| The following issues, uncertainties, and risks, among others, should be considered in evaluating our business and growth outlook |
| Our business is subject to general economic and business factors that are largely out of our control |
| Our business is dependent on a number of factors that may have a materially adverse effect on our results of operations, many of which are beyond our control |
| The most significant of these factors are recessionary economic cycles, changes in customers &apos inventory levels, excess tractor or trailer capacity in comparison with shipping demand, and downturns in customers &apos business cycles |
| Economic conditions, particularly in market segments and industries where we have a significant concentration of customers and in regions of the country where we have a significant amount of business, that decrease shipping demand or increase the supply of tractors and trailers can exert downward pressure on rates or equipment utilization, thereby decreasing asset productivity |
| Adverse economic conditions also may harm our customers and their ability to pay for our services |
| Customers encountering adverse economic conditions represent a greater potential for loss, and we may be required to increase our allowance for doubtful accounts |
| We are also subject to increases in costs that are outside of our control that could materially reduce our profitability if we are unable to increase our rates sufficiently |
| Such cost increases include, but are not limited to, declines in the resale value of used equipment, increases in interest rates, fuel prices, taxes, tolls, license and registration fees, insurance, revenue equipment, and healthcare for our employees |
| We could be affected by strikes or other work stoppages at our facilities or at customer, port, border, or other shipping locations |
| In addition, we cannot predict the effects on the economy or consumer confidence of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state, or heightened security requirements |
| Enhanced security measures could impair our operating efficiency and productivity and result in higher operating costs |
| Our growth may not continue at historic rates |
| Historically, we have experienced significant and rapid growth in revenue and profits |
| There can be no assurance that our business will continue to grow in a similar fashion in the future or that we can effectively adapt our management, administrative, and operational systems to respond to any future growth |
| Further, there can be no assurance that our operating margins will not be adversely affected by future changes in and expansion of our business or by changes in economic conditions |
| 5 Increased prices, reduced productivity, and restricted availability of new revenue equipment may adversely affect our earnings and cash flows |
| We have experienced higher prices for new tractors over the past few years, partially as a result of government regulations applicable to newly manufactured tractors and diesel engines, in addition to higher commodity prices and better pricing power among equipment manufacturers |
| More restrictive Environmental Protection Agency, or EPA, emissions standards for 2007 will require vendors to introduce new engines |
| We have decided to upgrade our fleet with pre-2007 engines and other carriers may seek to do the same, possibly leading to shortages |
| Our business could be harmed if we are unable to continue to obtain an adequate supply of new tractors and trailers for these or other reasons |
| As a result, we expect to continue to pay increased prices for equipment and incur additional expenses and related financing costs for the foreseeable future |
| Furthermore, when we do decide to purchase tractors with post-2007 engines, such engines are expected to reduce equipment productivity and lower fuel mileage and, therefore, increase our operating expenses |
| At December 31, 2005, 68dtta6prca of our tractor fleet was comprised of tractors with pre-2007 engines that meet EPA-mandated clean air standards |
| Our entire tractor fleet will be comprised of tractors with such engines by the end of 2006 |
| In addition, a decreased demand for used revenue equipment could adversely affect our business and operating results |
| We rely on the sale and trade-in of used revenue equipment to offset the cost of new revenue equipment |
| However, a reversal of this trend could result in lower market values |
| This would increase our capital expenditures for new revenue equipment and increase our maintenance costs if management decides to extend the use of revenue equipment in a depressed market |
| If fuel prices increase significantly, our results of operations could be adversely affected |
| Prices and availability of petroleum products are subject to political, economic, and market factors that are generally outside our control |
| Political events in the Middle East, Venezuela, and elsewhere and hurricanes, and other weather-related events, also may cause the price of fuel to increase |
| Because our operations are dependent upon diesel fuel, significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition if we are unable to pass increased costs on to customers through rate increases or fuel surcharges |
| Historically, we have sought to recover a portion of short-term increases in fuel prices from customers through fuel surcharges |
| Fuel surcharges that can be collected do not always fully offset the increase in the cost of diesel fuel |
| To the extent we are not successful in these negotiations our results of operations may be adversely affected |
| Difficulty in driver and independent contractor recruitment and retention may have a materially adverse effect on our business |
| Difficulty in attracting or retaining qualified drivers, including independent contractors, could have a materially adverse effect on our growth and profitability |
| Our independent contractors are responsible for paying for their own equipment, fuel, and other operating costs, and significant increases in these costs could cause them to seek higher compensation from us or seek other opportunities within or outside the trucking industry |
| In addition, competition for drivers, which is always intense, continues to increase |
| If a shortage of drivers should continue, or if we were unable to continue to attract and contract with independent contractors, we could be forced to limit our growth, experience an increase in the number of our tractors without drivers, which would lower our profitability, or be required to further adjust our driver compensation package |
| We have increased our driver compensation on several occasions recently, and we are implementing additional pay increases in certain areas in 2006 |
| Increases in driver compensation could adversely affect our profitability if not offset by a corresponding increase in rates |
| We operate in a highly regulated industry, and increased costs of compliance with, or liability for violation of, existing or future regulations could have a materially adverse effect on our business |
| Our operations are regulated and licensed by various US agencies |
| Our company drivers and independent contractors also must comply with the safety and fitness regulations of the United States Department of Transportation, or DOT, including those relating to drug and alcohol testing and hours-of-service |
| Such matters as weight and equipment dimensions are also subject to US regulations |
| We also may become subject to new or more restrictive regulations relating to fuel emissions, drivers &apos hours-of-service, ergonomics, or other matters affecting safety or operating methods |
| Other agencies, such as the EPA and the Department of Homeland Security, or DHS, also regulate our equipment, operations, and drivers |
| 6 Future laws and regulations may be more stringent and require changes in our operating practices, influence the demand for transportation services, or require us to incur significant additional costs |
| Higher costs incurred by us, or by our suppliers who pass the costs onto us through higher prices, could adversely affect our results of operations |
| The DOT, through the Federal Motor Carrier Safety Administration Act, or FMCSA, imposes safety and fitness regulations on us and our drivers |
| New rules that limit driver hours-of-service were adopted effective January 4, 2004, and then modified effective October 1, 2005 |
| The rules effective October 1, 2005, did not substantially change the existing rules but are likely to create a moderate reduction in the amount of time available to drivers in longer lengths of haul, which could reduce equipment productivity in those lanes |
| The FMCSA is studying rules relating to braking distance and on-board data recorders that could result in new rules being proposed |
| We are unable to predict the effect of any proposed rules, but we expect that any such proposed rules would increase costs in our industry, and the on-board recorders potentially could decrease productivity and the number of people interested in being drivers |
| In the aftermath of the September 11, 2001 terrorist attacks, federal, state, and municipal authorities have implemented and continue to implement various security measures, including checkpoints and travel restrictions on large trucks |
| The Transportation Security Administration, or TSA, of the DHS has adopted regulations that require determination by the TSA that each driver who applies for or renews his or her license for carrying hazardous materials is not a security threat |
| This could reduce the pool of qualified drivers, which could require us to increase driver compensation, limit our fleet growth, or let trucks sit idle |
| These regulations also could complicate the matching of available equipment with hazardous material shipments, thereby increasing our response time on customer orders and our non-revenue miles |
| These security measures could negatively impact our operating results |
| Some states and municipalities have begun to restrict the locations and amount of time where diesel-powered tractors, such as ours, may idle, in order to reduce exhaust emissions |
| These restrictions could force us to alter our drivers &apos behavior, purchase on-board power units that do not require the engine to idle, or face a decrease in productivity |
| Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties |
| In addition to direct regulation by the DOT and other agencies, we are subject to various environmental laws and regulations dealing with the handling of hazardous materials, underground fuel storage tanks, and discharge and retention of storm-water |
| We operate in industrial areas, where truck terminals and other industrial facilities are located, and where groundwater or other forms of environmental contamination have occurred |
| Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others |
| We also maintain bulk fuel storage and fuel islands at the majority of our facilities |
| If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of applicable laws or regulations, it could have a materially adverse effect on our business and operating results |
| If we should fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability |
| Our business also is subject to the effects of new tractor engine design requirements implemented by the EPA such as those that became effective October 1, 2002, and are expected to become effective in 2007 which are discussed above under "e Risk Factors - Increased prices for, or increased costs of operating, new revenue equipment may materially and adversely affect our earnings and cash flow "e |
| Additional changes in the laws and regulations governing or impacting our industry could affect the economics of the industry by requiring changes in operating practices or by influencing the demand for, and the costs of providing, services to shippers |
| We may not make acquisitions in the future, or if we do, we may not be successful in integrating the acquired company, either of which could have a materially adverse effect on our business |
| Historically, acquisitions have been a part of our growth |
| There is no assurance that we will be successful in identifying, negotiating, or consummating any future acquisitions |
| If we fail to make any future acquisitions, our growth rate could be materially and adversely affected |
| Any acquisitions we undertake could involve the dilutive issuance of equity securities and/or incurring indebtedness |
| In addition, acquisitions involve numerous risks, including difficulties in assimilating the acquired companyapstas operations, the diversion of our managementapstas attention from other business concerns, risks of entering into markets in which we have had no or only limited direct experience, and the potential loss of customers, key employees, and 7 drivers of the acquired company, all of which could have a materially adverse effect on our business and operating results |
| If we make acquisitions in the future, we cannot guarantee that we will be able to successfully integrate the acquired companies or assets into our business |
| If we are unable to retain our key employees or find, develop, and retain service center managers, our business, financial condition, and results of operations could be adversely affected |
| We are highly dependent upon the services of several executive officers and key management employees |
| The loss of any of their services could have a short-term, negative impact our operations and profitability |
| We must continue to develop and retain a core group of managers if we are to realize our goal of expanding our operations and continuing our growth |
| Failing to develop and retain a core group of managers could have a materially adverse effect on our business |
| The Company has developed a structured business plan and procedures to prevent a long-term effect on future profitability due to the loss of key management employees |
| We are highly dependent on a few major customers, the loss of one or more of which could have a materially adverse effect on our business |
| A significant portion of our revenue is generated from a limited number of major customers |
| For the year ended December 31, 2005, our top 25 customers, based on revenue, accounted for approximately 61prca of our revenue |
| A reduction in or termination of our services by one or more of our major customers could have a materially adverse effect on our business and operating results |
| Seasonality and the impact of weather affect our operations and profitability |
| Our tractor productivity decreases during the winter season because inclement weather impedes operations, and some shippers reduce their shipments after the winter holiday season |
| Revenue can also be affected by bad weather and holidays, since revenue is directly related to available working days of shippers |
| At the same time, operating expenses increase and fuel efficiency declines because of engine idling and harsh weather which creates higher accident frequency, increased claims, and more equipment repairs |
| Ongoing insurance and claims expenses could significantly reduce our earnings |
| Our future insurance and claims expense might exceed historical levels, which could reduce our earnings |
| We self-insure for a portion of our claims exposure resulting from workers &apos compensation, auto liability, general liability, cargo and property damage claims, as well as employees &apos health insurance |
| We periodically evaluate and adjust our claims reserves to reflect our experience |
| However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts |
| We maintain insurance above the amounts for which we self-insure with licensed insurance carriers |
| Although we believe the aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that one or more claims could exceed our aggregate coverage limits |
| Insurance carriers have raised premiums for many businesses, including trucking companies |
| If these expenses increase, or if we experience a claim in excess of our coverage limits, or we experience a claim for which coverage is not provided, results of our operations and financial condition could be materially and adversely affected |
| We are dependent on computer and communications systems, and a systems failure could cause a significant disruption to our business |
| Our business depends on the efficient and uninterrupted operation of our computer and communications hardware systems and infrastructure |
| We currently use a centralized computer network and regular communication to achieve system-wide load coordination |
| Our operations and those of our technology and communications service providers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, terrorist attacks, Internet failures, computer viruses, and other events beyond our control |
| In the event of a significant system failure, our business could experience significant disruption |