Expedited Transportation – provides time critical expedited transportation to our customers through our wholly owned subsidiary Express-1, Inc. (Express-1). This typically involves dedicating one truck and driver to a load which has a specified time delivery requirement. Most of the services provided are completed through a fleet of exclusive use vehicles that are owned and operated by independent contract drivers. The use of non-owned resources to provide services minimizes the amount of capital investment required and is often described with the terms “non-asset” or “asset-light.” In January of 2009, certain assets and liabilities of First Class Expediting Services Inc. (FCES) were purchased to complement the operations of Express-1. Express-1 began consolidating the results of FCES as of the purchase date.

Freight Forwarding – provides freight forwarding services through a chain of independently owned stations located throughout the United States, along with our two company owned international branches through our wholly owned subsidiary Concert Group Logistics, Inc. (CGL). These stations are responsible for selling and operating freight forwarding transportation services within their geographic area under the authority of CGL. In October of 2009, certain assets and liabilities of LRG International Inc. (LRG) were purchased to complement the operations of CGL. CGL began consolidating the results of LRG as of the purchase date.

During 2008, the Company discontinued its Express-1 Dedicated business unit, in anticipation of the cessation of these operations in February 2009. All revenues and costs associated with this operation have been accounted for, net of taxes, in the line item labeled “Income from discontinued operations”. More information on the discontinuance of the Express-1 Dedicated operations can be found in Note 3 – Discontinued Operations.

The accompanying Consolidated Financial Statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company does not have any variable interest entities whose financial results are not included in the Consolidated Financial Statements.

The Company prepares its Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. The Company reviews its estimates, including but not limited to: accrued revenue, purchased transportation, recoverability of long-lived assets, accrual of acquisition earn-outs, estimated legal accruals, valuation allowances for deferred taxes, reserve for uncertain tax positions, and allowance for doubtful accounts on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. Management believes that these estimates are reasonable and have been discussed with the audit committee; however, actual results could differ from these estimates.

Cash and cash equivalents consist primarily of cash and money market accounts with an original maturity of three months or less and are maintained at financial institutions. At times, these balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. All of the non-interest bearing cash balances were fully insured at December 31, 2011, due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning in 2013, insurance coverage will revert to $250,000 per depositor at each financial institution, and the non-interest bearing cash balances may again exceed federally insured limits. At December 31, 2011, $72,344,000 was held in an interest bearing money market account. At December 31, 2010, there were no amounts held in interest bearing accounts.

The Company continues to mitigate the concentration of credit risk with respect to trade receivables for any one customer by the expansion of customer base, industry base, and service areas. For the year ended December 31, 2011, a domestic automotive manufacturer accounted for approximately 8% of the Company’s consolidated revenue. During 2011, the Company generated approximately 10% of its consolidated revenue from the Big Three domestic automotive manufacturers. Additionally, at December 31, 2011, account receivable balances related to the Big Three automotive makers equaled 5% of the Company’s consolidated accounts receivable. The concentration of credit risk extends to major automotive industry suppliers, international automotive manufacturers, and many customers who support and derive revenue from the automotive industry.

For the year ended December 31, 2010, a domestic automotive manufacturer accounted for approximately 5% of the Company’s consolidated revenue. During 2010, the Company generated approximately 8% of its consolidated revenue from the Big Three domestic automotive manufacturers. Additionally, at December 31, 2010, account receivable balances related to the Big Three automotive makers equaled 6% of the Company’s consolidated account receivable balance. The concentration of credit risk extends to major automotive industry suppliers, international automotive manufacturers, and many customers who support and derive revenue from the automotive industry.

The Company extends credit to its various customers based on evaluation of the customer’s financial condition and ability to pay in accordance with the payment terms. The Company provides for estimated losses on accounts receivable considering a number of factors, including the overall aging of accounts receivable, customers’ payment history and customers’ current ability to pay their obligations. The Company writes off accounts receivable against the allowance for doubtful accounts when an account is deemed uncollectible. We do not accrue interest on past due receivables.

Property and equipment are stated at cost. Expenditures for maintenance and repair costs are expensed as incurred. Major improvements that increase the estimated useful life of an asset are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in the results of operations. Depreciation is calculated by the straight-line method over the following estimated useful lives of the related assets:

Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. Intangible assets with indefinite lives consist principally of the Express-1 and CGL trade names. The Company follows the provisions of the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) Topic 350, “Intangibles – Goodwill and Other”, which requires an annual impairment test for goodwill and intangible assets with indefinite lives. If the carrying value of intangibles with indefinite lives exceeds their fair value, an impairment loss is recognized in an amount equal to that excess. Goodwill is evaluated using a two-step impairment test at the reporting unit level. The first step compares the book value of a reporting unit, including goodwill, with its fair value. If the book value of a reporting unit exceeds its fair value, we complete the second step in order to determine the amount of goodwill impairment loss that we should record. In the second step, we determine an implied fair value of the reporting unit’s goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill. The amount of impairment is equal to the excess of the book value of goodwill over the implied fair value of that goodwill.

The Company performs the annual impairment testing during the third quarter unless events or circumstances indicate impairment of the goodwill may have occurred before that time. For the years presented, we did not recognize any goodwill impairment as the estimated fair value of our reporting units with goodwill significantly exceeded the book value of these reporting units.

The Company follows the provisions of ASC Topic 360, “Property, Plant and Equipment” which establishes accounting standards for the impairment of long-lived assets such as property, plant and equipment and intangible assets subject to amortization. The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. During 2011 and 2010, there was no impairment of identified intangible assets.

The Company’s intangible assets subject to amortization consist of trade names, non-compete agreements, customer relationships, and other intangibles that are amortized on a straight-line basis over the estimated useful lives of the related intangible asset. The estimated useful lives of the respective intangible assets range from four to 12 years.

Other long-term assets consist primarily of balances representing various deposits, the long-term portion of the Company’s non-qualified deferred compensation plan and notes receivable from various CGL independent station owners. Also included within this account classification are incentive payments to independent station owners within the CGL network. These payments are made by CGL to certain station owners as an incentive to join the network. These amounts are amortized over the life of each independent station contract and the unamortized portion is recoverable in the event of default under the terms of the agreements.

FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and classifies the inputs used to measure fair value into the following hierarchy:

The aggregate net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, notes receivable, accounts payable, accrued expenses and short-term borrowings. Fair values approximate carrying values for these financial instruments since they are short-term in nature and they are receivable or payable on demand. The fair value of the Company’s long-term debt and CGL notes receivable approximated their respective carrying values based on the interest rates associated with these instruments.

Certain assets and liabilities are measured at fair value on a non-recurring basis, which means that the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value measurements or adjustments in certain circumstances, for example, when the Company makes an acquisition or in connection with goodwill and trade name impairment testing.

In accordance with FASB ASC Topic 350, “Intangibles—Goodwill and Other”, the Company’s goodwill and indefinite lived intangibles are tested for impairment annually or more frequently if significant events or changes indicate possible impairment. The Company’s annual impairment analyses were completed in the third quarter of fiscal years 2011 and 2010, and resulted in no impairments. For the years presented, we did not recognize any goodwill impairment as the estimated fair value of our reporting unit with goodwill significantly exceeded its carrying amount.

As discussed further in Note 11 — Acquisitions, the Company completed an acquisition in the fourth quarter of fiscal year 2009. The acquisition-date fair values of the intangible assets acquired have been estimated by management using income approach methodologies, pricing models and valuation techniques. The valuation of these identifiable intangible assets, as well as the other assets acquired and liabilities assumed, was based on management’s estimates, available information and reasonable and supportable assumptions. The fair value measurements were determined primarily based on Level 3 unobservable input data that reflect the Company’s assumptions regarding how market participants would value the assets.

The Company recognizes revenue at the point in time delivery is completed on the freight shipments it handles, with related costs of delivery being expensed within the same period in which the associated revenue is recognized. The Company uses the following supporting criteria to determine that revenue has been earned and should be recognized:

Taxes on income are provided in accordance with ASC Topic 740, “Income Taxes”. Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Financial Statements. Deferred tax assets and liabilities are determined based on the differences between the book values, and the tax basis of particular assets and liabilities and the tax effects of net operating loss and capital loss carry forwards. 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. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized as income or expense in the period that included the enactment date. A valuation allowance is provided to offset the net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Accounting for uncertainty in income taxes is determined based on ASC Topic 740, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. As of December 31, 2011 and 2010, the Company accrued approximately $200,000 and $135,000 for certain potential state income taxes.

The Company accounts for share-based compensation based on the equity instrument’s grant date fair value in accordance with ASC Topic 718, “Compensation – Stock Compensation”. The Company has recorded compensation expense related to stock options and restricted stock units of $1.2 million, $157,000 and $172,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

Options and restricted stock units generally become fully vested three to five years from the date of grant and expire five to ten years from the grant date. Certain of the restricted stock units also contain performance based vesting criteria. As of December 31, 2011, the Company had no shares available for future equity grants under its existing plans. During the life of the plans 356,000 stock options have been exercised.

The weighted-average fair value of each stock option recorded in expense for the years ended December 31, 2011, 2010 and 2009 was estimated on the date of grant using the Black-Scholes option pricing model and amortized over the requisite service period of the underlying options. The Company has used one grouping for the assumptions, as its option grants have similar characteristics. The expected term of options granted has been derived based upon the Company’s history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data was also used to estimate option exercises and employee terminations. Estimated volatility is based upon the Company’s historical market price at consistent points in a period equal to the expected life of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the dividend yield is zero. The assumptions outlined in the table below were utilized in the calculations of compensation expense from option grants in the reporting periods reflected.

As of December 31, 2011, the Company had approximately $4.0 million of unrecognized compensation cost related to non-vested stock option-based compensation that is anticipated to be recognized over a weighted average period of approximately 4.3 years. Remaining estimated compensation expense related to existing stock-option based plans is $1.2 million, $875,000, $781,000, $652,000 and $395,000 for the years ending December 31, 2012, 2013, 2014, 2015, and 2016, respectively.

As of December 31, 2011, the Company had approximately $6.9 million of unrecognized compensation cost related to non-vested restricted stock-based compensation that is anticipated to be recognized over a weighted average period of approximately 4.5 years. Remaining estimated compensation expense related to existing restricted stock-based plans is $1.6 million, $1.5 million, $1.5 million, $1.4 million and $900,000 for the years ending December 31, 2012, 2013, 2014, 2015 and 2016, respectively.

At December 31, 2011 and 2010, the aggregate intrinsic value of options outstanding and exercisable was $12,800,000 and $3,200,000, respectively. During the years ended December 31, 2011, 2010 and 2009 the intrinsic value of options exercised was $1,034,000, $159,000 and zero, respectively. During the years ended December 31, 2011, 2010, and 2009 stock options with a fair value of $785,000, $159,000 and 199,000 vested, respectively. For additional information regarding our plan refer to Note 10 – Stockholders’ Equity.

Earnings per common share are computed in accordance with ASC Topic 260, “Earnings per Share”, which requires companies to present basic earnings per share and diluted earnings per share. Basic earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share are computed by dividing net income by the combined weighted average number of shares of common stock outstanding and dilutive options outstanding during the year. The table below identifies the weighted average number of shares outstanding and the associated earnings per common share for the periods represented.

Diluted earnings per common share are computed by dividing net income by the combined weighted average number of shares of common stock outstanding and the potential dilution of stock options, warrants, restricted stock units and convertible preferred stock outstanding during the period, if dilutive. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. For the year ended December 31, 2011, the weighted average of potentially dilutive securities excluded from the computation of diluted earnings per share was as follows:

The Company has in place an Employee Stock Ownership Plan (“ESOP”). Shares issued to this plan are included in both the basic and diluted weighted average common shares outstanding amounts. Common shares outstanding from the ESOP were 64,395 and 63,750 and 63,750 for the years ended December 31, 2011, 2010 and 2009, respectively. For additional information refer to Note 14 – Employee Benefit Plans.