OVERVIEW

We are the eleventh largest truckload carrier in the United States measured by fiscal 2007 revenue according to Transport Topics, a publication of the American Trucking Associations, Inc. We focus on targeted markets where we believe our service standards can provide a competitive advantage. We are a major carrier for transportation companies such as freight forwarders, less-than-truckload carriers, and third-party logistics providers that require a high level of service to support their businesses, as well as for traditional truckload customers such as manufacturers and retailers. We also generate revenue through a subsidiary that provides freight brokerage services.

Outlook for 2009

Our overriding goal for 2009 is to generate a profit. Toward that end, we are undertaking strict cost controls and managing the size of our fleet to reflect available freight. We believe our goal is achievable and have made the following assumptions, among others, in establishing our goal:

• Industry-wide truckload freight tonnage will decline significantly versus 2008 in the first three quarters of 2009, before approaching 2008 levels in the fourth quarter;
• Because of expected reduced volumes in our industry and the expected further deterioration of other sectors of the economy, freight rates will continue to suffer from downward pressure;
• Uncertainty will persist regarding the availability of credit for our customers, their ability to make payments when due, additional pressures on our customer's cost structures, and additional pressures on our own expenses;
• An anticipated reduction of our consolidated fleet size by 150 tractors in the first quarter of 2009, any further reductions required later in the year, and an increase in the full-year average percentage of team-driven tractors in our fleet will limit the negative effects of rate pressure and decreased shipments such that our revenue per tractor per week will be similar to 2007;
• Certain cost savings initiatives we have identified are successfully executed and we do not experience upward pressure on driver compensation;
• Financing under our Credit Facility, Daimler Facility, and other sources remains available under terms substantially similar to the current terms, taking into account the recent amendment to the Credit Agreement;
• Average fuel prices as reported by the Department of Energy for 2009 remain below $2.40 per gallon on a full-year basis and our fuel surcharge recovery percentage does not deteriorate;
• Our frequency and severity of accident and workers' compensation claims, and associated accrual amounts, remain consistent with the average level over the past three years;
• The used equipment market does not continue to deteriorate below levels seen at the end of 2008; and
• The legal and regulatory framework applicable to our business
(including applicable tax laws and emissions regulations) remains substantially the same.

Recent Results and Year-End Financial Condition

At December 31, 2008, our total stockholders' equity was $118.8 million and our total balance sheet debt, net of cash, was $160.7 million for a total debt-to-capitalization ratio of 57.5% and a book value of $8.42 per basic and diluted share. At year end, we also had approximately $40.6 million in undrawn letters of credit posted with insurance carriers. At December 31, 2008, we had $38.9 million of available borrowing capacity under our Credit Agreement. In March 2009, we obtained an amendment to our Credit Agreement, which retroactively to January 1, 2009 amended the fixed charge coverage covenant in exchange for increases in interest rates and fees under the Credit Agreement and the payment of fees.

For the year ended December 31, 2008, total revenue increased 8.6%, to $773.9 million from $712.5 million during 2007. Freight revenue, which excludes revenue from fuel surcharges, increased 2.2%, to $615.8 million in 2008 from $602.6 million in 2007. Including impairment charges discussed below, we experienced a net loss of $53.4 million, or ($3.80) per basic and diluted share, for 2008 compared to a net loss of $16.7 million, or ($1.19) per basic and diluted share, for 2007. On a non-GAAP basis, without the impairment charges discussed below, our net loss would have been $19.0 million, or ($1.36) per basic and diluted share for 2008, compared to a net loss of $15.7 million, or ($1.12) per basic and diluted share for 2007. Our 2008 loss includes impairment charges that did not affect our liquidity or cash flow for the year. These impairment charges are described in more detail below "Additional Information Concerning Impairment Charges," but included a $24.7 million non-cash charge to write off the goodwill associated with the acquisition of Star Transportation in 2006, and a $9.7 million, after-tax write-down of revenue equipment carrying values for tractors currently held for sale expected to be traded or sold in 2009 and our in-use tractors expected to be traded or sold in 2009 and 2010. There was no tax benefit associated with the nondeductible goodwill impairment charge.

The following tables reconcile our financial results for the years ended December 31, 2008 and December 31, 2007, as reported and, on a non-GAAP basis, excluding the impairment charges:

   Items Affecting Net Loss Comparability:                       Fiscal Year
   (Dollars in Thousands)                                    2008          2007
   Reported Net Loss                                       $ (53,391 )   $ (16,726 )
   Impairment charge on goodwill                           $  24,671            --
   Impairment charge on assets                             $   9,698     $   1,024
   Non-GAAP Basis Net Loss, Excluding Impairment Charges   $ (19,022 )   $ (15,702 )



  Items Affecting Loss Per Share Comparability:                     Fiscal Year
                                                                 2008        2007
  Reported Loss Per Share                                       $ (3.80 )   $ (1.19 )
  Impairment charge on goodwill                                 $  1.75          --
  Impairment charge on assets                                   $  0.69     $  0.07
  Non-GAAP Basis Loss Per Share, Excluding Impairment Charges   $ (1.36 )   $ (1.12 )

These impairment charges are discussed in more detail below in "Additional Information Concerning Impairment Charges." We are presenting the non-GAAP financial measures because we believe they better reflect our fundamental business performance. The non-GAAP financial measures exclude items that we believe to be unusual and that affect the comparability of our results from prior periods.

For the year ended December 31, 2008, our average freight revenue per tractor per week, our main measure of asset productivity, increased 0.6%, to $3,105 compared to $3,088 for the year ended December 31, 2007. The increase was primarily generated by a 0.7% increase in average miles per tractor attributable to a substantial increase in the percentage of our fleet operated by two-person driver teams.

Revenue

We generate substantially all of our revenue by transporting, or arranging transportation of, freight for our customers. Generally, we are paid by the mile or by the load for our services. The main factors that affect our revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, the number of tractors operating, and the number of miles we generate with our equipment. These factors relate to, among other things, the U.S. economy, inventory levels, the level of truck capacity in our markets, specific customer demand, competition, the percentage of team-driven tractors in our fleet, driver availability, and our average length of haul.

In our trucking operations, we also derive revenue from fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services. We measure revenue before fuel surcharges, or "freight revenue," because we believe that fuel surcharges tend to be a volatile source of revenue. We believe the exclusion of fuel surcharges affords a more consistent basis for comparing the results of operations from period to period. In our brokerage operations, we derive revenue from arranging loads for other carriers.

We operate tractors driven by a single driver and also tractors assigned to two-person driver teams. Our single driver tractors generally operate in shorter lengths of haul, generate fewer miles per tractor, and experience more non-revenue miles, but the lower productive miles are expected to be offset by generally higher revenue per loaded mile and the reduced employee expense of compensating only one driver. We expect operating statistics and expenses to shift with the mix of single and team operations.

Expenses and Profitability

The main factors that impact our profitability on the expense side are the variable costs of transporting freight for our customers. The variable costs include fuel expense, driver-related expenses, such as wages, benefits, training, and recruitment, and independent contractor and third party carrier costs, which we record as purchased transportation. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency, and other factors. Our main fixed cost is the acquisition and financing of long-term assets, primarily revenue equipment and operating terminals. In addition, we have other mostly fixed costs, such as certain non-driver personnel expenses.

Our main measure of profitability is operating ratio, which we define as operating expenses, net of fuel surcharge revenue, divided by total revenue, less fuel surcharge revenue.

Revenue Equipment

At December 31, 2008, we operated approximately 3,292 tractors and 8,277 trailers. Of these tractors, approximately 2,555 were owned, 646 were financed under operating leases, and 91 were provided by independent contractors, who own and drive their own tractors. Of these trailers, approximately 2,571 were owned and approximately 5,706 were financed under operating leases. We finance a portion of our tractor fleet and most of our trailer fleet with off-balance sheet operating leases. These leases generally run for a period of three years for tractors and five to seven years for trailers. During 2008, we continued to have a late model fleet with an average tractor age of 2.1 years and an average trailer age of 4.3 years.

Independent contractors (owner-operators) provide a tractor and a driver and are responsible for all operating expenses in exchange for a fixed payment per mile. We do not have the capital outlay of purchasing the tractor. The payments to independent contractors and the financing of equipment under operating leases are recorded in revenue equipment rentals and purchased transportation. Expenses associated with owned equipment, such as interest and depreciation, are not incurred, and for independent contractor-tractors, driver compensation, fuel, and other expenses are not incurred. Because obtaining equipment from independent contractors and under operating leases effectively shifts financing expenses from interest to "above the line" operating expenses, we evaluate our efficiency using net margin as well as operating ratio.

Additional Information Concerning Impairment Charges

Pursuant to Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets, we conducted goodwill impairment testing in light of the current diminished market conditions and declining market outlook for our Star Transportation operating subsidiary, which was acquired in September of 2006. Because we identified a potential impairment, we engaged an independent third party to assist us in the completion of valuations used in the impairment testing process. The completion of this work concluded that the goodwill previously recorded for the Star acquisition was fully impaired and resulted in a $24.7 million, or $1.75 per basic and diluted share, non-cash goodwill impairment charge. There was no tax benefit associated with this nondeductible charge.

Pursuant to FASB Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we performed an impairment analysis of the carrying value of our tractors and trailers. We recently undertook the analysis after lowering our 2009 revenue and tractor disposal proceeds expectations in response to a combination of sharply lower economic indicators, a worsening credit market, and significantly lower prices received for disposals of our own used revenue equipment, all of which deteriorated substantially during the fourth quarter of 2008. Based on these factors and the expected remaining useful lives of the tractors, we recorded a $6.4 million asset impairment charge ($1.2 million was recorded in the third quarter and $5.2 million was recorded in the fourth quarter) to write down the carrying values of tractors and trailers held for sale andexpected to be traded or sold in 2009. Although we do not expect to be required to make any current or future cash expenditures as a result of this impairment charge, cash proceeds of future disposals of revenue equipment are anticipated to be lower than expected prior to this impairment charge.

In accordance with the impairment guidance of FAS 144, most of the tractors held and used which are scheduled to be disposed of in 2009 and 2010 were written down to their fair value as of December 31, 2008. Actual disposition values may be greater or less than expected because of the length of time before disposition and the relatively small amount of market data concerning fair market values of tractors of these model years and mileage. Also, a portion of these tractors are covered by tradeback agreements with the manufacturer, but the exact number cannot be ascertained because the tradebacks are based on a percentage of the number of new tractors actually purchased. The carrying values for revenue equipment scheduled for trade in 2011 and beyond were not adjusted because those tractors and trailers were not required to be impaired based on recoverability testing using the expected future cash flows and disposition values of such equipment.

In addition, our 2007 asset impairment charge was related to our decision to sell our corporate aircraft to reduce ongoing operating costs. We recorded an impairment charge of $1.7 million, reflecting the unfavorable fair market value of the airplane as compared to the combination of the estimated payoff of the long-term operating lease and current book value of related airplane leasehold improvements.

RESULTS OF OPERATIONS

For comparison purposes in the table below, we use freight revenue, or total revenue less fuel surcharges, in addition to total revenue when discussing changes as a percentage of revenue. We believe excluding this sometimes volatile source of revenue affords a more consistent basis for comparing our results of operations from period to period. Freight revenue excludes $158.1 million, $109.9 million, and $111.6 million of fuel surcharges in 2008, 2007, and 2006, respectively.

The following table sets forth the percentage relationship of certain items to total revenue and freight revenue:

                      2008     2007     2006                       2008     2007     2006

                                                Freight revenue
    Total revenue    100.0%   100.0%   100.0%         (1)         100.0%   100.0%   100.0%
   Operating                                    Operating
   expenses:                                    expenses:
   Salaries,                                    Salaries,
   wages, and                                   wages, and
   related                                      related
   expenses           34.1     38.0     38.4    expenses           42.8     44.9     45.8
                                                Fuel expense
   Fuel expense       33.7     29.6     28.4    (1)                16.7     16.8     14.5
   Operations and                               Operations and
   maintenance        5.5      5.7      5.3     maintenance        6.9      6.7      6.3
   Revenue                                      Revenue
   equipment                                    equipment
   rentals                                      rentals
   and purchased                                and purchased
   transportation     11.8     9.3      9.3     transportation     14.8     11.0     11.1
   Operating taxes                              Operating taxes
   and licenses       1.7      2.0      2.1     and licenses       2.1      2.3      2.5
   Insurance and                                Insurance and
   claims             4.9      5.1      5.0     claims             6.1      6.0      6.0
   Communications                               Communications
   and utilities      0.9      1.0      1.0     and utilities      1.1      1.2      1.2
   General                                      General
   supplies and                                 supplies and
   expenses           3.2      3.3      3.1     expenses           4.3      3.9      3.7
   Depreciation                                 Depreciation
   and                                          and
   amortization,                                amortization,
   including net                                including net
   gains on                                     gains on
   disposition of                               disposition of
   equipment (2)      8.2      7.5      6.0     equipment (2)      10.3     8.9      7.2
    Goodwill                                      Goodwill
   impairment (3)     3.2      0.0      0.0     impairment (3)     4.0      0.0      0.0
   Total operating                              Total operating
   expenses          107.2    101.5     98.6    expenses          109.1    101.8     98.3
   Operating                                    Operating
   income (loss)     (7.2)    (1.5)     1.4     income (loss)     (9.1)    (1.8)     1.7
   Other expense,                               Other expense,
   net                1.4      1.6      0.9     net                1.7      1.9      1.1
   Income (loss)                                Income (loss)
   before income                                before income
   taxes             (8.6)    (3.1)     0.5     taxes             (10.8)   (3.7)     0.6
   Income tax                                   Income tax
   expense                                      expense
   (benefit)         (1.7)    (0.8)     0.7     (benefit)         (2.1)    (0.9)     0.8
   Net loss          (6.9)%   (2.3)%   (0.2)%   Net loss          (8.7)%   (2.8)%   (0.2)%

(1) Freight revenue is total revenue less fuel surcharges. In this table, fuel surcharges are eliminated from revenue and subtracted from fuel expense. The amounts were $158.1 million, $109.9 million and $111.6 million in 2008, 2007, and 2006, respectively.
(2) Includes a $9.4 million pre-tax impairment charge for held and used equipment and $6.4 million of pre-tax impairment charges for equipment held for sale in the year ended December 31, 2008, which together represent 2.0% of total revenue and 2.6% of freight revenue. Includes a $1.7 million pre-tax impairment charge for equipment held for sale in the year ended December 31, 2007. See the discussion above under "Additional Information Concerning Impairment Charges" for a more extensive description of these impairments.
(3) Represents a $24.7 non-cash impairment charge to write off the goodwill associated with the acquisition of our Star Transportation subsidiary. See the discussion above under "Additional Information Concerning Impairment Charges" for a more extensive description of this impairment.

Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007

Total revenue increased $61.4 million, or 8.6%, to $773.9 million in 2008, from $712.5 million in 2007. Freight revenue excludes $158.1 million of fuel surcharge revenue in 2008 and $109.9 million in 2007. Freight revenue (total revenue less fuel surcharges) increased $13.2 million, or 2.2%, to $615.8 million in 2008, from $602.6 million in 2007. For comparison purposes, we use freight revenue (total revenue less fuel surcharge revenue) when discussing changes as a percentage of revenue. We believe removing this sometimes volatile source of revenue affords a more consistent basis for comparing the results of operations from period to period.

Average freight revenue per tractor per week, our primary measure of asset productivity, increased 0.6% to $3,105 in 2008 from $3,088 in 2007. The increase was primarily generated by a 0.7% increase in average miles per tractor. The average miles per tractor increase was attributable to a 7 percentage point increase in the percentage of our fleet operated by driver teams (which usually generate higher miles than a solo-driver truck). The increase in teams offset a deterioration in miles per truck in our solo fleets. We continued to constrain the size of our tractor fleet to achieve greater fleet utilization and attempt to improve profitability. Weighted average tractors decreased 4.6% to 3,456 in 2008 from 3,623 in 2007.

Our Solutions revenue increased approximately 176% to $54.7 million in 2008 from $19.8 million in 2007, primarily due to an increase in fuel surcharge collection, much of which is passed on to the third party carriers, and an increase in brokerage loads to 27,117 in 2008 from 10,743 loads in 2007. As a result, average revenue per load increased approximately 9.4% to $2,017 in 2008 from $1,843 per load in 2007.

Salaries, wages, and related expenses decreased $6.6 million, or 2.5%, to $263.8 million in 2008, from $270.4 million in 2007. As a percentage of freight revenue, salaries, wages, and related expenses decreased to 42.8% in 2008 from 44.9% in 2007. Driver pay decreased $7.7 million to $180.8 million in 2008, from $188.5 million in the 2007 period. The decrease was attributable to lower driver wages as more drivers have opted onto our driver per diem pay program. Our payroll expense for employees, other than over-the-road drivers, decreased $1.8 million to $45.4 million from $47.2 million, due to a reduction in non-driver work force comparable to the percentage reduction in tractor fleet. These reductions were partially offset by an increase in workers' compensation expense related to unfavorable development of some outstanding claims during 2008, as well as increases in our group health expenses, and additional office salary expense related to severance payments.

Fuel expense, net of fuel surcharge revenue of $158.1 million in 2008 and $109.9 million in 2007, increased $1.5 million to $102.6 million in 2008 from $101.1 million in 2007. As a percentage of freight revenue, net fuel expense was essentially constant at 16.7% in 2008 and 16.8% in 2007. Net fuel expense was highly volatile during the year, however, amounting to 19.0% of freight revenue during the second quarter and dropping to 11.5% of freight revenue in the fourth quarter. Fuel surcharges amounted to $0.384 per total mile in 2008 compared to $0.257 per total mile in 2007. We received a fuel surcharge on our loaded miles from most shippers. However, this does not cover the entire cost of high fuel prices for several reasons, including the following: surcharges cover only loaded miles, not the approximately 11% of non-revenue miles we operated in 2008; surcharges do not cover miles driven out-of-route by our drivers; and surcharges typically do not cover refrigeration unit fuel usage or fuel burned by tractors while idling. In addition, fuel surcharges vary in the percentage of reimbursement offered, and not all surcharges fully compensate for fuel price increases even on loaded miles.

The rate of fuel price increases also can have an impact. Most fuel surcharges are based on the average fuel price as published by the DOE for the week prior to the shipment. In times of decreasing fuel prices, the lag time causes additional recovery. Lag time was a factor to additional recovery during the second half of 2008, as fuel prices decreased rapidly during the period.

We have established several initiatives to combat the cost of fuel. We have invested in auxiliary power units for a percentage of its fleet and is evaluating the payback on additional units where idle time is already lower. We have also reduced the maximum speed of many of our trucks, implemented strict idling guidelines for our drivers, encouraged the use of shore power units in truck stops, and imposed standards for accepting broker freight that include a minimum combined rate and assumed fuel surcharge component. This combination of initiatives contributed to a significant improvement in fleetwide average fuel mileage. We will continue to review shipper's overall freight rate and fuel surcharge program. Fuel costs may continue to be affected in the future by price fluctuations, volume purchase commitments, the terms and collectibility of fuel surcharges, the percentage of miles driven by independent contractors, and lower fuel mileage due to government mandated emissions standards that have resulted in less fuel efficient engines. At December 31, 2008, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

Operations and maintenance, consisting primarily of vehicle maintenance, repairs, and driver recruitment expenses, increased $2.0 million to $42.5 million in 2008 from $40.4 million in 2007. The increase resulted from increased tractor and trailer maintenance costs, as well as increased tire expense associated with a somewhat older average fleet age and the associated tire replacement cycle. As a percentage of freight revenue, operations and maintenance increased to 6.9% in 2008 from 6.7% in 2007.

Revenue equipment rentals and purchased transportation increased $24.5 million, or 36.8%, to $91.0 million in 2008, from $66.5 million in 2007. As a percentage of freight revenue, revenue equipment rentals and purchased transportation expense increased to 14.8% in 2008 from 11.0% in 2007. These increases were primarily driven by increased payments to third-party transportation providers associated with Solutions, our brokerage subsidiary, which increased to $45.7 million in 2008 from $16.3 million in 2007. This was offset by a $3.7 million reduction in payments to independent contractors, which decreased to $14.1 million in 2008 from $17.8 million in 2007, mainly due to a decrease in the independent contractor fleet, and a decrease in tractor and trailer equipment rental and other related expenses to $31.2 million in 2008 compared with $32.5 million in 2007. We had financed approximately 646 tractors and 5,706 trailers under operating leases at December 31, 2008, compared with 693 tractors and 6,322 trailers under operating leases at December 31, 2007. This expense category will fluctuate with the number of loads hauled by independent contractors and handled by Solutions and the percentage of our fleet financed with operating leases, as well as the amount of fuel surcharge revenue passed through to the independent contractors and third-party carriers.

Operating taxes and licenses decreased $1.0 million, or 7.3%, to $13.1 million in 2008 from $14.1 million in 2007. As a percentage of freight revenue, . . .