, interest rates, consumer confidence and other macroeconomic factors. Declines in manufacturing activity and customer spending result in reduced production output, thereby decreasing demand for over-the-road freight shipments. As a result of the prolonged decline in the general economy, we designated approximately 160 tractors as non-operating in 2009 and increased our reliance on purchased transportation on less profitable routes. This resulted in a reduction in the number of shipments we could deliver, spread our fixed costs over a smaller revenue base and decreased our profit margins on certain routes, leading to an increase in our operating expenses as a percentage of total revenues. In addition, many of our competitors aggressively reduced their pricing on certain routes, which has adversely affected industry-wide rates, revenues and operating ratios.
 
There can be no assurances that government responses to the disruptions in the financial markets and other factors contributing to the recent recession will restore consumer confidence and positively impact manufacturing activity and consumer spending to levels where demand for over-the-road freight shipments rebounds. Unfavorable changes in the above factors or in other business and economic conditions affecting our customers or our business model could result in continued reduced demand for freight shipments, increase the number of tractors we designate as non-operating, reduce our potential revenues, increase our operating expenses, increase competition within the transportation industry or force us to reduce the prices we charge, any of which could have a material adverse effect on our business, financial condition and results of operations.
 
We Operate in a Highly Competitive Industry.
 
The over-the-road freight industry is highly competitive. We compete, and expect to continue to compete, with a variety of local, regional, inter-regional and national LTL, truckload and private fleet motor carriers of varying sizes and, to a lesser extent, with brokerage companies, railroads and air freight carriers, many of whom have greater financial resources, have larger freight capacity and larger customer bases than we do. Increased competition in the transportation services industry can lead to downward pricing pressures and reduced profit margins. There are many factors that could impair our ability to compete, including the following:
 
  •  expansion of the coverage networks and services offered by our competitors;
 
  •  reduction of the rates charged by our competitors;


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  •  solicitation by customers and potential customers of multiple bids for their shipping needs and the resulting downward pricing pressures or loss of business;
 
  •  establishment by our competitors of partnering relationships with our customers to offer customized services;
 
  •  establishment by our competitors of enhanced logistics, brokerage and other similar services or partnering by existing service providers with our competitors;
 
  •  continued consolidation of participants in the over-the-road freight industry could result in more carriers with greater financial resources; and
 
  •  commencement of operations by our customers of their own private trucking fleet or enhancement of any of our customers’ private trucking fleets.
 
If we are unable to effectively compete with other participants in the over-the-road freight industry or other modes of transportation, whether on the basis of pricing, services or otherwise, we may be unable to retain existing customers or attract new customers, either of which could have a material adverse effect on our business, financial condition and results of operations.
 
Excess Capacity in the Over-the-Road Freight Sector has Resulted in Downward Pricing Pressure.
 
Beginning in 2007, the over-the-road freight sector experienced year-over-year declines in tonnage totaling an aggregate of 4.5% in the three years through 2009, primarily reflecting a weakening freight environment in the United States, especially in the construction, manufacturing and retail sectors. As a result of overcapacity, pricing for over-the-road freight has been highly competitive and subject to downward rate pressure. We cannot assure you that the pricing environment for over-the-road freight will improve significantly, or at all. If the pricing environment does not improve or we are unable to match the prices of our competitors within the over-the-road freight sector, and the LTL market in particular, there could be a material adverse effect on our business, financial condition and results of operations.
 
We Expect Competition for Qualified Drivers to Increase.
 
There has been intense competition for qualified drivers in recent years. We believe a large number of drivers are nearing retirement age and that there is an insufficient number of younger individuals either currently driving or presently enrolled in driving schools to replace the number of drivers who will be retiring in the coming years. The Council of Supply Chain Management Professionals projects that driver shortages will increase due to factors including aging driver demographics and the regulatory environment to which drivers are subject. We expect that this shortage of qualified drivers will result in increased competition for such drivers, particularly those with Hazmat certifications, and that our ability to operate the more than 160 tractors that are currently designated as non-operating will be constrained by the current availability of drivers. Any shortage of drivers could force us to further increase driver compensation, which could adversely affect our profitability unless we are able to offset the increased compensation costs with a corresponding increase in freight rates. In addition, our industry suffers from high turnover of drivers. This turnover rate requires us to continuously recruit a substantial number of drivers in order to operate existing equipment. If we are unable to attract and retain a sufficient number of qualified drivers, we could be forced to increase our reliance on purchased transportation, decrease the number of pickups and deliveries we are able to make, increase the number of our idle tractors or limit our growth, any of which could have a material adverse effect on our business, financial condition and results of operations.
 
Our Operations Depend Significantly on Our Facilities in the Philadelphia Metropolitan Area.
 
Our primary facility, which houses our administrative headquarters, is located in Westampton, New Jersey. In 2009, 85.6% of our outbound LTL shipments were processed at this facility. Accordingly, any interruption of our operations at this location could significantly reduce our ability to deliver freight and to administer and oversee our business. If prolonged, such interruption could have a material


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adverse effect on our business, financial condition and results of operations. In addition, in anticipation of the growth of our business, we have leased an additional facility in Delanco, New Jersey, which is approximately five miles from our Westampton facility. Any interruption of operations at this facility could impact our ability to grow. Any disruption with a wide impact on the Philadelphia metropolitan area could also have a material adverse effect on our business, financial condition and results of operations.
 
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, including Harry Muhlschlegel, our Chairman and Chief Executive Officer, James Molinari, our President, and Brian Fitzpatrick, our Chief Financial Officer, and other key employees, including members of our sales force, operational management and load planning team. Our success will depend, in part, on our ability to retain our current management and to attract and retain qualified personnel in the future. Competition for senior management and key employees 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. In addition, following termination of employment and expiration of certain non-compete provisions in their employment agreements, these individuals may engage in other businesses that may compete with us. See “Compensation Discussion and Analysis— Employment Agreements and Potential Payments upon Termination or Change in Control.”
 
If Our Employees were to Unionize or Our Labor Costs were to Increase, Our Operating Costs could Increase.
 
None of our employees is currently represented by a collective bargaining agreement. We cannot assure you that our employees will not unionize, or attempt to unionize, in the future, that they will not otherwise seek higher wages and enhanced employee benefits or that unionization procedures in the United States will not be made easier at either the federal or state level. The unionization of our employees could result in an increase in wage expenses and our cost of employee benefits, limit our ability to provide certain services to our customers, cause customers to limit their use of our services due to the increased potential for strikes or other work stoppages and result in increased expenditures in connection with the collective bargaining process, any of which could have a material adverse effect on our business, financial condition and results of operations.
 
We are Dependent on Availability of Cost Effective Purchased Transportation.
 
In certain instances, we utilize purchased transportation supplied by third-party local and national trucking companies to deliver freight. The purchased transportation provider will either pick up freight, which typically has already been consolidated into a full trailer, at our facility or one of our tractors will deliver the freight to the third-party’s facility, in these cases primarily for local delivery to the recipient. There is significant competition for cost effective purchased transportation in the over-the-road freight industry, and we cannot assure you that we will be able to contract for sufficient purchased transportation capacity as and when needed, or at all. Any shortage in purchased transportation could increase the costs we are charged by providers of purchased transportation, reduce our ability to deliver shipments in a timely manner or require us to deliver shipments that are not economically efficient for us, any of which could have a material adverse effect on our business, financial condition and results of operations.


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We Operate in a Highly Regulated Industry.
 
Our operations are subject to extensive federal, state and local laws and regulations. These laws and regulations 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. The federal government substantially deregulated the transportation industry following the enactment of the Motor Carrier Act of 1980, the Trucking Industry Regulatory Reform Act of 1994, the Federal Aviation Administration Authorization of 1994 and the ICC Termination Act of 1995. Prices and services are now largely free of regulatory controls, although individual states may require compliance with safety and insurance requirements. As an interstate motor carrier, we also remain subject to regulatory controls imposed by agencies within the U.S. Department of Transportation, or DOT, including the Federal Motor Carrier Safety Administration, such as safety, insurance and bonding requirements.
 
We are subject to the hours of service regulations issued by the Federal Motor Carrier Safety Administration. Under the current rules, drivers are currently allowed 11 hours of driving time within a 14-hour, non-extendable period from the start of the work day. This driving time must follow 10 consecutive hours of off-duty time. In addition, calculation of on-duty time limits of 70 hours in eight days restarts after the driver has had at least 34 hours of off-duty time. In October 2009, the Federal Motor Carrier Safety Administration entered into a settlement agreement with Public Citizen and other parties that had filed suit asserting that the current rules are not stringent enough. Under this settlement, the Federal Motor Carrier Safety Administration has submitted a new proposed hours of service rule and has agreed to publish a final rule by July 2011. We are not certain of the effect that this proposed rule may have on our operations.
 
There also are regulations specifically relating to the trucking industry, including testing and specifications of equipment, product handling requirements and hazardous material requirements. See “Business — Regulation.” For example, beginning November 30, 2010, the Federal Motor Carrier Safety Administration will begin rating individual driver safety performance, including all driver violations, over 3-year time periods under new regulations known as the Comprehensive Safety Analysis 2010, or CSA. CSA is an initiative designed by the Federal Motor Carrier Safety Administration to improve large truck and bus safety and ultimately reduce commercial motor vehicle-related crashes, injuries and fatalities. Prior to these regulations, only carriers were rated by the DOT, and the rating only included out-of-service violations and ticketed offenses associated with out-of-service violations. This new system changes the safety evaluation process for all motor carriers and enables the DOT to regulate individual drivers to make driver safety performance history more transparent to law enforcement and motor carriers. We expect that as a result of this new system, we will be required to devote greater resources to safety training, personnel and information technology, which may require substantial attention of our management team and increase our operating expenses. In addition, any downgrade in our DOT safety rating, as a result of these new regulations or otherwise, could have a material adverse effect on our business, financial condition and results of operations.
 
We are also subject to regulations to combat terrorism imposed by the Department of Homeland Security, including Customs and Border Protection agencies, and other agencies. Compliance with existing laws and regulations requires substantial attention of our management team and the incurrence of significant costs associated with training, personnel and information technology. We cannot assure you that compliance with CSA or other future laws and regulations will not increase the amount of management time and costs associated with our compliance measures, and any increase could be significant. In addition, we could be subject to fines or penalties and civil and criminal liability resulting from any failure to comply with federal, state and local laws and regulations.
 
We Incur Costs and Liabilities Relating to Various Environmental Laws and Regulations.
 
As part of our business, we operate real property, service, fuel and maintain vehicles and arrange for the transportation of hazardous materials. As a result, we are subject to various environmental and


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safety laws and regulations, including those governing the handling, transportation, storage, disposal and release of hazardous materials. These laws and regulations, including those administered by the U.S. Environmental Protection Agency, or EPA, and the Pipeline and Hazardous Materials Safety Administration, also require us to obtain and maintain various licenses and permits. If hazardous materials are released into the environment at our facilities or in connection with our transportation or disposal of waste or other operations, regardless of whether we are at fault, we may be required to participate in, or may have liability for, response costs and the investigation and remediation of such a release. We could also be subject to claims for personal injury, property damage and damage to natural resources. Any fines or penalties, remediation costs or civil and criminal liability resulting from our failure to comply with environmental requirements or from the release of hazardous materials could have a material adverse effect on our business, financial condition and results of operations.
 
We are Impacted by Regulations Governing Engine Exhaust and Greenhouse Gas Emissions.
 
The EPA has issued regulations that require manufacturers of diesel engines to implement progressive reductions in associated exhaust emissions. Some of the federal regulations required reductions in the sulfur content of on-road diesel fuel beginning in June 2006, the introduction of emissions after-treatment devices on newly-manufactured engines and vehicles beginning with model year 2007 and the reduction of nitrogen and non-methane hydrocarbon emissions to be phased in between model years 2007 and 2010. Tractor engines that comply with these regulations are generally less fuel-efficient and have increased maintenance costs compared to engines in tractors manufactured before these requirements became effective. Accordingly, these regulations, as well as similar state and local regulations, particularly in California, have resulted in us paying higher prices for tractors and diesel engines and increased our fuel and maintenance costs. See “Business — Environmental Matters.” We cannot assure you that continued increases in engine prices or maintenance costs will not have a material adverse effect on our business, financial condition and results of operations.
 
On January 16, 2009, the EPA adopted a waiver that enabled California to phase in restrictions on transport refrigeration unit, or TRU, emissions over several years. The TRU Airborne Toxic Control Measure will require companies that operate TRUs within California to meet certain emissions in-use performance standards. These regulations will require other carriers and us to retrofit or replace our TRUs that enter California or reduce or eliminate transport in California.
 
There is also an increased regulatory focus on climate change and greenhouse gas emissions in the United States. Existing or future federal, state or local greenhouse gas emission legislation or regulation could adversely impact our business. For example, on May 21, 2010, President Obama signed an executive memorandum directing the National Highway Traffic Safety Administration and the EPA to develop new, stricter fuel efficiency standards for heavy trucks, beginning in 2014. In addition to possible increased fuel costs and other direct expenses, there could be a decreased demand for our services if legislation or regulation causes our customers to reduce product output or to elect different modes of transportation. In addition, any customer initiatives requiring limitations on the emission of greenhouse gases could increase our future capital, or other, expenditures, for example by requiring additional emissions controls, and have a material adverse impact on our business, financial condition and results of operations.
 
We may be Adversely Impacted by Fluctuations in the Price and Availability of Diesel Fuel and Increases in Diesel Fuel Taxes.
 
Diesel fuel is one of our largest operating expenses. Political events in the Middle East, Venezuela, and elsewhere, as well as hurricanes and other weather-related events, both as currently experienced and as might be experienced due to climate change, and current and future market-based (cap-and-trade) greenhouse gas emissions control mechanisms, all may cause an increase in the price of fuel. In addition, in April 2010, a deepwater drilling rig sank in the Gulf of Mexico after an apparent blowout and fire. We cannot predict the full impact of the incident and resulting spill on our operations, including any increase in the price of diesel fuel. Because we do not presently hedge our fuel costs, any such increase


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will increase our operating expenses. Historically, consistent with standard industry practice, we have included a fuel surcharge billed to our customers to mitigate the impact on us of rising fuel prices. This surcharge has helped us to defray rising fuel prices but may not always result in us fully recovering increases in the cost of fuel, particularly as the surcharge is benchmarked to the Department of Energy’s weekly fuel price increase, which results in an inability to immediately revise fuel surcharges following an increase in the cost of fuel. The extent of recovery may vary depending on the amount of customer-negotiated adjustments and our overall fuel economy. In addition, the total amount that we can charge our customers is often determined by competitive pricing pressures and market factors. Accordingly, we cannot assure you that we will be able to continue to maintain existing fuel surcharges or increase surcharges in the event fuel prices increase further. Any inability to maintain appropriate fuel surcharges, or to implement corresponding decreases in other operating expenses, could have a material adverse effect on our business, financial condition and results of operations.
 
We may be Unable to Increase Our Freight Volumes and Our Focus on Specialized Freight.
 
Our business strategy is based in part on our ability to increase our truck tonnage and our focus on specialized freight, such as temperature-controlled and Hazmat freight. We may not achieve any such increases, and, even if we do succeed, our strategy may not have the favorable impact on operations that we anticipate. In addition, we may incur substantial expenditures in connection with implementation of these parts of our strategy, such as acquisitions of additional temperature-controlled trailers, and may not be able to recoup the costs of investment in the short term, or at all. If we are unable to implement our strategy successfully, there could be a material adverse effect on our business, financial condition and results of operations.
 
We may be Unable to Successfully Execute Our Business Strategy if we Fail to Satisfy Customer Demands.
 
Our business strategy is based on our ongoing ability to provide our customers with premium services, reliability, security and personalized service. A significant part of our reputation is based on the levels of customer service that we currently provide and the ongoing satisfaction of customer expectations. If we are unable to continue providing premium services, reliability, security and customized service in the future, or our customers perceive any such inability, our reputation could be damaged and our customers could seek alternative providers of over-the-road freight services, which could have a material adverse effect on our business, financial condition and results of operations. In addition, any such failure could adversely affect our efforts to attract new customers.
 
Our Engine Remanufacturing Program may not Result in Cost Savings we Expect, or any Cost Savings at All.
 
We have recently begun an engine remanufacturing program with a major engine manufacturer to extend the life of our tractors. As part of this remanufacturing program, substantially all of the moving parts in the engines are replaced. These remanufactured engines are under full warranty for unlimited miles for four years from the date of remanufacture. We believe that the remanufacturing program will reduce our capital expenditures in the short-term, improve our operating cash flow and delay our need to acquire new tractors, the prices of which have increased significantly as a result of new regulations on exhaust emissions. We do not have sufficient data at this point to determine if there will be an increase in maintenance costs for the remanufactured engines. We cannot assure you that there will not be an increase in maintenance costs for these remanufactured engines, that we will be able to complete the remanufacturing program on time or that we will achieve the level of benefits that we expect to realize within the timeframes we currently expect. Any of these factors could have a material adverse effect on our business, financial condition and results of operations. In addition, if remanufactured parts fail more quickly than expected or our tractors break down more frequently as a result of the remanufacturing program, we may be unable to deliver shipments on time, or at all, or incur higher operating costs, either


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of which could have a material adverse effect on our business, financial condition and results of operations.
 
We may be Unable to Acquire New Tractors And Trailers at Attractive Prices, or at All.
 
Investment in new tractors and trailers historically has been a significant part of our annual capital expenditures. We currently expect these expenditures to decrease in the short term due to the engine remanufacturing program we are currently implementing. However, as we begin to replace our remanufactured tractors or expand our fleet, we may have difficulty in purchasing new tractors and trailers due to a decrease in production by our major suppliers. We cannot assure you that we will be able to obtain new tractors and trailers at attractive prices, or at all, or that we will have sufficient available capital to finance any new equipment acquisitions.
 
We are Impacted by Seasonal Sales Fluctuations.
 
The transportation industry is subject to seasonal sales fluctuations as shipments generally are lower in the first calendar quarter, due to a variety of factors, including holidays, demand for products shipped by our customers and overall economic conditions. If we were to experience an increase in these seasonal sales fluctuations, we may not be able to satisfy the increased demand for our services during periods of seasonal peak demand, and we may not be able to decrease our operating expenses sufficiently during periods of seasonally weak demand, either of which could have a material adverse effect on our financial condition and results of operations.
 
We are Exposed to Claims Related to Various Types of Losses, which could Significantly Reduce Our Profitability.
 
We are exposed to claims related to accidents, cargo loss and damage, property and casualty losses, personal injury, workers’ compensation and general liability. We have insurance coverage with third-party insurance carriers to cover these types of claims, but we do not carry insurance for certain losses. We cannot assure you that we will be able to obtain or maintain such policies in the future, and certain types of losses may be either uninsurable or not economically insurable, such as losses due to earthquakes, riots or acts of war. If a loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss. If a loss is uninsured, we could be forced to incur significant expenditures to replace the lost property or pay damages. In addition, any accident or incident involving us, whether or not covered by our insurance policies, could negatively affect our reputation among customers and the public, thereby making it more difficult for us to compete effectively. As a result, any loss, or series of losses, whether related or not, could have a material adverse effect on our business, financial condition and results of operations. In addition, insurance carriers typically require us to obtain letters of credit to pay premiums and deductibles under the associated policies. We cannot assure you that we will be able to obtain these letters of credit on commercially reasonable terms, or at all, which could significantly affect the cost and availability of insurance in the future.
 
We Self-Insure Our Fleet with Respect to Physical Damage.
 
We currently self-insure for losses resulting from physical damage to our fleet of tractors. Any increase in the number or severity of incidents of property damage to our fleet will result in an increase in our self-insurance expenses. Accordingly, if we are subject to numerous incidents of property damage to our fleet or an increase in our historic levels of severe incidents, there could be a material adverse effect on our business, financial condition and results of operations. If we are unable to continue to self-insure against these losses or otherwise determine continued self-insurance is not in our best interests, we cannot assure you that we will be able insure these losses through an insurance carrier at acceptable premiums, or at all, and the premiums under any insurance policy could exceed the expenses we historically have incurred in relation to our self-insurance.


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We have Significant Ongoing Cash Requirements and may not be Able to Raise Additional Capital to Respond to Business Opportunities, Challenges, Acquisitions or Unforeseen Circumstances.
 
Our business is highly capital intensive. We currently anticipate capital expenditures, net of sales, will not exceed $8.0 million for 2010. In the future, we expect our purchases of property and equipment to increase as we replace or expand our fleet, particularly given the increased prices of new tractors and trailers. While we intend to finance expansion and renovation projects with existing cash, cash flow from operations and available borrowings under our new revolving credit facility, we may require additional capital to supplement operating cash flow from time to time and to respond to business opportunities, challenges, acquisitions or unforeseen circumstances. Such capital, however, may not be available when we need it, or only be available on terms that are unacceptable to us. For example, the terms of our financing arrangements could make it more difficult for us to obtain additional debt financing in the future and to pursue business opportunities, including potential acquisitions. If we are unable in the future to generate sufficient cash flow from operations or borrow the necessary capital to fund our planned capital expenditures, we will be forced to limit our growth, operate our equipment for longer periods of time or sell tractors or trailers in the aftermarket where pricing is currently weak. In addition, we may not be able to service our existing customers or to acquire new customers. The inability to raise additional capital on acceptable terms could have a material adverse effect on our business, financial condition and results of operations.
 
We have a History of Net Losses and may not Become Profitable in the Future.
 
Since our 2006 leveraged recapitalization in which JCP Fund IV acquired majority control of us from the then existing shareholders, we have not generated positive net income. As of March 31, 2010, we had an accumulated deficit of approximately $34.4 million and negative shareholders’ equity. To generate positive net income, we will need to generate and sustain higher revenues while maintaining or reducing expenses, and we may incur increased capital expenditures in advance of any corresponding increase in revenues. Because many of our expenses are fixed in the short term, or are incurred in advance of receipt of anticipated revenues, we may not be able to decrease our expenses in a timely manner to offset any shortfall of sales. We may also face other challenges due to factors outside of our control, including the status of the overall U.S. economy. We cannot assure you that we will generate positive net income or sufficient free cash flow to meet our obligations. If we do become profitable, we may not be able to sustain or increase net income on a quarterly or an annual basis.
 
We have Several Major Customers, the Loss of One or More of which could have a Material Adverse Effect on Our Business.
 
In 2009, our 25 largest customers accounted for 34.8% of our total revenues. In addition, our customer base is heavily weighted toward industrial, chemical, pharmaceutical, agricultural and food companies. Economic conditions and capital markets may adversely affect our customers and their ability to remain solvent. Generally, we do not have contractual relationships that guarantee any minimum volumes with our customers, and we cannot assure you that our customer relationships will continue as presently in effect. A reduction in or termination of our services by one or more of our major customers could have a material adverse effect on our business, financial condition and results of operations.
 
We may be Unable to Successfully Consummate Acquisitions.
 
We may seek to acquire other over-the-road freight carriers as well as other complementary businesses, such as logistics service providers or freight brokerage firms. Exploration of potential acquisitions requires significant attention from our senior management team. In addition, we expect to compete for acquisition opportunities with other companies, some of which have greater financial and other resources than we do. We cannot assure you that we will have sufficient cash with which to consummate an acquisition or otherwise be able to obtain financing for any acquisition. If we are unable


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to access sufficient funding for potential acquisition, we may not be able to complete transactions that we otherwise find advantageous.
 
Any subsequent acquisition will entail numerous risks, including:
 
  •  the diversion of resources from our existing business to the acquired business;
 
  •  failure of the acquired company to achieve projected revenues, earnings or cash flows;
 
  •  potential compliance issues with regard to the acquired company;
 
  •  potential loss of key employees and customers of the acquired company;
 
  •  an inability to recognize projected cost savings and economies of scale and scope; and
 
  •  risks associated with any additional debt or assumed liabilities related to any acquisition.
 
In addition, we may have difficulty in integrating any acquired business and its operations, services and personnel into our existing operations, and such integration may require a significant amount of time and effort by our management team. To the extent we do not successfully avoid or overcome the risks or problems resulting from any acquisitions we undertake, there could be a material adverse effect on our business, financial condition and results of operations.
 
The Transportation Industry is Affected by Numerous Factors that are Out of Our Control.
 
Businesses operating in the transportation industry are affected by numerous factors that are out of their control, including weather conditions, both as currently experienced and as might be experienced due to climate change, traffic conditions, road closures and construction-related and other delays. In addition, our operating expenses as a percentage of total revenues tend to be highest in the winter months, primarily due to inclement weather and the associated costs of decreased fuel economy and transit delays. We cannot assure you that these factors and conditions will not delay our shipments, impact our ability to operate without disruption or otherwise have a material adverse effect on our business, financial condition and results of operations. In addition, many local, state and federal transportation authorities levy tolls on tractors and trailers for their use of highways and other roads. As the need for improvements to these highways and other roads arise, we expect that many of these tolls may be increased and that other transportation authorities will levy additional tolls and fees on tractors and trailers for use of the roadways. We cannot assure you that we will be able to pass any portion these expenses on to our customers, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.
 
We have Substantial Debt and may Incur Additional Debt in the Future, and the Agreements Governing our Debt Contain Restrictions that could Significantly Restrict our Ability to Operate our Business.
 
On a pro forma basis after giving effect to this offering and the use of proceeds therefrom and an initial drawing under our new revolving credit facility, we will have total outstanding debt of $      million. This offering is conditioned upon the concurrent closing of the new revolving credit facility. We may incur additional debt in the future, which would result in a greater portion of our cash flow from operations being dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes. We expect that the terms of our new revolving credit facility will contain a number of covenants, including provisions that restrict our ability to incur additional indebtedness, pay dividends, make acquisitions or engage in mergers or consolidations. In addition, we expect that the terms of our new revolving credit facility will require us to comply with specified financial ratios and tests, including consolidated leverage ratio and fixed charge coverage ratio requirements. The computation of these measures may differ from GAAP financial measures and the Adjusted EBITDA calculation used in this prospectus and may not be readily ascertainable from our financial statements or other financial data that we publish. Our ability to comply with the covenants and restrictions contained in our debt instruments may be affected by events beyond our control, including prevailing economic, financial and


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industry conditions. We cannot assure you that we will be able to comply with any covenants or restrictions contained in our new revolving credit facility. The breach of any of these covenants or restrictions could result in a default and would permit the lenders to prohibit subsequent borrowings under the facility and to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest, and the commitments of the lenders to make further extensions of credit under our new revolving credit facility could be terminated. Most of our assets are pledged as collateral and if we were unable to repay our indebtedness to our lenders, the lenders could proceed against the collateral securing that indebtedness.
 
We may not be able to Use a Significant Portion of Our Net Operating Loss Carry Forwards, which could Adversely Affect Our Operating Results.
 
Due to losses recognized for federal and state income tax purposes in prior periods, we have generated significant federal and state net operating loss carry forwards, which may expire before we are able to use them. Different states have different carry-forward periods, and losses may expire in one state even if the losses remain usable for federal or other state purposes. In addition, under U.S. federal and state income tax laws, if over a rolling three-year period, the cumulative change in our ownership by “5% shareholders” exceeds 50%, our ability to use our net operating loss carry forwards to offset future taxable income may be limited. Change in ownership may include changes due to the issuance of additional shares of our common stock or, in certain circumstances, securities convertible into our common stock. The effect of this transaction or future transactions on our cumulative change in ownership may further limit our ability to use our net operating loss carry forwards to offset future taxable income. Furthermore, it is possible that transactions in our stock that may not be within our control may cause us to exceed the 50% cumulative change threshold and may impose a limitation on the utilization of our net operating loss carry forwards in the future. In the event the usage of our net operating loss carry forwards is subject to limitation and we are profitable, our operating results could be adversely affected.
 
We may not be Able to Grow Our Revenues, Adjusted EBITDA or Net Income.
 
Our annual net revenues have grown from $125.3 million in 2005 to $203.1 million in 2009, which represents an average annual growth rate of 12.9%. Over the same period, our Adjusted EBITDA and net income have decreased from $23.8 million and $9.7 million, respectively to $22.7 million and $(5.1) million, respectively. In the future, we may not be able to grow our business at the same rate as our revenue growth. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business or fund liquidity needs, which could have a material adverse effect on our business, financial condition and results of operations.
 
Anti-Terrorism Measures, Future Terrorist Attacks and Acts of War could Affect our Operations.
 
As a result of past terrorist attacks, federal authorities as well as many state and municipal authorities have implemented and are continuing to implement anti-terrorism and enhanced security measures, including checkpoints and travel restrictions on large trailers and fingerprinting of drivers in connection with new hazardous materials endorsements on their licenses. These and any future anti-terrorism measures could increase the costs associated with our operations or otherwise reduce driver productivity. Moreover, large trailers carrying toxic chemicals are potential terrorist targets, and we may be obligated to take measures, including possible capital expenditures, to protect our tractors and trailers. For example, security measures at bridges and tunnels may cause delays or increase the non-driving time of our drivers. Future terrorist acts or acts of war could result in a further increase in existing security measures to which we are subject and have a general adverse effect on economic activity. In addition, premiums charged for some or all of the insurance coverage we currently maintain could increase dramatically or such coverage could be unavailable in the future.


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Our Long-Lived Assets are Subject to Potential Asset Impairment.
 
As of March 31, 2010, goodwill and other intangible assets represented approximately $13.5 million, or approximately 10.6% of our total assets and approximately 15.1% of our non-current assets, the carrying value of which may be reduced if we determine that those assets are impaired. In addition, net property and equipment totaled approximately $73.7 million, or approximately 58.1% of our total assets, and approximately 82.5% of our non-current assets.
 
We review for potential goodwill impairment on an annual basis. In addition, we test for the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. If there are changes to the methods used to allocate carrying values, if our estimates of future operating results change or if there are changes to other significant assumptions, the estimated carrying values and the estimated fair value of our goodwill and long-lived assets could change significantly and may result in impairment charges that could have a material adverse effect on our business, financial condition and results of operations.
 
There may be Conflicts of Interest Arising out of Relationships and Transactions Between Us and Third-Party Entities in which Harry Muhlschlegel has Interests.
 
We have entered into a number of transactions with related parties, including with entities in which Harry Muhlschlegel, our Chief Executive Officer, have interests. For example, we lease our corporate headquarters and primary consolidation facility from Jenicky L.L.C., an entity managed by Mr. Muhlschlegel and his wife, Karen Muhlschlegel, and owned by Harry and Karen Muhlschlegel and trusts established for the benefit of their children. We have also entered into other transactions with related parties. These related party transactions could cause conflicts of interest between us and the other parties to the transaction, which could lead to less favorable results than if the transactions had been with unrelated parties. See “Certain Relationships and Related Party Transactions.”
 
If We Fail to Maintain Adequate Internal Control over Financial Reporting in Accordance with Section 404 of Sarbanes-Oxley, it could Result in Inaccurate Financial Reporting, Sanctions or Securities Litigation, or could Otherwise Harm Our Business.
 
Under current SEC rules, beginning with our fiscal year ending December 31, 2011, we will be required to report on our internal control over financial reporting under Section 404 of Sarbanes-Oxley and related rules and regulations of the SEC. We will be required to review on an annual basis our internal control over financial reporting and on a quarterly and annual basis to evaluate and disclose any changes in our internal control over financial reporting. Completing documentation of our internal control system and financial processes, remediation of control deficiencies, and management testing of internal controls will require substantial time and effort by us. We cannot assure you that we will be able to complete the required management assessment by our reporting deadline. Failure to implement these changes in a timely, effective or efficient manner could harm our operations, financial reporting or financial results, and could result in our being unable to obtain an unqualified report on internal controls from our independent auditors.


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Risks Relating to This Offering
 
The Market Price of Our Common Stock may Fluctuate Significantly, and you could Lose All or Part of your Investment.
 
The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
 
  •  significant volatility in the market price and trading volume of securities of competitors, which is not necessarily related to their operating performance, and in the stock market generally;
 
  •  our quarterly or annual earnings and those of other companies in our industry;
 
  •  the public’s reactions to our public announcements and filings;
 
  •  additions or departures of our senior management personnel;
 
  •  sales of common stock by our directors and executive officers;
 
  •  adverse public reaction to any indebtedness we may incur or securities we may issue in the future;
 
  •  changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to our business;
 
  •  changes in accounting standards, policies, guidance, interpretations or principles;
 
  •  downgrades of our stock or negative research reports published by securities or industry analysts;
 
  •  actions by shareholders; and
 
  •  changes in general conditions in the United States and global economies or financial markets, including those resulting from acts of God, war, incidents of terrorism or responses to such events.
 
There is Currently no Public Market for Our Common Stock, and a Market for Our Securities may not Develop, which would Adversely Affect the Liquidity and Price of Our Securities.
 
There is currently no public market for our common stock. The initial public offering price for our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Investors, therefore, have no access to information about prior market history on which to base their investment decision. An active market for our common stock may not develop following the completion of this offering, or if it does develop, may not be sustained. If an active trading market is not established or is not sustained, you may have difficulty selling shares of our common stock at a price greater than or equal to the initial offering price, or at all.
 
Our Directors, Executive Officers and Principal Shareholders will Continue to have Substantial Control over Us after this Offering and could Delay or Prevent a Change in Corporate Control.
 
After this offering, our directors, executive officers and current holders of more than 5% of our common stock, together with their affiliates, will beneficially own, in the aggregate, approximately     % of our outstanding common stock, assuming no exercise of the underwriters’ option to purchase additional securities. As a result, these shareholders, including JCP Fund IV, acting together, would have the ability to control the outcome of matters submitted to our shareholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these shareholders, acting together, would have the ability to control the management and affairs of our company and may take actions that you may not agree with or that are not in your interests or those of other shareholders.


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This concentration of ownership also might harm the market price of our common stock by:
 
  •  delaying, deferring or preventing a change in corporate control;
 
  •  impeding a merger, consolidation, takeover or other business combination involving us; or
 
  •  discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
 
Future Sales of our Common Stock, Including Shares Purchased in this Offering, in the Public Market could Lower our Stock Price.
 
Sales of substantial amounts of our common stock in the public market by our existing shareholders following the completion of this offering, upon the exercise of outstanding stock options or by persons who acquire shares in this offering, may adversely affect the market price of our common stock. Such sales could also create public perception of difficulties or problems with our business. These sales might also make it more difficult for us to sell common stock in the future at a time and price that we deem necessary or appropriate.
 
Upon the completion of this offering, we will have outstanding           shares of common stock, of which:
 
  •            shares are shares that we are selling in this offering and, unless purchased by affiliates, may be resold in the public market immediately after this offering; and
 
  •            shares will be “restricted securities,” as defined in Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and eligible for sale in the public market pursuant to the provisions of Rule 144, of which           shares are subject to lock-up agreements and will become available for resale in the public market beginning 180 days after the date of this prospectus.
 
With limited exceptions, these lock-up agreements prohibit a shareholder from selling, contracting to sell or otherwise disposing of any common stock or securities that are convertible or exchangeable for common stock for 180 days from the date of this prospectus without the consent of the joint book-running managers. As a result of these lock-up agreements, notwithstanding earlier eligibility for sale under the provisions of Rule 144, none of these shares may be sold until at least 180 days after the date of this prospectus. The joint book-running managers have advised us that they have no present intent or arrangement to release any shares subject to these lock-up arrangements. Upon a request to release any shares subject to a lock-up, the joint book-running managers would consider the particular circumstances surrounding the request, including the length of time before the lock-up expires, the number of shares requested to be released, reasons for the request, the possible impact on the market or our common stock and whether the holder of our shares requesting the release is an officer, director or other affiliate of ours. As restrictions on resale end, whether by release of shares subject to lock-up agreement or otherwise, our stock price could drop significantly if the holders of these restricted securities sell them or are perceived by the market as intending to sell them. These sales might also make it more difficult for us to sell securities in the future at a time and at a price that we deem appropriate.
 
You will Suffer Immediate and Substantial Dilution.
 
The initial public offering price per share is substantially higher than the pro forma net tangible book value per share immediately after the offering. As a result, you will pay a price per share that substantially exceeds the tangible book value of our assets after subtracting our liabilities. Assuming an offering price of $      per share, you will incur immediate and substantial dilution in the amount of $      per share. See “Dilution.” Any future equity issuances will result in even further dilution to holders of our common stock unless offered at a premium to our pro forma net tangible book value at the time of such offering.


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If Securities Analysts or Industry Analysts Downgrade our Stock, Publish Negative Research or Reports, or do not Publish Reports About our Business, our Stock Price and Trading Volume could Decline.
 
We expect that investors in our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our market. If one or more analysts adversely change their recommendation regarding an investment in our common stock or that of one of our competitors, trading prices for our common stock could decline. In addition, if one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading prices of our common stock or trading volume to decline.
 
Certain Provisions of New Jersey Law and our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws that will be in Effect after this Offering may Deter Takeover Attempts, which may Limit the Opportunity of our Shareholders to Sell their Shares at a Favorable Price, and may Make it More Difficult for our Shareholders to Remove our Board of Directors and Management.
 
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:
 
  •  prohibition on shareholder action through written consents;
 
  •  a requirement that special meetings of shareholders be called only by our board of directors;
 
  •  advance notice requirements for shareholder proposals and nominations;
 
  •  availability of “blank check” preferred stock;
 
  •  establishment of a classified board of directors;
 
  •  the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or due to the resignation or departure of an existing board member;
 
  •  the prohibition of cumulative voting in the election of directors, which would otherwise allow less than a majority of shareholders to elect director candidates;
 
  •  the ability of our board of directors to alter our bylaws without obtaining shareholder approval;
 
  •  limitations on the removal of directors; and
 
  •  the required approval of at least 662/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors and the inability of shareholders to take action by written consent in lieu of a meeting.
 
In addition, because we are incorporated in New Jersey, we are governed by certain provisions of the New Jersey Business Corporation Act that may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our shareholders. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and New Jersey law could discourage potential takeover attempts, could reduce the price that investors are willing to pay for shares of our common stock in the future and could potentially result in the market price being lower than they would without these provisions.
 
No shares of preferred stock will be outstanding upon the completion of this offering. Our amended and restated certificate of incorporation authorizes the board of directors to issue up to          shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which will be determined at the time of issuance by our board of directors without further action by the shareholders. These terms may include voting rights, including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund


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provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock and, therefore, could reduce the value of our common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock and the foregoing anti-takeover provisions may prevent or frustrate attempts by a third party to acquire control of our company, even if some of our shareholders consider such change of control to be beneficial. See “Description of Capital Stock.”
 
We do not Expect to Pay any Dividends for the Foreseeable Future, and Investors in this Offering Therefore may be Forced to Sell their Stock in Order to Obtain a Return on their Investment.
 
We do not anticipate that we will pay any dividends to holders of our common stock for the foreseeable future. Any payment of dividends will be at the discretion of our board of directors and will depend on our financial condition, capital requirements, legal requirements, earnings and other factors. Our existing credit facilities limit, and we expect that the terms of any indebtedness we incur to refinance our existing indebtedness will limit, our ability to pay dividends. We plan to use net income for the purpose of investing in the growth of our business. Consequently, you should not rely on dividends in order to receive a return on your investment. See “Dividend Policy.”
 
We may Become Involved in Securities Class Action Litigation that could Divert Management’s Attention and Harm our Business.
 
In recent years, the stock markets have experienced significant price and volume fluctuations that have affected market prices. These broad market fluctuations have impacted the market price of securities issued by many companies and, in the future, may cause the market price of our common stock to fluctuate. In the past, following periods of market volatility in the price of a company’s securities, shareholders have often brought securities class action litigation against such company. We may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could have a material adverse effect on our business.
 
We will Incur Significant Costs as a Result of Being a Public Company.
 
As a public company, we will incur significant legal, accounting and other administrative expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, as well as rules of the Securities and Exchange Commission, or SEC, and The Nasdaq Stock Market, impose significant corporate governance practices on public companies. We expect these rules and regulations to increase our legal and financial compliance costs. We also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain the same or similar coverage.
 
We do not Expect any of the Proceeds from this Offering will be Available to us in the Operation of our Business.
 
We intend to use the net proceeds from this offering and an initial drawing under our new revolving credit facility to repay all of our existing indebtedness. Accordingly, we do not expect any of the proceeds of this offering will be available to us for acquisitions, capital expenditures, working capital or other general corporate purposes.


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FORWARD-LOOKING STATEMENTS
 
This prospectus contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including those discussed under “Risk Factors.” The following factors, among others, could cause our actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements:
 
  •  the impact of general economic conditions and any prolonged delay in the economic recovery;
 
  •  the competitive nature of the transportation industry;
 
  •  fluctuations in the levels of capacity in the freight industry;
 
  •  competition for, and attraction and retention of, qualified drivers;
 
  •  our ability to retain our executive officers and other key employees;
 
  •  the effects of current and future governmental and environmental regulations, particularly those relating to exhaust and greenhouse gas emissions;
 
  •  our ability to offer the level and type of services that we currently provide to our customers;
 
  •  our ability to retain customers and expand our customer base;
 
  •  seasonal fluctuations in our business;
 
  •  our ability to grow our business;
 
  •  prices of diesel fuel;
 
  •  prices for and availability of transportation equipment;
 
  •  our ability to operate our Philadelphia metropolitan area consolidation operations;
 
  •  availability of purchased transportation;
 
  •  the effects of claims related to accidents, cargo loss and damage, property damage, personal injury, workers’ compensation and general liability;
 
  •  our ability to make interest and principal payments on our existing debt obligations and satisfy the other covenants contained in our existing credit facility, our new revolving credit facility or any other indebtedness we incur to refinance our existing indebtedness and other debt agreements;
 
  •  our ability to enter into our new revolving credit facility;
 
  •  general economic, political and other risks that are out of our control;
 
  •  concentration of ownership among our existing executives, directors and principal shareholders;
 
  •  the costs associated with being a public company and our ability to comply with the internal controls and financial reporting obligations of the SEC and Sarbanes-Oxley; and
 
  •  other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.”
 
Although we believe that the expectations reflected in the forward-looking statements are reasonable based on our current knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.


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USE OF PROCEEDS
 
Assuming an offering price of $      per share (the midpoint of the range set forth on the cover page of this prospectus), we estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of $      million, after deducting underwriting discounts and commissions and estimated fees and expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) the net proceeds to us from this offering by $      million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us.
 
We intend to use the net proceeds of this offering and an initial drawing under our new revolving credit facility to:
 
  •  repay $      million of outstanding indebtedness under the term loan portion of our existing credit facility, which bears interest at a rate of LIBOR plus 7.0%, and accrued but unpaid interest thereunder, following which such facility will be terminated. Our existing revolving credit facility expires in August 2011, and our existing term debt is due August 2012;
 
  •  repay $      million aggregate principal amount of and accrued but unpaid interest under our 9% subordinated notes due 2012, which notes are held by certain of our shareholders;
 
  •  repay $      million aggregate principal amount of and accrued but unpaid interest under our 14% convertible subordinated notes due 2013; and
 
  •  repay $      million aggregate principal amount of and accrued but unpaid interest under our 7.5% senior subordinated notes due 2014, which notes are held by JCP Fund IV. See “Description of Indebtedness.”
 
In the event any of our 14% convertible subordinated notes due 2013 are converted to common stock prior to the consummation of the offering, the amount of the initial drawing under our new revolving credit facility will be reduced.
 
An affiliate of Wells Fargo Securities, LLC, one of the joint book-running managers of this offering, is a lender under our existing credit facility and will receive a portion of the proceeds from this offering. See “Conflicts of Interest.” This offering is conditioned upon the concurrent closing of the new revolving credit facility.
 
We will not receive any proceeds from the sale of shares by the selling shareholders, which include JCP Fund IV and certain of our executive officers, as part of the underwriters’ over-allotment option but will pay all fees and expenses of the selling shareholders associated with this sale, other than underwriting discounts and commissions.


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DIVIDEND POLICY
 
We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any dividends in the foreseeable future. Any payment of dividends on our common stock in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our board of directors. In addition, our ability to declare and pay dividends is restricted by covenants in our existing credit facility, and we expect to be subject to similar restrictions under our new revolving credit facility.


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CAPITALIZATION
 
The following table sets forth our cash and cash equivalents and total capitalization as of March 31, 2010:
 
  •  on an actual basis;
 
  •  on a pro forma basis to give effect to the issuance of           shares (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) to be issued concurrently with this offering upon exercise of           warrants held by JCP Fund IV on a cashless basis; and
 
  •  on a pro forma as adjusted basis to give further effect to: (1) the issuance of           shares of common stock in this offering (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) and (2) application of the net proceeds of this offering and an initial drawing under our new revolving credit facility as described under “Use of Proceeds.”
 
You should read this information in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.
 
                         
    As of March 31, 2010  
                Pro
 
          Pro
    Forma
 
    Actual     Forma     As Adjusted(1)  
    (unaudited)
 
    (in thousands, except share and per share data)  
 
Cash and cash equivalents
  $ 3,599     $ 3,599     $          
                         
Existing senior secured credit facility
  $ 102,727     $ 102,727     $    
New revolving credit facility
                   
7.5% senior subordinated notes
    9,740       9,740          
14% convertible subordinated notes
    1,700       1,700          
9% subordinated notes
    3,292       3,292          
                         
Total debt
    117,459       117,459     $  
                         
Warrant liability
    8,062                 
                         
Shareholders’ equity
                       
Capital stock
                       
Preferred stock, 0 shares authorized, issued and outstanding, actual and pro forma; and 0 shares, par value $     , authorized and 0 shares issued and outstanding, pro forma as adjusted
                   
Common stock, $0.01 par value,          shares authorized,          shares issued and outstanding, actual;          shares authorized, issued and outstanding, pro forma; and          shares authorized,          shares issued and outstanding, pro forma as adjusted
    1       1          
Additional paid-in capital
    2,518       10,580          
Accumulated other comprehensive loss
    (404 )     (404 )        
Accumulated deficit
    (34,372 )     (34,372 )        
                         
Total shareholders’ equity (deficit)
    (32,257 )     (24,195 )        
                         
Total capitalization
  $ 93,264     $ 93,264     $  
                         
 
 
(1) A $1.00 increase (decrease) in the assumed initial public offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) each of total shareholders’ equity and total capitalization by $      million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.


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DILUTION
 
Purchasers of shares of our common stock in this offering will experience immediate and substantial dilution in the net tangible book value of the common stock from the initial public offering price. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of our common stock outstanding. Dilution in net tangible book value per share represents the difference between the amount per share that you pay in this offering and the net tangible book value per share immediately after this offering. As of March 31, 2010, we had negative net tangible book value of $45.8 million, or $      per share.
 
After giving effect to the issuance of      shares (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) to be issued concurrently with this offering upon exercise of      warrants held by JCP Fund IV on a cashless basis, our pro forma net tangible book value as of March 31, 2010 would have been $     , or $      per share of common stock.
 
After giving effect to the sale of           shares of our common stock in this offering at an initial public offering price of $      per share, and after the deduction of estimated underwriting discounts and commissions and estimated fees and expenses payable by us, our pro forma as adjusted net tangible book value at March 31, 2010 would have been approximately $      million, or $      per share. This represents an immediate increase in net tangible book value of $      per share to existing shareholders and an immediate and substantial dilution of $      per share to new investors. The following table illustrates this per share dilution:
 
                 
          Per Share  
 
Assumed initial public offering price per share
                   $             
Actual net tangible book value per share as of March 31, 2010
  $            
Increase in net tangible book value per share attributable to cashless exercise of warrants
               
                 
Pro forma net tangible book value per share as of March 31, 2010
               
Increase per share attributable to new investors
               
                 
Pro forma as adjusted net tangible book value per share after this offering as of March 31, 2010
               
                 
Dilution per share to new investors
          $    
                 
 
A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) our pro forma as adjusted net tangible book value by $      million, the pro forma as adjusted net tangible book value per share after this offering by $      per share, and the dilution per share to new investors by $      per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
 
The following table summarizes on the pro forma basis described above, as of March 31, 2010, the total number of shares of common stock purchased from us and the total consideration and the average price per share paid by existing holders and by investors participating in this offering. The calculation below is based on the assumed initial public offering price of $      per share, which is the midpoint of the range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated fees and expenses payable by us.
 
                                         
    Shares Purchased     Total Consideration     Average Price
 
    Number     Percentage     Amount     Percentage     Per Share  
 
Existing shareholders
                           %                            %   $             
New investors
                                       
                                         
Total
            100.0 %             100.0 %   $    
                                         


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Each $1.00 increase (decrease) in the assumed offering price of $      per share would increase (decrease) total consideration paid by new investors and total consideration paid by all shareholders by $      million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and before deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
 
If the underwriters exercise in full their option to purchase additional securities, the number of shares of common stock held by existing shareholders will be reduced to          , or     % of the aggregate number of shares of common stock outstanding after this offering, the number of shares of common stock held by new investors will be increased to          , or     % of the aggregate number of shares of common stock outstanding after this offering.
 
The pro forma dilution information above is for illustration purposes only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing. The number of shares of our common stock outstanding after the offering as shown above is based on the number of shares outstanding as of March 31, 2010. As of March 31, 2010, there were options outstanding to purchase          shares of our common stock, with exercise prices ranging from $      to $      per share and a weighted average exercise price of $      per share, warrants to purchase           shares of our common stock at an exercise price of $      per share and $2.5 million of subordinated notes convertible into an aggregate of           shares of our common stock. The tables and calculations above assume that the warrants have been exercised on a cashless basis and that the convertible notes are repaid with a portion of the proceeds of this offering and an initial drawing under our new revolving credit facility. In addition, if we grant options, warrants, preferred stock, or other convertible securities or rights to purchase our common stock in the future with exercise prices below the initial public offering price, new investors will incur additional dilution upon exercise of such securities or rights.


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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
 
The following table sets forth, for the periods and dates indicated, our selected historical consolidated financial data. All of these materials are contained elsewhere in this prospectus. The data as of and for the years ended December 31, 2005, 2006, 2007, 2008 and 2009 have been derived from consolidated financial statements audited by KPMG LLP, an independent registered public accounting firm. The selected historical consolidated financial data as of December 31, 2008 and 2009, and for the three years ended December 31, 2009, have been derived from our consolidated financial information included elsewhere in this prospectus. We derived the historical financial data as of and for the three months ended March 31, 2009 and 2010 from our unaudited interim consolidated financial statements, which are included elsewhere in this prospectus. The selected historical and other financial data presented below represent portions of our financial statements and are not complete. Our historical results are not necessarily indicative of the results that should be expected in the future and our interim results are not necessarily indicative of the results that should be expected for the full fiscal year. You should read this information in conjunction with “Use of Proceeds,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.
 
                                                         
    Year Ended December 31,     For the Three Months Ended March 31,  
    2005     2006(1)     2007     2008     2009     2009     2010  
                                  (unaudited)  
    (in thousands, except share, per share and other data)  
 
Income Statement Data:
                                                       
Net revenues(2)
  $ 125,252     $ 149,629     $ 205,585     $ 228,966     $ 203,127     $ 50,123     $ 53,226  
Fuel surcharge(3)
    15,225       22,906       33,425       59,683       26,186       5,214       8,548  
                                                         
Total revenues
    140,477       172,535       239,010       288,649       229,313       55,337       61,774  
Operating expenses:
                                                       
Salaries, wages and benefits
    67,986       97,443       112,526       130,837       114,119       29,011       29,423  
Supplies and other expenses
    36,333       48,070       70,636       95,264       62,168       14,044       18,378  
Purchased transportation
    5,650       7,514       12,431       9,037       14,236       3,312       3,857  
Depreciation and amortization
    10,307       13,948       21,088       22,411       20,875       5,445       5,111  
Operating taxes and licenses
    6,644       8,179       11,424       12,731       10,944       2,805       2,619  
Insurance and claims
    4,058       4,623       6,302       6,460       5,029       1,516       1,138  
Loss/(gain) on disposal of property and equipment
    (4,025 )     (2,335 )     (313 )     202       133       (5 )     220  
                                                         
Operating income/(loss)
    13,525       (4,907 )     4,916       11,707       1,809       (791 )     1,028  
Interest expense, net
    3,196       7,631       12,547       13,535       9,631       2,314       3,089  
Change in fair value of warrants
                                        7,482  
                                                         
Income/(loss) before income taxes
    10,352       (12,538 )     (7,631 )     (1,828 )     (7,822 )     (3,105 )     (9,543 )
Income taxes/(benefit)
    607       12,984       (2,729 )     (630 )     (2,685 )     (1,109 )     (1,001 )
                                                         
Net income/(loss)(4)
  $ 9,745     $ (25,522 )   $ (4,902 )   $ (1,198 )   $ (5,137 )   $ (1,996 )   $ (8,542 )
                                                         
Weighted average common stock outstanding:
                                                       
Basic
                                                       
Diluted
                                                       
Earnings/(loss) per share available to common shareholders(4):
                                                       
Basic
  $       $       $       $       $       $       $    
Diluted
  $       $       $       $       $       $       $    
Pro forma diluted earnings per share (as adjusted)(5)
                                  $               $    
Other Data:
                                                       
Total shipments(6)
                447,926       474,421       493,186       115,554       130,603  
Net revenue per shipment
              $ 459     $ 483     $ 412     $ 434     $ 408  
Total miles
                100,342,554       110,943,067       89,506,703       22,193,387       23,481,516  
Empty miles (linehaul)(7)
                3.9 %     3.9 %     3.8 %     3.9 %     3.5 %
Average operating tractors(8)
                843       935       829       847       825  
Net revenue per operating tractor per day(8)
              $ 964     $ 964     $ 968     $ 939     $ 1,024  
Miles per operating tractor per day(8)
                470       467       427       416       452  
Operating ratio(9)
    90.4 %     102.8 %     97.9 %     95.9 %     99.2 %     101.4 %     98.3 %
Adjusted EBITDA (in thousands)(10)
  $ 23,832     $ 26,658     $ 26,004     $ 34,118     $ 22,684     $ 4,654     $ 6,139  
Adjusted EBITDA margin(11)
    17.0 %     15.5 %     10.9 %     11.8 %     9.9 %     8.4 %     9.9 %
Capital expenditures (in thousands), net of sales
  $ 32,979     $ 32,783     $ 17,097     $ 1,355     $ 1,405     $ 69     $ 1,508  


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    Year Ended December 31,     For the Three Months Ended March 31,  
    2005     2006(1)     2007     2008     2009     2009     2010  
                                  (unaudited)  
    (in thousands, except share, per share and other data)  
 
Balance Sheet Data (at end of period):
                                                       
Cash and cash equivalents
  $ 303     $ 4,900     $ 49     $ 3,395     $ 2,412     $ 1,255     $ 3,599  
Working capital
    (1,057 )     15,115       12,092       18,996       12,519       11,802       12,959  
Property and equipment, net
    67,900       99,742       115,631       94,966       76,059       89,765       73,659  
Total assets
    87,381       137,486       167,639       146,210       125,148       134,796       126,787  
Total debt
    62,701       125,000       148,204       135,449       118,067       125,238       117,459  
Shareholders’ equity/(deficit)
    15,506       (12,668 )     (17,572 )     (19,035 )     (23,930 )     (21,175 )     (32,257 )
 
 
(1) Results of operations include expenses associated with our June 2006 leveraged recapitalization transaction. During the leveraged recapitalization transaction, we repurchased and retired 3,841 shares of Class B common stock for $3.6 million. In connection with the transaction, we were required to change our federal tax status to a C corporation from an S corporation. As a result of the transaction, we recorded a $28.6 million charge against current year operating results. This was primarily comprised of a $15.3 million expense to record the immediate vesting and payout of certain outstanding stock options, offset by $6.1 million of favorable tax effect of this expense, a charge against earnings of $17.1 million to record the tax effect of changing from an S corporation to a C corporation for federal tax purposes, primarily representing the recognition of deferred federal income tax liability, and other fees and expenses necessary to finance the transaction.
 
(2) We define net revenues to be total revenues less fuel surcharges.
 
(3) At the time of our acquisition of Western Freightways in December 2006, the accounting systems of Western Freightways did not permit for the recording of fuel surcharges. We upgraded their systems in February 2007. Accordingly, 2006 and 2007 fuel surcharges exclude surcharges imposed by Western Freightways from the date of acquisition to February 2007. Fuel surcharges imposed by Western Freightways during this period are included in net revenues.
 
(4) We were taxed under the Code as a subchapter S corporation until June 23, 2006. Under subchapter S, we did not pay corporate income taxes on our taxable income. Instead, our shareholders were liable for federal and state income taxes on our taxable income. For comparison purposes, a pro forma income tax provision for corporate income taxes has been calculated as if we had been taxed as a subchapter C corporation for 2005 and January 1, 2006 through June 22, 2006. The following is a summary of the pro forma net income (loss) used in calculating the 2005 and 2006 earnings per share:
                 
    Year Ended December 31,  
    2005     2006  
 
Historical income/(loss) before taxes
  $     10,352     $     (12,538 )
Pro forma income tax provision/(benefit)
    3,662       (4,388 )
                 
Pro forma net income/(loss)
  $ 6,690     $ (8,150 )
                 
 
(5) Pro forma diluted earnings per share (as adjusted) is computed by dividing net income, adjusted for the elimination of approximately $      million in interest expense and the related tax benefit of approximately $      million, assuming the retirement of approximately $      million of our outstanding debt and accrued but unpaid interest thereunder and the incurrence of approximately $      of debt under our new revolving credit facility, by the pro forma number of weighted average shares outstanding used in the calculation of diluted earnings per share, assuming the issuance of           shares (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus) to be issued concurrently with this offering upon exercise of           warrants held by JCP Fund IV on a cashless basis and the issuance of           shares of common stock in this offering (assuming an initial public offering price of $      per share, the midpoint of the range set forth on the cover page of this prospectus).
 
(6) Number of shipments is equal to the number of freight bills invoiced to our customers.
 
(7) We compute empty miles (linehaul) percentage by dividing the number of empty miles traveled by our linehaul tractors by the total number of miles traveled by our linehaul tractors.
 
(8) We define operating tractors to be all tractors with current registrations and assigned drivers that are available for the transport of freight for our customers. We compute the number of operating tractors based on the average number of tractors in operation as of the end of each week during the period. Prior to February 16, 2007, we did not track the number of operating tractors, and the number of operating tractors in 2007 is based on the average number of tractors in operation as of the end of each week beginning February 17, 2007. Net revenue per operating tractor per day and miles per operating tractor per day are computed on the basis of a five-day work week, excluding holidays. As of December 31, 2009 and March 31, 2010 we had 155 and 177 tractors, respectively designated as non-operating.
 
(9) We compute our operating ratio by dividing total operating expenses by total revenues.
 
(10) Adjusted EBITDA represents earnings before interest, income taxes, depreciation and amortization and change in the fair value of warrants. Adjusted EBITDA is a non-GAAP financial measure that we use to evaluate financial performance and to

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determine resource allocation. We believe Adjusted EBITDA presents a view of our operating results that is important to prospective investors because it is commonly used as an analytical indicator of performance within the transportation services industry. By excluding interest, income taxes, depreciation and amortization and change in the fair value of warrants, we are able to evaluate performance without considering decisions that, in most cases, are not directly related to meeting our customers’ transportation requirements and were either made in prior periods or are related to the structure or financing of our business. These excluded items are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP.
 
The following table provides a reconciliation of net income to Adjusted EBITDA:
 
                                                         
          Three Months
 
          Ended
 
    Year Ended December 31,     March 31,  
    2005     2006     2007     2008     2009     2009     2010  
                                  (unaudited)  
    (in thousands)  
 
Net income/(loss)
  $ 9,745     $ (25,522 )   $ (4,902 )   $ (1,198 )   $ (5,137 )   $ (1,996 )   $ (8,542 )
Interest expense (net)
    3,173       7,631       12,547       13,535       9,631       2,314       3,089  
Income taxes/(benefit)
    607       12,984       (2,729 )     (630 )     (2,685 )     (1,109 )     (1,001 )
Depreciation and amortization
    10,307       13,948       21,088       22,411       20,875       5,445       5,111  
Change in fair value of warrants
                                        7,482  
Leveraged recapitalization expenses(12)
          17,617                                
                                                         
Adjusted EBITDA
  $ 23,832     $ 26,658     $ 26,004     $ 34,118     $ 22,684     $ 4,654     $ 6,139  
                                                         
 
(11) We compute our Adjusted EBITDA margin by dividing Adjusted EBITDA by total revenues.
 
(12) Leveraged recapitalization expenses include $15.3 million of expense to record the immediate vesting and payout of certain outstanding stock options and $2.3 million of professional fees and other expenses.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with the “Selected Historical Consolidated Financial Data,” and our consolidated financial statements and the related notes included elsewhere in this prospectus. The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading “Risk Factors” and elsewhere in this prospectus.
 
Overview
 
We are a growth-oriented motor carrier using a differentiated Load-to-Deliver operating model that combines the higher revenue per tractor characteristics of an LTL carrier with the operating flexibility and lower fixed costs of a service-sensitive truckload carrier. We offer a full range of over-the-road transportation solutions to our customers, including customized, expedited, time-definite, dedicated and specialized LTL and truckload services. Our specialized services include the transportation of temperature-controlled and Hazmat freight. We believe our Load-to-Deliver operating model provides our customers with a compelling value proposition and gives us a competitive advantage in sourcing freight. Specifically, the flexibility of our Load-to-Deliver operating model allows us to accommodate a broad range of shipment sizes and freight for both regional and national accounts while providing shippers faster and more predictable transit times with reduced freight damage. As of March 31, 2010, our fleet consisted of 987 owned tractors and 2,141 owned or leased trailers, including 887 temperature-controlled trailers. Since 2002, we have grown total revenues and Adjusted EBITDA at compound annual growth rates of 21.7% and 19.3%, respectively. During the fiscal year ended December 31, 2009, we generated total revenues of $229.3 million, Adjusted EBITDA of $22.7 million and net loss of $5.1 million.
 
We serve shippers throughout the continental United States and parts of Canada but focus primarily on the attractive market for LTL freight originating in the Northeast and the much larger market of inbound truckload freight back into the region. LTL services involve the consolidation and transport of freight from numerous shippers to multiple destinations on one vehicle and thus garner higher net revenue per tractor than truckload shipments. Truckload services involve the transport of a single shipper’s freight to a single destination. We manage our operations on a round-trip basis to maximize revenue per operating tractor by pursuing headhaul freight lanes for both our outbound and inbound trips. For the outbound portion of our round-trip, we generally deploy our local pickup fleet to gather LTL shipments throughout the Northeast that we build into linehaul loads at our Philadelphia metropolitan area LTL consolidation operations. The cornerstone of our Load-to-Deliver operating model consists of delivering LTL shipments directly from a linehaul trailer to the recipient, eliminating the need for a network of costly and labor-intensive destination and breakbulk terminals typical of traditional LTL carriers. For the inbound portion of our round-trip, we generally transport truckload freight back to the Northeast to reposition our tractors and trailers near our consolidation operations.
 
We believe our Load-to-Deliver operating model offers a compelling value proposition to our customers. We provide our customers time-definite LTL services with lower cargo claims and fewer opportunities for delays because our Load-to-Deliver operating model requires fewer handlings per LTL shipment than a traditional LTL carrier. For example, for the year ended December 31, 2009, our claims ratio was 0.24% as compared to the average of 1.04% reported by the Transportation Loss Prevention and Security Association. We believe we can reduce a shipment’s transit time by up to 24 hours for every breakbulk terminal that our Load-to-Deliver operating model avoids while transporting our customers’ freight. In addition, we believe our customers value the ability to work with a flexible motor carrier that can service a broad spectrum of their transportation needs.
 
We believe our Load-to-Deliver operating model provides us with a competitive advantage in sourcing freight while enhancing utilization of our tractors and allowing us to operate more cost effectively. Our Load-to-Deliver operating model allows us to avoid the historically unfavorable pricing of


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truckload freight outbound from the Northeast and positions us to take advantage of higher priced truckload freight inbound to the Northeast, a densely populated, high consumption area. We believe our Load-to-Deliver operating model enables us to optimize the economics of a round-trip by combining two favorably priced headhauls (an outbound load of LTL shipments and an inbound truckload shipment) to maximize revenue per operating tractor. For example, in 2009 our net revenue per operating tractor per day of approximately $1,000 was significantly higher than the $500 to $700 per day that we believe to be the average for publicly traded truckload carriers over the same period. In addition, because we generally deliver LTL freight directly from the trailer to the recipient, we do not need the significant capital investment and high-fixed cost structure required to operate the numerous local delivery fleets, nationwide breakbulk and destination terminals and multiple staffs of freight handlers, typically associated with our LTL competitors. We believe our customers recognize the importance of having access to our temperature-controlled and Hazmat services. As a result, they will often use our services to transport non-specialized freight to retain access to these services.
 
Revenues, Expenses and Key Performance Indicators
 
We primarily generate revenues by transporting LTL and truckload freight. We generally define an LTL shipment as a shipment that is less than 28,000 pounds or utilizes less than 28 linear feet on a trailer (although shipments of such size are larger and heavier than typical LTL shipments), whereas a truckload shipment is greater than or equal to 28,000 pounds. We generate additional revenues from our brokerage and warehousing operations, which historically have accounted for less than 3% of our total revenues. For LTL freight movements we are generally paid a rate per hundredweight based on the weight and volume characteristics of the freight as well as the length of haul. For truckload freight movements we are generally paid a rate per mile or per load for our services. We also derive additional revenues from fuel surcharges, accessorial charges for temperature-controlled and Hazmat services, and, to a much lesser extent, other ancillary customer charges. Consistent with standard industry practice, we generally include a fuel surcharge in customer contracts to mitigate the impact of fluctuating fuel prices. This surcharge is benchmarked to the Department of Energy’s weekly national fuel price index and varies based on the specifics of each customer’s contract.
 
We manage our operations on a round-trip basis to maximize revenue per operating tractor by pursuing headhaul freight lanes for both our outbound and inbound trips. Our revenue growth is impacted by total number of individually billed shipments, including both LTL and truckload freight, and revenue per shipment. Revenue per shipment is principally driven by the mix between LTL and truckload freight, average length of haul, the average weight and volume characteristics of the freight and the per hundredweight, per mile or per load rate we charge for our services. Our capacity to generate revenues is dependent upon the number of tractors and trailers available for us to operate, including the number of drivers available to operate these tractors, plus the use of third-party purchased transportation. We monitor total revenues because the costs of diesel fuel and our ability to collect appropriate fuel surcharges are an important part of our business. We also focus on revenues before fuel surcharge, or net revenues. We believe that eliminating the impact of the fuel surcharge, which is tied to fluctuations in fuel prices, may lead to a more consistent basis for comparing our results of operations across periods. We monitor our net revenues primarily by analyzing the changes and trends in our shipment count with corresponding changes in net revenue per shipment and net revenue per operating tractor per day.
 
Our operating profitability is impacted by variable costs of transporting freight for our customers, fixed costs and other expenses containing both fixed and variable components. Our primary variable costs include driver wages, diesel fuel, tires, replacement parts and purchased transportation. These expenses generally vary with the miles driven by our fleet. Expenses that are primarily fixed in nature include non-driver salaries, wages and benefits, driver benefits, rent expense and the depreciation related to our tractors and trailers. Expenses that have both fixed and variable components include maintenance, warehouse and dock employee salaries and certain of our insurance coverages. We focus on the profitability of the round-trip each time we plan a load, factoring in revenues earned on each portion of the round-trip, number of stops required, distance between stops and empty miles. We gauge our overall


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success by monitoring our Adjusted EBITDA margin and our operating ratio, a measure of profitability calculated by dividing total operating expenses by total revenues. During the stronger economic and freight environment in 2005, our Load-to-Deliver operating model enabled us to achieve an operating ratio of 90.4% and an Adjusted EBITDA margin of 17.0%. We are continually managing the business to improve our operating margins and Adjusted EBITDA and believe that a stronger market for trucking transportation services should enable us to improve on the ratios we have achieved over the last 12 months.
 
The following is a description of our principal operating expenses:
 
Salaries, Wages and Benefits.  Salaries, wages and benefits include all expenses relating to driver and non-driver employees including salary, bonuses and other benefits. Benefits include such costs as healthcare, workers’ compensation and company-matched 401(k) contributions.
 
Supplies and Other Expenses.  Supplies and other expenses include the cost of operating and maintaining our tractors, trailers and operating facilities. The primary components of supplies and other expenses are diesel fuel, tires and replacement parts, tolls, vehicle maintenance and rent expense. We actively manage our fuel costs by purchasing fuel in bulk for storage at certain of our facilities and have volume purchasing arrangements with national fuel centers that allow our drivers to purchase fuel in transit at a discount to advertised rates. We further manage our exposure to changes in fuel prices through fuel surcharge programs with our customers. We have historically been able to pass through a significant portion of increases in fuel prices and related taxes to customers in the form of fuel surcharges, although our recovery of increased expenses varies based on each customer contract. These fuel surcharges, which adjust with the cost of fuel, enable us to recover a substantial portion of the higher cost of fuel as prices increase (subject to some time lag), excluding non-revenue miles, out-of-route miles or fuel used while the tractor is idling. As of December 31, 2009, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
 
Purchased Transportation.  In certain instances, we utilize purchased transportation supplied by third-party local and national trucking companies to deliver freight. The purchased transportation provider will either pick up freight, which typically has already been consolidated into a full trailer, at our facility or one of our tractors will deliver the freight to the third-party’s facility, in these cases primarily for local delivery to the recipient. The use of purchased transportation provides flexibility to our operations and enables us to avoid lanes with insufficient volumes to meet our round-trip profitability requirements, cover periods of peak capacity demand and to take advantage of attractive rates in the purchased transportation market, such as during 2009. In addition, the use of third-party carriers for certain of our deliveries allows us to cost effectively deliver freight while reducing wear and tear on, and preserving the life of, our tractors and trailers. The amount of purchased transportation we utilize varies period to period depending on market conditions and our truck tonnage.
 
Depreciation and Amortization.  Depreciation and amortization is a noncash expense charged against earnings to write off the cost of an asset during its estimated useful life. Our depreciation and amortization expense is primarily associated with our tractors and trailers and to a lesser extent with the intangible assets related to our prior acquisitions. We capitalize the expenditures related to our engine remanufacturing program and depreciate these costs over the increased useful life of the asset, typically 48 months depending on the utilization of the tractor.
 
Operating Taxes and Licenses.  The primary components of operating taxes and licenses are federal and state fuel taxes and registrations and licenses for our tractors and trailers.
 
Insurance and Claims.  Insurance and claims includes all expenses relating to the premiums and loss experience of our insurance coverage, including vehicle liability, general liability, cargo claim and umbrella policies.
 
Loss/(Gain) on Disposal of Property and Equipment.  Loss/(gain) on disposal of property and equipment reflects the difference between the proceeds we receive when disposing of a fixed asset compared to its book value at the time of disposition.


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Trends and Outlook
 
A downturn in freight shipments began early in 2007 and worsened through mid-2009 in connection with the overall economic recession in the United States, which impacted our results of operations for the years ended December 31, 2008 and 2009. The market pricing for Northeast inbound truckload freight decreased significantly due to truck tonnage reductions as well as excess available tractors in these trade lanes. Also, certain LTL carriers pursued significant price discounting programs in 2009 to gain market share resulting in industry-wide rate declines in 2009, which have stabilized at lower levels in 2010. We believe these factors were the primary contributors to the decrease in our revenues and earnings for the year ended December 31, 2009. The adverse effect on our financial results was partially mitigated by our ability to add new customers, win additional business from existing customers, handle shipments of specialized freight and scale back operations to match decreased truck tonnage. Over the past 18 months, in response to the severe freight downturn, we implemented several initiatives that removed approximately $6.8 million of annual costs, including company-wide salary reductions, headcount reductions and terminating our 401(k) matching program. We also more efficiently utilized our assets and designated a number of our tractors and trailers as non-operating.
 
The economic recovery that we believe began in the first quarter of 2010 has led to an increase in shipments and total revenues of 13.0% and 11.6%, respectively, in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. If the economic environment continues to improve, we believe that there will be higher demand and competition for qualified employees, which may result in wage and benefit increases associated with hiring qualified driver and non-driver employees that could offset our prior cost reduction measures. Our recent lease of an approximately 170,000 square foot consolidation operation near our Westampton, New Jersey headquarters will allow us to double the number of LTL shipments we can consolidate. As of March 31, 2010, we had 177 available tractors, or 17.9% of our current fleet, that we can place back into operation to meet growing demand for our services with no additional capital investment. Furthermore, any increase in our net revenue per shipment, which decreased 14.7% from $483 in 2008 to $412 in 2009, should improve our operating results.
 
We believe that pricing in the Northeast inbound truckload freight market has improved and we expect it will continue to improve as the economic recovery leads to a better balance between supply of tractors available for truckload shipments and demand for transport of truckload freight. We believe that pricing for outbound LTL shipments has improved at a slower rate because there remains an imbalance between supply of tractors available for LTL shipments and demand for transport of LTL freight. Because we generally enter into contracts with our customers lasting one year or longer, we expect that we will benefit from the improved pricing environment over time, although we will be able to immediately take advantage of improvements in spot market pricing on a smaller portion of our business. Our contracts typically govern price and services but generally do not guarantee a volume of shipments. We also expect that following completion of this offering, our administrative expenses and stock compensation expense will increase as a result of increased costs associated with being a public company and vesting of restricted stock and that our interest expense will be reduced as a result of the application of the net proceeds to repay existing indebtedness.


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Operating Statistics
 
The following table sets forth operating statistics for our business for each of the periods presented:
 
                                         
    Year Ended December 31,     Three Months Ended March 31,  
    2007     2008     2009     2009     2010  
 
Total shipments(1)
    447,926       474,421       493,186       115,554       130,603  
Net revenue per shipment
  $ 459     $ 483     $ 412     $ 434     $ 408  
Total miles
    100,342,554       110,943,067       89,506,703       22,193,387       23,481,516  
Empty miles (linehaul)(2)
    3.9 %     3.9 %     3.8 %     3.9 %     3.5 %
Average operating tractors(3)
    843       935       829       847       825  
Net revenue per operating tractor per day(3)
  $ 964     $ 964     $ 968     $ 939     $ 1,024  
Miles per operating tractor per day(3)
    470       467       427       416       452  
Operating ratio(4)
    97.9 %     95.9 %     99.2 %     101.4 %     98.3 %
Adjusted EBITDA margin(5)
    10.9 %     11.8 %     9.9 %     8.4 %     9.9 %
 
 
(1) Number of shipments is equal to the number of freight bills invoiced to our customers.
 
(2) We compute empty miles (linehaul) percentage by dividing the number of empty miles traveled by our linehaul tractors by the total number of miles traveled by our linehaul tractors.
 
(3) We define operating tractors to be all tractors with current registrations and assigned drivers that are available for the transport of freight for our customers. We compute the number of operating tractors based on the average number of tractors in operation as of the end of each week during the period. Prior to February 16, 2007, we did not track the number of operating tractors, and the number of operating tractors in 2007 is based on the average number of tractors in operation as of the end of each week beginning February 17, 2007. Net revenue per operating tractor per day and miles per operating tractor per day are computed on the basis of a five-day work week, excluding holidays. As of December 31, 2009 and March 31, 2010 we had 155 and 177 tractors, respectively, designated as non-operating.
 
(4) We compute our operating ratio by dividing total operating expenses by total revenues.
 
(5) We compute our Adjusted EBITDA margin by dividing Adjusted EBITDA by total revenues.


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Results of Operations
 
The following table summarizes selected income statement data and outlines selected income statement data as a percentage of total revenues for the periods indicated:
 
                                                                                 
    Year Ended December 31,     For the Three Months Ended March 31,  
    2007     2008     2009     2009     2010  
                                        (unaudited)  
    (in thousands except percentages)  
 
Net revenues(1)
  $ 205,585       86.0 %   $ 228,966       79.3 %   $ 203,127       88.6 %   $ 50,123       90.6 %   $ 53,226       86.2 %
Fuel surcharges(2)
    33,425       14.0       59,683       20.7       26,186       11.4       5,214       9.4       8,548       13.8  
                                                                                 
Total revenues
  $ 239,010       100.0 %   $ 288,649       100.0 %   $ 229,313       100.0 %   $ 55,337       100.0 %   $ 61,774       100.0 %
Operating expenses:
                                                                               
Salaries, wages and benefits
    112,526       47.1 %     130,837       45.3 %     114,119       49.8 %     29,011       52.4 %     29,423       47.6 %
Supplies and other expenses
    70,636       29.6       95,264       33.0       62,168       27.1       14,044       25.4       18,378       29.8  
Purchased transportation
    12,431       5.2       9,037       3.1       14,236       6.2       3,312       6.0       3,857       6.2  
Depreciation and amortization
    21,088       8.8       22,411       7.8       20,875       9.1       5,445       9.8       5,111       8.3  
Operating taxes and licenses
    11,424       4.8       12,731       4.4       10,944       4.8       2,805       5.1       2,619       4.2  
Insurance and claims
    6,302       2.6       6,460       2.2       5,029       2.2       1,516       2.8       1,138       1.8  
Loss/(gain) on disposal of property and equipment
    (313 )     (0.1 )     202       0.1       133       0.1       (5 )     (0.1 )     220       0.4  
                                                                                 
Operating income/(loss)
  $ 4,916       2.1 %   $ 11,707       4.1 %   $ 1,809       0.8 %   $ (791 )     (1.4 )%   $ 1,028       1.7 %
Interest expense, net
    12,547       5.2 %     13,535       4.7 %     9,631       4.2 %     2,314       4.2 %     3,089       5.0 %
Change in fair value of warrants
                                                    7,482       12.1  
                                                                                 
Loss before income taxes
  $ (7,631 )     (3.2 )%   $ (1,828 )     (0.6 )%   $ (7,822 )     (3.4 )%   $ (3,105 )     (5.6 )%   $ (9,543 )     (15.4 )%
Income tax benefit
    (2,729 )     (1.1 )     (630 )     (0.2 )     (2,685 )     (1.2 )     (1,109 )     (2.0 )     (1,001 )     (1.6 )
                                                                                 
Net loss
  $ (4,902 )     (2.1 )%   $ (1,198 )     (0.4 )%   $ (5,137 )     (2.2 )%   $ (1,996 )     (3.6 )%   $ (8,542 )     (13.8 )%
                                                                                 
 
 
(1) We define net revenues to be total revenues less fuel surcharges.
 
(2) At the time of our acquisition of Western Freightways in December 2006, the accounting systems of Western Freightways did not permit for the recording of fuel surcharges. We upgraded their systems in February 2007. Accordingly, 2006 and 2007 fuel surcharges exclude surcharges imposed by Western Freightways from the date of acquisition to February 2007. Fuel surcharges imposed by Western Freightways during this period are included in net revenues.
 
Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 
Net Revenues
 
Net revenues increased 6.2%, or $3.1 million, in the three months ended March 31, 2010 to $53.2 million from $50.1 million in the three months ended March 31, 2009. The increase in net revenues resulted primarily from a 13.0% increase in total shipments in the 2010 period to 130,603 as compared to 115,554 shipments in the comparable period in 2009, partially offset by a decrease in net revenue per shipment of 6.0% in the 2010 period to $408 from $434 in the comparable period in 2009. The increase in total shipments was primarily the result of the improving economic environment and corresponding increase in demand for freight transportation services by our customers. The decrease in net revenue per shipment was primarily the result of smaller average shipment sizes of our LTL freight, a higher percentage of LTL shipments as compared to truckload shipments and lower industry-wide pricing resulting from competitive pressures. This pricing stabilized at lower levels in 2010. Our net revenue per operating tractor per day increased 9.1% in the three months ended March 31, 2010 to $1,024 as compared to $939 in the comparable period in 2009. The increase in net revenue per operating tractor per day was primarily the result of the implementation of operating and load planning efficiency initiatives beginning in the second half of 2009 which enabled us to transport 13.0% more shipments in the 2010 period with 2.6% fewer operating tractors.


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Fuel Surcharges
 
Fuel surcharge revenues increased 63.9%, or $3.3 million, in the 2010 period to $8.5 million as compared to $5.2 million in the comparable period in 2009. The increase in fuel surcharge revenues was primarily the result of an increase in average diesel fuel prices of approximately 29.9% in the first three months of 2010, as reported by the Energy Information Administration, and a 5.8% increase in the miles driven in the 2010 period as compared to the comparable period in 2009.
 
Total Revenues
 
Total revenues increased 11.6%, or $6.4 million, in the three months ended March 31, 2010 to $61.8 million as compared to $55.3 million in the comparable period in 2009.
 
Operating Expenses
 
Salaries, wages and benefits increased 1.4%, or $0.4 million, in the three months ended March 31, 2010 to $29.4 million as compared to $29.0 million in the comparable period in 2009. The increase in salaries, wages and benefits in 2010 was primarily the result of higher payments to drivers, who are typically paid on a per mile basis, partially offset by a reduction in non-driver headcount and a company-wide reduction in salaries implemented in August 2009. As a percentage of total revenues, salaries, wages and benefits decreased to 47.6% in the 2010 period as compared to 52.4% in the comparable period in 2009. This decrease as a percentage of total revenues was primarily due to higher revenues to cover our fixed expenses and the impact of salary reductions.
 
Supplies and other expenses increased 30.9%, or $4.3 million, in the three months ended March 31, 2010 to $18.4 million as compared to $14.0 million in the comparable period in 2009. The increase in supplies and other expenses in the 2010 period was primarily the result of a 5.8% increase in miles driven by our tractors requiring more diesel fuel as well as higher average price per gallon at which the fuel was purchased. In addition, the increase in the miles driven by our fleet increased maintenance costs. As a percentage of total revenues, supplies and other expenses increased to 29.8% in the 2010 period from 25.4% in the comparable period in 2009. This percentage increase was primarily due to higher average fuel prices in the 2010 period as compared to 2009.
 
Purchased transportation increased 16.5%, or $0.5 million, in the three months ended March 31, 2010 to $3.9 million as compared to $3.3 million in the comparable period in 2009. As a percentage of total revenues, purchased transportation increased to 6.2% in the 2010 period from 6.0% in the comparable period in 2009.
 
Depreciation and amortization decreased 6.1%, or $0.3 million, in the three months ended March 31, 2010 to $5.1 million as compared to $5.4 million in the comparable period in 2009. As a percentage of total revenues, depreciation and amortization decreased to 8.3% in the 2010 period from 9.8% in the comparable period in 2009.
 
Operating taxes and licenses decreased 6.6%, or $0.2 million, in the three months ended March 31, 2010 to $2.6 million as compared to $2.8 million in the comparable period in 2009. As a percentage of total revenues, operating taxes and licenses decreased to 4.2% in the 2010 period from 5.1% in the comparable period in 2009. The decreases in dollar amount and percentage were primarily due to the designation of certain tractors as non-operating, which reduced the number of tractors on which registration fees were paid.
 
Insurance and claims decreased 24.9%, or $0.4 million, to $1.1 million in the three months ended March 31, 2010 as compared to $1.5 million in the comparable period in 2009. As a percentage of total revenues, insurance and claims decreased to 1.8% in the 2010 period from 2.7% in the comparable period in 2009. The decreases in dollar amount and percentage were primarily due to a lower claims ratio.


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Net Interest Expense
 
Net interest expense increased 33.5%, or $0.8 million, to $3.1 million in the three months ended March 31, 2010 as compared to $2.3 million in the comparable period in 2009. This increase was primarily due to the increase in the interest rate on our existing credit facility and the interest expense associated with the $10.0 million of senior subordinated debt issued in November 2009.
 
Change of Fair Value of Warrants
 
The change in fair value of warrants is due to the issuance of warrants in the fourth quarter of 2009, resulting in a non-cash charge of $7.5 million.
 
Income Tax Benefit
 
Income tax benefit was $1.0 million during the three months ended March 31, 2010 as compared to a benefit of $1.1 million in the comparable period in 2009. The effective income tax rate in each year varies from the federal statutory rate primarily due to state income taxes and certain permanent differences. The effective tax rate for the three months ended March 31, 2010 was significantly lower than the effective tax rate in the comparable prior period due to the change in the fair value of the warrants.
 
Net Income (Loss)
 
Net loss increased to $8.5 million in the three months ended March 31, 2010 as compared to $2.0 million in the comparable period in 2009.
 
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 
Net Revenues
 
Net revenues declined 11.3%, or $25.8 million, in 2009 to $203.1 million as compared to $229.0 million in 2008. The decrease in net revenues resulted from a 14.7% decline in net revenue per shipment in 2009 to $412 from $483 in 2008 offset by a 4.0% increase in total shipments in 2009 to 493,186 from 474,421 in 2008. The decrease in net revenue per shipment was primarily the result of smaller average shipment sizes of our LTL freight, a higher percentage of LTL shipments as compared to truckload shipments and lower industry-wide pricing resulting from aggressive strategies employed by certain of our competitors. We were able to partially offset this difficult freight and pricing environment with higher shipment volumes through new customer wins as well as additional lanes and routes from existing customers. Even though 2009 was a difficult pricing environment, net revenue per operating tractor per day increased to $968 in 2009 as compared to $964 in 2008 primarily due to our ability to operate more efficiently in markets that did not meet our Northeast inbound freight density requirements and the greater emphasis we placed on purchased transportation.
 
Fuel Surcharges
 
Fuel surcharge revenues declined 56.1%, or $33.5 million, in 2009 to $26.2 million as compared to $59.7 million in 2008. The decrease in fuel surcharge revenues was primarily the result of a decrease in average fuel prices of approximately 35.3% in 2009 compared to 2008, as reported by the Energy Information Administration, as well as a 19.3% decrease in the miles driven by our fleet.
 
Total Revenues
 
Total revenues declined 20.6%, or $59.3 million, in 2009 to $229.3 million as compared to $288.6 million in 2008.
 
Operating Expenses
 
Salaries, wages and benefits decreased 12.8%, or $16.7 million, in 2009 to $114.1 million as compared to $130.8 million in 2008. The decrease in salaries, wages and benefits in 2009 was primarily the result of lower payments to drivers, a reduction in non-driver headcount and a company-wide reduction in salaries implemented in August 2009. As a percentage of total revenues, salaries, wages and benefits increased to 49.8% in 2009 from 45.3% in 2008. Our smaller revenues base from which to cover fixed expenses and


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revenue declines that outpaced our cost reduction initiatives were the primary causes of this percentage increase.
 
Supplies and other expenses decreased 34.7%, or $33.1 million, in 2009 to $62.2 million from $95.3 million in 2008. The decrease in supplies and other expenses in 2009 was primarily the result of fewer miles driven by our tractors necessitating a lower volume of diesel fuel purchases as well as lower average price per gallon at which the fuel was purchased in 2009 compared to 2008. As a percentage of total revenues, supplies and other expenses decreased to 27.1% in 2009 from 33.0% in 2008. This percentage decrease was primarily due to lower average fuel prices in 2009 compared to 2008.
 
Purchased transportation increased 57.5%, or $5.2 million, in 2009 to $14.2 million from $9.0 million in 2008. As a percentage of total revenues, purchased transportation increased to 6.2% in 2009 from 3.1% in 2008. These dollar amount and percentage increases were primarily due to our decision to designate a number of tractors as non-operating and to increase use of third-party carriers due to the attractive rates available to us from these carriers in certain lanes.
 
Depreciation and amortization decreased 6.9%, or $1.5 million, in 2009 to $20.9 million from $22.4 million in 2008. The decrease in depreciation and amortization was primarily the result of certain vehicles in the fleet becoming fully depreciated during 2009. As a percentage of total revenues, depreciation and amortization increased to 9.1% in 2009 from 7.8% in 2008. This percentage increase was primarily the result of reduced revenues.
 
Operating taxes and licenses decreased 14.0%, or $1.8 million, in 2009 to $10.9 million from $12.7 million in 2008. As a percentage of total revenues, operating taxes and licenses increased to 4.8% in 2009 from 4.4% in 2008. This decrease in operating taxes and licenses was primarily due to our decision to reduce driver headcount and designate certain tractors as non-operating, which reduced the number of tractors on which registration fees were paid.
 
Insurance and claims decreased 22.2%, or $1.5 million, to $5.0 million in 2009 from $6.5 million in 2008. As a percentage of total revenues, insurance and claims was 2.2% in both 2009 and 2008.
 
Net Interest Expense
 
Net interest expense decreased 28.8%, or $3.9 million, to $9.6 million in 2009 from $13.5 million in 2008. This decrease was primarily due to lower average debt balance in 2009 as compared to 2008 partially offset by slightly higher average interest rates.
 
Income Tax Benefit
 
Income tax benefit was $2.7 million during 2009 compared to a benefit of $0.6 million in 2008. The effective income tax rate in each year varies from the federal statutory rate primarily due to state income taxes and certain permanent differences.
 
Net Income (Loss)
 
Net loss increased to $5.1 million in 2009 from $1.2 million in 2008.
 
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 
Net Revenues
 
Net revenues increased 11.4%, or $23.4 million, in 2008 to $229.0 million as compared to $205.6 million in 2007. The increase in net revenues resulted from a 5.2% increase in revenue per shipment in 2008 to $483 as compared to $459 in 2007 and an increase in total shipments of 5.9% in 2008 to 474,421 from 447,926 in 2007. The increase in net revenue per shipment was primarily the result of larger average shipment sizes of our LTL freight and a higher percentage of truckload shipments as compared to LTL shipments. The increase in shipments was a result of the addition of new customers through the acquisition of P&P Transport, winning additional business from existing customers and adding new customers. Net revenue per operating tractor per day remained constant at $964.


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Fuel Surcharges
 
Fuel surcharge revenues increased 78.6%, or $26.3 million, in 2008 to $59.7 million as compared to $33.4 million in 2007. The increase in fuel surcharge revenues was primarily the result of an increase in average fuel prices of approximately 32.1% in 2008 as compared to 2007, as reported by the Energy Information Administration, as well as a 10.6% increase in the miles driven by our fleet.
 
Total Revenues
 
Total revenues increased 20.8%, or $49.6 million, in 2008 to $288.6 million as compared to $239.0 million in 2007.
 
Operating Expenses
 
Salaries, wages and benefits increased 16.3%, or $18.3 million, to $130.8 million in 2008 from $112.5 in 2007. As a percentage of total revenues, salaries, wages and benefits decreased to 45.3% in 2008 from 47.1% in 2007. This percentage decrease was primarily due to improving rates, offset by the addition of drivers and non-driver employees to service increased levels of demand. In addition, as a result of the integration of P&P Transport, we were able to reduce our non-driver workforce through attrition and termination, which also helped us reduce our operating expenses as a percentage of total revenues.
 
Supplies and other expenses increased 34.9%, or $24.7 million, to $95.3 million in 2008 from $70.6 million in 2007. As a percentage of total revenues, supplies and other expenses increased to 33.0% in 2008 from 29.6% in 2007. These percentage increases were primarily due to higher average fuel prices in 2008 than 2007, offset slightly by increased fleet miles per gallon resulting from the elimination of older vehicles, increased usage of auxiliary power units, reductions in the maximum speed our tractors can travel and installation of vented mud flaps that improve aerodynamics of our tractors and trailers.
 
Purchased transportation decreased 27.3%, or $3.4 million, to $9.0 million in 2008 from $12.4 million in 2007. As a percentage of total revenues, purchased transportation decreased to 3.1% in 2008 from 5.2% in 2007. The acquisition of P&P Transport in June 2007, which increased the size of our fleet by 199 tractors and led to an increase in the number of available drivers, and the decrease in freight demand reduced our overall requirements for purchased transportation in 2008.
 
Depreciation and amortization increased 6.3%, or $1.3 million, to $22.4 million in 2008 from $21.1 million in 2007. As a percentage of total revenues, depreciation and amortization decreased to 7.8% in 2008 from 8.8% in 2007. This percentage decrease was primarily due to increased revenues more than offsetting the increased depreciation charges incurred as a result of the addition of the P&P Transport fleet.
 
Operating taxes and licenses increased 11.4%, or $1.3 million, to $12.7 million in 2008 from $11.4 million in 2007. As a percentage of total revenues, operating taxes and licenses decreased to 4.4% in 2008 from 4.8% in 2007. This percentage decrease was primarily due to increased revenues more than offsetting the increased costs resulting from higher licensing costs due to the greater number of tractors and trailers and increased fuel consumption which results in increased federal and state fuel taxes.
 
Insurance and claims increased 2.5%, or $0.2 million, to $6.5 million in 2008 from $6.3 million in 2007. As a percentage of total revenues, insurance and claims decreased to 2.2% in 2008 from 2.6% in 2007. This percentage decrease was primarily due to improved claims experience for tractor liability and freight claims, as well as our continued effort to capitalize on insurance rate reduction opportunities as they arise.
 
Net Interest Expense
 
Net interest expense increased 7.9%, or $1.0 million, to $13.5 million in 2008 from $12.5 million in 2007. This increase was primarily due to the additional debt incurred in June 2007 as a result of our acquisition of P&P Transport.


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Income Taxes
 
Income tax benefit was $0.6 million during 2008 compared to a benefit of $2.7 million in 2007. The effective income tax rate in each year varies from the federal statutory rate primarily due to state income taxes and certain permanent differences, the largest of which is depreciation related to tractors and trailers.
 
Net Income (Loss)
 
Net loss decreased to $1.2 million in 2008 from $4.9 million in 2007.
 
Liquidity and Capital Resources
 
Capital Resources
 
The operation and growth of our business have required, and will continue to require, a significant investment in tractors, trailers and working capital. Our primary sources of liquidity have been funds provided by operations and borrowings under our existing credit facility.
 
We believe that we will be able to finance our working capital needs for at least the next 12 months with cash, cash flows from operations and borrowings available under our new revolving credit facility. We will have significant capital requirements over the long-term, which may require us to incur additional debt or seek additional equity. The availability of additional debt or equity will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Based on our recent operating results, current cash position, anticipated future cash flows and sources of available financing, we do not expect that we will experience any significant liquidity constraints over the next 12 months. Recently, we have developed a program to remanufacture existing engines in our tractor fleet. We have entered into this program with a major engine manufacturer that will provide a full warranty on the remanufactured engines for unlimited miles for four years. We expect that the remanufactured engines will add up to four years to the useful life of a tractor at approximately 25% of the cost of a new tractor. We expect that this program will reduce the amount we would otherwise need to spend on capital expenditures, thereby enhancing our free cash flow.
 
At March 31, 2010, we had outstanding debt of $117.5 million consisting of amounts outstanding under our existing credit facility and three series of subordinated notes, all of which we intend to repay with the net proceeds of this offering and an initial drawing under our new revolving credit facility. We currently maintain a line of credit, which permits revolving borrowings and letters of credit up to an aggregate of $20.0 million. As of March 31, 2010, we had no borrowings under the revolving line of credit and outstanding letters of credit of $1.9 million. We are obligated to comply with certain financial covenants under our line of credit agreement and were in compliance with these covenants at March 31, 2010. See “Description of Indebtedness.” Our existing revolving credit facility expires in August 2011, and our existing term debt is due August 2012.
 
Concurrently with this offering, we intend to enter into a revolving credit facility with a syndicate of financial institutions with Wells Fargo Bank, N.A., as administrative agent, and Wells Fargo Securities, LLC, as sole lead arranger and book runner. We expect our revolving credit facility will provide for a $60.0 million revolving credit facility and that at the closing of this offering we will have $      million in outstanding borrowings under the facility, $      million in additional borrowing capacity under the new revolving credit facility and $      million in outstanding letters of credit. We expect that all borrowings under our new revolving credit facility will be subject to the satisfaction of required conditions, including the absence of a default at the time of and after giving effect to such borrowing and the accuracy of the representations and warranties in the agreement. See “Description of Indebtedness.”


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Cash Flows
 
The following table summarizes our cash flows for the periods indicated:
 
                                         
    Year Ended December 31,     Three Months Ended March 31,  
    2007     2008     2009     2009     2010  
                      (unaudited)  
    (in thousands)  
 
Net cash provided by operating activities
  $ 18,162     $ 18,213     $ 19,062     $ 8,233     $ 3,735  
Net cash used in investing activities
    (43,381 )     (1,355 )     (1,405 )     (69 )     (1,508 )
Net cash provided by (used in) financing activities
    20,368       (13,512 )     (18,640 )     (10,304 )     (1,040 )
                                         
Net (decrease) increase in cash and cash equivalents
  $ (4,851 )   $ 3,346     $ (983 )   $ (2,140 )   $ 1,187  
Cash at beginning of period
    4,900       49       3,395       3,395       2,412  
                                         
Cash at end of period
  $ 49     $ 3,395     $ 2,412     $ 1,255     $ 3,599  
                                         
 
Operating Activities
 
Net cash provided by operating activities was approximately $3.7 million and $8.2 million for the three months ended March 31, 2010 and 2009, respectively. The decrease in net cash provided by operating activities for the first quarter of 2010 is primarily due to an increase in accounts receivable resulting from increased revenues.
 
Net cash provided by operating activities was approximately $19.1 million, $18.2 million and $18.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. The increase in cash flows from operating activities of $0.8 million for 2009 was primarily due to an increase in pretax loss of $6.0 million offset by decreases in accounts receivable and other current assets and increases in accounts payable and accrued expenses. Cash flow from operating activities in 2007 and 2008 was approximately the same.
 
Investing Activities
 
Net cash used in investing activities was approximately $1.5 million and $0.1 million for the three months ended March 31, 2010 and 2009, respectively. The increase in net cash used in investing activities for the first quarter of 2010 is primarily due to capital expenditures related to our engine remanufacturing program.
 
Net cash used in investing activities was approximately $1.4 million, $1.4 million and $43.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. Net cash used in investing activities was considerably higher in 2007 due to the acquisition of P&P Transport for $26.3 million. In addition, in 2007 we had higher net capital expenditures, primarily for tractors, as we decided to acquire tractors which still had 2006 EPA approved engines. The decreases in 2008 and 2009 as compared to 2007 were primarily due to a reduction in capital expenditures for tractors and trailers during such years. Capital expenditures for the purchase of tractors and trailers, net of equipment sales and trade-ins, office equipment and land and leasehold improvements, totaled $1.4 million, $1.4 million and $17.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.
 
We estimate capital expenditures, net of sales, will not exceed $6.5 million for the nine months ending December 31, 2010 and $9.0 million for 2011. We expect these capital expenditures will be used primarily to acquire new tractors and trailers and to finance our engine remanufacturing program.


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Financing Activities
 
Net cash used in financing activities was approximately $1.0 million and $10.3 million for the three months ended March 31, 2010 and 2009, respectively. The decrease in cash used in financing activities is primarily due to a higher repayment of our long-term senior debt in 2008.
 
Net cash used in financing activities was approximately $18.6 million and $13.5 million for the years ended December 31, 2009 and 2008, respectively, and net cash provided by financing activities was $20.4 million for the year ended December 31, 2007. The increase in net cash used in financing activities in 2009 is primarily due to a $27.2 million repayment of our long-term senior debt which was financed with operating cash flow and the proceeds from our issuance of $10.0 million of senior subordinated notes. See “Description of Indebtedness.”
 
Net Operating Loss Carryforwards
 
We expect that this offering will result in an ownership change and limit our ability to use our net operating loss carryforwards to offset future taxable income. As of December 31, 2009, we had federal net operating loss carryforwards of $28.8 million and state net operating loss carryforwards of $42.5 million. Regardless of whether such an ownership change occurs, we believe that our net operating loss carryforwards will be sufficiently available, for federal and state income tax purposes, to offset any regular taxable income we generate in 2010 and 2011. Accordingly, although our net operating loss carryforwards might be limited as a result of an ownership change, we do not believe that the limitation would materially affect our after-tax cash flow.
 
Contractual Obligations
 
As of December 31, 2009, we had the following contractual obligations.
 
                                         
    Payments Due by Year  
    Total     2010     2011-2012     2013-2014     After 2014  
    (in millions)  
 
Senior secured credit facility
  $ 103.8     $ 4.2     $ 99.6     $     $  
14% convertible subordinated notes
    3.2                   3.2        
7.5% subordinated notes(1)
    10.0                   10.0        
9% senior subordinated notes
    1.7             1.7              
Capital lease obligations
    0.3       0.1       0.2              
Rent and operating leases(2)
    12.2       4.2       5.0       2.8       0.2  
                                         
Total contractual obligations
  $ 131.2     $ 8.5     $ 106.5     $ 16.0     $ 0.2  
                                         
 
 
(1) Excludes $0.6 million of debt discount related to the warrants as of December 31, 2009.
 
(2) Includes $5.2 million in rent obligations related to real property.
 
As of December 31, 2009, on a pro forma basis after giving effect to this offering and the use of proceeds therefrom and an initial drawing under our new revolving credit facility, we had the following contractual obligations.
 
                                         
    Pro Forma Payments Due by Period  
    Total     2010     2011-2012     3-5 Years     After 2014  
    (in millions)  
 
New revolving credit facility
  $           $           $           $           $        
Capital lease obligations
                                       
Rent and operating leases(1)
                                       
                                         
Total contractual obligations
  $       $       $       $       $  
                                         
 
 
(1) Includes $   million in rent obligations related to real property.


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Off-Balance Sheet Transactions
 
Our liquidity is not materially affected by off-balance sheet transactions. Like many other trucking companies, we have utilized operating leases to finance a portion of our tractor and trailer additions. Vehicles held under operating leases are not carried on our balance sheet. Our rental expense related to tractor and trailer leases was $1.5 million, $2.3 million and $2.0 million for the years ended December 31, 2007, 2008 and 2009, respectively.
 
We do not own any real estate and we lease all of our facilities. These operating leases have termination dates ranging through June 30, 2015. Rental payments for such facilities are reflected in our consolidated statements of income in the line item “Supplies and other expenses.” Rental payments for our facilities and trailer storage totaled $3.1 million, $3.6 million, $3.4 million and $0.7 million for the years ended December 31, 2007, 2008 and 2009 and the three months ended March 31, 2010 respectively. On March 30, 2010, we entered into a 26-month lease for a new facility in Delanco, New Jersey providing for annual lease payments of approximately $560,000. We have options to renew the lease on our Westampton, New Jersey facility through April 30, 2021 and to renew the lease on our Delanco, New Jersey facility through May 31, 2017.
 
Critical Accounting Policies
 
The preparation of financial statements in accordance with United States Generally Accepted Accounting Principles (“GAAP”) requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, revenue, and expenses in our consolidated financial statements and accompanying notes. Management evaluates these estimates and assumptions on an ongoing basis, utilizing historical experience, consulting with experts, and using other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates and assumptions, and it is possible that materially different amounts would be reported using differing estimates or assumptions. We consider our critical accounting policies to be those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates.
 
A summary of the significant accounting policies followed in preparation of the financial statements is contained in Note 2 to our consolidated financial statements attached hereto. The following discussion addresses our most critical accounting policies:
 
Revenues Recognition and Accounts Receivable
 
We recognize revenues and the related direct costs on the delivery date, and billing generally occurs on the pick-up date. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on our historical write-off experience and a specific review of all past due balances, which we perform monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
 
Goodwill
 
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill and intangible assets with indefinite useful lives are not amortized, but tested for impairment at least annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared to its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and we must perform step two of the impairment test (measurement). Under step two, an


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impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. We operate as one reporting unit and perform our annual impairment review as of November 30 of each year. We concluded no goodwill impairment was necessary as of our November 30, 2009 impairment review.
 
Long-Lived Assets
 
Long-lived assets, such as property, plant and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. As of December 31, 2009, the Company had a certain number of tractors that were designated as non-operating, which management viewed as temporary. This was an event that required management to review for impairment. Based on their review, management determined that no revision of the remaining useful lives or write-down of long-lived assets is required. We concluded that no other such events or changes in circumstances occurred during 2009.
 
Income Taxes
 
Deferred tax accounts arise as a result of timing differences between when items are recognized in our consolidated financial statements compared to when they are recognized in our tax returns. Significant management judgment is required in determining our provision for income taxes and in determining whether deferred tax assets will be realized in full or in part. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We periodically assess the likelihood that all or some portion of deferred tax assets will be recovered from future taxable income. To the extent we believe recovery is not more likely than not, a valuation allowance is established for the amount determined not to be realizable. We have not recorded a valuation allowance at December 31, 2009, as all deferred tax assets are more likely than not to be realized as they are expected to be utilized by the reversal of the existing deferred tax liabilities in future periods.
 
We believe that we have adequately provided for our future tax consequences based upon current facts and circumstances and current tax law. However, should our tax positions be challenged, different outcomes could result and have a significant impact on the amounts reported through our consolidated statements of operations.
 
Valuation of Common Stock Warrants
 
We use the Black-Scholes option-pricing model to value our liability-classified warrants to purchase common stock. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the fair value of the underlying common stock, the expected life of the warrants and stock price volatility. An expected life of 5 years was utilized in the initial (November 30, 2009) model as the warrants can be sold to us beginning five years from the date of issuance. An expected life of 4.75 years was utilized in the March 31, 2010 model. As a private company, we do not have sufficient history to estimate the volatility of our common stock price. We use comparable public companies as a basis for our expected volatility to calculate the fair value of our common stock. We intend to continue to consistently apply this process using comparable companies until a sufficient amount of historical information regarding the volatility of our own share price becomes available. The risk-free interest rate


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is based on U.S. Treasury instruments with a remaining term equal to the contractual term of the warrants. The assumptions used in calculating the fair value of the liability classified warrants represent our best estimate and involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use different assumptions, charges related to changes in the fair value of the warrants could be materially different in the future.
 
The fair value of our common stock determined by our board of directors represents the most important factor in determining the value of our warrants.
 
In connection with the issuance of debt that included warrants to purchase common stock in the fourth quarter of 2009, our board of directors obtained an independent third-party valuation to assist it in estimating the fair market value of our common stock. We engaged an independent third-party valuation firm to assist our board of directors in determining the fair value of our common stock as of March 31, 2010.
 
In order to estimate the fair value of our common stock, we first estimated our enterprise value and then derived the value of our common stock implied by the enterprise value as described in more detail below.
 
In estimating our enterprise value, we used methodologies and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, or the AICPA Practice Guide, Valuation of Privately-held-Company Equity Securities Issued as Compensation. The primary methodologies that we used to determine our enterprise value were a market-based approach and an income-based approach.
 
  •  Under the market-based approach, we calculated the valuation multiples relative to the market value of capital (MVC) to EBITDA ratio based on a three-year average ratio as well as the MVC to recent EBITDA ratio and the ratio of MVC to revenues for comparable, publicly traded companies. We then applied those multiples to our basis as of the valuation date. Since investors tend to place greater emphasis on earnings capacity, we chose to attribute 80% weight to the earnings multiples and 20% weight to the revenues multiple.
 
  •  Under the income-based approach, we employed the discounted cash flow (DCF) model using our projections for the calendar years 2010 through 2012 and extrapolated an additional seven-year period using certain key assumptions.
 
We then employed the option pricing method to calculate the implied value of our common stock. Under this method, we estimated the fair value of our common stock as the net value of a series of call options, representing the present value of the expected future returns to the common shareholders.
 
As discussed above, we then reduced the value of the common stock using this approach by applying an illiquidity discount to account for the heightened level of risk associated with our shares compared to that of comparable, publicly traded companies.
 
We plan to continue to obtain independent third party valuations at each reporting date until the completion of this offering for purposes of valuing the outstanding warrants.
 
Property and Equipment
 
Property and equipment are stated at cost. Depreciation on property and equipment is calculated by the straight-line method over the estimated useful life, which ranges from four to 10 years, down to an estimated salvage value of the property and equipment, which ranges from zero to 40% of the capitalized cost. We periodically review the reasonableness of our estimates regarding useful lives and salvage values of our revenue equipment and other long-lived assets based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, the number of tractors designated as non-operating and prevailing industry practice. We both routinely and periodically review and make a determination as to whether the salvage value of our tractors and trailers is higher or lower than originally expected. This determination is generally based upon market conditions in equipment


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sales, and the average miles driven on the equipment being sold. Future changes in our useful life or salvage value estimates, or fluctuation in market value that is not reflected in our estimates, could have a material effect in our results of operations. We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our property and equipment may not be recoverable.
 
Recently Adopted Accounting Guidance
 
On September 30, 2009, we adopted changes issued by the FASB to accounting for and disclosure of events that occurred after the balance sheet date but before financial statements are issued or are available to be issued, otherwise known as “Subsequent Events.” Specifically, these changes set forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events that occurred after the balance sheet date. The adoption of these changes had no impact on the consolidated financial statements. We have evaluated subsequent events from the balance sheet date through August 11, 2010, the date at which the financial statements were issued.
 
Quantitative and Qualitative Disclosures about Market Risk
 
We are subject to interest rate risk in connection with our existing credit facility. The interest rate on our existing credit facility fluctuates based on LIBOR plus an applicable margin. In connection with our existing credit facility, we entered into an interest rate swap agreement with Wells Fargo Bank, N.A. in April 2008 that, as amended, expires in August 2010. The notional amount of this interest rate swap is $75.0 million, and we do not intend to renew it upon its expiration. Assuming no drawings under the $20.0 million line of credit under our existing credit facility, a 1.0% change in the borrowing rate on our existing credit facility would change our annual interest expense by $0.2 million. We do not use derivative financial instruments for speculative trading purposes.
 
We expect to be subject to interest rate changes in connection with our new revolving credit facility. The interest rate on our new revolving credit facility is expected to fluctuate based on LIBOR plus an applicable margin. We do not intend to enter into interest rate swaps in connection with our new revolving credit facility. Assuming our new revolving credit facility is fully drawn, a 1.0% change in the borrowing rate would change our annual interest expense by $0.6 million.
 
We are also exposed to commodity price risk related to diesel fuel prices and manage our exposure to that risk primarily through the application of fuel surcharges. We cannot assure you that our fuel surcharge revenue programs will be effective in the future.


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INDUSTRY
 
The U.S. trucking industry is large, fragmented and highly competitive. According to the ATA, the U.S. trucking industry generated approximately $544 billion in revenue in 2009 and accounted for approximately 81.9% of the $664.7 billion in domestic spending on freight transportation. In general, the trucking industry can be divided into two distinct segments: “for-hire” carriers, including LTL and truckload carriers and “private” carriers, which are shipper-owned company fleets. According to the ATA, for-hire carriers generated $284.8 billion in 2009, or 42.8% of total transportation revenue, while private carriers generated $259.6 billion, or 39.1% of total transportation revenue. The ATA expects that trucking will continue to dominate the overall freight transportation landscape, accounting for approximately 83.1% of all domestic spending on freight transportation by 2021. According to the ATA, total domestic truck revenue is expected to increase to approximately $932.9 billion by 2021, representing an average annual increase of 4.6%.
 
     
2009 U.S. Freight Transportation Market Share
  Annual U.S. Trucking Revenue Growth by Segment
 
(PIE CHART)
Source: ATA, represents percentage of revenue.
  (GRAPH)
 Source: ATA.
 
LTL carriers handle a large number of small shipments, that weigh approximately 1,000 pounds according to the ATA, for multiple shippers on a scheduled basis. LTL carriers manage a network of pickup and delivery, breakbulk and destination terminals and a staff of freight handlers, all of which contribute to a high fixed cost operating model with ongoing capital requirements. Furthermore, the use of breakbulk terminals increases freight transit times and the risk of cargo damage. LTL carriers typically calculate rates based on the weight and size of shipments, distance shipped, and type of freight hauled, which is generally referred to as revenue per hundredweight. Because LTL carriers can transport multiple shipments in a single trailer and must maintain a high cost infrastructure, revenue per tractor is generally higher than that of truckload carriers. The ATA estimates that LTL industry revenue totaled $38.6 billion in 2009, representing 5.8% of domestic transportation revenue. The ATA expects that LTL carrier revenue will grow to $84.8 billion by 2021, representing an average annual increase of 6.8% from 2009 and will account for 7.5% of domestic transportation revenues in 2021, representing a 1.7% increase in market share as compared to 2009.
 
Truckload carriers typically utilize a driver, tractor and 53-foot trailer to transport a full load of freight from a shipper’s dock to its destination. Since truckload carriers are able to deliver freight point-to-point without rehandling, a fixed network of terminals is not required, resulting in lower fixed costs, greater operating flexibility, and fewer damage claims as compared to LTL carriers. Truckload carriers can generally transport up to 40,000 pounds per load and typically calculate rates based on the number of miles required for delivery, the type of freight hauled and lane specific factors. According to the ATA, truckload carrier revenue totaled $246.2 billion in 2009, representing 37.0% of domestic transportation revenue. The ATA expects that truckload carrier revenue will grow to $432.5 billion by 2021, representing an average annual increase of 4.8% from 2009, and will account for 38.5% of total


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domestic transportation revenue by 2021, representing a 1.5% increase in market share as compared to 2009.
 
Although certain segments of the trucking industry have been consolidating, the market remains largely fragmented. According to 2008 data published by Transport Topics the ten largest for-hire truckload carriers are estimated to comprise approximately 5.3% of the total for-hire truckload market while the top ten LTL carriers accounted for 49.9% of the for-hire LTL market. We compete with thousands of other carriers, most of which operate fewer than 100 tractors. To a lesser extent, we compete with railroads, third-party logistics providers, and other transportation companies. The principal means of competition in our industry are service, the ability to provide capacity when and where needed, and price. In times of strong freight demand, service and capacity become increasingly important, and in times of weak freight demand pricing becomes increasingly important.
 
Due primarily to regional consumption and manufacturing patterns, certain freight lanes within the U.S. are directionally imbalanced. For instance, because the Northeast is a densely populated area where personal consumption levels exceed manufacturing output, significantly more freight is shipped into the region than out of the region. As a result, freight movements into the Northeast, or inbound shipments, generally command higher transportation rates than freight movements originating from the Northeast, or outbound shipments. The following graphic demonstrates the imbalance of rates per mile for truckload shipments that we believe provides us with a competitive advantage:
 
Source: Truckloadrate.com
Note: Rates for illustrative purposes only; represents an average of the trailing 12 months as of July 2010 (excluding fuel).
 
Demand for trucking services in the U.S. is primarily driven by overall economic activity, particularly manufacturing output, industrial production and consumer demand. There is a high


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correlation between real GDP growth and demand for trucking services. Generally, given the dependence of North American shippers on trucking as a primary means of transportation, truck tonnage is considered a leading indicator of economic activity. We believe that since 2002, two major economic cycles have occurred: the period from 2002 to 2006, characterized by economic expansion and growth in the trucking industry; and the recessionary period from 2007 to 2009, during which there was a global economic recession, major credit crisis and contraction in the trucking industry.
 
During the 2002 to 2006 expansionary period, strong economic fundamentals bolstered by high manufacturing output and consumer demand created a growth market for the trucking industry. Annual growth in real GDP and industrial production of approximately 2.9% and 2.3%, respectively, from 2002 to 2006 led to an annual increase in total truck tonnage of 2.3% over the same time period. In addition to steadily increasing freight volumes, industry pricing accelerated due primarily to equipment and driver capacity shortages. Increased truck tonnage combined with an improved pricing environment resulted in a steady increase in revenue for the trucking industry during the 2002 to 2006 period.
 
The global recession of 2007 to 2009 created a difficult trucking environment characterized by a significant reduction in freight demand and an excess supply of tractors, which led to a sharp decline in freight rates. During this time frame, real GDP and industrial production declined at compound annual growth rates of approximately 1.3% and 6.3%, respectively. As shown in the chart below, total truck tonnage increased 3.5% year-over year in the first quarter of 2008. As the global recession accelerated in the second half of 2008 and 2009, total truck tonnage declined sharply, demonstrated by year-over-year declines of 10.8%, 12.6% and 8.4% in the first, second and third quarters of 2009, respectively.
 
Beginning in the third quarter of 2009, the trucking industry has rebounded as U.S. manufacturing and industrial production have gradually increased and consumer demand has encouraged retailers to restock inventories. According to the U.S. Bureau of Economic Analysis, real GDP increased at an annualized rate of 5.0% in fourth quarter of 2009 and 3.7% in the first quarter of 2010. The International Monetary Fund expects real GDP to increase 3.3% in 2010. Similarly, according to the Federal Reserve, U.S. industrial production grew at an annualized rate of 1.6% in the fourth quarter of 2009 and 7.4% in the first quarter of 2010. Manufacturers Alliance/MAPI Inc. expects industrial production to grow 6.0% in 2010.
 
The following chart illustrates the correlation of truck tonnage and real GDP:
 
Year-over-Year Change in Total Truck Tonnage and Real GDP
 
(LINE GRAPH)
 
Source: ATA, U.S. Bureau of Economic Analysis.
 
Truck tonnage increases resulting from the 2002 to 2006 expansionary period encouraged many trucking carriers to significantly increase the size of their fleets to meet an anticipated rise in demand. As shown in the chart below, retail sales of Class 8 tractors, which are tractors with a gross vehicle weight rating of over 33,000 pounds and include all tractors that haul trailers, averaged approximately


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210,000 units annually over the five year period, which resulted in a historically high supply of tractors. In response to the significant decline in truck tonnage, new emissions standards and a challenging credit environment, orders for new tractors decreased precipitously during the 2007 to 2009 period. This significant capacity reduction led to an increase in the average fleet age from 5.7 years in 2006 to 6.5 years in 2009, according to ACT Research, Co., LLC.
 
     
U.S. Class 8 Retail Sales
 
Class 8 Tractor Fleet Age
 
     
(BAR GRAPH)   (BAR GRAPH)
Source: ACT Research, Co., LLC
  Source: ACT Research, Co., LLC.
 
We believe that the recent improvement in economic conditions and resulting increase in truck tonnage coupled with several years of below-average tractor purchases, a large number of trucking company bankruptcies since 2007 and industry-wide driver capacity shortages will lead to a more favorable relationship between freight demand and industry-wide trucking capacity than we have experienced over the last three years.
 
Many shippers have accelerated their focus on quality improvement, order cycle time reductions, just-in-time inventory management and regional assembly and distribution methods We believe other emerging trends in the over-the-road transportation industry include the following:
 
  •  Continued constraints on increases in truck capacity is creating opportunities for safe and reliable carriers to capture additional freight.
 
  •  An increased reliance by shippers on a smaller base of core carriers.
 
  •  A growing demand for customized services as more companies seek to reduce costs and improve returns without sacrificing service levels.
 
  •  Increased outsourcing of non-core functions by shippers in an effort to redeploy resources.


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BUSINESS
 
Overview
 
We are a growth-oriented motor carrier using a differentiated Load-to-Deliver operating model that combines the higher revenue per tractor characteristics of an LTL carrier with the operating flexibility and lower fixed costs of a service-sensitive truckload carrier. We offer a full range of over-the-road transportation solutions to our customers, including customized, expedited, time-definite, dedicated and specialized LTL and truckload services. Our specialized services include the transportation of temperature-controlled and Hazmat freight. We believe our Load-to-Deliver operating model provides our customers with a compelling value proposition and gives us a competitive advantage in sourcing freight. Specifically, the flexibility of our Load-to-Deliver operating model allows us to accommodate a broad range of shipment sizes and freight for both regional and national accounts while providing shippers faster and more predictable transit times with reduced freight damage. As of March 31, 2010, our fleet consisted of 987 owned tractors and 2,141 owned or leased trailers, including 887 temperature-controlled trailers. Since 2002, we have grown total revenues and Adjusted EBITDA at compound annual growth rates of 21.7% and 19.3%, respectively. During the fiscal year ended December 31, 2009, we generated total revenues of $229.3 million, Adjusted EBITDA of $22.7 million and net loss of $5.1 million.
 
We serve shippers throughout the continental United States and parts of Canada but focus primarily on the attractive market for LTL freight originating in the Northeast and the much larger market of inbound truckload freight back into the region. LTL services involve the consolidation and transport of freight from numerous shippers to multiple destinations on one vehicle and thus garner higher net revenue per tractor than truckload shipments. Truckload services involve the transport of a single shipper’s freight to a single destination. We manage our operations on a round-trip basis to maximize revenue per operating tractor by pursuing headhaul freight lanes for both our outbound and inbound trips. For the outbound portion of our round-trip, we generally deploy our local pickup fleet to gather LTL shipments throughout the Northeast that we build into linehaul loads at our Philadelphia metropolitan area LTL consolidation operations. The cornerstone of our Load-to-Deliver operating model consists of delivering LTL shipments directly from a linehaul trailer to the recipient, eliminating the need for a network of costly and labor-intensive destination and breakbulk terminals typical of traditional LTL carriers. For the inbound portion of our round-trip, we generally transport truckload freight back to the Northeast to reposition our tractors and trailers near our consolidation operations.


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The diagram below illustrates a hypothetical round-trip under our Load-to-Deliver operating model:
 
DIAGRAM
 
We believe our Load-to-Deliver operating model offers a compelling value proposition to our customers. We provide our customers time-definite LTL services with lower cargo claims and fewer opportunities for delays because our Load-to-Deliver operating model requires fewer handlings per LTL shipment than a traditional LTL carrier. For example, for the year ended December 31, 2009, our claims ratio was 0.24% as compared to the average of 1.04% reported by the Transportation Loss Prevention and Security Association. We believe we can reduce a shipment’s transit time by up to 24 hours for every breakbulk terminal that our Load-to-Deliver operating model avoids while transporting our customers’ freight. In addition, we believe our customers value the ability to work with a flexible motor carrier that can service a broad spectrum of their transportation needs.
 
We believe our Load-to-Deliver operating model provides us with a competitive advantage in sourcing freight while enhancing utilization of our tractors and allowing us to operate more cost effectively. Our Load-to-Deliver operating model allows us to avoid the historically unfavorable pricing of truckload freight outbound from the Northeast and positions us to take advantage of higher priced truckload freight inbound to the Northeast, a densely populated, high consumption area. We believe our Load-to-Deliver operating model enables us to optimize the economics of a round-trip by combining two favorably priced headhauls (an outbound load of LTL shipments and an inbound truckload shipment) to maximize revenue per operating tractor. For example, in 2009 our net revenue per operating tractor per day of approximately $1,000 was significantly higher than the $500 to $700 per day that we believe to be the average for publicly traded truckload carriers over the same period. In addition, because we generally


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deliver LTL freight directly from the trailer to the recipient, we do not need the significant capital investment and high-fixed cost structure required to operate the numerous local delivery fleets, nationwide breakbulk and destination terminals and multiple staffs of freight handlers typically associated with our competitors. We believe our customers recognize the importance of having access to our temperature-controlled and Hazmat services. As a result, they will often use our services to transport non-specialized freight to retain access to these services.
 
We believe our Load-to-Deliver operating model is management intensive and difficult to replicate. Successful implementation of our business model requires professionals with experience in a Load-to-Deliver or comparable operating model at multiple levels of the organization. In particular, our business model requires a strong focus on outbound logistics, load planning, proprietary technologies and operating and marketing objectives as well as an ability to identify strategically located properties for expansion. Our Load-to-Deliver operating model and marketing efforts emphasize customer satisfaction and strategic partnership while simultaneously focusing on a disciplined approach to pricing and selectively pursuing freight that fits within our operating system. As an example of our management’s ability to identify freight that fits our system and freight lanes, in 2009 our percentage of empty miles was less than 4%, compared to an average of 27.6% and 13.4% among truckload and LTL carriers, respectively, according to data from the ATA.
 
History
 
We were founded in 2000 as a New Jersey corporation by Harry Muhlschlegel, a highly respected transportation industry veteran, and began operating with 29 tractors from a 50,000 square foot facility in Glassboro, New Jersey. Since our founding, Mr. Muhlschlegel has been joined by several key members of the former Jevic management team and together they have continued to refine our Load-to-Deliver operating model in response to a changing transportation environment. Key milestones to our growth include:
 
  •  2001: Introduced temperature-controlled service;
 
  •  2002: Acquired Edward M. Rude Carrier Corporation, a West Virginia-based common carrier operating 22 tractors;
 
  •  2002: Transferred operations to 100,000 square foot consolidation operation in Westampton, New Jersey;
 
  •  2004: Expanded Westampton facility to 150,000 square feet;
 
  •  2004: Total annual revenue first exceeded $100 million;
 
  •  2006: Recapitalization with JCP Fund IV;
 
  •  2006: Acquired Western Freightways, a Denver-based motor carrier operating 119 tractors in a business model similar to our Load-to-Deliver operating model;
 
  •  2006: Launched brokerage operation;
 
  •  2006: Total annual revenue first exceeded $150 million;
 
  •  2007: Acquired P&P Transport, a New Jersey-based motor carrier operating 199 tractors;
 
  •  2007: Total annual revenue first exceeded $200 million; and
 
  •  2010: Leased 170,000 square foot facility in Delanco, New Jersey.
 
In 1981, Mr. Muhlschlegel founded Jevic and served as its chairman and chief executive officer. Mr. Muhlschlegel, together with his senior management team, pioneered an operating model similar to our Load-to-Deliver operating model. Jevic experienced success as both a private and public company. Its management team led the company through an initial public offering in October 1997 and its subsequent cash sale to Yellow Corporation in July 1999. From 1992 to 1998, Jevic’s revenues and EBITDA grew at compound annual rates of 24.6% and 31.2%, respectively.


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Shortly after our founding, several members of the Jevic management team, including James Molinari and Brian Fitzpatrick, joined New Century and have been integral to our growth. Of our top 34 senior managers, 23 have worked together for an average of over 20 years specifically within the Load-to-Deliver or a comparable operating model.
 
Operating and Growth Strategy
 
We believe our experienced management team and our differentiated Load-to-Deliver operating model will allow us to capitalize on any volume growth from an economic recovery as well as key ongoing trends in the U.S. freight transportation industry. The following are the key components of our operating and growth strategy:
 
Build Freight Density in Existing System.
 
We believe we have significant growth opportunities in the outbound Northeast LTL market and the much larger market of inbound truckload freight back into the region. The goal of our marketing and sales strategy is to increase our freight volumes and density in the Northeast by adding new customers and building new lanes with, and cross-selling our services to, existing customers. Despite the economic downturn, we have been able to grow our number of active customers 17% from 963 in 2007 to 1,129 in 2009. We believe we are well positioned to capture a greater percentage of our customers’ transportation spend. We offer a broad range of services to our customers, which gives us multiple opportunities to attract new customers and to cross-sell additional services to existing customers. During 2009, 23 of our top 25 customers by total revenue used both our LTL and truckload services, and more than half of our top 200 customers by total revenue have used our temperature-controlled services. For example, Crayola LLC, which started as a customer for our truckload services, has since expanded to use our LTL, temperature-controlled and expedited services. In addition, we believe that our operational flexibility positions us well to take advantage of the growing trend of shippers partnering with a small base of core carriers for all of their shipping needs. We have proactively prepared ourselves for increased freight volumes by leasing an approximately 170,000 square foot consolidation operation near our Westampton, New Jersey headquarters that will allow us to double the number of LTL shipments we can consolidate. As of March 31, 2010, we had 177 available tractors, or 17.9% of our current fleet, that we can place back into operation to meet growing demand for our services with no additional capital investment. Furthermore, any increase in our net revenue per shipment, which decreased 14.7% from $483 in 2008 to $412 in 2009, should improve our operating results.
 
Maintain Emphasis on Specialized Freight.
 
We have focused and intend to continue focusing on transporting specialized freight such as pharmaceuticals, chemicals and certain agricultural and horticultural products. For example, the percentage of our net revenues generated from pharmaceutical companies included among our 800 largest customers (excluding customers of our wholly-owned subsidiary Western Freightways) has more than doubled from 4.0% in 2006 to 9.5% in 2009. We believe that customers in these industries demand exceptional service and generally have less cyclical demands for freight delivery. In order to accommodate the needs of these customers, we will continue to emphasize the use of highly experienced drivers and specialized equipment. We believe that our 100% Hazmat certified driver workforce and ability to transport certain hazardous materials nationwide makes us a leading transportation provider for the chemical and pharmaceutical industries. Our fleet of temperature-controlled trailers has increased from 439 in 2005 to 887 as of March 31, 2010. Total revenues from the shipment of temperature-controlled freight have grown 52.3% annually from $9.6 million in 2005 to $51.9 million in 2009 and have increased from 6.9% of our total revenues in 2005 to 22.6% in 2009.


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Focus on Tractor and Trailer Technology.
 
The technology programs for our tractors and trailers are key aspects of our operating model and our ability to deliver consistently high levels of customer service. Over the years, our management team has been an early adopter of technologies such as satellite tracking, self-lubricating chassis on both our tractors and trailers, auxiliary power units, automatic transmissions, vented mud flaps and super-single tires. We believe these technologies improve our fuel efficiency, extend the useful life of our tractors and enhance driver satisfaction. Most recently, in response to uncertainties in new engine designs, we have established a program to remanufacture existing engines. We have entered into this program with a major engine manufacturer who will provide a full warranty on the engine for unlimited miles for four years. We expect that remanufactured engines will add up to four years to the useful life of a tractor for approximately 25% of the cost of a new tractor, thereby enhancing free cash flow and improving our return on invested capital.
 
Continue to Focus on Operating Efficiency.
 
We are focused on driving operational and financial improvements to increase asset productivity, accelerate earnings growth, enhance returns and improve our competitive position. To achieve these goals, we have placed significant management emphasis on optimizing freight mix, controlling costs and tightly managing our revenue generating equipment. We employ management information systems, including messaging systems and freight optimization software, to improve shipment selection and maximize profitability. As an example of our management’s ability to identify freight that fits within our system and freight lanes, in 2009 our percentage of empty miles was less than 4.0%, compared to an average of 27.6% and 13.4% among truckload and LTL carriers, respectively, according to data from the ATA. In response to the industry-wide downturn in truck tonnage, we implemented initiatives that removed approximately $6.8 million of annual costs, including company-wide salary reductions, headcount reductions and terminating our 401(k) matching program. We implemented operating and load planning efficiency initiatives in the second half of 2009 that allowed us to transport 13.0% more shipments with 2.4% fewer operating tractors in the three months ended March 31, 2010 than in the three months ended March 31, 2009. Our cost saving initiatives and improved asset utilization, combined with an improving freight environment, contributed to the 150 basis point improvement in our Adjusted EBITDA as a percentage of total revenues in the first quarter of 2010 as compared to the first quarter of 2009. While certain of these cost saving initiatives will be reversed in an improving economic environment, we believe our less asset intensive operating model eliminates the need for a significant terminal network infrastructure and will allow us to continue to increase our Adjusted EBITDA margins with increasing truck tonnage and improvements in pricing.
 
Recruit and Retain Highly Experienced, Professional Drivers.
 
Our highly experienced, non-union drivers are critical to our operating model. The operational flexibility and safety track record of our drivers allow us to offer a variety of services and to compete for freight requiring premium service levels. Our driver turnover rate, which has ranged from 25% to 32% per year over the last four years, is significantly below the average turnover for truckload carriers of 83.9% during the same period, as estimated by the ATA. We believe that we will continue to be successful at recruiting and retaining skilled drivers because we promote a driver friendly environment. We provide attractive and comfortable equipment, direct communication with senior management and the flexibility to operate either as a single driver or as part of a two-person team. Our wages and benefits are based on an hourly rate or a rate per mile plus payments for completion of specific actions, such as each delivery stop made, and other incentives designed to encourage driver safety, retention and long-term employment. We believe that our drivers are compensated very competitively, allowing us to attract and retain qualified drivers who fit into our high service culture. We believe our driver friendly culture emanates from Mr. Muhlschlegel, our founder and Chief Executive Officer and a former driver, who has continually emphasized the importance of a stable, high quality driver force. We believe our driver friendly culture will be an increasing competitive advantage should the availability of drivers decrease in the future.


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Pursue Selective Acquisitions.
 
The transportation and logistics industry is large and highly fragmented. Since our founding, we have acquired Edward M. Rude Carrier Corporation, Western Freightways and P&P Transport, each of which complemented and expanded our service offerings and fit our operating strategy of maximizing revenue per tractor on a round-trip basis. We will continue to explore other opportunities to acquire motor carriers and logistics service providers that would increase our scale and efficiency, expand our premium service offerings or enhance our customer base.
 
Load-to-Deliver Operating Model
 
Our Load-to-Deliver operating model differentiates us from other trucking companies by combining the higher revenue per tractor characteristics of an LTL carrier with the operating flexibility and lower fixed costs of a service-sensitive truckload carrier. Our operating model also enables us to transport multiple smaller shipments similar to an LTL carrier together with the point-to-point, time-definite delivery of a typical truckload carrier. This operating model is substantially different from the traditional hub and spoke LTL model and enables us to avoid unfavorable pricing of truckload freight from the Northeast while capitalizing on the attractive truckload rates back into the region. We generally define an LTL shipment as a shipment that is less than 28,000 pounds or utilizes less than 28 linear feet on a trailer (although shipments of such size are larger and heavier than typical LTL shipments), whereas a truckload shipment is greater than or equal to 28,000 pounds.
 
We generally pick-up freight within a 150 mile radius of our consolidation operations, which we refer to as our pickup dispatch zone. By contrast, a typical LTL carrier operates 20 to 35 breakbulk and consolidation terminals to cover the same geography as our pickup dispatch zone which we have historically covered with one facility. The majority of our LTL shipments are already palletized, do not need to be touched and can be loaded and unloaded via forklift. On average, our typical LTL shipment weighs between 3,000 and 3,500 pounds, which enables us to assemble loads more quickly than traditional LTL carriers. We believe that our Westampton, New Jersey facility is larger in both square footage and total cubic area (due to higher ceilings) than most LTL facilities. As a result, we are able to handle LTL shipments that are larger and heavier than those transported by most LTL carriers and to stage freight for longer periods of time. LTL services constitute the primary outbound freight from our consolidation operations.


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The graphic below illustrates our 2009 shipments by origination region:
 
(MAP)
 
The cornerstone of our Load-to-Deliver operating model consists of delivering LTL shipments directly from a linehaul trailer to recipients. Due to our lane density, we are able to combine and sequence shipments, primarily on 53-foot trailers, such that their final destinations are in close proximity to each other, thereby increasing our operating efficiency and asset utilization. The load planning function is a critical component of our Load-to-Deliver system. We believe that our load planning function is significantly more sophisticated than that of a traditional LTL carrier because it entails sequential delivery directly from the linehaul trailer. In planning our outbound loads, we attempt to position our tractors and trailers so that the final LTL delivery stop is near the truckload shipment that will complete the round-trip to our consolidation operations, thereby minimizing empty miles. We believe our focus on sequential delivery directly from a linehaul trailer is significantly different than the delivery process of either traditional LTL or truckload carriers who focus on either terminal-to-terminal or point-to-point routes, respectively. We employ 14 people in our load planning department who collectively have an average of 12.4 years of experience in planning loads under either the Load-to-Deliver or similar operating model.


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The graphic below illustrates our 2009 shipments by destination region:
 
(MAP)
 
For the inbound portion of our round-trip, we generally transport truckload freight into the Northeast to reposition our tractors and trailers near our LTL consolidation operations in the Philadelphia metropolitan area. Our dispatchers arrange for the pickup and delivery of freight and coordinate the associated routing of our tractors and trailers to the freight’s final destination. Although we provide truckload services nationwide based on pricing and routing factors, we generally transport truckload freight from the Western and Southern areas of the United States to the Northeast to reposition our tractors and trailers near our Philadelphia metropolitan area LTL consolidation operations. Our Load-to-Deliver operating model also allows us to increase equipment utilization and avoid the unfavorable pricing of truckload freight outbound from the Northeast and positions us to take advantage of higher priced truckload freight inbound to the Northeast, which is a densely populated, high consumption area where consumption levels significantly exceed output levels. As a result of this imbalance, truckload rates for Northeast inbound freight typically are greater than the rates for Northeast outbound


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freight. The following graphic demonstrates the imbalance of rates per mile for truckload shipments that we believe provides us with a competitive advantage:
 
(MAP)
Source: Truckloadrate.com
Note:  Rates for illustrative purposes only, represents an average of the trailing 12 months as of July 2010 (excluding fuel)
 
Benefits of the Load-to-Deliver Operating Model to Our Customers
 
  •  Improved Transit Time.  We provide our customers with faster transit times with fewer opportunities for delays of their LTL freight deliveries. We believe this gives us a significant competitive advantage over traditional LTL carriers. For example, we can transport LTL freight from Philadelphia, Pennsylvania to Dallas, Texas in two days without stopping at a breakbulk hub given our point to point delivery model, while the same shipment traveling through a traditional hub and spoke LTL network would likely take three days because of the need to unload and reload the freight at several breakbulk hubs en route.
 
  •  Lower Cargo Claims.  We provide our customers time-definite LTL services with lower cargo claims than a traditional LTL carrier since our Load-to-Deliver operating model requires fewer handlings per LTL shipment. For example, for the year ended December 31, 2009, our claims ratio was 0.24%, as compared to the average of 1.04% reported by the Transportation Loss Prevention and Security Association.
 
  •  Core Carrier with Operational Flexibility to Ship All Types of Freight.  We provide our customers with the flexibility to handle a wide range of shipment sizes, weights and types of freight not typically provided by a typical LTL or truckload carrier. We believe our customers value the ability to work with a flexible motor carrier that can service a broad spectrum of their transportation needs.


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Benefits of the Load-to-Deliver Operating Model to Us
 
  •  Optimized Round-Trip Economics.  Our Load-to-Deliver operating model allows us to increase equipment utilization and avoid the unfavorable pricing of truckload freight outbound from the Northeast and positions us to take advantage of higher priced truckload freight inbound to the Northeast. We believe our Load-to-Deliver operating model enables us to optimize the economics of a round-trip by combining two favorably priced headhauls (an outbound LTL shipment and an inbound truckload shipment) to maximize revenue per operating tractor. For example, in 2009 our net revenue per operating tractor per day of approximately $1,000 was significantly higher than the $500 to $700 per day that we believe to be the average for publicly traded truckload carriers over the same period.
 
  •  Right Sized Fixed Cost Infrastructure.  We operate a less asset intensive operating model. Since we generally deliver LTL freight directly from the trailer, we do not have the significant capital investment and high-fixed cost structure required to operate the numerous local delivery fleets, nationwide breakbulk and destination terminals and multiple staffs of freight handlers and load planners, typically associated with our LTL competitors. We have a higher percentage of variable costs than a typical LTL carrier and are better positioned to scale our operations to operate through economic downturns while still maintaining significant operating leverage to expand margins in an economic upturn. For example, our Adjusted EBITDA margin in 2009 was 9.9%, which we believe is significantly higher than the average EBITDA margin of publicly-traded LTL carriers, and we were able to achieve a 150 basis point improvement in our Adjusted EBITDA margin in the first quarter of 2010 as compared to the first quarter of 2009.
 
  •  Ability to Cross-Sell Multiple Services to Customers.  We offer a broad range of services to our customers, which gives us multiple opportunities to attract new customers and to cross-sell additional services to existing customers. For example, Crayola LLC, which started as a customer for our truckload services, has since expanded to use our LTL, temperature-controlled and expedited services. In addition, we believe that our operational flexibility positions us well to take advantage of the growing trend of shippers partnering with a small base of core carriers for all of their shipping needs. We believe our customers recognize the importance of having access to our temperature-controlled and Hazmat services. As a result, they will often use our services to transport non-specialized freight to retain access to these services.
 
Our Services
 
We offer a full range of over-the-road transportation solutions to our customers, including customized, expedited, time-definite, dedicated and specialized LTL and truckload services. We regularly expand our service offerings to meet our customers’ evolving freight requirements so that we are able to address all of their over-the-road shipment needs. We provide our customers with the flexibility to handle a wide range of shipment sizes, weights and types of freight not typically provided by a traditional LTL or truckload carrier. In addition, we provide these services over a broad range of distances ranging from 15 to 3,000 miles. We believe our ability to transport multiple types of freight over multiple distances differentiates us from our competitors.
 
Expedited Services
 
Certain of our drivers work together in teams of two, which enables us to move a shipment of freight almost continuously across the country while allowing the drivers to remain in compliance with applicable work regulations, particularly hours of service restrictions. The use of these teams enables us to offer expedited LTL and truckload services nationwide, and we can often guarantee delivery of a shipment from the Northeast to West coast destinations within three business days.


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Temperature-Controlled Services
 
For LTL and truckload freight, we offer our customers temperature-controlled services. Temperature-controlled services consist of both heated service for customers whose freight must be protected from freezing during winter months and refrigerated service for customers whose freight must be maintained at a cold or constant temperature. Customers typically requiring temperature-controlled trailers include those in the food, chemical and pharmaceutical industries. We typically receive an accessorial charge related to our temperature-controlled services. Our fleet of temperature-controlled trailers, most of which provide both heating and refrigeration capability, has increased from 439 in 2005 to 887 as of March 31, 2010. Total revenues from the shipment of temperature-controlled freight have grown 52.3% annually from $9.6 million in 2005 to $51.9 million in 2009 and have increased from 6.9% of our total revenues in 2005 to 22.6% in 2009. Management believes that we are among the largest providers of temperature-controlled transportation services in the Northeast.
 
Hazardous Materials Services
 
We believe that our 100% Hazmat certified driver workforce and ability to transport certain hazardous materials nationwide makes us a leading transportation provider for the chemical and pharmaceutical industries. We typically receive an accessorial charge related to our Hazmat services. The percentage of total revenues from the transportation of Hazmat freight has increased from 9.0% in 2007 to 10.3% in 2009.
 
Dedicated Services
 
We offer dedicated truckload services, which provide exclusive use of equipment and offer tailored solutions under long-term contracts. Dedicated truckload service allows us to provide trucking solutions to meet specific customer needs.
 
Brokerage Services
 
We offer LTL and truckload brokerage services to supplement our core services. This provides us with the ability to service our customers’ freight whose economic and/or logistical considerations do not fit within our network as well as to offer capacity to meet seasonal demands. In addition, our brokerage operation enhances our ability to identify attractive freight for the Northeast inbound portion of our round-trip. In the year ended December 31, 2009, less than 1% of our revenues were derived from brokerage services.
 
Warehousing Services
 
We offer warehousing services at our operations facilities in the Philadelphia metropolitan area. We can offer temperature-controlled warehousing services, which allows us to store temperature sensitive shipments, including chemicals and pharmaceuticals, for extended periods of time. Our warehousing facilities provide our customers with a flexible solution for short-term and fluctuating space requirements. We provide warehousing services to customers for which we also provide transportation services.


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Tractors and Trailers and Associated Maintenance
 
We evaluate equipment decisions based on factors including cost, useful life, warranty terms, technological advances, expected maintenance costs, fuel economy, driver comfort, customer needs, manufacturer support and resale value. We typically operate well-maintained equipment with uniform specifications to minimize our spare parts inventory, streamline our maintenance program and simplify driver training. As of March 31, 2010, our fleet consisted of 987 company-owned tractors, 1,927 company-owned trailers and 214 leased trailers. As of March 31, 2010, the average age of our owned tractors and trailers was 4.8 and 6.6 years, respectively. The major operating systems of most of our tractors are covered by manufacturers’ warranties for between 300,000 to 750,000 miles, and most of our trailers are covered by manufacturers’ warranties for 60 months. The following table outlines certain information regarding our fleet as of March 31, 2010.
 
                                 
    Tractors     Trailers  
Model year
  Owned     Owned     Leased     Total  
 
2011
    1       0       0       0  
2010
    0       0       0       0  
2009
    5       6       0       6  
2008
    1       118       80       198  
2007
    472       227       125       352  
2006
    266       235       0       235  
2005
    110       392       0       392  
2004
    9       240       0       240  
2003
    8       115       0       115  
2002
    14       38       6       44  
2001
    42       144       3       147  
2000
    20       156       0       156  
Prior to 2000
    39       254       0       254  
Unavailable
    0       2       0       2  
                                 
Total
    987       1,927       214       2,141  
                                 
 
Freightliner and Kenworth manufacture most of our tractors. Operating a well-maintained fleet allows us to minimize repairs and service interruptions. The age and various attributes of our fleet also enhance our ability to attract drivers, increase fuel economy, minimize breakdowns and allow us to take advantage of advanced aerodynamics, speed management and idle controls. Over the years, our management team has been an early adopter of tractor and trailer technologies such as satellite tracking, self-lubricating chassis on both our tractors and trailers, auxiliary power units, automatic transmissions, vented mud flaps and super-single tires. We believe these technologies also improve our fuel efficiency, extend the useful life of our tractors and enhance driver satisfaction. We have also regulated the maximum speed of our tractors to decrease fuel consumption and increase safety.
 
Our current linehaul tractor trade-in cycle ranges from approximately 36 months to 60 months, depending on equipment type and usage, although we expect this cycle to be delayed as a result of our engine remanufacturing program. We regularly monitor our tractor trade-in cycle based on maintenance costs, capital requirements, costs of new and used tractors and other factors. We do not have any agreement with tractor or trailer manufacturers pursuant to which they have agreed to repurchase the tractors or trailers or guarantee a residual value. We therefore could incur losses upon disposition if resale values of used tractors or trailers decline.
 
We adhere to a comprehensive maintenance program during the life of our equipment and perform most routine servicing and repairs at our facilities in the Philadelphia metropolitan area to reduce costly on-road repairs and out-of-route trips. Most recently, in response to uncertainties in new engine designs, we have established a program to remanufacture existing engines. We have entered into this program with a major engine manufacturer who will provide a full warranty on the engine for unlimited miles for


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four years. We expect that remanufactured engines will add up to four years to the useful life of a tractor for approximately 25% of the cost of a new tractor, thereby enhancing free cash flow and improving our return on invested capital.
 
Most of our trailers are equipped with air ride suspensions and anti-lock brakes. As of March 31, 2010, 887 of our trailers were equipped with temperature-controlled units that provide heating and refrigeration capability. We use a combination of 28, 48 and 53 foot trailers, which we believe allows us greater flexibility in the scheduling and dispatch of both LTL and truckload shipments.
 
Drivers
 
As of March 31, 2010, we employed 1,004 non-union, Hazmat certified drivers, which provides us with maximum flexibility in the types of freight we can transport. The recruitment, training and retention of safe and qualified drivers are essential to support our continued growth and to meet the service requirements of our customers. We hire drivers who meet our objective guidelines relating primarily to their safety record, road test evaluations, driving experience and other personal evaluations, including physical examinations and mandatory drug and alcohol testing. New hires, who are required to be at least 23 years of age and have two years of experience, undergo an orientation program to introduce them to our Load-to-Deliver operating model. We meet with our drivers periodically to carefully evaluate performance and discuss any current concerns. We believe that our stringent selection criteria for drivers and our regular training courses are an important factor in our safety record. Senior management is actively involved in the selection of new drivers.
 
We believe our driver friendly culture emanates from Mr. Muhlschlegel, our founder and Chief Executive Officer and a former driver, who has continually emphasized the importance of a stable, high quality driver force. We provide attractive and comfortable equipment, direct communication with senior management, wages and benefits at the high end of market range that are based on an hourly rate or a rate per mile plus payments for completion of specific actions, such as each delivery stop made, and other incentives designed to encourage driver safety, retention and long-term employment. In addition, our Load-to-Deliver operating model maximizes the amount of time our drivers are able to spend at home relative to truckload drivers because they frequently return to our Philadelphia area consolidation operations and, to a much more limited extent, our Denver facility to begin the next outbound trip. Drivers receive cash awards for providing superior service and developing satisfactory safety records. We also offer drivers the ability to work in teams of two, which allows us to move shipments almost continuously across the United States while allowing drivers to remain in compliance with applicable work regulations. We typically recruit drivers who have experience driving for truckload carriers. Our driver turnover rate, which has ranged from 25% to 32% per year over the last four years, is significantly below the average turnover for truckload carriers of 83.9% during the same period, as estimated by the ATA.
 
Driver shortages have historically been a significant capacity constraint for both LTL and truckload carriers. The Council of Supply Chain Management Professionals projects that driver shortages will increase due to factors including aging driver demographics and the regulatory environment to which drivers are subject. We expect that we will be required to increase wages paid to our drivers as the driver shortage increases, and we cannot assure you that we will be able to pass along any wage increases to our customers. We expect that this shortage of qualified drivers will result in increased competition for such drivers, particularly those with Hazmat certifications, and that our ability to operate the tractors that we have currently designated as non-operating will be constrained by the current availability of drivers. We believe our driver friendly culture will be an increasing competitive advantage should the availability of drivers decrease in the future.


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Purchased Transportation
 
In certain instances, we utilize purchased transportation supplied by third-party local and national trucking carriers under non-exclusive contractual arrangements to deliver freight. The purchased transportation provider will either pick up freight, which typically has already been consolidated into a full trailer load, at our facility or one of our tractors will deliver the freight to the third-party’s facility, in these cases primarily for local delivery to the recipient. For example, we will drop off a non-time sensitive portion of a LTL shipment with a purchased transportation provider who will then arrange for delivery to our customers. In certain markets in which we have high shipment volumes, we have established relationships with preferred purchased transportation providers that offer us discounted fees due to the volume of our shipments.
 
The use of purchased transportation provides flexibility to our operations and enables us to avoid lanes with insufficient volumes to meet our round-trip profitability requirements, cover periods of peak capacity demand and to take advantage of attractive rates in the purchased transportation market, such as during 2009. In addition, the use of third-party carriers for certain of our deliveries allows us to cost effectively deliver our customers freight while reducing wear and tear on, and preserving the life of, our tractors and trailers. The amount of purchased transportation we utilize varies period to period depending on market conditions and truck tonnage. In the year ended December 31, 2009, purchased transportation expenses represented approximately 6.2% of our total revenue.
 
Employees
 
As of March 31, 2010 and December 31, 2009, 2008 and 2007, we had 1,555, 1,519, 1,513 and 1,558 total employees, respectively, including drivers. Our non-driver employees permit us to centrally support services such as maintenance, warehousing, load planning, accounting, information technology, marketing, human resource support, credit and claims management and carrier services. None of our employees is covered by a collective bargaining agreement. We believe that our relationship with our employees is strong. The following table details our employees by function as of the dates indicated below:
 
                                 
    As of December 31,     As of March 31,  
    2007     2008     2009     2010  
 
Drivers
    992       972       941       1,004  
Administrative and Senior Management
    193       193       200       180  
Warehouse
    153       141       153       149  
Maintenance
    72       74       94       91  
Operations, including Load Planning
    97       89       86       88  
Sales and Marketing
    51       44       45       43  
 
Sales and Marketing
 
We operate a sales force of approximately 39 people who cover regional markets and an additional 4 sales people who cover our national accounts. Our sales force includes corporate account executives, account executives, sales managers, inside sales representatives, commission sales representatives and dispatchers. Our average salesperson has more than five years of experience working for us. We compensate our sales force with both a base salary and a bonus based on monthly LTL and truckload shipment performance targets. Our salespersons are conversant in cross-selling all of our transportation services, including customized, expedited, time-definite and specialized LTL and truckload services.
 
We typically market to shippers that value our superior customer service, including our ability to transport temperature-controlled and Hazmat freight and to provide time-definite delivery, as opposed to shippers that base transportation decisions solely on price.


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In marketing and selling our services, these individuals seek to improve our asset productivity by pursuing freight that allows for rapid turnaround times, minimizes non-revenues miles between loads and provides us with competitive rates, balance lanes and improve the reliability of our delivery schedule. Our salespersons work with customers to reduce their transportation costs, inventory carrying costs, handling costs, loss and damage claims and information processing costs.
 
We utilize a computerized freight-costing model to determine the price level at which a particular shipment of freight will be profitable. This function is overseen by our pricing department, which works closely with our salespersons to provide price quotes in a timely fashion. We typically modify elements of this model to simulate actual conditions under which freight will be shipped. We believe that our technology-driven pricing model provides us with a competitive advantage when competing for spot market freight.
 
We also routinely compete for business by participating in bid solicitations with various shippers. Shippers generally solicit bids for relatively large numbers of shipments for a period of one to two years and typically choose to enter into contractual arrangements with a limited number of motor carriers based upon price and service.
 
Our senior management team reviews all new potential customers and evaluates whether the proposed arrangements satisfy our revenue and asset productivity requirements. We also regularly review our existing customer base and modify or terminate relationships that no longer satisfy our requirements.
 
Customers
 
We have a large, stable and diverse base of customers built around our Load-to-Deliver operating model with whom we work closely to develop customized transportation solutions. In 2009, we served approximately 1,100 active customers for whom we transported at least 50 shipments. Of our top 200 customers by total revenue in 2007, we continued to provide services to approximately 90% in 2009. We believe this high level of retention throughout the economic downturn and the fact that we have increased our active customers by 17% from 963 in 2007 to 1,129 in 2009 exemplifies the compelling value proposition we provide to our customers and positions us for growth during an economic recovery. In 2009, our 25 largest customers accounted for 34.8% of our total revenues and included Air Products and Chemicals, Inc., Arkema Inc., Cardinal Health, Inc., Crayola LLC, The Dow Chemical Company, International Flavors and Fragrances, Inc., LXP, Mercedes-Benz USA and Teva Pharmaceutical Industries Ltd. Our customer base is heavily weighted toward industrial, chemical, pharmaceutical, agricultural and food companies, unlike many other trucking companies for which retail customers are a large component. We specifically target these customers because they have less cyclical and more consistent shipping needs in the freight lanes we prefer and are willing to appropriately compensate us for the high level of service we provide. Further, we believe our customer base is well positioned for an industrial-led economic recovery.
 
Our customers have stringent shipping requirements and tend to be subject to increasing regulation of the products they produce and market. Our Load-to-Deliver operating model and marketing efforts emphasize customer satisfaction and strategic partnership while simultaneously focusing on disciplined freight selectivity and pricing. We target customers who are able to generate high transportation volumes in the geographic markets we cover, allowing us to build significant traffic lane density with predictable volumes. We also seek customers whose freight requires special equipment or handling, as this freight typically commands premium rates for transportation of temperature-controlled and Hazmat freight and time-definite delivery. Due to our specialized service offerings and equipment, we believe we are well-positioned to serve such customers.


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The following chart shows the breakdown of 2009 total revenues from our top 800 customers by the industry in which those customers operate.
 
(PI CHART)
 
Over the last five years, we have received numerous awards and honors for our customer service, including Large Refrigerated Carrier of the Year and Strategic Partner by LXP, New Jersey Motor Truck Association President’s Club Diamond Member and Logistics Management Quest for Quality Award for the Northeast/Mid-Atlantic Regional LTL Carrier. We believe that as a strategic partner and highly regarded carrier we are able to bid on certain new routes before most other carriers and may be selected for such routes even where we are not the lowest cost provider. In addition, we believe that these awards enhance our ability to attract new customers.
 
Fuel
 
We actively manage our fuel costs by purchasing fuel in bulk for storage at our Westampton, New Jersey, Denver, Colorado, Spartanburg, South Carolina and Willingboro, New Jersey facilities and have volume purchasing arrangements with national fuel centers that allow our drivers to purchase fuel at a discount to advertised rates while in transit. To help further reduce fuel consumption, we installed auxiliary power units in our company-owned tractors during 2007 and 2008. These units reduce fuel consumption by providing quiet climate control and electrical power for our drivers without idling the tractor engine. We have also regulated the maximum speed of our tractors to decrease fuel consumption and increase safety.
 
In addition to operating a fuel efficient fleet, we further manage our exposure to changes in fuel prices through fuel surcharge programs with our customers. We have historically been able to pass through a significant portion of long-term increases in fuel prices and related taxes to customers in the form of fuel surcharges. These fuel surcharges, which adjust with the cost of fuel, enable us to recover a substantial portion of the higher cost of fuel as prices increase, excluding non-revenues miles, out-of-route miles or fuel used while the tractor is idling. As of March 31, 2010, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
 
Competition
 
We compete in the domestic trucking industry, which is a part of the broader commercial transportation industry. The trucking industry is extremely competitive and highly fragmented. We compete, and expect to continue to compete, with a variety of local, regional, inter-regional and national LTL, truckload and private fleet motor carriers of varying sizes and, to a lesser extent, with brokerage companies, railroads and air freight carriers, many of whom have greater financial resources, have larger freight capacity and larger customer bases than we do. We compete with numerous motor carriers for


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LTL shipments, including A. Duie Pyle, Arkansas Best Corporation, Con-way, Inc., FedEx Corporation, New England Motor Freight, Old Dominion Freight Line, Inc. and YRC Worldwide Inc. For truckload shipments, our primary competitors include Heartland Express, Inc., JB Hunt Transportation Services, Knight Transportation, Inc., Swift Transportation Co., Inc. and Werner Enterprises, Inc.
 
We believe that the principal competitive factors in our business are service, price and the availability and configuration of equipment that meets a variety of customers’ needs. We also compete with other motor carriers for the services of drivers. We believe that we are able to compete effectively in our markets by providing consistently high quality and timely-service at competitive prices.
 
We believe that there are substantial aspects of our operations that restrict the ability of competitors to adopt our Load-to-Deliver operating model. Traditional LTL and truckload carriers can efficiently handle freight that is compatible with their respective operating systems but typically do not have the flexibility to accommodate a wide range of shipment size and delivery options. Small LTL carriers typically lack the necessary critical mass, freight density and capital to adopt such a system, while large LTL carriers tend to have a high fixed cost infrastructure, which results in an inability to focus on specific types of freight, such as large shipment sizes, and results in smaller average shipment size and a greater number of deliveries per trailer than we typically make. Large LTL carriers typically operate breakbulk facilities that are smaller than our Philadelphia metropolitan area consolidation operations and therefore are not configured to handle only large LTL freight shipments. Also, certain large LTL carriers with whom we compete have unionized workforces operating under contracts that do not provide sufficient flexibility to implement a Load-to-Deliver operating model. Truckload carriers lack a system to accommodate both multiple pick-ups and multiple deliveries and would require a substantial capital investment to build the necessary terminals and significantly larger sales forces. Additionally, the Load-to-Deliver operating model requires high quality drivers who are willing to make LTL deliveries and sophisticated operating and management information systems, which we have developed internally over an extended period of years.
 
Seasonality
 
Our revenues are subject to seasonal variations. Our customers tend to reduce shipments in the first calendar quarter for a variety of reasons, including holidays, demand for their products and overall economic conditions. Our operating expenses as a percentage of total revenues also tend to be higher in the winter months, primarily due to inclement weather and the associated costs of decreased fuel economy and transit delays. Generally, revenues in the first quarter and fourth quarters are the weakest while the second and third quarters are the strongest. We believe our ability to offer specialized services moderates seasonal variations by allowing us to transport freight during winter and summer months that require temperature-controlled services.
 
Technology
 
We believe that our use of proven technologies enhances our efficiency and provide us with competitive service advantages. Over the years, our management team has been an early adopter of tractor and trailer technologies such as satellite tracking, self-lubricating chassis on both our tractors and trailers, auxiliary power units, automatic transmissions, vented mud flaps and super-single tires. We believe these technologies also improve our fuel efficiency, extend the useful life of our tractors and enhance driver satisfaction. We believe our technology programs assist us in minimizing our percentage of empty miles, which was less than 4% in 2009.


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Through this technology, we provide better and more timely information to our customers, improve our operating efficiency and controls and more effectively leverage our resources. Examples of the technologies we employ include:
 
  •  Satellite-based tracking and messaging that allow us to communicate with our drivers, obtain load position updates, provide our customers with freight visibility and enable us to download engine operating information, such as fuel mileage and idling time;
 
  •  Freight optimization software that aids us in selecting loads that match our overall criteria, including lane density, pickup and delivery density and load factor;
 
  •  Automated bill rating system that enables us to price both LTL and truckload rates and generate our daily invoices in the same system without manual intervention;
 
  •  Web-based, electronic data interchange and internet communication with customers concerning freight tendering, invoices, shipment status and other relevant information; and
 
  •  Document imaging software that scans documents, including bills of lading and delivery receipts, onto compact disks, which are then available for use company-wide.
 
We believe that our technology systems enhance the productivity of our back office teams. We regularly evaluate our technology systems to ensure that they are sufficient to satisfy our needs and those of our customers.
 
Properties
 
Our principal consolidation operations in Westampton, New Jersey and Delanco, New Jersey are strategically located along the Northeast corridor adjacent to Interstates 95 and 295. From these locations, we can make deliveries to major freight markets from New England to the Southeast within one day and to the Midwest within two days. We also lease warehouse, terminal facilities and equipment maintenance facilities in Delanco, New Jersey; Pennsauken, New Jersey; Spartanburg, South Carolina; Denver, Colorado; and Willingboro, New Jersey. We also lease properties for equipment storage space in various locations, including Kensington, Connecticut; Fremont, Indiana; St. Joseph, Michigan; Brentwood, New York; Dayton, New Jersey; Pennsauken, New Jersey; Charlotte, North Carolina; and Petersburg, Virginia.
 
Information regarding our principal facilities appears in the following table:
 
                 
        Square
  Current Lease
   
Location   Property Function   Footage   Expiration   Renewal Term
45 East Park Drive Westampton, New Jersey   Consolidation facility, bulk fuel storage and headquarters   150,000   April 30, 2011   Option for two 5-year renewals
600 Creek Road
Delanco, New Jersey
  Consolidation facility, equipment maintenance facility and administration   172,100   May 31, 2012   Option for one 2-year and one 3-year renewal
9285 Commerce Highway
Pennsauken, New Jersey
  Offices   17,900   March 31, 2015   Option for two 5-year renewals
2771 Fairforest Clevedale
Spartanburg, South Carolina
  Trucking terminal, freight warehouse, bulk fuel storage and office   17,500   April 30, 2011   Option for two 1-year renewals
6540 N. Washington Street Denver, Colorado   Consolidation facility, equipment maintenance facility bulk fuel storage and offices   40,260   November 30,
2012
  Option for one 3-year renewal
48 Ironside Court Willingboro, New Jersey   Equipment maintenance facility, parking lot, bulk fuel storage and offices   40,000   April 30, 2011   Option for two 5-year renewals
49 Ironside Court Willingboro, New Jersey   Warehouse facility, driver training center   84,000   April 30, 2011   Option for two 5-year renewals


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Regulation
 
The federal government substantially deregulated the transportation industry following the enactment of the Motor Carrier Act of 1980, the Trucking Industry Regulatory Reform Act of 1994, the Federal Aviation Administration Authorization of 1994 and the ICC Termination Act of 1995. Prices and services are now largely free of regulatory controls, although individual states may require compliance with safety and insurance requirements. As an interstate motor carrier, we also remain subject to regulatory controls imposed by agencies within the DOT, including the Federal Motor Carrier Safety Administration, such as safety, insurance and bonding requirements.
 
We are subject to the hours of service regulations issued by the Federal Motor Carrier Safety Administration. Under the current rules, drivers are allowed 11 hours of driving time within a 14-hour, non-extendable period from the start of the work day. This driving time must follow 10 consecutive hours of off-duty time. In addition, calculation of the on-duty time limits of 70 hours in eight days restarts after the driver has had at least 34 hours of off-duty time. In October 2009, the Federal Motor Carrier Safety Administration entered into a settlement agreement with Public Citizen and other parties that had filed suit asserting that the current rules are not stringent enough. Under this settlement, the Federal Motor Carrier Safety Administration has submitted a new proposed hours of service rule and has agreed to publish a final rule by July 2011.
 
Our business is also subject to changes in legislation and regulations, which can affect our operations and those of our competitors. For example, beginning November 30, 2010, the Federal Motor Carrier Safety Administration will begin to implement the CSA nationwide, which requires rating individual driver safety performance, including all driver violations, over 3-year time periods. However, Colorado fully implemented CSA in July 2010 and New Jersey is expected to do so prior to the nationwide rollout in November 2010. CSA is an initiative designed by the Federal Motor Carrier Safety Administration to improve large truck and bus safety and ultimately reduce commercial motor vehicle-related crashes, injuries and fatalities. Prior to these regulations, under the Safety Status Measurement System, only carriers were rated by the DOT, and the rating included out-of-service violations and ticketed offenses associated with out-of-service violations. The CSA system changes the safety evaluation process for all motor carriers and enables the DOT to regulate individual drivers to make driver safety performance history more transparent to law enforcement and motor carriers.
 
In January 2010, the Federal Motor Carrier Safety Administration issued regulatory guidance prohibiting the use of electronic devices for texting while driving a commercial motor vehicle on public roads in interstate commerce. This guidance expressly notes that it is not intended to prohibit the use of electronic dispatching tools and fleet management systems.
 
The DOT requires drivers to obtain commercial drivers’ licenses and also requires that we maintain a drug and alcohol testing program in accordance with DOT regulations. Our program includes pre-employment, random and post-accident drug testing. We are authorized by the DOT to haul hazardous materials. We require all of our drivers to have the proper Hazmat endorsements and to be regularly trained as prescribed by DOT regulations. The Transportation Security Administration has adopted regulations that require determination by the agency that each driver who applies for or renews his or her license for carrying Hazmat materials is not a security threat.
 
We are also subject to regulations to combat terrorism imposed by the Department of Homeland Security, including Customs and Border Protection agencies, and other agencies.
 
Our failure to comply with the laws and regulations to which we are subject could result in substantial fines or revocation of our permits or licenses or change in our safety rating.
 
Environmental Matters
 
Our operations and properties are subject to extensive U.S. federal, state and local and Canadian environmental protection and health and safety laws, regulations and permits. These environmental laws


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govern, among other things, the generation, storage, handling, transportation, treatment, disposal and release of hazardous materials; the emission and discharge of hazardous materials into the ground, air or water; and the health and safety of our employees.
 
Environmental laws and regulations are complex, change frequently and have tended to become stricter over time. There can be no assurance that violations of environmental laws will not be identified or occur in the future, or that environmental laws or permits will not change in a manner that could impose material costs on us. Some environmental laws hold current or previous owners or operators of real property liable for the costs of cleaning up contamination, even if these owners or operators did not know of and were not responsible for such contamination. In addition, as a transporter and handler of hazardous materials, we are potentially subject to strict, joint and several liability for investigating and remediating spills and other environmental releases of these substances. Third parties may also make claims against us for personal injuries, property damage and damage to natural resources associated with the presence or release of hazardous materials. Although we have not incurred and do not currently anticipate any material liabilities in connection with these environmental laws, we may be required to make expenditures for environmental remediation in the future.
 
The EPA issued regulations that required progressive reductions in exhaust emissions from diesel engines through model year 2010, and there are similar state and local regulations regarding emissions. These regulations generally required reductions in the sulfur content of on-road diesel fuel beginning in June 2006, the introduction of emissions after-treatment devices on newly-manufactured engines and vehicles beginning with model year 2007, and reduced nitrogen and non-methane hydrocarbon emissions to be phased in between model years 2007 and 2010. These regulations have resulted in higher prices for tractors and diesel engines and increased fuel and maintenance costs, and we cannot assure you that continued increases in pricing or costs will not have a material adverse effect on our business, financial condition and results of operations.
 
On January 16, 2009, the EPA adopted a waiver that enabled California to phase in restrictions on TRU emissions over several years. The TRU Airborne Toxic Control Measure will require companies that operate TRUs within California to meet certain emissions in-use performance standards. The California regulations apply not only to California intrastate carriers, but also to carriers outside of California who wish to enter the state with TRUs. We have complied with the first compliance deadline of December 31, 2009 that applied to model year 2002 and older TRU engines, and the next compliance deadline of December 31, 2010 applies to model year 2003 TRU engines. California also required the registration of all California-based TRUs by July 31, 2009, a process we have completed for our trailers that transport freight within California. These regulations will require us to retrofit or replace our TRUs that enter California or we would be required to reduce or eliminate transport in California, which currently represents only a small portion of our business.
 
California has also recently adopted regulations to improve the fuel efficiency of certain tractors within the state. The operators of tractors and trailers subject to these regulations must use U.S. EPA SmartWay certified tractors and trailers, or retrofit their existing fleet with SmartWay verified technologies that have been demonstrated to meet or exceed certain fuel savings percentages. Enforcement of these regulations for 2011 model year equipment began in January 2010 and will be phased in over several years for older equipment. We are currently evaluating our options for meeting these requirements. Based on currently available information, we do not expect these costs to be material to us.
 
There is an increased regulatory focus on climate change and greenhouse gas emissions in the United States. Existing or future federal, state or local greenhouse gas emission legislation or regulation could adversely impact our business. In addition to possible increased fuel costs and other direct expenses, there could be a decreased demand for our services if such legislation or regulation causes our customers to reduce product output or to elect different modes of transportation. In addition, any customer initiatives requiring limitations on the emission of greenhouse gases could increase our future capital, or other, expenditures, for example by requiring additional emissions controls, and have a material adverse impact on our business, financial condition and results of operations.


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Safety
 
We are committed to a high level of safety in all of our operations and have implemented a team approach to risk management that builds in loss control at the earliest stages. We provide our employees with the equipment and training required to do their jobs safely and efficiently and retrain on a periodic basis to reinforce leading safety techniques. We employ safety personnel to administer our safety programs and utilize technology to assist us in managing risks associated with our business. In addition, we have a recognition program for driver safety performance and maintain a safety bonus program. We believe our selective driver recruiting, extensive training programs, the regulation of the maximum speed at which our tractors can travel and emphasis on a safety-conscious culture help us to maintain low levels of claims relative to the broader trucking industry. In 2009, our claims and insurance as a percentage of our total revenues were 2.2%. We are a member of the Transportation Community Awareness Emergency Response (Trans(AER)) and the Council on the Safe Transportation of Hazardous Articles (COSTHA), and we are an American Chemistry Council (ACC) Responsible Care Partner. In addition, we received our Responsible Care Management System (RCMS) Certification in 2009 for LTL and truckload services, including temperature-controlled and Hazmat freight.
 
Insurance
 
We currently self-insure for losses relating from physical damage to our fleet of tractors. We maintain $25.0 million of general and automobile liability coverage. We also maintain $500,000 of insurance coverage per trailer for cargo damage claims. 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 and maintain insurance reserves for anticipated losses and expenses. We also believe that we have a favorable history of workers’ compensation claims, and for the last three years we have been in the top tenth percentile of workers’ compensation experience modification rating in New Jersey.
 
Litigation
 
We are routinely a party to litigation incidental to our business, primarily relating to accidents, claims for workers’ compensation or for personal injury and property damage incurred in the transportation of freight. We believe that the outcome of such actions will not have a material adverse effect on our financial position or results of operations.


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MANAGEMENT
 
Executive Officers and Directors
 
The following table sets forth certain information with respect to our executive officers and directors as of          , 2010.
 
             
Name
 
Age
 
Position
 
Harry Muhlschlegel
    63     Chairman and Chief Executive Officer
James Molinari
    59     President and Director
Brian Fitzpatrick
    50     Chief Financial Officer and Secretary
Jerry Shields
    51     Senior Vice President, Operations
James J. Dowling
    64     Director
David S. Harris
    50     Director
Samuel H. Jones, Jr. 
    76     Director
Paul Leand
    43     Director
Seth E. Wilson
    40     Director
 
Set forth below is a brief description of the business experience of each of our directors and executive officers as well as certain key employees who, although not in policy-making positions, are important to the management of our business:
 
Harry Muhlschlegel is our founder and has served as our Chairman and Chief Executive Officer since 2000. Mr. Muhlschlegel served as the Chairman and Chief Executive Officer of Jevic from its founding in 1982 until it was sold to Yellow Corporation in 1999. Mr. Muhlschlegel also served in the United States Marine Corps. Mr. Muhlschlegel’s extensive experience in the transportation industry and in-depth understanding of our Load-to-Deliver operating model provides valuable insight to the board and our management team regarding financial, operational and management issues.
 
James Molinari has served as the President of New Century since 2000 and currently serves as a Director. Prior to his current position, he served as Vice President of Business Development for Jevic, where he was responsible for new account development and marketing to existing customers. Prior to joining Jevic, Mr. Molinari held several senior operations and sales management roles in various LTL and truckload companies. Mr. Molinari’s experience in the transportation industry enables him to provide valuable insight to the board regarding financial, operational and management issues.
 
Brian Fitzpatrick has served as our Chief Financial Officer and Secretary since 2002 and as a Director from 2006 to 2010. From 2000 to 2002, Mr. Fitzpatrick served as Chief Financial Officer for Nexi Communications, an outsourced information technology and internet services provider headquartered in Princeton, New Jersey. From 1993 to 2000, Mr. Fitzpatrick was the Chief Financial Officer of Jevic. From 1982 to 1993, Mr. Fitzpatrick held various commercial banking positions. Mr. Fitzpatrick received a B.S. in Finance and Economics from Susquehanna University and an M.B.A. from Monmouth University.
 
Jerry Shields has served as our Senior Vice President, Operations since 2006. In that position, he has direct responsibility for daily operations of LTL freight movement. From 2000 to 2006, he served as our Vice President, Operations. From 1987 to 2000, Mr. Shields held various senior operational positions with Jevic, including Eastern Regional Vice President for Operations and Vice President of Linehaul Operations.
 
James J. Dowling has served as a Director since 2006. Mr. Dowling is a Managing Director of Jefferies Capital Partners and has been employed by Jefferies Capital Partners since 2002. From 1984 until 2002, Mr. Dowling was a senior securities research analyst specializing in the transportation industry, a portfolio manager and an investment banker with Furman Selz LLC and its successors. From 1969 to 1984, Mr. Dowling was a securities research analyst with Shearson American Express and its predecessors. Mr. Dowling serves on the boards of directors of R&R Trucking Holdings, LLC and Aurora Trailer Holdings LLC and is chairman of K-Sea General Partner GP LLC, the general partner of the


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general partner of K-Sea Transportation Partners L.P. Mr. Dowling brings to the board extensive experience advising portfolio companies of Jefferies Capital Partners and provides valuable insight regarding strategic, financing and management issues. Mr. Dowling received his B.S. and M.B.A. degrees from Fairleigh Dickinson University.
 
David S. Harris has served as a director since 2010. Since 2004, Mr. Harris has served as a director of Steiner Leisure Limited and Rex American Resources Corporation. He has served as President of Grant Capital, Inc., a private investment company, since January 2002. Mr. Harris served as a Managing Director of Tri-Artisan Partners, LLC, a private merchant banking firm engaged in investment banking and principal investment activities, from January 2005 to June 2006. From May 2001 until December 2001, Mr. Harris served as a Managing Director in the investment banking division of ABN Amro Securities LLC. From September 1997 until May 2001, Mr. Harris served as a Managing Director and Sector Head of the Retail, Consumer and Leisure Group of ING Barings LLC, a financial institution. From 1986 to 1997, Mr. Harris served in various capacities as a member of the investment banking group of Furman Selz LLC, which was acquired by ING Barings LLC in September 1997. Mr. Harris is a director of Rex Stores Corporation, which engages in the production and sale of ethanol and leases real estate properties. Mr. Harris’ experience enables him to provide valuable insight to the board regarding financial and management issues. Mr. Harris received a B.S. in Accounting and Finance from Rider University and an M.B.A. from Columbia University.
 
Samuel H. Jones, Jr. has served as a director since 2010. Since 2001, Mr. Jones has served as a consultant to S-J Transportation Co., Inc., a company specializing in the transportation of industrial waste nationwide and in two Canadian provinces. Mr. Jones has also served as President of S-J Venture Capital Company since 1991. From 1971 to 2002, Mr. Jones was President of S-J Transportation Co. In addition to serving as director of Jevic from 1997 to 1999, Mr. Jones’ board experience includes serving as a director of Rowan University Tech Park since 2003, serving as Chairman and Trustee of Fogg Enterprises since 1998, serving as a director of Viewpoint, Inc. from 1999 to 2008, serving on the Foundation Board of Salem County Community College from 1997 to 2010 and serving as a director of Salem County Utility Authority from 1980 to 2006. Mr. Jones’ experience in the transportation industry enables him to provide valuable insight to the board regarding strategic, operational and management issues.
 
Paul Leand has served as a director of since 2010. Mr. Leand is the Chief Executive Officer and Director of AMA Capital Partners LLC, or AMA, an investment bank specializing in the maritime industry and also serves on the board of directors of Ship Finance International Limited and SeaCo Ltd. From 1989 to 1998 Mr. Leand served at the First National Bank of Maryland where he managed the Bank’s Railroad Division and its International Maritime Division. He has worked extensively in the U.S. capital markets in connection with AMA’s restructuring and mergers and acquisitions practices. Mr. Leand serves as a member of American Marine Credit LLC’s Credit Committee and served as a member of the Investment Committee of AMA Shipping Fund I, a private equity fund formed and managed by AMA. Mr. Leand’s experience in the transportation industry enables him to provide valuable insight to the board regarding strategic, operational and management issues. Mr. Leand received a B.S. in Business Administration from Boston University.
 
Seth E. Wilson has served as a Director since 2006. Mr. Wilson is a Managing Director of Jefferies Capital Partners and has been employed by Jefferies Capital Partners and its predecessor since 1994. From 1992 until 1994, Mr. Wilson was employed in the Investment Banking Division of Furman Selz LLC. Mr. Wilson currently serves on the boards of directors of R&R Trucking Holdings, LLC, Aurora Trailer Holdings LLC and EW Transportation LLC (formerly K-Sea Transportation LLC) and has previously served on the boards of directors of Arnold Transportation Services, Inc. and IDB Carriers (BVI) Ltd. Mr. Wilson brings to the board extensive experience advising portfolio companies of Jefferies Capital Partners and provides valuable insight regarding strategic, financing and management issues. Mr. Wilson received an A.B. from Harvard University and an M.B.A. from the Stanford University Graduate School of Business.


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Key Employees
 
The following table sets forth certain information with respect to our key employees, other than our executive officers, as of          , 2010.
 
             
Name
 
Age
 
Position
 
William Hunter
    49     Senior Vice President, Sales
Richard Luhrs
    63     Senior Vice President, Corporate Development
Linda Adams
    47     Vice President of Traffic and Pricing
Vince Devine
    45     Vice President and Controller
Kevin Long
    44     Vice President of Risk Management
Timothy Munns
    52     Treasurer
 
Set forth below is a brief description of the business experience of each of our key employees who, although not in policy-making positions, are important to the management of our business:
 
William Hunter has served as our Senior Vice President, Sales since 2003 and is currently responsible for daily management of all of our regional and national accounts. He initially joined New Century in 2001 as Regional Vice President of Sales. From 1994 to 2001, Mr. Hunter was the Director of Regional Sales for the Philadelphia metropolitan area for Jevic. Before joining Jevic, Mr. Hunter was employed in various sales capacities with ABF Freight System, Inc. and Consolidated Freightways Corporation. Mr. Hunter received a B.S. from St. Josephs University.
 
Richard Luhrs has served as our Senior Vice President, Corporate Development since 2006. In that role he assists the leadership team in enhancing overall operational processes and identifying and reviewing acquisition opportunities. From 1999 to 2006, Mr. Luhrs was employed as a Senior Vice President and Group Executive within the Shevell Group of Companies, L.L.C., a privately-held LTL carrier, with overall profit and loss responsibilities for three of its four operating companies. From 1990 to 1999, Mr. Luhrs was a co-founder and partner of Titan Express, a Northeast LTL carrier. From 1971 to 1990, Mr. Luhrs was a founder and partner of Management Methods, Inc., a management consulting firm providing services to the transportation industry. Prior to founding Management Methods, he was employed by Interdata Systems Inc. as a Project Manager with responsibility for designing and implementing productivity and routing systems for large trucking clients, prior to which, he worked at APA Transport Corp., a regional LTL carrier, as a staff engineer working to develop driver and platform productivity systems.
 
Linda Adams has served as our Vice President, Traffic and Pricing since 2000. From 1992 to 2000, Ms. Adams held various positions at Jevic, ultimately serving as Director of Pricing and Traffic. From 1982 to 1992, she served in various positions at Central Transport, ultimately serving as a regional sales associate within its New Jersey market. Ms. Adams received a Bachelors of General Studies from Oakland University and an M.B.A. from Rider University.
 
Vince Devine has served as our Vice President and Controller since 2007. He served as our Assistant Controller and Director of Financial Reporting from 2005 to 2007. From 2002 to 2005, Mr. Devine served as the Assistant Controller at Applied Extrusion Technologies, Inc. From 1992 to 2002, Mr. Devine served in a variety of positions at Foamex International, Inc., ultimately serving as Regional Manufacturing Controller. Earlier in his career, he was as an internal auditor at IMO Industries, Inc. from 1989 to 1992 and a Staff Auditor at Coopers & Lybrand from 1987 to 1989. Mr. Devine received a B.S. in Accounting from Widener University and is a Certified Public Accountant.
 
Kevin Long currently serves as our Vice President, Risk Management and has been employed by us since 2002. From 1993 to 2002, Mr. Long served as Director of Risk Management at Jevic. From 1991 to 1993, Mr. Long served at National Freight, Inc., ultimately serving as Insurance Supervisor. Mr. Long received a B.A. in Business from Widener University.


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Timothy Munns has served as our Treasurer since 2008. He initially joined us as our Director of Finance in 2007. Mr. Munns served as the Chief Financial Officer of P&P Transport from 1998 to 2007. From 1989 to 1998, Mr. Munns was Vice President of Commercial Lending at the PNC Financial Services Group. Mr. Munns received a B.A. in Accounting from Temple University and a M.S. in Taxation from Widener University.
 
Board Composition
 
Our board of directors will consist of seven members. The board has determined that Mr. Harris, Mr. Jones and Mr. Leand are deemed “independent” for the purposes of the corporate governance rules and regulations of The Nasdaq Stock Market. Within 90 days of our listing on the Nasdaq Global Market, a majority of the members of our committees will be required to be independent, and within one year of our listing on the Nasdaq Global Market, a majority of our full board of directors and all of the members of our committees will be required to be independent for purposes of the corporate governance rules and regulations of The Nasdaq Stock Market.
 
In accordance with our amended and restated certificate of incorporation, immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual general meeting of shareholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:
 
  •  The Class I directors will be Mr. Leand and Mr. Molinari, and their terms will expire at the annual general meeting of shareholders to be held in 2011;
 
  •  The Class II directors will be Mr. Harris, Mr. Jones and Mr. Wilson, and their terms will expire at the annual general meeting of shareholders to be held in 2012; and
 
  •  The Class III directors will be Mr. Dowling and Mr. Muhlschlegel, and their terms will expire at the annual general meeting of shareholders to be held in 2013.
 
Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.
 
Board Committees
 
Our board of directors plans to establish the following committees: an audit committee, a compensation committee and a nominating and corporate governance committee. The responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by our board of directors.
 
Audit Committee
 
Our audit committee will oversee our corporate accounting and financial reporting processes. Among other matters, the audit committee will evaluate the independent auditors’ qualifications, independence and performance; determine the engagement of the independent auditors; review and approve the scope of the annual audit and the audit fee; discuss with management and the independent auditors the results of the annual audit and the review of our quarterly consolidated financial statements; approve the retention of the independent auditors to perform any proposed permissible non-audit services; monitor the rotation of partners of the independent auditors on the New Century engagement team as required by law; review our critical accounting policies and estimates; oversee our internal audit function; review related party transactions; and annually review the audit committee charter and the committee’s performance. All members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Stock Market. Our board


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will determine that one of the members of the audit committee is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of The Nasdaq Stock Market. Within one year of our listing on the Nasdaq Global Market, all of the members of the audit committee will be required to be independent directors as defined under the applicable rules and regulations of the SEC and The Nasdaq Stock Market. The audit committee will operate under a written charter that will satisfy the applicable standards of the SEC and The Nasdaq Stock Market.
 
Compensation Committee
 
Our compensation committee will review and recommend policies relating to compensation and benefits of our officers and employees. The compensation committee will review and approve corporate goals and objectives relevant to compensation of our chief executive officer and other executive officers, evaluate the performance of these officers in light of those goals and objectives and set the compensation of these officers based on such evaluations. The compensation committee will also administer the issuance of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. Within one year of our listing on the Nasdaq Global Market, all of the members of our compensation committee will be required to be independent under the applicable rules and regulations of the SEC, The Nasdaq Stock Market and the Code.
 
Nominating and Corporate Governance Committee
 
The nominating and corporate governance committee will be responsible for making recommendations regarding candidates for directorships and the size and composition of our board. In addition, the nominating and corporate governance committee will be responsible for overseeing our corporate governance guidelines and reporting and making recommendations concerning governance matters. Potential candidates will be discussed by the entire board, and director nominees will be subject to the approval of the independent members of the board. Within one year of our listing on the Nasdaq Global Market, our nominating and corporate governance committee will be required to be composed exclusively of directors who are independent under the applicable rules and regulations of The Nasdaq Stock Market.
 
The nominating and corporate governance committee will consider nominees to the board of directors recommended by a shareholder, if such shareholder complies with the advance notice provisions of our bylaws. Our bylaws provide that a shareholder who wishes to nominate a person for election as a director at a meeting of shareholders must deliver written notice to our corporate secretary. This notice must contain, as to each nominee, all of the information relating to such person as would be required to be disclosed in a proxy statement meeting the requirements of Regulation 14A under the Exchange Act, and certain other information set forth in the bylaws. In order to be eligible to be a nominee for election as a director by a shareholder, such potential nominee must deliver to our corporate secretary a written questionnaire providing the requested information about the background and qualifications of such person and a written representation and agreement that such person is not and will not become a party to any voting agreements, any agreement or understanding with any person with respect to any compensation or indemnification in connection with service on the board of directors, and would be in compliance with all of our publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines.
 
Code of Ethics
 
We have adopted a written code of business conduct and ethics, known as our code of conduct, which applies to all of our directors, officers, and employees, including our Chief Executive Officer and our Chief Financial Officer. Our code of conduct is available at www.nctrans.com. Our code of conduct


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may also be obtained by contacting investor relations at (609) 265-1110. Any amendments to our code of conduct or waivers from the provisions of the code for our Chief Executive Officer and our Chief Financial Officer will be disclosed on our Internet website promptly following the date of such amendment or waiver.
 
Compensation Committee Interlocks and Insider Participation
 
None of the members of the compensation committee who will continue to serve on the compensation committee after completion of this offering is currently or has been at any time one of our officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. None of our executive officers was a director of another entity where one of that entity’s executive officers served on our compensation committee, and none of our executive officers served on the compensation committee or the board of directors of another entity where one of that entity’s executive officers served as a director on our board of directors.
 
Board Leadership Structure and Management Oversight
 
The board of directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The board understands that there is no single, generally accepted approach to providing board leadership and that board leadership structure may vary as circumstances warrant. Our board of directors has determined that having a combined Chairman and Chief Executive Officer, an independent lead director and independent members and chairs for each of the committees of our board of directors provides the best board leadership structure for us at this time. We believe that having Mr. Muhlschlegel serve as both Chairman and Chief Executive Officer demonstrates to our employees, customers, strategic partners and other stakeholders that we are under strong leadership, and Mr. Muhlschlegel has primary responsibility for managing our operations. He has led our company since its founding, is a recognized leader in the transportation industry and has the skills necessary to serve as our Chairman. Our Chairman is responsible for:
 
  •  setting the agenda for and chairing meetings of the board of directors; and
 
  •  providing information to directors in advance of each meeting and as necessary between meetings.
 
Upon completion of this offering, we will also establish a lead director who will be elected annually by the independent members of the board of directors. Our lead director will be responsible for:
 
  •  chairing meetings of the board of directors when the Chairman is not present, including presiding at all executive sessions of the board of directors (without management present) at all regularly scheduled meetings of the board of directors;
 
  •  working with management to determine the information and materials provided to directors;
 
  •  approving the agenda, schedules and other information provided to the board of directors; and
 
  •  serving as a liaison between the Chairman and the independent directors.
 
Our lead director will also consult with the Chairman regularly on other matters that are pertinent to the board of directors and is able to call meetings of the independent directors. Our board of directors believes that the lead director will make valuable contributions to our company, including monitoring the performance of the board of directors, helping directors reach consensus, coordinating the work of the committees of the board of directors and ensuring and supporting effective shareholder communications.


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Our board of directors believes that this structure will create an effective balance between strong, capable leadership and appropriate oversight by non-employee directors.
 
Subject to active oversight by the board of directors, our management is primarily responsible for managing the risks we face in the ordinary course of operating our business. Our board of directors receives operations and strategic presentations from management, which presentations include discussions of the principal risks to our business. In addition, in connection with this offering, the board of directors will delegate certain risk oversight functions to each of its committees. The Audit Committee will assist the board of directors in the management of our system of disclosure controls and procedures and our internal controls over financial reporting. The Compensation Committee will assist the board of directors in risk oversight functions related to our compensation policies and programs and employee retention issues. The Nominating and Corporate Governance Committee will assist the board of directors in risk oversight functions related to important compliance matters, including periodic reviews of the Code of Ethics and Code of Business Conduct to ensure compliance with applicable securities laws and regulations and stock market rules. We believe that this leadership structure enhances our efficiency in fulfilling our oversight functions with respect to our business and facilitates division of risk management oversight responsibilities among the full board of directors, each of its committees and our management team.


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COMPENSATION DISCUSSION AND ANALYSIS
 
This Compensation Discussion and Analysis, or CD&A, provides an overview of our executive compensation program, together with a description of the material factors underlying the decisions which resulted in the compensation provided in 2009 to our Chief Executive Officer, Chief Financial Officer, President and Senior Vice President, Operations (collectively, the “named executive officers”), as presented in the tables which follow this CD&A. This CD&A contains statements regarding our performance targets and goals. These targets and goals are disclosed in the limited context of our compensation program and should not be understood to be statements of management’s expectations or estimates of financial results or other guidance. We specifically caution investors not to apply these statements to other contexts.
 
Objective of Compensation Policy
 
The objective of the Company’s compensation policy is to provide a total compensation package to each of the named executive officers that will enable the Company to:
 
  •  attract, motivate and retain high-quality executive officers in a competitive market for talent who will contribute to the advancement of our strategic, operational and financial goals; and
 
  •  provide for long-term incentives that will closely align the financial interests of our named executive officers with the interests of our shareholders and that encourage long-term service and loyalty.
 
In pursing these objectives, we use a mix of four main elements of compensation, which are each described in detail below in “— Elements of Compensation.” The Company’s compensation philosophy places a strong emphasis on “pay for performance.” Accordingly, a significant portion of total executive compensation reflects a risk aspect and is tied to the achievement of specific strategic, operational and financial goals. Our practice has been, and following our initial public offering is expected to continue to be, to use the components of our executive compensation program to directly tie the total amount of executive compensation to the creation of long-term shareholder value and to achieve a total compensation level appropriate for our size, financial performance and industry. In pursuing these goals, we offer an opportunity for greater overall compensation in the event of superior Company performance, matched with the prospect of lower overall compensation in the event that the Company’s performance does not meet expectations.
 
Our philosophy is to base a greater percentage of each employee’s compensation on Company performance as the employee becomes more senior, with a significant portion of total named executive officer compensation to be directly tied to the achievement of Company performance goals. We believe that this philosophy is appropriate because the performance of our named executive officers is more likely to have a direct impact on the Company’s achievement of strategic, operational and financial goals, as well as on shareholder value. However, the Company does provide base salary and perquisites at levels that it believes are competitive in order to ensure that we will be able to attract and retain high-caliber executive officers.
 
Process for Setting Total Compensation
 
Prior to this offering, the compensation paid to our named executive officers was generally determined in accordance with their employment agreements, which were entered into through negotiation with Jefferies Capital Partners in connection with our 2006 recapitalization. The compensation set forth in these employment agreements was set at levels consistent with the compensation paid to each of our named executive officers prior to our recapitalization and was approved by Jefferies Capital Partners. Since these employment agreements were entered into, our board of directors has periodically reviewed the total compensation of our named executive officers and the mix of the components used to compensate those officers in light of their responsibilities and performance, as well as the performance


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of the Company, to ensure that each named executive officer’s compensation remains at an appropriate level. Following this offering, the compensation paid to our named executive officers is expected to generally be determined in accordance with their new employment agreements, which were entered into on August 10, 2010. These employment agreements are described in detail below in “— Employment Agreements and Potential Payments upon Termination or Change in Control.” In addition, in connection with this offering, our board of directors will appoint an independent compensation committee to determine matters of executive compensation.
 
Historically, our board of directors has reviewed the total compensation of our named executive officers and the mix of components used to compensate those officers on an annual basis. In determining the total amount and mix of the components of executive compensation, our board of directors strives to create incentives and rewards for performance consistent with our short-term and long-term objectives. In determining the total amount and mix of short-term and long-term compensation and the portion of each named executive officer’s income that should be at risk, our board of directors assesses each named executive officer’s overall contribution to our business, scope of responsibilities, historical compensation and performance. Our board of directors has not assigned a fixed weighting among each of the compensation components. Individual performance is evaluated based on the named executive officer’s expertise, leadership, ethics and personal performance against goals and objectives that are established by our board of directors in consultation with our named executive officers. Each named executive officer’s ownership interest in the Company is also factored into determining annual executive compensation.
 
Our board of directors has not engaged a compensation consultant, or otherwise used compensation studies or benchmarking, in setting the compensation of our named executive officers. Instead, compensation decisions are made by our board of directors as a whole after taking into account input from each member of the board, including our chairman and chief executive officer Harry Muhlschlegel. These decisions are based on the collective business experience of our board of directors and are not based on a formulaic or other non-subjective approach. Following our initial public offering, our compensation committee may, from time to time as it sees fit, retain third-party executive compensation specialists in connection with determining executive compensation and establishing compensation policies.
 
Elements of Compensation
 
Our compensation program for our named executive officers consists of the following elements, each of which is described in greater detail below:
 
  •  base salary;
 
  •  annual performance-based cash incentive awards;
 
  •  long-term equity-incentive awards; and
 
  •  perquisites and other benefits.
 
Base Salary
 
The base salaries that we pay our named executive officers are determined in accordance with their employment agreements. Pursuant to their employment agreements, Messrs. Muhlschlegel, Molinari, Fitzpatrick and Shields are entitled to receive base salaries of $367,744, $367,744, $367,744 and $207,992, respectively. In addition, each named executive officer’s base salary automatically increases annually based on the increase in the Consumer Price Index for the region covering New Jersey, as reported in the Bureau of Labor Statistics of the U.S. Department of Labor. A named executive officer’s base salary also may be subject to additional increases at the discretion of our board of directors. Factors that our board of directors may take into account in determining whether to increase a named executive officer’s base salary include, but are not limited to, (i) individual performance and the level of responsibility and complexity of the named executive officer’s position with the Company; (ii) the amount of the named executive officer’s salary in relation to our other named executive officers; (iii) our overall performance


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and achievements; and (iv) the then prevailing economic and business conditions affecting the Company. In addition, in order to provide our board of directors with flexibility during industry downturns, each of our named executive officers’ base salaries may be unilaterally reduced by up to 5% if the reduction applies to all employees at the “director” level and above or by up to 10% if the reduction applies to all employees at the “managerial” level and above. Such reduction may be instituted no more than one time during any three year period. The Company believes that the base salary that we pay our named executive officers is a key element in being able to attract and retain high-quality executive officers.
 
In recognition of the recent economic downturn in the United States and Canada, our named executive officers agreed to waive their automatic salary increases during 2009 and 2010. In addition, in August 2009, Messrs. Muhlschlegel, Molinari and Fitzpatrick each entered into an agreement with us to voluntarily reduce his base salary by 10% and Mr. Shields entered into an agreement with us to voluntarily reduce his base salary by 5%, in each case, for a period of 12 months. Messrs. Muhlschlegel, Molinari and Fitzpatrick agreed to a larger base salary reduction than Mr. Shields due to their higher overall compensation and greater responsibilities with respect to the Company. As the result of these reductions, each of Messrs. Muhlschlegel’s, Molinari’s and Fitzpatrick’s annual base salary was reduced from $367,744 to $330,970 and Mr. Shields’ annual base salary was reduced from $207,992 to $197,592. In addition, in July 2010, each of Messrs. Muhlschlegel, Molinari, Fitzpatrick and Shields agreed to extend his base salary reduction through December 31, 2010. These base salary reductions are reflected in the named executive officers’ new employment agreements.
 
Annual Performance-Based Cash Incentive Awards
 
The Company believes that annual cash bonuses are an appropriate way to reward our named executive officers for superior Company performance and to align the interests of our named executive officers with our shareholders by tying a portion of their compensation to company and individual performance goals. Prior to this offering, annual cash bonuses were generally based on the Company’s achievement of specified levels of EBITDA (excluding gains on the sale of equipment in the ordinary course of business). In calculating the Company’s EBITDA for purposes of determining bonuses, our board of directors maintained the discretion to include or exclude the impact of changes in accounting principles and the occurrence of extraordinary or unusual events, such as acquisitions.
 
Each named executive officer’s bonus opportunity is determined pursuant to his employment agreement with the Company. Prior to this offering, (i) Mr. Muhlschlegel had a bonus opportunity of 50%, 25% and 10% of base salary, depending on achievement of EBITDA goals, (ii) Messrs. Molinari and Fitzpatrick each had a bonus opportunity of 40%, 20% and 10% of base salary, depending on achievement of EBITDA goals, and (iii) Mr. Shields had a bonus opportunity of 30%, 15% and 10% of base salary, depending on achievement of EBITDA goals. The differences in the level of bonus opportunities were due to the varying levels of duties and responsibilities of our named executive officers.
 
Prior to this offering, in the event that the Company achieved 100% of its EBITDA goal, the named executive officers were entitled to receive a bonus of 50% of base salary, in the case of Mr. Muhlschlegel, 40% of base salary, in the case of Messrs. Molinari and Fitzpatrick, or 30% of base salary, in the case of Mr. Shields. In the event that the Company achieved 95% or more, but less than 100%, of its EBITDA goal, the named executive officers were entitled to receive a bonus of 25% of base salary, in the case of Mr. Muhlschlegel, 20% of base salary, in the case of Messrs. Molinari and Fitzpatrick, or 15% of base salary, in the case of Mr. Shields. In the event that the Company achieved 90% or more, but less than 95%, of its EBITDA goal, the named executive officers were entitled to receive a bonus of 10% of base salary. If the Company did not achieve at least 90% of its EBITDA goal, the named executive officers were not entitled to receive any bonus. In addition, if the Company achieved EBITDA in excess of its goal, our board of directors, in its sole discretion, could elect to award bonuses to our named executive officers in excess of their maximum bonus opportunity. Factors that our board of directors considered in awarding an additional bonus if more than 100% of EBITDA was achieved included overall market conditions and individual contributions towards the success of the Company.


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Prior to this offering, target EBITDA was generally determined by our board of directors in the beginning of the relevant year based on our future financial projections, as well as our past financial results. With respect to 2009, prior to setting any performance goals, our board of directors determined, in consultation with our named executive officers, that no bonuses would be paid to the named executive officers with respect to 2009, regardless of Company or individual performance. This decision was made by our board of directors and named executive officers in recognition of the economic downturn in the United States and Canada and its impact on the transportation business generally. Accordingly, no performance targets were established for 2009.
 
Following this offering, pursuant to their new employment agreements, our named executive officers will be entitled to earn an annual discretionary bonus. These bonuses may be based on (i) individual performance, (ii) the Company’s (a) total revenue, (b) EBITDA (with such adjustments as our board of directors determines to be appropriate), (c) earnings per share, (d) operating ratio or (e) return on invested capital and/or (iii) such other measures as determined by our board of directors in its sole discretion. Each named executive officer will have a target bonus opportunity of 40% of base salary, which represents a decrease from a 50% target bonus opportunity for Mr. Muhlschlegel and an increase from a 30% target bonus opportunity for Mr. Shields. The changes in target bonus opportunity for Messrs. Muhlschlegel and Shields were made because our board of directors determined that it would be appropriate for each named executive officer to have the same target bonus opportunity following this offering.
 
After the final determination of each named executive officer’s bonus amount, bonuses will either be paid currently to the named executive officer in cash or, upon a previously made election by the named executive officer, will be deferred to his account under the New Century Transportation, Inc. Executive SERP Plan (the “SERP”), as described below in “— Perquisites and Other Benefits.”
 
Long-Term Equity Incentive Awards
 
Our long-term equity incentive program is designed to (i) attract key employees, (ii) encourage long-term retention of key employees, (iii) enable us to recognize efforts put forth by key employees who contribute to our development and (iv) align the interests of our key employees with our shareholders by tying a portion of their compensation to company performance. Through this program, we encourage long-term service and loyalty to the Company by fostering an employee ownership culture. Prior to our recapitalization, equity-based awards were granted by our board of directors under the New Century Transportation, Inc. Amended and Restated Equity Incentive Plan, or the Equity Incentive Plan. In connection with our recapitalization, the Company ceased granting awards under the Equity Incentive Plan and adopted the New Century Transportation, Inc. 2006 Stock Incentive Plan, or the 2006 Stock Plan. On          , 2010, our shareholders and board of directors approved the New Century Transportation Inc. Stock Incentive Plan, or the Stock Incentive Plan. In connection with the adoption of the Stock Incentive Plan, both the 2006 Stock Plan and the Equity Incentive Plan were terminated, provided that the terms of such plans will continue to govern outstanding awards granted under such plans. A summary of the terms of the Stock Incentive Plan, the 2006 Stock Plan and the Equity Incentive Plan is set forth below in “— Equity Compensation Plan Information.”
 
Our board of directors periodically reviews each named executive officer’s ownership interest in the Company to ensure that our named executive officers’ interests are aligned with our shareholders’ interests. Since our 2006 recapitalization, each of our named executive officers has maintained a significant ownership interest in the Company. As a result, our board of directors has determined that additional equity grants to our named executive officers have not been necessary. Accordingly, our named executive officers have not been granted equity-based awards under the 2006 Stock Plan, except for the automatic restricted stock grants made as of December 31, 2009, as described below.
 
In connection with our 2006 recapitalization, certain of our employees, including all of our named executive officers, agreed to the imposition of certain forfeiture restrictions on shares, and options to purchase shares, of the Company’s common stock that they already owned (the “Restricted Shares”).


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These restrictions were placed on the Restricted Shares to ensure the continued employment of our named executive officers following our recapitalization, as well as to ensure that our named executive officers maintain a significant ownership stake in the Company. Under the terms of the Restricted Share agreements, the restrictions applicable to the Restricted Shares held by the named executive officers as of our 2006 recapitalization will lapse upon the earlier of (i) July 1, 2011, (ii) the occurrence of a public offering or (iii) the first anniversary of an approved sale (in all cases, provided that the named executive officer’s employment with the Company has not been terminated for cause or by the named executive officer due to a voluntary resignation).
 
In the event that any Restricted Shares are forfeited, the forfeited Restricted Shares will be automatically regranted under the 2006 Stock Plan (in the form of restricted shares of Company common stock) to each individual who owns, and has not forfeited, Restricted Shares based on the number of Restricted Shares owned by such individual as of our 2006 recapitalization in relation to the total number of Restricted Shares outstanding as of our 2006 recapitalization (other than Restricted Shares held by terminated employees). Pursuant to an amendment to the Restricted Share agreements entered into with each of our named executive officers in June 2010, any shares that are so granted will become vested upon the earlier of (i) the 16 month anniversary of a public offering, (ii) an approved sale in which the consideration received by the Company’s shareholders is primarily cash or (iii) the first anniversary of an approved sale in which the consideration received by the Company’s shareholders is not primarily cash, in each case, provided that the named executive officer’s employment with the Company has not been terminated for cause or by the named executive officer due to a voluntary resignation. These amendments had the effect of changing the vesting date in connection with a public offering from the date of such public offering to the 16 month anniversary of such public offering and were made in order to ensure our named executive officers continued employment following a public offering.
 
Because an individual who held Restricted Shares ceased employment with the Company on December 31, 2009, Messrs. Muhlschlegel, Molinari, Fitzpatrick and Shields received additional automatic grants under the 2006 Stock Plan of          ,          ,     and           restricted shares of our common stock, respectively.
 
For purposes of the Restricted Shares and the shares of our common stock granted in respect of the forfeiture of Restricted Shares, (i) an “approved sale” is generally defined as a sale of the Company, including in one or more series of related transactions, to another party or group of parties (including a transaction to recapitalize or form a holding company of the Company) pursuant to which such party or parties acquire (a) a majority of the Company’s common stock (whether by merger, consolidation, sale, transfer or otherwise) or (b) all or substantially all of the Company’s consolidated assets and (ii) a “public offering” is generally defined as a successfully completed firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act in respect of the offer and sale of shares of the Company’s common stock resulting in aggregate net proceeds to the Company and any shareholder selling shares of the Company’s common stock in such offering of not less than $40,000,000. The Company’s initial public offering is expected to constitute a “public offering” for purposes of the Restricted Shares.
 
Perquisites and Other Benefits
 
Each of our named executive officers is eligible to participate in our general employee benefit programs, including medical, dental, life insurance and disability coverage. In addition, Messrs. Muhlschlegel, Molinari and Fitzpatrick are each entitled to receive a monthly car allowance of $1,750 and Mr. Shields is entitled to receive a monthly car allowance of $1,200. The Company views car allowances as a meaningful benefit to our named executive officers who are required to travel by car in the performance of their duties for the Company.
 
Our named executive officers are also eligible to participate, along with our other employees, in the New Century Transportation, Inc. 401(k) Plan (the “401(k) Plan”). Pursuant to the terms of the 401(k) Plan, each eligible employee may defer up to 75% of his or her compensation (subject to the applicable


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IRS limits) and the Company will make matching contributions at the rate of 25% of the first 6% of compensation contributed to the 401(k) Plan by an employee. However, effective March 2009, because of the recent economic downturn, the Company suspended all matching contributions under the 401(k) Plan. Company matching contributions are 100% vested at all times. Company contributions made to the named executive officers under the 401(k) Plan during 2009 are shown in the “All Other Compensation” column of the Summary Compensation Table.
 
In addition, our named executive officers are eligible to participate in our SERP. The SERP is a non-qualified deferred compensation plan that permits eligible employees to defer a portion of their compensation in excess of the IRS limits on deferrals that apply to tax-qualified retirement plans, such as the 401(k) Plan. Under the terms of the SERP, eligible employees may elect to defer up to 50% of their total compensation to the SERP. The Company may make matching contributions in an amount not to exceed 100% of a participant’s compensation and may also make discretionary contributions. None of our named executive officers elected to participate in the SERP in 2009 or in any previous years.
 
2010 Compensation
 
As described above in “— Base Salary,” each of our named executive officers entered into a new employment agreement with the Company on August 10, 2010. These employment agreements extend our named executive officers’ base salary reductions through December 31, 2010 and are described in detail below in “— Employment Agreements and Potential Payments upon Termination or Change in Control.” In addition, due to the economic climate throughout the United States and Canada, our board of directors has not determined whether our named executive officers will be eligible to earn any bonus compensation with respect to 2010. Accordingly, no bonus targets or goals for 2010 have been established to date, and any bonuses paid to our named executive officers with respect to 2010 will be at the sole discretion of our board of directors.
 
In addition, on          , 2010, our shareholders and board of directors approved the Stock Incentive Plan. In connection with the adoption of the Stock Incentive Plan, both the 2006 Stock Plan and the Equity Incentive Plan were terminated, provided that the terms of such plans will continue to govern outstanding awards granted under such plans. A summary of the Stock Incentive Plan is provided below in “— Equity Compensation Plan Information.”
 
Tax and Accounting Considerations
 
The Company is not party to any arrangements that provide for tax gross-up payments. In addition, as a privately held company, the Company was not subject to the deduction limitations of Section 162(m) of the Code, and accordingly, did not structure its compensation arrangements in a manner intended to satisfy the performance-based compensation exception to Section 162(m) of the Code. Although the Company generally intends to pay compensation that is deductible following our initial public offering, because we will compensate our named executive officers in a manner designed to promote our varying corporate objectives, the Company may not adopt a policy requiring all compensation to be deductible. In addition, although the accounting impact of compensation is not a key driver of our compensation program, the Company does consider the accounting impact of compensation when making compensation decisions.


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Summary Compensation Table
 
                                         
                All Other
   
            Stock
  Compensation
   
Name and Principal Position
  Year   Salary ($)(1)   Awards ($)(2)   ($)(3)   Total ($)
 
Harry Muhlschlegel
    2009       360,362       59,375       21,000       440,737  
Chairman and Chief
                                       
Executive Officer
                                       
Brian Fitzpatrick
    2009       360,362       42,275       22,163