This financial review presents our operating results for each of our three most recent fiscal years and our financial condition as of December 31, 2012. You should read the following discussion and analysis in conjunction with our financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth under Item 1A. "Risk Factors." Overview
We are a leading asset-light transportation and logistics service provider offering a full suite of solutions, including customized and expedited LTL, TL, TMS, intermodal solutions (transporting a shipment by more than one mode, primarily via rail and truck), freight consolidation, inventory management, and domestic and international air. We utilize a broad third-party network of transportation providers, comprised of ICs and purchased power providers, to serve a diverse customer base in terms of end market focus and annual freight expenditures. Although we service large national accounts, we primarily focus on small to mid-size shippers, which we believe represent an expansive and underserved market. Our business model is highly scalable and flexible, featuring a variable cost structure that requires minimal investment (as a percentage of revenues) in transportation equipment and facilities, thereby enhancing free cash flow generation and returns on our invested capital and assets.
We have three operating segments:
Less-than-Truckload. Our LTL business involves the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments throughout the United States and into Mexico, Puerto Rico, and Canada. With a network of 36 LTL service centers and over 200 third-party delivery agents, we employ a point-to-point LTL model that we believe provides us with a competitive advantage over the traditional hub and spoke LTL model in terms of faster transit times, lower incidence of damage, and reduced fuel consumption. Our LTL segment also includes domestic and international air transportation services. Truckload and Logistics. Within our TL business, we arrange the pickup, delivery, and inventory management of TL freight through our network of 28 TL service centers, five freight consolidation and inventory management centers, 20 company dispatch offices, and 75 independent brokerage agents located throughout the United States and Canada. We offer temperature-controlled, dry van, intermodal drayage, and flatbed services and specialize in the transport of refrigerated foods, poultry, and beverages. We believe this specialization provides consistent shipping volume year-over-year.
Transportation Management Solutions. Within our TMS business, we offer a "one-stop" transportation and logistics solution, including access to the most cost-effective and time-sensitive modes of transportation within our broad network. Specifically, our TMS offering includes pricing, contract management, transportation mode and carrier selection, freight tracking, freight bill payment and audit, cost reporting and analysis, and dispatch. Our customized TMS offering is designed to allow our customers to reduce operating costs, redirect resources to core competencies, improve supply chain efficiency, and enhance customer service.
Recent Acquisitions
In February 2012, we acquired all of the outstanding stock of Capital Transportation Logistics ("CTL") for the purpose of expanding our presence within the TMS segment. Headquartered in New Hampshire, CTL primarily provides transportation management solutions on LTL freight as well as truckload brokerage and freight bill audit and payment services. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K. In April 2012, we acquired all of the outstanding stock of Grundman Holdings, Inc., which wholly owned both D&E Transport, Inc. and D&E Leasing, Inc. (collectively, "D&E"), for the purpose of expanding our presence within the TL segment. Headquartered in Minnesota, D&E is an asset-light flatbed carrier focused primarily on food and agricultural products. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K. In June 2012, we acquired all of the outstanding stock of CTW Transport ("CTW") for the purpose expanding our presence within the TL segment. Headquartered in Massachusetts, CTW focuses primarily on refrigerated food products. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
In August 2012, we acquired all of the operating assets of R&M Transportation and all of the outstanding stock of Sortino Transportation (collectively, "R&M") for the purpose of expanding our presence within the TL segment. Headquartered in Nebraska, R&M is an asset-light carrier focused primarily on refrigerated truckload services. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.

In August 2012, we acquired all of the outstanding stock of Expedited Freight Systems, Inc. ("EFS") for the purpose of expanding our presence within the LTL segment. EFS is a Midwest regional overnight LTL provider based in Wisconsin. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
In November 2012, we acquired all of the outstanding stock of Central Cal Transportation ("Central Cal") for the purpose of expanding our presence within the TL segment. Headquartered in Northern California, Central Cal is an intermodal carrier focused primarily on the transportation of agricultural products and commodities. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
In November 2012, we acquired all of the outstanding stock of Brandon Carrier Group, Inc. ("A&A"), a truckload service provider headquartered in South Dakota, for the purpose of expanding our presence within the TL segment. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.
In December 2012, we acquired all of the outstanding stock of Direct Connection Transportation ("DCT"), a non-asset truckload service provider headquartered in Arizona, for the purpose of expanding our presence within the TL segment. See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and assumptions. In certain circumstances, those estimates and assumptions can affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing our financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. Application of the accounting policies described below involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. The following is a brief discussion of our critical accounting policies and estimates. Goodwill and Other Intangibles
Goodwill represents the excess of purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets of a business acquired. Goodwill is tested for impairment at least annually using a two-step process that begins with an estimation of the fair value at the "reporting unit" level. We have four reporting units for our three operating segments. We have one reporting unit for our LTL and TMS segments and two reporting units for our TL segment as this is the lowest level for which discrete financial information is prepared and regularly reviewed by segment management. The impairment test for goodwill involves comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. The second step includes hypothetically valuing all the tangible and intangible assets of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit's goodwill is compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying amount. For purposes of our impairment test, the fair value of our reporting units are calculated based upon an average of an income fair value approach and market fair value approach. Based on the test performed in 2012, we concluded that the fair value for all reporting units was significantly in excess of the respective reporting unit's carrying value. Other intangible assets recorded consist of definite-lived customer lists. We evaluate our other intangible assets for impairment when current facts or circumstances indicate that the carrying value of the assets to be held and used may not be recoverable.
Revenue Recognition
LTL revenue is recorded when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; and collection of revenue is reasonably assured. We use a percentage of services completed method to recognize revenue, which results in an allocation of revenue between reporting periods based on the distinctive phases of each LTL transaction completed in each reporting period, with expenses recognized as incurred. We believe that this is the most appropriate method for LTL revenue recognition based on the multiple distinct phases of a typical LTL transaction, which is in contrast to the single phase of a typical TL transaction.
TL revenue is recorded when all of the following have occurred: an agreement of sale exists; pricing is fixed or determinable; delivery has occurred; and our obligation to fulfill a transaction is complete and collection of revenue is reasonably assured. This occurs when we complete the delivery of a shipment or the service has been fulfilled.

TMS transportation revenue and related transportation costs are recognized when the shipment has been delivered by a third-party carrier. Fee for services revenue is recognized when the services have been rendered. At the time of delivery or rendering of services, as applicable, our obligation to fulfill a transaction is complete and collection of revenue is reasonably assured. We offer volume discounts to certain customers. Revenue is reduced as discounts are earned.
We typically recognize revenue on a gross basis, as opposed to a net basis, because we bear the risks and benefits associated with revenue-generated activities by, among other things, (1) acting as a principal in the transaction,
(2) establishing prices, (3) managing all aspects of the shipping process, and
(4) taking the risk of loss for collection, delivery, and returns. Certain TMS transactions to provide specific services are recorded at the net amount charged to the client due to the following factors: (A) we do not have latitude in establishing pricing, and (B) we do not bear the risk of loss for delivery and returns; these items are the risk of the carrier.

Results of Operations
The following table sets forth, for the periods indicated, summary LTL, TL, TMS, corporate, and consolidated statement of operations data. Such revenue data for our LTL, TL, and TMS business segments are expressed as a percentage of consolidated revenues. Other statement of operations data for our LTL, TL, and TMS business segments are expressed as a percentage of segment revenues. Total statement of operations and corporate and eliminations data are expressed as a percentage of consolidated revenues.

                                                      Year Ended December 31, 2012
                                       2012                        2011                       2010
                                                         (Dollars in thousands)
Revenues:
LTL                          $  511,006        47.6  %   $ 466,823        55.3  %   $ 409,914        64.9  %
TL                              476,638        44.4  %     301,279        35.7  %     158,724        25.1  %
TMS                              91,558         8.5  %      79,188         9.4  %      65,902        10.4  %
Eliminations                     (5,848 )      (0.5 )%      (3,663 )      (0.4 )%      (2,522 )      (0.4 )%
Total                         1,073,354       100.0  %     843,627       100.0  %     632,018       100.0  %
Purchased transportation
costs:
LTL                             373,723        73.1  %     352,890        75.6  %     307,721        75.1  %
TL                              320,214        67.2  %     212,439        70.5  %     140,380        88.4  %
TMS                              65,370        71.4  %      58,677        74.1  %      48,466        73.5  %
Eliminations                     (5,848 )      (0.5 )%      (3,663 )      (0.4 )%      (2,522 )      (0.4 )%
Total                           753,459        70.2  %     620,343        73.5  %     494,045        78.2  %
Net revenues (1):
LTL                             137,283        26.9  %     113,933        24.4  %     102,193        24.9  %
TL                              156,424        32.8  %      88,840        29.5  %      18,344        11.6  %
TMS                              26,188        28.6  %      20,511        25.9  %      17,436        26.5  %
Total                           319,895        29.8  %     223,284        26.5  %     137,973        21.8  %
Other operating expenses
(2):
LTL                              99,359        19.4  %      87,890        18.8  %      78,856        19.2  %
TL                              120,048        25.2  %      66,228        22.0  %      11,141         7.0  %
TMS                              14,883        16.3  %      12,222        15.4  %      11,458        17.4  %
Corporate                         7,156         0.7  %       5,831         0.7  %       3,635         0.6  %
Total                           241,446        22.5  %     172,171        20.4  %     105,090        16.6  %
Depreciation and
amortization:
LTL                               2,422         0.5  %       1,718         0.4  %       1,676         0.4  %
TL                                6,306         1.3  %       2,572         0.9  %         744         0.5  %
TMS                                 771         0.8  %         688         0.9  %         694         1.1  %
Total                             9,499         0.9  %       4,978         0.6  %       3,114         0.5  %
Operating income:
LTL                              35,502         6.9  %      24,325         5.2  %      21,661         5.3  %
TL                               30,070         6.3  %      20,040         6.7  %       6,459         4.1  %
TMS                              10,534        11.5  %       7,601         9.6  %       5,284         8.0  %
Corporate                        (7,156 )      (0.7 )%      (5,831 )      (0.7 )%      (3,635 )      (0.6 )%
Total                            68,950         6.4  %      46,135         5.5  %      29,769         4.7  %
Total interest expense            8,030         0.7  %       4,335         0.5  %       8,154         1.3  %
Loss on early extinguishment
of debt                               -           -  %           -           -  %      15,916         2.5  %
Income before provision for
income taxes                     60,920         5.7  %      41,800         5.0  %       5,699         0.9  %
Provision for income taxes       23,390         2.2  %      15,929         1.9  %       2,108         0.3  %
Net income                       37,530         3.5  %      25,871         3.1  %       3,591         1.2  %
Accretion of Series B
preferred stock                       -           -  %           -           -  %         765         0.1  %
Net income available to
common stockholders          $   37,530         3.5  %   $  25,871         3.1  %   $   2,826         0.4  %

(1) Reflects revenues less purchased transportation costs.
(2) Reflects the sum of personnel and related benefits, other operating expenses, acquisition transaction expenses, and restructuring and IPO related expenses.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 Revenues
Consolidated revenues increased by $229.8 million, or 27.2%, to $1,073.4 million in 2012 from $843.6 million in 2011, more than half of which was attributable to the impact of recent acquisitions.
LTL revenues increased by $44.2 million, or 9.5%, to $511.0 million in 2012 from $466.8 million in 2011. This reflected the acquisition of EFS, which contributed revenues of $9.2 million, and year-over-year LTL tonnage growth of 8.9%, driven by a 9.7% increase in the number of LTL shipments. These increases were slightly offset by a 0.7% decline in weight per shipment. Our LTL tonnage increase was primarily due to new customer growth.
TL revenues increased by $175.3 million, or 58.2%, to $476.6 million in 2012 from $301.3 million in 2011. This growth was primarily driven by the 2011 acquisitions of Morgan Southern, Bruenger, James Brooks, and Prime, and the 2012 acquisitions of D&E, CTW, R&M, Central Cal, A&A, and DCT, which collectively contributed $142.7 million of the revenue increase. The remaining $32.6 million of the revenue increase was driven primarily by increases in market pricing and load growth as well as increased utilization of the broker agent network. TMS revenues increased by $12.4 million, or 15.6%, to $91.6 million in 2012 from $79.2 million in 2011, primarily as a result of new and existing customer growth and the acquisition of CTL, which contributed revenues of $5.4 million in 2012. Purchased Transportation Costs
Purchased transportation costs increased by $133.2 million, or 21.5%, to $753.5 million in 2012 from $620.3 million in 2011.
LTL purchased transportation costs increased by $20.8 million, or 5.9%, to $373.7 million in 2012 from $352.9 million in 2011. This increase was primarily the result of rising fuel costs and increases in tonnage and shipments reflected above in LTL revenues. Excluding fuel surcharges, our average linehaul cost per mile was $1.24 during 2012 and 2011. LTL purchased transportation costs as a percentage of LTL revenues decreased to 73.1% in 2012 from 75.6% in 2011 primarily as a result of ongoing pricing and cost initiatives and additional lane density.
TL purchased transportation costs increased by $107.8 million, or 50.7%, to $320.2 million in 2012 from $212.4 million in 2011, primarily as a result of our 2011 and 2012 TL acquisitions. TL purchased transportation costs as a percentage of TL revenues decreased to 67.2% in 2012 from 70.5% in 2011, primarily due to the fact that Prime's freight storage and handling expenses, as well as Bruenger, D&E, CTW, R&M and A&A employee drivers and leased and owned equipment expenses are excluded from transportation costs and instead are included in other operating expenses. Our other TL businesses typically use ICs rather than employee drivers and do not lease equipment. Additionally, increases in market pricing and increased utilization of our TL agent network reduced the percentage of purchased transportation costs to TL revenues.
TMS purchased transportation costs increased by $6.7 million, or 11.4%, to $65.4 million in 2012 from $58.7 million in 2011. TMS purchased transportation costs as a percentage of TMS revenues decreased to 71.4% in 2012 from 74.1% in 2011, primarily as a result of higher margin services due to the acquisition of CTL. Other Operating Expenses
Other operating expenses, which reflect the sum of the personnel and related benefits, other operating expenses, and acquisition transaction expenses line items shown in our consolidated statements of operations, increased by $69.2 million, or 40.2%, to $241.4 million in 2012 from $172.2 million in 2011. Within our LTL business, other operating expenses increased by $11.5 million, or 13.0%, to $99.4 million in 2012 from $87.9 million in 2011, primarily as a result of the incremental costs associated with the 9.7% increase in shipment count, expanded infrastructure costs to support new business initiatives, the reinstatement of our 401(k) match and our August 2012 acquisition of EFS, which contributed $8.2 million of the total increase. As a percentage of LTL revenues, other operating expenses increased to 19.4% in 2012 from 18.8% in 2011, primarily due to the employee drivers of EFS being included in other operating expenses.
Within our TL business, other operating expenses increased by $53.8 million to $120.0 million in 2012 from $66.2 million in 2011. As a percentage of TL revenues, other operating expenses increased to 25.2% in 2012 from 22.0% in 2011, primarily due to the 2011 and 2012 TL acquisitions, which incrementally contributed $49.9 million of the total increase. Prime's freight storage and handling expenses, as well as Bruenger, D&E, CTW, R&M and A&A employee drivers and leased and owned equipment expenses are included in other operating expenses.

Within our TMS business, other operating expenses increased by $2.7 million, or 21.8% to $14.9 million in 2012 from $12.2 million in 2011, primarily as a result of the acquisition of CTL, which contributed $2.4 million of the total increase. TMS other operating expenses, as a percentage of TMS revenues, increased to 16.3% in 2012 from 15.4% in 2011.
Other operating expenses that were not allocated to our LTL, TL, or TMS businesses increased to $7.2 million in 2012 from $5.8 million in 2011. This increase was a result of $1.8 million of incremental infrastructure costs incurred in 2012 offset by a decrease in acquisition expenses of $0.6 million. Depreciation and Amortization
Depreciation and amortization increased to $9.5 million in 2012 from $5.0 million in 2011, reflecting increases in property, plant, and equipment primarily due to our various 2011 and 2012 acquisitions, which provided us with additional capacity to support our customer base. Within our LTL business, depreciation and amortization increased to $2.4 million in 2012 from $1.7 million in 2011, primarily as a result of the acquisition of EFS. Depreciation and amortization within our TL business increased to $6.3 million in 2012 from $2.6 million in 2011 primarily as a result of the acquisitions of Bruenger, D&E, CTW, R&M and A&A. Within our TMS business, depreciation and amortization was $0.8 million in 2012 and $0.7 million in 2011. Operating Income
Operating income increased by $22.9 million, or 49.5%, to $69.0 million in 2012 from $46.1 million in 2011, primarily as a result of the factors above. As a percentage of revenues, operating income increased to 6.4% in 2012 from 5.5% in 2011.
Within our LTL business, operating income increased by $11.2 million, or 45.9%, to $35.5 million from $24.3 million, and also increased as a percentage of LTL revenues to 6.9% in 2012 from 5.2% in 2011, primarily as a result of the factors above.
Within our TL business, operating income increased by $10.1 million, or 50.0%, to $30.1 million from $20.0 million. However, operating income in our TL business decreased as a percentage of TL revenues to 6.3% in 2012 from 6.7% in 2011, primarily as a result of the factors above.
Within our TMS business, operating income increased by $2.9 million, or 38.6%, to $10.5 million from $7.6 million, and also increased as a percentage of TMS revenues to 11.5% in 2012 from 9.6% in 2011, primarily as a result of the factors above.
Interest Expense
Interest expense increased by $3.7 million to $8.0 million in 2012 from $4.3 million in 2011, primarily attributable to the borrowings we incurred to finance our 2011 and 2012 acquisitions.
Income Tax
Income tax provision was $23.4 million in 2012 compared to $15.9 million in 2011. The effective tax rate was 38.4% in 2012 compared to 38.1% in 2011. The effective income tax rate varies from the federal statutory rate of 35.0% primarily due to state and Canadian income taxes as well as the impact of items causing permanent differences.
Net Income Available to Common Stockholders Net income available to common stockholders was $37.5 million in 2012 compared to $25.9 million in 2011.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 Revenues
Consolidated revenues increased by $211.6 million, or 33.5%, to $843.6 million in 2011 from $632.0 million in 2010, approximately half of which was attributable to the impact of the TL acquisitions.
LTL revenues increased by $56.9 million, or 13.9%, to $466.8 million in 2011 from $409.9 million in 2010. This reflected year-over-year LTL tonnage growth of 4.3%, driven by a 4.8% increase in the number of LTL shipments, slightly offset by a 0.5% decline in weight per shipment. Our LTL tonnage increase was driven by new customer growth. In addition to growth in tonnage and shipments, our revenue per hundredweight including fuel surcharges increased during the year by 9.9%. This reflected increased fuel prices year-over-year and an increase in revenue per hundredweight excluding fuel of 4.3%, which resulted from stabilization in the LTL pricing environment, our yield improvement initiatives, and a change in freight mix that provided an increased revenue per hundredweight. Our yield improvement initiatives included surcharges in certain geographic locations and renegotiations of accounts that have fuel caps or waivers in effect. TL revenues increased by $142.6 million, or 89.8%, to $301.3 million in 2011 from $158.7 million 2010. This growth was primarily driven by the acquisitions of Morgan Southern, Bruenger, James Brooks, and Prime, 18.8% organic growth due to a 5.1%

increase in the number of loads, a year-over-year increase in revenue per load of 12.3%, and the continued expansion of our TL agent network. Our 2011 TL acquisitions contributed revenues of $112.8 million.
TMS revenues increased by $13.3 million, or 20.2%, to $79.2 million in 2011 from $65.9 million in 2010, primarily as a result of new and existing customer growth.
Purchased Transportation Costs
Purchased transportation costs increased by $126.3 million, or 25.6%, to $620.3 million in 2011 from $494.0 million in 2010.
LTL purchased transportation costs increased by $45.2 million, or 14.7%, to $352.9 million in 2011 from $307.7 million in 2010, and increased as a percentage of LTL revenues to 75.6% in 2011 from 75.1% in 2010. This increase was primarily the result of rising fuel costs in 2011. Excluding fuel surcharges, our average linehaul cost per mile increased to $1.24 in 2011 from $1.22 in 2010. This increase was mitigated by our yield improvement initiatives and linehaul cost reduction initiatives that included the utilization of our ICs on lanes most impacted by rising rates.
TL purchased transportation costs increased by $72.0 million, or 51.3%, to $212.4 million in 2011 from $140.4 million in 2010, primarily as a result of our 2011 TL acquisitions. TL purchased transportation costs as a percentage of TL revenues decreased to 70.5% in 2011 from 88.4% in 2010, primarily due to the fact that Morgan Southern and Bruenger employee drivers and leased equipment expenses are included in other operating expenses. Our other TL businesses . . .