jchc_Current_Folio

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K

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☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016


◻	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 333-210698

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Jack Cooper Holdings Corp.

(Exact name of registrant as specified in its charter)

_____________________________________________________________

Delaware

26-4822446

(State or other jurisdiction of

incorporation or organization)

(I.R.S. employer

Identification no.)

1100 Walnut Street, Suite 2400, Kansas City, Missouri		64106
(Address of principal executive offices)		(Zip Code)

(816) 983 4000

(Registrant’s telephone number, including area code)

_____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ◻NO ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ◻NO ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. YES ☒ NO ◻

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ◻

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):


Large accelerated filer	◻	Accelerated filer	◻

Non-accelerated filer	☒	Smaller reporting company	◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ◻ NO ☒

The aggregate market value of the common stock held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter, June 30, 2016, was $0. As of March 22, 2017, there were outstanding 100 shares of the Registrant’s common stock, all of which were issued to the Registrant’s parent company.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I

ITEM 1: BUSINESS

As used in this Annual Report on Form 10-K, unless the context otherwise requires or indicates, references to “JCHC,” “the Company,” “our Company,” “we,” “our” and “us” refer to Jack Cooper Holdings Corp. and its subsidiaries and affiliates.

Business Overview

We are a growth‑oriented, specialty transportation and other logistics provider and the largest over‑the‑road finished vehicle logistics (“FVL”) company in North America. Through our Transport and Logistics segments, we provide premium asset‑heavy and asset‑light solutions to the global new and previously owned vehicle (“POV”) markets, specializing in finished vehicle transportation and other logistics services for major automotive original equipment manufacturers (“OEMs”) and fleet ownership companies, remarketers, dealers, and auctions. We believe several factors, including healthy end‑markets, ongoing optimization of our network, recently passed federal legislation, innovation in our asset‑light Logistics segment, and opportunistic acquisitions, will drive growth in our business.

Our largest customers include General Motors Company (“GM”), Ford Motor Company (“Ford”) and Toyota Motor Sales, USA, Inc. (“Toyota”) for whom we have provided services for 88, 24, and 37 years, respectively. We have become a trusted provider for our OEM customers, working closely with them on their transport and other logistics needs. In 2011, as a demonstration of our operational excellence and service, we were the first‑ever auto carrier and one of just 68 companies among GM’s approximately 20,000 suppliers to receive the GM Supplier of the Year Award. We repeated this accomplishment in 2013, when 82 companies received the award. Also, in May 2014, Ford’s chief executive officer presented us with the Ford 2013 World Excellence Award, in 2015, we received the award for Outstanding Performance from GM Remarketing, and in 2016, we were named Port Carrier of the Year by Wallenius Wilhelmsen Logistics, a third- party logistics provider for Nissan. In addition, we are the primary third‑party logistics provider for Ford Vehicle Remarketing, further emphasizing the strength of our relationship as well as demonstrating our presence in the remarketed vehicle market. We are focused on strengthening our core asset‑intensive transport and complementary asset‑light logistics business that makes us who we are today.

Our Transport segment is the market leader in over‑the‑road FVL. We deliver finished vehicles from manufacturing plants, vehicle distribution centers (“VDCs”), seaports, and railheads to new vehicle dealerships. As of December 31, 2016, we operate a fleet of 2,050 active rigs and a network of 53 strategically located terminals across the United States and Canada. We operate in the short haul segment of the U.S. automotive transportation market for primarily new vehicles and to a lesser extent POVs. We haul four and two‑door automobiles, light trucks, sport utility vehicles, and transit vans. In 2016, we transported over 3.7 million finished vehicles, which we believe is significantly higher than the number of units transported by our nearest competitor.

Our Logistics segment provides a range of asset‑light services to the POV market, including inspections, automated claims management, title and key storage services, brokerage and export services, port processing, third‑party logistics management, and other technical services. We believe we are one of the largest inspectors of used vehicles in the United States. We independently report on the condition of POVs to both close the lessee‑lessor contracts (e.g., when a POV is returned to a dealership by a customer) and to remarket the vehicle through both wholesale and retail channels. We also help our customers move vehicles to and from dealerships, inspection lots, auctions, and overseas markets by coordinating transportation from third-party trucking, rail, or ocean shipping providers. We further provide value added services across the supply chain, such as our vehicle inspection application, PhotoBooth, which provides high‑definition photo technology to vehicle dealers and remarketers who, for marketing purposes, normally take a large number of photos of each vehicle they plan to sell. We intend to further diversify across the FVL value chain and build interdependency with our customers by growing and expanding our logistics services.

We have a track record of transformative acquisitions and plan to continue to evaluate attractive complementary businesses as part of our specialty transportation expansion strategy. Since 2008, we have completed five acquisitions, including the acquisition of substantially all of the assets of Allied Systems Holdings, Inc. (the “Allied Acquisition”) and certain of its wholly-owned subsidiaries (the “Allied Sellers”) in December 2013, following which we solidified our position as the largest over‑the‑road FVL provider in North America and as one of the leading FVL providers. We believe we are ideally positioned to capitalize on favorable growth in the global FVL industry, which includes all modes of

transportation, whether truck, rail, or ship. Additionally, we believe that we are well positioned to expand into other related industries that require highly specialized or customized asset‑heavy and asset‑light solutions. We plan to leverage the core competencies we have developed in running our FVL business to ultimately become a leading player in several specialty transportation markets.

We have two reportable segments, the Transport segment and the Logistics segment. The Transport segment includes the following companies:

Jack Cooper Transport Company, Inc. (“Jack Cooper”), founded in 1928, started as a carrier for GM products in Kansas City, Missouri. As of December 31, 2016, Jack Cooper had 53 terminals primarily in the Midwestern and Eastern half of the U.S. and Canada. Jack Cooper is the parent of Auto Handling Corporation (“Auto Handling”), Pacific Motor Trucking Company (“Pacific”) and Jack Cooper Transport Canada, Inc. (“JCT Canada”).

Auto Handling, established in 1972, provides yard management services at six Jack Cooper terminals, including rail loading and unloading, receiving vehicles at manufacturing plants, shuttling and baying of vehicles, and scanning and dispatching vehicles.

Pacific, a transport company, had principal operations on the west coast of the United States. Pacific discontinued its operations during the second quarter of 2015.

JCT Canada, established in January 2010, and its subsidiaries: Jack Cooper Canada 1 Limited Partnership and Jack Cooper Canada 2 Limited Partnership. Together, JCT Canada operates 12 terminals across Canada.

The Logistics segment is comprised of the following companies:

Jack Cooper Logistics, LLC (“JCL”) established on November 9, 2010 to engage in the global non‑asset based automotive supply chain for new and used finished vehicles. JCL has the following subsidiaries:

Axis Logistics Services, Inc., which was formed in connection with the Allied Acquisition, conducts a brokerage business.

Jack Cooper CT Services, Inc., which was formed in connection with the Allied Acquisition, provides vehicle inspection and title storage services for pre‑owned and off‑lease vehicles.

Auto Export Shipping, Inc. (“AES”) was acquired on June 10, 2011 to provide the brokering of the international shipment of cars and trucks from various ports in the U.S. to various international destinations on third‑party ships.

Jack Cooper Rail & Shuttle, Inc., which was formed in connection with the Allied Acquisition, provides shuttle services to local rail yards.

CarPilot, Inc., which was formed in April 2016 to facilitate a marketplace where consumers who seek the delivery of their vehicles to certain destinations can be matched with independent contractors willing to drive those vehicles to such destinations.

JCH Mexico, a Mexican entity (“AXIS Mexico”) provides logistics services to new vehicle manufacturers and rail and truck transportation companies in Mexico. Its subsidiaries include:

AXIS Operadora Hermosillo S.A., which is 99.998%‑owned by JCH Mexico, a holding company, and .002%‑owned by JCL;

AXIS Operadora Mexico S.A., which is 99.998%‑owned by JCH Mexico and .002%‑owned by JCL;

AXIS Operadora Guadalajara S.A., which is 99.998%‑owned by JCH Mexico and .002%‑owned by JCL;

AXIS Operadora Monterrey S.A., which is 99.998%‑owned by JCH Mexico and .002%‑owned by JCL; and

AXIS Logistica S. de R.L., which is 99%‑owned by JCH Mexico and 1%‑owned by JCL.

For financial information concerning our reportable segments and geographic regions, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and Item 8 “Financial Statements and Supplementary Data.”

Company History

The Company was originally formed as IEP Carhaul LLC, a Delaware limited liability company, on May 6, 2009, and subsequently changed its name to Jack Cooper Holdings LLC on June 1, 2010 through a corporate reorganization. On November 29, 2010, the Company converted its corporate structure from a limited liability company to a corporation and changed its name to Jack Cooper Holdings Corp.

Originally, our automotive transportation business was the product of the combination of two companies in the automotive carrier sector, Active Transportation Company LLC and Jack Cooper, which were acquired in January 2008 and May 2009, respectively. In March 2011, we added DMT Trucking, Inc., a carhaul transportation company, and on December 27, 2013, we completed the Allied Acquisition.

The Allied Sellers were debtors in Chapter 11 bankruptcy cases pending in the United States Bankruptcy Court for the district of Delaware and in certain cases under Part IV of the Companies’ Creditors Arrangement Act pending in the Canadian Bankruptcy Court. Allied’s assets included 2,191 rigs, including approximately 831 active rigs, certain receivables and real property. Further, as a result of the Allied Acquisition, we increased the number of terminal locations that we operate by 17 active terminals in the U.S., of which three were combined with existing terminals of Jack Cooper, and ten terminals in Canada, which resulted in a net addition of 24 transport terminal locations to Jack Cooper’s then existing transport terminal base. We also created or acquired new operating companies including: Axis Logistic Services, Inc., Jack Cooper CT Services, Inc., Jack Cooper Rail & Shuttle, Inc., Axis Mexico and two new Canadian operating companies.

In connection with the notes offering discussed below, on June 5, 2014, the Company completed a merger (the “Merger”), pursuant to which JCHC became a wholly-owned subsidiary of Jack Cooper Enterprises, Inc. (“JCEI”) and the stockholders of JCHC immediately prior to the Merger became the stockholders of JCEI. JCEI has no material operating activities other than being the sole stockholder of JCHC and as described below.

On June 10, 2014, JCEI issued and sold $150 million aggregate principal amount of its 10.50%/11.25% Senior PIK Toggle Notes due 2019 (the “JCEI Notes”) through a private placement pursuant to Rule 144A. As permitted by Section 4.3 of the indenture governing the JCEI Notes (the “JCEI Indenture”), the consolidated financial statements presented herein are those of JCHC and we include JCEI consolidating information in a footnote to the consolidated financial statements of JCHC.

Key 2016 Events

Solus Term Loan

On October 28, 2016, the Company entered into a new credit agreement for a $41.0 million senior secured term loan facility with Wilmington Trust, National Association, as agent for certain funds affiliated with, or managed by, Solus Alternative Asset Management LP (collectively, “Solus”) as the lenders thereto (the “Solus Term Loan”). The Solus Term Loan bears interest at a rate per annum equal to 10.5% payable quarterly in arrears. The Solus Term Loan will mature on October 28, 2020, subject to a springing maturity as more fully described in the Solus Term Loan credit agreement. The Solus Term Loan is secured by substantially all of the assets of the Company and its domestic subsidiaries on a subordinated basis to the liens securing the Credit Facility and the MSD Term Loan. Approximately $24.0 million of the proceeds from the Solus Term Loan were loaned to JCEI to be used to fund the cash portion of the consideration for the

Public Exchange Offer and the Private Exchange, as described below. In connection with the Solus Term Loan, certain entities affiliated with, or managed by, Solus were issued an aggregate of 74,046 warrants to purchase shares of the non-voting Class B Common Stock of JCEI, at an exercise price of $0.01 per share.

Public Exchange Offer

On November 1, 2016, JCEI commenced an unregistered offer to exchange (the “Public Exchange Offer”) up to $80,450,000 of JCEI Notes for (i) cash and (ii) warrants to purchase shares of Class B Common Stock of JCEI, par value $0.0001 per share (the “Class B Common Stock”), that are each exercisable into one share of Class B Common Stock (the “Exchange Warrants”). In the Public Exchange Offer, for each $1,000 of principal amount of JCEI Notes exchanged, the tendering holder received (i) $125 in cash (or $135 in cash if such holder tendered prior to the early tender deadline), and (ii) 3.5783 warrants to purchase shares of JCEI’s Class B Common Stock. $34.3 million aggregate principal amount of JCEI Notes were tendered in the Public Exchange Offer. The aggregate consideration transferred for the tendered JCEI Notes through the Public Exchange Offer was $4.4 million of cash and 122,608 Exchange Warrants.

Concurrent Private Exchange

Concurrent with the commencement of the Public Exchange Offer, JCEI entered into a note purchase agreement (the “Note Purchase Agreement”) with certain holders (including the T. Michael Riggs Irrevocable Trust) of the JCEI Notes (the “Private Exchange Noteholders”) that beneficially own approximately 51.9% of the JCEI Notes ($96.9 million aggregate principal amount of JCEI Notes). Pursuant to the Note Purchase Agreement, the Private Exchange Noteholders agreed not to participate in the Public Exchange Offer and to exchange 100% of their JCEI Notes in a private exchange transaction which occurred concurrently with the closing of the Public Exchange Offer. The exchange by the Private Exchange Noteholders is referred to herein as the “Private Exchange”. As consideration for the exchange of their JCEI Notes, concurrently with the closing of the Public Exchange Offer, the Private Exchange Noteholders received (i) cash in the amount of $135 per $1,000 of JCEI Notes exchanged, which the aggregate amount of approximately $13.1 million was placed into escrow for the benefit of the Private Exchange Noteholders concurrently with the execution of the Note Purchase Agreement, and (ii) their pro rata portion of 346,804 Exchange Warrants. In addition, because the Public Exchange Offer was not fully subscribed, the Private Exchange Noteholders also received their pro rata portion of an additional amount of cash equal to the total amount of cash offered in the Public Exchange offer less the cash used in the Public Exchange Offer. The aggregate consideration transferred for the JCEI Notes tendered through the Private Exchange was $19.6 million of cash and 346,804 Exchange Warrants.

The exchange transactions resulted in (i) the retirement of $34.3 million aggregate principal amount of JCEI Notes through the Public Exchange, and (ii) the retirement of $96.9 million aggregate principal amount of the JCEI Notes through the Private Exchange, resulting in a total of $131.1 million of JCEI Notes being retired during 2016.

Intercompany Loan

Following the closing of the Solus Term Loan, the Company and JCEI entered into a loan whereby the Company loaned approximately $24.0 million of the net proceeds from the Solus Term Loan to JCEI to use as the cash consideration for the Public Exchange Offer and the Private Exchange. The loan bears interest at an annual rate of 1.5% payable-in-kind beginning 121 days after October 28, 2016 and has a maturity date of June 17, 2019.

Terminal Closures

In the fourth quarter of 2015, management made the determination to close two Canadian terminals due to continued losses attributable to those locations. The closure of the terminals occurred during the second quarter of 2016. Further, also during the second quarter of 2016, the Company closed two U.S. terminals due to not meeting management’s performance expectations. As a result of one of the U.S. closures the Company estimated it had triggered a $2.9 million full withdrawal liability, net of previously recorded partial withdrawal liabilities, from the Teamsters of Philadelphia and Vicinity Pension Plan, or the Philadelphia Plan.

Industry Overview

We operate in the global FVL industry. Our industry includes (i) the process through which new and used vehicles are transported from a point of origin to a final destination and (ii) value‑added logistics services that are performed on

vehicles while they are in transit to their final destination. According to the distance between a vehicle’s point of origin and its destination, over‑the‑road truck carriers either transport vehicles directly from origin to destination or work in concert with railroads and/or seafaring vessels to deliver vehicles. Value‑added logistics services performed in the FVL industry include yard management, port processing, technical services, inspections and third‑party logistics management services.

The vehicle transportation segment of the FVL industry is typically split into two main markets: the original equipment manufacturer FVL market (the “OEM FVL” market), which transports new vehicles, and the previously owned vehicle, also called remarketed, FVL market (the “POV FVL” or “remarketed FVL” market), which transports used vehicles. Vehicles transported in the OEM FVL market are shipped by automotive manufacturers, while used vehicles transported in the POV FVL market are typically shipped by commercial auction houses, rental car companies and auto dealer groups. The total number of vehicles transported in the OEM FVL market can be represented by the seasonally adjusted annual rate (“SAAR”), of U.S. new light vehicle sales, which totaled approximately 18.4 million vehicles in 2016, plus those vehicles that are produced for export markets. In the case of the POV FVL market, while between 40 million and 42 million used vehicles change hands on average on an annual basis, an estimated 27 million vehicles require transportation services, according to Freedonia Group, Inc. (“Freedonia”).

The distance from a new vehicle’s point of origin to its final delivery point typically determines the means of transportation that will carry it to its final destination. According to Freedonia, if vehicles that are both produced and purchased domestically have an ultimate destination that is 350 miles or more from its origin, the vehicle is transported from its origin by rail to a rail yard near its final destination where it is then transported by car haul rig to its final destination. Conversely, if that vehicle’s final destination is less than 350 miles from its origin, a car‑hauler transports the vehicle directly to an auto dealership. Management believes that while historically a large percentage of new vehicles were transported by railroads for the longest legs (above 350 miles), virtually all finished vehicles will be transported by car‑haul at some point in the finished vehicle supply chain.

The FVL industry also incorporates a wide array of value‑added services performed on vehicles while they are in transit to their final destination. These services include yard management, port processing, automated claims management, technical services, key and title storage services, inspections and third‑party logistics management services.

Yard Management Services—Yard management services include rail loading and unloading, receiving vehicles from manufacturing plants, shuttling and baying of vehicles, and scanning and dispatching vehicles.

Port Processing Services—Port processors receive vehicles shipped to ports and process them for distribution via truck or rail. Services provided by port processors include inventory management, storage, vehicle preparation and transport scheduling.

Automated Claims Management—Automated claims management services include determining at which link of the supply chain damage to a vehicle occurred and tracking the development of each cargo damage recovery claim all the way through collections.

Technical Services—Technical services include a variety of services, including accessory fittings and installations, repairs, storage management, vehicle washing, cleaning services, parts handling and surveys.

Key Storage Services—Key storage services include the storage and inventory of keys for leased vehicles on behalf of rental companies.

Title Storage Services—Title storage services consist of providing secured storage, processing and shipment of titles to the point of sale for remarketed vehicles.

Inspection Services—Inspection services include inspections on shipped vehicles in order to limit their liability as transportation modes change as well as inspections aimed at determining the overall condition of an asset to both settle a lessee-lessor contract, such as for fair usage clauses, and effectively price, recondition and sell the assets. Inspections range from basic functional, cosmetic and mechanical checks before customer delivery to in-depth condition reports.

Third‑Party Logistics Management Services—Third‑party logistics management services include network design, re‑marketing and claims management.

Equipment, Maintenance and Fuel

We operate strategically placed terminals in the U.S. and Canada, from which we direct our day‑to‑day operations. As of December 31, 2016, our fleet comprised 2,970 rigs (2,886 owned and 84 leased), of which approximately 2,050 are currently in operation. Our inactive rigs include 250 roadworthy rigs and 405 rigs that are parked and require investment to become roadworthy and 265 rigs that are used for parts. Rigs are deployed as needed when the Company has a signed service contract with a customer.

There are nominal costs associated with having rigs that are not fully deployed as the only expense incurred is annual incremental storage costs of $425 or less per idle rig. The Company does not incur expenses for licensing as parked rigs are not required to be licensed, nor does the Company typically incur maintenance costs on idled rigs until a decision to deploy a parked rig is made. There are no opportunity costs associated with having rigs that are not fully deployed, as rigs are deployed as needed when the Company has a signed service contract with a customer, and the Company only enters into contracts when it is economically advantageous to do so. Typically, when a non‑roadworthy rig is being prepared to be deployed, we incur capital expenditures which will vary depending on the condition and age of the vehicle, but may range from approximately $50,000 to $150,000, and when an unlicensed rig is being prepared to be deployed, the Company incurs licensing expenses of approximately $2,000 per rig. The Company’s excess capacity is a direct result of the Allied Acquisition, and the Company believes that its spare capacity is not typical in the industry. During 2015, we purchased 180 rigs previously operated under operating leases, however in 2016 the Company did not purchase any rigs previously operated under operating leases.

A new 75‑foot rig (comprised of a tractor, trailer and head‑ramp) currently costs approximately $250,000, and if it has been properly maintained, refurbished near the midpoint of its useful life and a replacement engine is installed in it at the appropriate mileage interval, has an average life of approximately 17 years. At December 31, 2016, the average age of the active rigs that we own or lease was between 12 and 13 years and the average remaining useful life was between 4 and 5 years. The average age is generally calculated based on the tractor manufacture dates.

As of December 31, 2016, we maintained our rigs at our 24 shop locations operated by approximately 266 maintenance personnel, however, we do contract third‑party maintenance support throughout the U.S. as necessary. Rigs are scheduled for regular preventive maintenance inspections. Each garage is equipped to handle repairs, including repairs to electrical systems, air conditioners, suspension, hydraulic systems, cooling systems, and minor engine repairs. We have some engine repair capabilities, and more recently, we have also used engine suppliers for engine replacements in order to obtain long‑term warranties offered by them. We manage equipment parts through centralized parts vendors.

In order to reduce fuel costs, our drivers may purchase fuel from several national suppliers with whom we have negotiated competitive discounts and central billing arrangements. We purchase approximately 97% of our over-the-road fuel within our network at preferred negotiated rates.

Customers

Our customers are major domestic and foreign automotive OEMs, including GM, Ford, Toyota, Chrysler, Nissan and Hyundai/Kia. Our principal customers are auto manufacturers that use our services for delivery of new vehicles to dealers. For the years ended December 31, 2016, 2015, and 2014, our three largest customers, GM, Ford and Toyota, collectively accounted for 87%, 83%, and 81% of total revenues, respectively, and GM alone accounted for 47%, 40%, and 38%, respectively. We have developed and maintained long‑term relationships with our significant customers and have historically been successful in negotiating contract renewals. Under written contracts, we have served GM since 1928, Ford since 1984 and Toyota since 1979. Our logistics customers also include OEM remarketers, rental car agencies and finance companies who are automotive lenders and dealers. No other customer accounted for more than 10.0% of our operating revenues during 2016.

The majority of our contracts are awarded as a result of a competitive bidding process. Our sales and marketing activities are conducted by our senior management, who interface directly with our customers. The limited number of OEMs enables our senior management to be closely involved in acquiring new business. We supplement our sales and

marketing efforts by participating in conferences, trade shows, and industry associations such as the Automobile Carriers Conference.

We have one‑year or multi‑year contracts in place with the majority of our customers. Most of the contracts, upon expiration, automatically renew for one‑year terms unless terminated by either party. The customer contracts establish rates for the transportation of vehicles generally based upon a fixed rate per vehicle transported plus a variable rate for each mile that a vehicle is transported. Certain contracts provide for rate variation per vehicle depending on the size and weight of the vehicle. During 2016, the majority of our customers paid us a fuel surcharge that allowed us to recover approximately 40% of fuel costs incurred during the year.

Competition

We compete primarily in the short haul new vehicle segment of the automotive transportation market. Our primary business involves the transportation of new vehicles from manufacturing plants, VDCs, seaports and railheads to new vehicle dealerships under one‑year or multi‑year contracts with OEM customers.

The segment of the automotive transportation market is bifurcated between union and non‑union carriers. Based on their union affiliations, many OEMs prefer to use union car carriers for their light‑vehicle transportation needs. In addition, while it is more difficult for non‑union car carriers to compete for union business, union carriers are able to secure business with non‑union OEMs, rental car companies and remarketers. In 1995, there were 29 union carriers. Growth in competition from foreign car manufacturers, which has taken market share from U.S. manufacturers, the establishment of foreign non‑union manufacturing in the U.S., the rise of non‑union carriers and increased reliance by auto manufacturers on rail carriers has adversely affected union carriers. Consequently, the number of union carriers has steadily declined such that Cassens Transport Co. is now the largest of the Company’s two sole union competitors. The Company’s primary non‑union carrier competitors include Hanson & Adkins Auto Transport, United Road Services, Inc., Moore Transport of Tulsa LLC, Centurion Auto Holding Co. and Fleet‑Car Lease, Inc.

We compete with our union and non‑union competitors on the basis of the size of our fleet, strength and location of our network, price, on‑time and damage‑free deliveries, and the experience of our driver base. We believe that we are able to compete effectively with our motor carrier competitors with regard to each of these factors, except that we are challenged to compete effectively against non‑union carriers as to price in certain geographic areas where non‑union manufacturers are located. We believe our network enables us to compete effectively against our competitors. We compete with rail carriers for off‑rail business on the basis of price and, in robust selling environments when dealers have low inventories, on the basis of transit times.

Seasonality and Economic Factors

Demand for vehicle transport in our Transport and Logistics segments can be affected by inclement weather, particularly during the winter months, when such weather tends to slow the delivery of vehicles. Additionally, our business is subject to a number of general economic factors that may have a material adverse effect on the results of our operations, many of which are largely out of our control, including recessionary economic cycles and downturns primarily in the automotive sales market. Economic conditions may adversely affect our customers’ business levels, the amount of transportation services they need and their ability to pay for our services. The demand for automobile transport is also a function of the timing and volume of lease originations, new car model changeovers, dealer inventories and new and used auto sales, with the second quarter typically our highest revenues period during the year.

Employees

As of December 31, 2016, we had approximately 3,855 employees in the U.S. and Canada, including 1,962 drivers, 923 yard personnel, 266 mechanics, 76 vehicle inspectors and 628 other personnel. In addition, we have 281 employees in Mexico. All 3,151 of our drivers, shop mechanics and yard personnel are represented by various labor unions. Most of the Company’s U.S. employees are represented by the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (the “Teamsters”) and covered by the National Master Automobile Transporters Agreement (the “Master Agreement”). The Master Agreement with these employees commenced on June 1, 2011 and expired on August 31, 2015. A new agreement is currently under negotiation. The Teamsters and the Company have mutually agreed to keep all terms and provisions of the Master Agreement in effect until a new agreement is entered into. The Company negotiates renewals to the Master Agreement through an industry‑wide bargaining group called the National

Automobile Transporters Labor Division (NATLD). Other U.S. employees are represented by the International Association of Machinists and are covered under separate agreements. Additionally, employees at our Canadian terminals are members of Teamsters of Canada or Union for Canada (“Unifor”), formerly Canadian Auto Workers. We believe that we maintain good relationships with both our union and non‑union employees.

Information Technology

We have made a long‑term commitment to utilize technology to serve our customers. Our information and operational systems use a broad range of both purchased and internally developed applications to support our operations. We have implemented GPS devices and tablets in our fleet, which enables our terminals to provide customers with timely updates concerning vehicle load, dispatch and delivery and promotes efficient control and tracking of customer vehicle inventories. Through electronic data interchange and other protocols, we communicate directly with manufacturers and other shippers in the process of delivering vehicles, including electronic invoicing and collection, and provide electronic proof of delivery for all new car OEM deliveries. We also use these protocols to communicate with inspection companies, railroads, port processors and other carriers.

In 2015, we internally developed a proprietary model to help us better calculate and measure certain operating factors that we believe drive profitability at the terminal level. Also in 2015, we began using supply chain design and software services, which allow us to optimize our routes more efficiently and in a cost‑effective manner. In 2016, we developed our patent‑pending PhotoBooth vehicle inspection application for personal tablets. PhotoBooth provides high‑definition photo technology to vehicle dealers and remarketers who, for marketing purposes, normally take a large number of photos of each vehicle they plan to sell. With PhotoBooth, these dealers and remarketers can ensure that their pictures, which can be easily transferred from the application to a web page, are consistently framed, focused, named, and ordered across their entire inventory.

Regulation and Environmental

We are regulated by the U.S. Department of Transportation (the “DOT”) and the Federal Motor Carrier Safety Administration (the “FMCSA”) and various state agencies and similar agencies in Canada and Mexico, or, collectively, the Transportation Agencies. These agencies have broad authority to regulate numerous activities, such as auto carrier equipment, safety, security, hours of service, registration and licensing to engage in auto carrier operations, handling of hazardous materials, insurance and financial responsibility. The Transportation Agencies conduct reviews and audits to determine compliance with the regulatory requirements. We are also subject to the safety and security requirements of the U.S. Department of Homeland Security, the Canada Border Services Agency and the Mexican Transportation Ministry. There are currently numerous regulatory efforts to improve fuel efficiency and minimize engine idle time.

On December 4, 2015, the FAST Act was signed into law. The FAST Act will allow us to transport non‑auto based cargo on the trailers of our rigs on our backhauls. The FAST Act also provides for an additional five feet of total length for automobile transporters, changing the current federal limit from 75 feet to 80 feet. Additionally, front and rear overhang limits are now increased by one foot in the front and two feet in the rear, to a total allowance of four feet front overhang and six feet rear overhang. As a result, the total length of a truck has been effectively increased to 90 feet.

Each state must formally adopt certain provisions of the FAST Act for operations within that state’s borders. We have begun operating according to the FAST Act’s new length guidelines in Illinois, Indiana, Michigan, Missouri, Ohio, and Texas, where we have written confirmation of these states’ compliance with the new regulations of the FAST Act. Specifically, we have taken advantage of the increased rear overhang limit in all six of these states, which has resulted in increased load efficiency. In Michigan, we also have been able to increase our load factor by one vehicle as a result of the FAST Act. We are working with additional states to ensure that they have formally adopted the additional length allowance of the FAST Act.

Our AES ocean shipping operations between U.S. and foreign ports are regulated by U.S. Customs and Border Protection. AES transactions with international shipper customers, ocean carriers and other logistics services providers are subject to regulations of the U.S. Treasury Office of Foreign Assets Control, which administers various U.S. trade laws and embargoes, and various laws and regulations such as the U.S. Foreign Corrupt Practices Act administered by the U.S. Department of Justice and Securities and Exchange Commission.

AES operations include non-vessel operating common carrier (“NVOCC”) services, which are regulated by the FMC under the U.S. Shipping Act of 1984, or the Shipping Act. A NVOCC purchases blocks of cargo capacity from vessel operators and resells or uses such capacity to move cargo booked with the NVOCC by its shipper customers. The Shipping Act requires NVOCCs in United States export trade to be licensed by the FMC, to post a bond to protect shippers’ interests and to publish an ocean freight tariff. A licensee must have among its officers a “Qualifying Individual” who the FMC finds to be of good character and have the required shipping business experience and ability to manage international ocean freight operations. The Shipping Act and FMC regulations require that NVOCCs’ freight rates and charges be in accordance with published tariffs or covered by NVOCC service contracts with shipper customers filed with the FMC. The Shipping Act and regulations prohibit certain practices including payment of deferred rebates to shippers, accepting bookings from unlicensed or unbonded NVOCCs, unreasonable refusals to deal, giving undue preference or advantage to any shipper or type of traffic, or imposing unduly prejudicial or discriminatory rates, charges and practices. The Shipping Act also requires that ocean freight service contracts between NVOCCs and vessel operators must be filed with the FMC and conform to certain regulatory requirements. AES is duly licensed as an NVOCC by the FMC, and is bonded, publishes a tariff in compliance with FMC regulations and operates in accordance with such tariff or service contracts filed with the FMC in U.S.‑foreign trade.

Various foreign agencies, including agencies in Mexico and Canada, also exercise regulatory powers over our foreign activities, including over our ability to engage in auto carrier freight transportation, safety matters, contract compliance, insurance requirements, tariff and trade policies, taxation and financial reporting.

In addition, our terminal operations are subject to various federal, state and local laws, regulations and requirements that govern environmental, health and safety matters, including regulated materials management; the generation, handling, storage, transportation, treatment and disposal of regulated wastes or substances; the storage and handling of fuel and lubricants; the discharge of pollutants to the environment; and those that impose liability for and require investigation and remediation of releases or threats of releases of regulated substances, including at third‑party owned off‑site disposal sites, as well as laws and regulations that regulate workplace safety.

Some of our operations require environmental permits and controls to prevent and limit pollution to the environment. Failure to comply with these laws, regulations and permits may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of civil and criminal fines and penalties, the imposition of remedial obligations, assessment of monetary penalties and the issuance of injunctions limiting or preventing some or all of our operations. At several locations, the Company’s operations have historically involved the handling of bulk quantities of fuel, which could leak or be spilled from handling and storage activities. Maintenance of underground storage tanks (“USTs”), is regulated at the federal and, in most cases, state levels.

During 2015, we ceased purchasing and handling bulk quantities of fuel and we no longer own or operate USTs for bulk storage of fuel. During 2016, the Company ceased operating and removed its UST tanks at its Fort Wayne Facility, which were previously used for anti‑freeze and new and used oil. The Company also operates an aboveground storage tank bulk fueling system at its Kansas City and Fort Wayne facilities. Diesel fuel is dispensed on an emergency only basis and the gasoline tanks are used for Company yard vans and pick‑up trucks. We maintain regular, ongoing testing or monitoring programs for our facilities and aboveground storage tanks. We believe our facilities are in compliance with current environmental standards and we will not be required to incur substantial costs to bring our facilities into compliance. We believe our operations are in compliance with transportation requirements and environmental, health and safety regulatory requirements.

We are also subject to environmental remediation liability. Under federal and state laws, we may be liable for the cost of investigation or remediation of contamination or damages as a result of the release or threatened release of hazardous substances or wastes or other pollutants into the environment at or by our facilities or properties, or as a result of our current or past operations, including facilities to which we have shipped wastes for disposal, recycling or treatment, regardless of when the release of hazardous substances occurred or the lawfulness of the activities giving rise to the release. These laws, such as the federal Clean Water Act, the Comprehensive Environmental Response, Compensation, and Liability Act and the Resource Conservation and Recovery Act, typically impose liability and cleanup responsibility without regard to fault or whether the owner or operator knew of or caused the release or threatened release. Our policy is to accrue regulatory‑related costs when those costs are believed to be probable and can be reasonably estimated. The quantification of environmental remediation exposures is often difficult and requires an assessment of many factors, including the nature and extent of contamination, the timing, extent and method of remedial action, current and changing laws and regulations, advancement in environmental remediation technologies, the quality of information available related

ITEM 1A: RISK FACTORS

Our business is subject to certain risks and uncertainties. The following identifies those we consider to be most important:

Risks Relating To Our Business

In the past, we have reported net losses from continuing operations, and there is no assurance that we will be profitable in the future.

During the years December 31, 2011 through 2016, we reported net losses from continuing operations and have maintained an accumulated stockholders’ deficit. Our history of net losses could impair our ability to raise capital needed for our operations and result in a material adverse impact on our results of operations. There is no assurance that we will be able to achieve profitability in the future.

We will continue to have significant capital requirements, which may require us to seek additional borrowings, lease financing, or equity capital or engage in asset sales, and there can be no assurance that we will be able to incur such additional financing.

Over the long-term, we will continue to have significant capital requirements, which may require us to seek additional borrowings, lease financing, or equity capital, or engage in asset sales. Further, we routinely evaluate market conditions and the availability of additional financing in the form of debt and equity capital and intend to seek additional funding when conditions are appropriate, and further may conduct near-term and long-term capital raises, financing and refinancing transactions, “restricted payment” transactions, and other strategic or financing transactions, including, without limitation, near-term and long-term high-yield debt offerings and other debt offerings, private and public equity offerings (including an initial public offering), redemptions, repurchases, dividends, distributions, other transactions with respect to the Company’s debt, equity, and/or derivative securities and corporate reorganizations, acquisitions, divestitures, and mergers. The availability of financing or equity capital will depend on our financial condition and results of operations as well as prevailing market conditions. There can be no assurance that we will be able to incur additional debt or refinance our existing debt as it becomes due or that we will receive additional equity capital.

The loss of any of our major customers would adversely affect our business.

Our business is highly dependent on our largest customers, GM, Ford and Toyota. For the year ended December 31, 2016, these customers collectively accounted for 87% of total revenues, and individually GM accounted for 47% and Ford accounted for 30% of our total revenues. A reduction in business from these customers resulting from a failure to renew contracts or maintain volumes, reduced demand for their own products, a discontinuation of one or more products, an inventory buildup, a work stoppage, sourcing of products from other suppliers or other factors could materially impact our operating revenues. Furthermore, the loss of any major customer could have a material adverse effect on our business, financial condition and results of operations.

Our largest customers have expressed concern about our financial condition and our significant leverage and have indicated that they are closely monitoring our financial situation as they consider our position as a significant supplier to them. We believe that our recent loss of business related to certain traffic lanes from one of our three largest customers during the 2016 bidding process was in-part related to their concerns about our significant leverage. Further, under our current contract with another one of our three largest customers, which expires in December 2018, the customer has the right to terminate or renegotiate the terms of the agreement if we have failed to achieve a JCEI consolidated Debt to EBITDA ratio, as defined in the agreement, of 3.3x as of December 31, 2016. JCEI’s consolidated Debt to EBITDA ratio as defined by the agreement for the year ended December 31, 2016 was 8.2x. The Public Exchange Offer and Private Exchange was intended to address the concerns that customer and our other customers have expressed to us; however, the Public Exchange Offer and Private Exchange did not bring us into compliance with the aforementioned contract provision. While no modification to our business volumes with our customers has occurred subsequent to the Public Exchange Offer and Private Exchange, the customer with whom we have the aforementioned contract provision has further indicated to our management that unless we further address our leverage as required by the contract and provide them with assurances regarding our continued financial stability, they will seek to diversify their suppliers of transport services, will enforce this contract provision and will move a large portion of their transport business currently managed by us to other suppliers. We are engaged in ongoing discussions with that customer and other customers about our financial position, and also believe that concerns about our financial condition are impeding some of our customers from entering into extended terms

of service agreements with us. Although we intend to continue to explore a transaction to bring us in compliance with the customer contract provision, there can be no assurance that we will be successful in achieving such goal. Accordingly, there can be no assurance that completion of any future transaction will otherwise satisfy our customers’ concerns and that they will not move a significant portion of our business to other suppliers.

We operate under contracts with most of our customers with terms varying from one to five years. The contracts between our customers and us generally establish rates for the transportation of vehicles based upon a fixed rate per vehicle transported and a variable rate for each mile a vehicle is transported. The contracts generally permit us to recover a portion of increases in fuel prices and fuel taxes, and in some cases, labor costs.

We may not be able to successfully renew these contracts on or prior to their expiration on terms satisfactory to us or may not be able to continue to serve these customers without service interruption. In addition, we face the risk of losing market share in connection with our negotiations to renew our customer contracts. A loss in market share without an increase in revenues or pricing or an adequate reduction in costs would likely have an adverse effect on our operations.

We extend trade credit to certain of our customers to facilitate the use of our services, and rely on their creditworthiness. Accordingly, a bankruptcy or a significant deterioration in the financial condition of a major customer could have a material adverse effect on our business, financial condition and results of operations, due to a reduction in business, a longer collection cycle or an inability to collect accounts receivable.

A significant reduction in vehicle production levels or plant closings by these manufacturers, the loss of key customers, or a significant reduction or change in the design, definition and frequency of services provided for any of these customers by us, including if manufacturers begin to transport automobiles themselves, would have a material adverse effect on our operations.

We are highly dependent on the automotive industry and a decline in the automotive industry could have a material adverse effect on our operations.

The automotive transportation market in which we operate is dependent upon the volume of new automobiles, sport utility vehicles (“SUVs”), and light trucks manufactured, imported and sold by the automotive industry in the U.S., Canada, and Mexico. The automotive industry is highly cyclical, and the demand for new automobiles, SUVs and light trucks is directly affected by such external factors as general economic conditions in the U.S., Canada and Mexico, unemployment, consumer confidence, fuel prices, government policies, continuing activities of war, terrorist activities, and the availability of affordable new car financing. As a result, our results of operations could be adversely affected by downturns in the general economy and in the automotive industry, and by changing consumer preferences in purchasing new automobiles, SUVs and light trucks or the overall financial condition of our major customers. A significant decline in the volume of automobiles, SUVs and light trucks manufactured, imported and sold in the U.S. and Canada could have a material adverse effect on our operations.

Our business strategy is dependent upon, and limited by, the availability of adequate capital.

Our business strategy will require additional capital for, among other purposes, acquiring additional rigs and entering new markets, which may include the acquisition of existing businesses. If cash generated internally is insufficient to fund capital requirements, we will require additional debt or equity financing. Adequate financing may not be available or, if available, may not be available on terms satisfactory to us. In addition, the terms of debt documents may, under certain circumstances, limit our ability to pursue acquisitions or make capital expenditures. If we fail to obtain sufficient additional capital in the future or we are unable to make adequate capital expenditures or fund acquisitions, we could be forced to curtail our business strategies by reducing or delaying capital expenditures or postpone acquisitions. As a result, there can be no assurance that we will be able to execute on any of our business strategies.

Our liquidity is highly dependent on our customers.

Our contracts generally require customers to reimburse us within 30 days of invoice date. If any of our large customers were to experience a liquidity problem that resulted in the customer being unable to make timely payments, we could, in turn, develop a liquidity problem. We may be forced to borrow additional funds at rates that may not be favorable or may curtail capital spending. Additionally, the phasing out of current favorable payment terms with customers may have a potential negative impact on our cash flow. This could have a material adverse effect on our business, operating results or financial condition.

Competition in the automotive transportation and logistics markets could result in a loss of our market share or a reduction in our rates in both our Transport and Logistics segments, which could have a material adverse effect on our operations.

The automotive transportation and logistics markets are highly competitive. In our Transport segment, we currently compete with other auto carriers of varying sizes, as well as with railroads and independent owner‑operators. In our Logistics segment, we compete with transportation brokers, auto‑haulers, inspection companies, auctions, freight forwarders and other NVOCCs, and other companies providing lot and yard services for the automotive industry. Our non‑union motor carrier competitors may be able to provide services to their customers at lower prices and in a more flexible manner than we can. In addition, certain of our customers may develop new methods for hauling vehicles, such as using local drive‑away services to facilitate local delivery of products. Transport companies that utilize non‑union labor operate at lower costs as compared to both our and other unionized transport companies. Non‑union transport competitors also operate without restrictive work rules that apply to both our and other unionized companies. Railroads, which specialize in long‑haul transportation, may be able to provide delivery services at costs to customers that are less than the long‑haul delivery cost of our services. Additionally, the continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources, and the development of new methods or technologies for hauling vehicles could lead to increased investments to remain competitive, either of which may lead to increased competition overall. If we lose market share to these competitors or have to reduce our rates in order to retain our market share, our financial condition and results of operations could be materially and adversely affected.

We may be adversely impacted by fluctuations in the price and availability of diesel fuel and our ability to continue to collect fuel surcharges.

Diesel fuel is a significant operating expense for our business. We do not hedge against the risk of diesel fuel price increases. An increase in diesel fuel prices or diesel fuel taxes, or any change in federal or state regulations that results in such an increase, could have an adverse effect on our operating results.

We typically are able to pass through a portion of our fuel costs to our customers. For the years ended December 31, 2016, 2015 and 2014, 40%, 58% and 68% of our fuel expenses were passed through to our customers, respectively. Changes in fuel costs will not result in a direct offset to fuel surcharges due to the nature of the calculation of fuel surcharges, which is customer‑specific and fluctuates as a result of miles driven, changes in the number and types of units hauled per customer, as well as the relationship of the national average cost of fuel (the national average diesel price index) or other contractually determined customer index benchmarks compared to actual fuel prices paid at the pump. In addition, depending on the base rate and fuel surcharge levels agreed upon by our customers, there could be a delay in reflecting increases in our surcharges to customers resulting from a rapid and significant change in the cost of diesel fuel, which could also have a material adverse effect on our operating results.

We continuously monitor the components of our pricing, including base freight rates and fuel surcharges, and address individual account profitability issues with our customers when necessary. Our fuel surcharge recovery may not capture increased costs we pay for fuel, especially when prices are rising. Further, during periods of low freight volumes, customers can use their negotiating leverage to negotiate fuel surcharge policies that are less favorable to us. There is no guarantee that we will be able to adjust our base rate pricing and/or fuel surcharges to offset changes to the cost of diesel fuel.

Our financial condition and business strategy may be adversely impacted by unfavorable market trends or if expected market trends do not materialize.

We are a transportation and logistics provider and an over‑the‑road FVL company, and provide a critical component of the automotive supply chain, serving as the primary link in the delivery of finished vehicles from manufacturing plants, VDCs, seaports and railheads to new vehicle dealerships. Part of our business strategy is to take advantage of favorable growth trends in the automotive sector and to strategically expand into adjacent industry verticals that require premium asset‑heavy and asset‑light freight logistics offerings. In addition, as the age of existing vehicles increases, we expect the demand for, and the production of, new replacement vehicles will also increase, which will result in an increased demand for the services we provide. However, if these market trends were to slow or reverse, or if they do not materialize, those events could have a material adverse effect on our business, operating results or financial condition, and, furthermore, we may not be able to realize some or all of our business strategy.

Our growth strategy includes acquisitions, diversification into new specialty transportation businesses and expansion into new geographic markets. We are subject to various risks in pursuing this growth strategy and we may have difficulty in integrating businesses we acquire and may be subject to unexpected liabilities.

Our business strategy includes a growth strategy in-part dependent on acquisitions, diversification into specialty transportation businesses and expansion into new geographic markets.

However, we may not be able to identify suitable acquisition candidates in the future, and we may never realize expected business opportunities and growth prospects from acquisitions. We may experience increased competition that limits our ability to expand our business. Our assumptions underlying estimates of expected cost savings may be inaccurate or general industry and business conditions may deteriorate. Acquisitions involve numerous risks, including, but not limited to: difficulties in integrating the operations, technologies and products acquired; the diversion of our management’s attention from other business concerns; current operating and financial systems and controls may be inadequate to deal with our growth; the risks of entering markets in which we have limited or no prior experience and the loss of key employees. Furthermore, even if we are able to identify attractive acquisition candidates, we may not be able to obtain the financing to complete such acquisitions.

If these factors limit our ability to integrate the operations of our acquisitions, successfully or on a timely basis, our expectations of future results of operations may not be met. In addition, our growth and operating strategies for any business we acquire may be different from the strategies that such business currently is pursuing. If our strategies are not the appropriate strategies for a company we acquire, it could have a material adverse effect on our business, financial condition and results of operations. Further, there can be no assurance that we will be able to maintain or enhance the profitability of any acquired business or consolidate the operations of any acquired business to achieve cost savings.

Furthermore, there may be liabilities that we do not discover in the course of performing due diligence investigations on each company or business we have already acquired or may acquire in the future. Such liabilities could include those arising from employee benefits contribution obligations of a prior owner or noncompliance with, or liability pursuant to, applicable federal, state or local environmental requirements by prior owners for which we, as a successor owner, may be responsible. In addition, there may be additional costs relating to acquisitions including, but not limited to, possible purchase price adjustments. Rights to indemnification by sellers of assets to us, even if obtained, may not be enforceable, collectible or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business.

We currently generate most of our revenues from the transportation of automobiles. However, we may grow our business by diversifying and entering into new specialty transportation businesses. To the extent we enter into such businesses, we will face numerous risks and uncertainties, including risks associated with the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, the required investment of capital and other resources and the loss of existing clients due to the perception that we are no longer focusing on our core business. Entry into certain new specialty transportation businesses may also subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If a new specialty transportation business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations could be materially adversely affected.

In addition, we intend to continue to expand our logistics and asset‑light services within our Logistics segment internationally. As we increase our international operations, we will become increasingly subject to a number of risks inherent in any business operating in foreign countries, including: political, social and economic instability, war and acts of terrorism; increased operating costs; repudiation, modification or renegotiation of contracts, disputes and legal proceedings in international jurisdictions; import export quotas and export and import requirements; compliance with applicable anti‑bribery law (including the Foreign Corrupt Practices Act of 1977, as amended); compliance with the U.S. Department of the Treasury’s Office of Foreign Assets Control sanctions programs; confiscatory taxation; work stoppages or strikes; unexpected changes in regulatory requirements; wage and price controls; imposition of trade barriers; imposition or changes in enforcement of local content and cabotage laws; restrictions on currency or capital repatriations; currency fluctuations and devaluations and other forms of government regulation; and economic conditions that are beyond our control.

If we cannot effectively manage the challenges associated with doing business internationally, our operating revenue and results of operations may suffer.

A component of our operations is the business we conduct in Canada and Mexico, and we are subject to risks of doing business internationally, including fluctuations in foreign currencies, changes in the economic strength of Canada and Mexico, difficulties in enforcing contractual obligations and intellectual property rights, burdens of complying with a wide variety of international and United States export and import laws, and social, political, and economic instability. Restrictive trade policies and imposition of duties, taxes, or government royalties by foreign governments are additional risks associated with our foreign operations. Although these additional risks have been largely mitigated by the terms of North American Free Trade Agreement (“NAFTA”), President Trump has indicated that his administration may renegotiate the terms of NAFTA. Although it is unknown what changes might be made to NAFTA or other border policies which may be adopted, it is possible there could be more restrictive trade policies and potential increased costs, as well as increased regulatory complexities. Changes to NAFTA may adversely affect our results of operations.

Further, changes to NAFTA may adversely affect the operations our customers, including OEMs, which could lead to a decreased demand for our services.

Sustained periods of severe abnormal weather can have a material adverse effect on our business.

Our terminals may close due to heavy snow, which will negatively affect revenues on a particular business day that may not be recouped in the future. In addition, inefficiencies in our loading, unloading and transit times associated with cleaning snow off of our rigs before use and cleaning snow off of vehicles being transported before and after transporting them, increased lodging costs due to hours of service restrictions for our drivers and premium (overtime) pay required in order to complete the unit movements over weekends to make up for the inefficiencies caused by delayed delivery of on‑ground customer inventories may also have a negative impact on earnings

There can be no assurance that we will continue to manage our business effectively when influenced by severe weather events or that severe weather events will not have a material adverse effect on our business, financial condition and results of operations.

Our operations are subject to business interruptions and casualty losses.

Our operations are subject to numerous inherent risks, particularly unplanned events such as inclement weather, union strikes, explosions, fires, other accidents and equipment failures. While our insurance coverage could offset losses relating to some of these types of events, our business, financial condition and results of operations could be materially adversely impacted to the extent any such losses are not covered by our insurance.

Insurance and claims expenses could have a material adverse effect on our business, financial condition and results of operations.

We have a combination of both self‑insurance and high‑deductible insurance programs for the risks arising out of the services we provide and the nature of our operations, including claims exposure resulting from cargo loss, personal injury, property damage and related liabilities, and workers’ compensation. Workers’ compensation is determined using actuarial estimates of the aggregate liability for claims incurred and an estimate of incurred but not reported claims, on an undiscounted basis. Our accruals for insurance reserves reflect certain actuarial assumptions and management judgments, which are subject to a high degree of variability. If the number or severity of claims for which we are retaining risk increases, our financial condition and results of operations could be adversely affected. If we lose our ability to self‑insure these risks, our insurance costs could materially increase and we may find it difficult to obtain adequate levels of insurance coverage.

We rely on our information technology systems to manage numerous aspects of our business and a disruption of these systems could adversely affect our business.

Our information technology, or IT, systems are an integral part of our business and a serious disruption to our IT systems could significantly limit our ability to manage and operate our business efficiently, which in turn could materially adversely impact our business, financial condition and results of operations. We depend on our IT systems for vehicle

inventory management, load makeup, dispatch, delivery reporting and invoices. Our IT systems also enable us to ship products to our customers on a timely basis, maintain cost‑effective operations and provide a high level of customer service. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all eventualities.

Our IT systems also depend upon global communications providers, satellite‑based communications systems, electric utilities, and telecommunications providers. We have no control over the operation, quality or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential to our business. Disruptions or failures in the services upon which our information technology platforms rely may adversely affect the services we provide, which could increase our costs or result in a loss of customers that could have a material adverse effect on our results of operations.

The security risks associated with IT systems have increased in recent years because of the increased sophistication and activities of perpetrators of cyber‑attacks. A failure in or breach of our IT security systems, or those of our third‑party service providers, as a result of cyber‑attacks or unauthorized access to our network could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, increase our costs and/or cause losses. We also confront the risk that a terrorist or other third parties may seek to use our property, including our IT systems to inflict major harm. Our systems may be vulnerable to disruption, failure or unauthorized access, which could have a material adverse effect on our consolidated financial statements.

Technological advances are facilitating the development of driverless vehicles, which may materially harm our business.

Driverless vehicles are being developed for the transportation and automotive industries that, if widely adopted, may materially harm our business. The eventual timing of availability of driverless vehicles is uncertain due to regulatory requirements, additional technological requirements, and uncertain consumer acceptance of these vehicles. The effect of driverless vehicles on the transportation and automotive industries is uncertain and could include changes in the level of new and used vehicles sales, the price of new vehicles, and the demand for our services, any of which could materially and adversely affect our business.

Our parent, JCEI and its controlling stockholder may take actions that conflict with the interest of others.

JCEI holds all of our outstanding common stock. T. Michael Riggs, our Chief Executive Officer, controls JCEI’s outstanding voting common stock, which gives him indirect control over the election of our Board of Directors, the appointment of members of management and approval of all actions requiring the approval of the holders of our common stock, including adopting amendments to our certificate of incorporation and approving mergers, acquisitions or sales of all or substantially all of our assets. The interests of JCEI and its controlling stockholder could conflict with the interests of other stockholders or noteholders. JCEI and its controlling stockholder also may have an interest in pursuing acquisitions, divestitures, financings or other transactions that could enhance JCEI’s equity investment in us, even though such transactions might involve risks to the interests of our noteholders.

We may be adversely impacted by work stoppages or other labor matters.

Our ability to perform daily operations on behalf of our customers is dependent upon our ability to attract and retain qualified drivers and mechanics to staff our terminals and garages. All drivers, shop mechanics and yard personnel are represented by various labor unions. Most of our U.S. employees are represented by the Teamsters and covered by the National Master Automobile Transporters Agreement and Supplements, or the Master Agreement. Other employees are represented by the International Association of Machinists and are covered under separate collective bargaining agreements. Additionally, employees at our Canadian terminals are members of Teamsters of Canada, or Unifor (formerly Canadian Auto Workers). The majority of the Canadian collective bargaining agreements expire between January 10, 2018 and December 18, 2020. Two of the Canadian collective bargaining agreements expired on May 31, 2016 and negotiations for new agreements are ongoing.

We are a signatory to the Master Agreement with the Teamsters, which expired on August 31, 2015. The NATLD have negotiated with the Teamsters National Automobile Transporters Industry Negotiating Committee (“TNATINC”) a tentative new Master Agreement on which Teamster members intend to vote by March 31, 2017. The NATLD and the Teamsters have mutually agreed to keep all terms and provisions of the Master Agreement in effect and adhere to labor

laws until a new agreement is entered into. If the tentative agreement is not ratified, we may not be able to negotiate a new union contract to replace the Master Agreement (at all or on terms that are favorable to us) or new contracts as other current contracts expire. Further, the perceived risk of our insolvency due to our substantial indebtedness may negatively impact such negotiations, and any new contracts may not be on terms acceptable to us or may result in increased labor costs, labor disruptions, increased employee turnover, higher risk management costs or lost customer market share, which could in turn have a material adverse effect on our financial condition, results of operations or customer relationships. In addition, we do not have exclusive control over proposals in bargaining with the Teamsters.

Should we experience higher than historical Teamsters employee retirements or resignations, or are unable to hire additional Teamsters employees as needed, our ability to grow our business, maintain our current business levels and meet customer service requirements could be adversely impacted. We may not be able to retain existing Teamsters personnel at existing staffing levels or attract new Teamsters employees to replenish our work force, as necessary.

Although we believe that our labor relations are positive, our facilities could experience a work stoppage or other labor disruptions. Any prolonged disruption involving our employees or our inability to renew labor agreements prior to expiration could have a material adverse impact on our results of operations and financial condition.

We are subject to various environmental and employee health and safety regulations that could impose substantial costs on us and may adversely impact our operating performance.

Our business is subject to numerous federal, state and local laws, regulations and requirements that govern environmental, health and safety matters, including those relating to air emissions, wastewater discharges, regulated materials management, the generation, handling, storage, transportation, treatment and disposal of regulated wastes or substances, and those that impose liability for and require investigation and remediation of releases or threats of release of regulated substances, including at third‑party owned off‑site disposal sites, as well as laws and regulations that regulate workplace safety. In particular, under applicable environmental requirements, we may be responsible for the investigation and remediation of natural resource damages associated with, and third‑party property damage or personal injury claims arising from, environmental conditions at currently and formerly owned, leased, operated or used sites and third‑party owned disposal sites, regardless of fault or the legality of the activities that led to such contamination. Given the nature of the past operations conducted by us, our predecessors and others at our current and former properties, there can be no assurance that the extent of all soil and groundwater contamination has been identified and is being addressed at all of our owned or operated properties and it is possible that we could be required to conduct, or be held responsible for the cost of conducting, investigations and remediation at any of our current properties, at formerly owned or operated properties or at off‑site disposal sites in the future.

Compliance with environmental, health and safety laws and regulations and the requirements and terms and conditions of the environmental permits, licenses and other approvals that are required for the operation of our business may cause us to incur substantial capital costs and operating expenses and may impose significant restrictions or limitations on the operation of our business. Environmental, health and safety regulations and environmental permits, licenses and other approvals may also require us to install new or updated pollution control equipment, modify our operations or perform other corrective actions at our facilities. In addition, the cost of complying with various environmental requirements is likely to increase over time, and there can be no assurance that the cost of compliance will not have a material adverse effect on our business, financial condition and results of operations. Moreover, violations of applicable environmental, health and safety laws and regulations or for the failure to have or comply with the terms and conditions of required environmental permits or other required approvals can lead to substantial fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring remedial or corrective measures, installation of pollution control equipment or other actions.

Future developments, such as changes in the nature of our operations, or changes in laws and regulations (such as in response to climate change concerns) or more stringent enforcement or interpretation thereof could cause us to incur substantial losses or expenditures. In addition, future spills or releases of regulated substances or accidents or the discovery of currently unknown contamination could give rise to material losses, expenditures and environmental or health and safety liabilities, including liabilities resulting from lawsuits brought by private litigants or neighboring property owners or operators for personal injury or property damage related to the operation of our facilities or the land on which our facilities are located.

Concern over climate change, including the impact of global warming, has led to significant legislative and regulatory efforts to limit carbon and other greenhouse gas emissions, and some form of federal, state or regional climate change legislation is possible in the future. We are unable to determine with any certainty the effects of any future climate

change legislation. However, emission‑related regulatory actions have historically resulted in increased costs of revenue equipment and diesel fuel, and future legislation, if passed, could result in increases in these and other costs. Increased regulation regarding greenhouse gas emissions, including diesel engine emissions and/or total vehicle fuel economy, could impose substantial costs on us that may adversely impact our results of operations. We may also be subject to additional requirements related to customer‑led initiatives or their efforts to comply with environmental programs. Until the timing, scope and extent of any future regulation or customer requirements become known, we cannot predict their effect on our cost structure or our operating results. Furthermore, although we are committed to mandatory and voluntary sustainability practices, increased awareness and any adverse publicity about greenhouse gas emissions emitted by companies in the transportation industry could harm our reputation or reduce customer demand for our services.

We operate in a regulated industry, and costs of compliance with, or liability for violations of, existing or future regulations could have a material adverse effect on our operating results.

We operate in the U.S. throughout the 48 contiguous states pursuant to operating authority granted by the DOT and in various Canadian provinces pursuant to operating authority granted by the Ministries of Transportation and Communications in such provinces. Such matters as weight, aerodynamics and equipment dimensions are subject to various government regulations. Further, various federal and state agencies exercise broad regulatory powers over the transportation industry, generally governing such activities as operations of and authorization to engage in motor carrier freight transportation, operations of non‑vessel‑operating common carriers, safety, contract compliance, insurance requirements, tariff and trade policies, taxation, and financial reporting. We could become subject to new or more restrictive regulations, such as regulations relating to engine emissions, drivers’ hours of service, occupational safety and health, ergonomics, cargo security, collective bargaining, security at ports and other matters affecting safety or operating methods. Compliance with all such regulations could substantially reduce equipment and driver productivity, and the costs of compliance could increase our operating expenses.

We could become subject to new or more restrictive regulations, such as regulations relating to engine emissions, drivers’ hours of service, occupational safety and health, ergonomics, or cargo security, collective bargaining, security at ports and other matters affecting safety or operating methods. Our drivers also must comply with the safety and fitness regulations promulgated by the DOT, including those relating to drug and alcohol testing and hours of service. Compliance with all such regulations could substantially reduce equipment and driver productivity and our load factor, and the costs of compliance could increase our operating expenses.

FMCSA’s compliance, safety, accountability program and regulations could potentially result in a loss of business to other carriers, driver shortages, increased costs for qualified drivers and driver and/or business suspension for noncompliance. A resulting decline in the availability of qualified drivers, coupled with additional personnel required to satisfy future revisions to hours of service regulations, could adversely impact our ability to hire drivers to adequately meet current or future business needs. Unsatisfactory FMCSA scores could result in a DOT intervention or audit, resulting in the assessment of fines, penalties, or a downgrade of our safety rating. Failures to comply with DOT safety regulations or downgrades in our safety rating could impact our reputation and have a material adverse impact on our operations or financial condition.

Increases in license and registration fees, bonding requirements, or taxes, including federal fuel taxes, or the implementation of new forms of operating taxes on the industry could also have an adverse effect on our operating results.

The ongoing development of data privacy laws may require changes to our data security policies and procedures, and the associated costs of the changes required to maintain our compliance with standards in the U.S. and other jurisdictions in which we operate could adversely affect our operating results.

We may be subject to withdrawal liability assessments related to multi-employer pension plans to which we make contributions pursuant to collective bargaining agreements.

Pursuant to collective bargaining agreements that are currently in place with local unions (either affiliated with the Teamsters or the International Association of Machinists & Aerospace Workers, or collectively, the “Unions”), we contribute to ten different multi-employer pension plans on behalf of our covered union employees. Most of these pension plans are significantly underfunded. If we were to withdraw from any multi-employer pension plan, either voluntarily or otherwise, we could be assessed with a multimillion dollar withdrawal liability, which could have a material adverse effect on us. Further, in certain circumstances we could become subject to withdrawal liability due to events beyond our control. For example, if we ceased operations or drastically and permanently reduced operations at all of the locations related to a

multi-employer pension plan due to the loss of a customer contract, and as a result permanently stopped contributing to such pension plan or significantly reduced contributions to such pension plan, we could be assessed a liability for a complete or partial withdrawal from such pension plan if it is underfunded at the time we ceased making contributions.

In recent years, we have incurred withdrawal liability from several pension plans creating payment obligations. In 2011, we fully withdrew from the Automotive Industries Pension Plan incurring a $3.6 million pension plan liability payable in quarterly installments of principal and interest totaling less than $0.1 million through December 2031.

In March 2016, we received a $0.3 million assessment in connection with triggering a full withdrawal from the Western Conference of Teamsters Pension Trust (the “Western Conference Trust”), we had fully accrued as of December 31, 2015. In January 2017, we received a $0.3 million assessment in connection with triggering a partial withdrawal from the Western Conference Trust related to the 2013 plan year. We had total estimated and actual liabilities in the amount of $0.5 million and $4.4 million as of December 31, 2016 and 2015, respectively, for all Western Conference Trust partial withdrawal liabilities as a result of declines in its contributions to the fund during the periods between 2011 and 2014 and the full withdrawal in 2015.

During the year ended December 31, 2016, we estimated we had triggered a full withdrawal liability from the Teamsters of Philadelphia and Vicinity Pension Plan (the “Philadelphia Plan”) due to the closure of one of our terminals during the second quarter of 2016. We recorded a $2.9 million estimate, net of previously recorded estimated partial withdrawal liabilities, for the full withdrawal liability during the year ended December 31, 2016. We recorded total estimated and actual liabilities of $5.3 million and $3.3 million as of December 31, 2016 and 2015, respectively, for all withdrawal liabilities from the Philadelphia Plan as a result of declines in its contributions to the fund during the periods since 2009 and the full withdrawal during 2016.

The most recent withdrawal liability estimates provided to us by the respective funds state that six of the ten multi-employer pension funds are underfunded, which results in an aggregate potential liability to us exceeding $1.2 billion if we were to withdraw from all of these funds, with the largest potential withdrawal liability exposure of over $1.08 billion related to the Central States, Southeast and Southwest Areas Pension Plan. The withdrawing employer can pay the obligation in a lump sum or over time as determined by the employer’s annual contribution rate prior to withdrawal, which, in some cases, could be up to 20 years.

In addition, to the extent these multi-employer pension plans remain or become further underfunded, upon the expiration of our collective bargaining agreements, we could be subject to additional contribution requirements as negotiated between us and the Unions which could have a material adverse effect on our financial performance.

Our business could be harmed by antiterrorism measures.

As a result of terrorist attacks on the United States, federal, state and municipal authorities have implemented and may implement in the future various security measures, including checkpoints and travel restrictions on large trucks. Although many companies would be adversely affected by any slowdown in the availability of freight transportation, the negative impact could affect our business disproportionately. If security measures disrupt the timing of deliveries, we could fail to meet the needs of our customers or could incur increased costs in order to do so. New antiterrorism measures may be implemented from time to time and such new measures could have a material adverse effect on our business, results of operations or financial condition.

Current and future legal proceedings could adversely affect us and our operations.

We cannot predict the outcome of pending or future legal proceedings, which could result in judgments that could negatively impact our financial condition, results of operations, liquidity or capital resources. We may incur significant legal fees and expenses in connection with pending or future litigation, which may also divert management’s attention from our business. See “Item 3—Legal Proceedings.”

Our total assets include goodwill and other indefinite‑lived intangibles. If we determine that these items have become impaired in the future, net income could be materially and adversely affected.

As of December 31, 2016, we had recorded goodwill of $32.0 million and certain indefinite‑lived intangible assets of $26.3 million. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. In accordance with Financial Accounting Standards Board Accounting Standards Codification, ASC Topic 350, “Intangibles—Goodwill and Other,” or ASC Topic 350, we test goodwill and indefinite‑lived intangible assets for

potential impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Any excess in carrying value over the estimated fair value is charged to our results of operations. We recorded an impairment of $14.1 million of goodwill and $1.2 million of intangible asset impairment in our Logistics segment during the year ended December 31, 2015. We may never realize the full value of our intangible assets. Any further determinations requiring the write‑off of a significant portion of intangible assets could have an adverse effect on our financial condition and results of operations. No impairment was recorded for the year ended December 31, 2016 and 2014.

We are dependent on key personnel and the loss of one or more of those key personnel could have a material adverse effect on our operating results.

Competition for qualified employees and personnel in the automotive transportation industry is intense and there are a limited number of qualified persons with knowledge of and experience in the automotive transportation industry. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel. In particular, our success is highly dependent upon the abilities of our senior executive management. We believe this management team, comprised of individuals who have worked in the automotive transportation industry for many years and with significant experience pursuing an acquisition strategy, is integral to implementing our business plan. The loss of the services of one or more of them could have a material adverse effect on our operating results.

Our reported financial condition and results of operations are subject to exchange rate fluctuations.

We have foreign operations in Canada and Mexico, and accounts receivable denominated in Nigerian naira, which presents further risk exposure related to foreign exchange fluctuations. Our reported financial condition and results of operations are reported in multiple currencies, including the Canadian dollar and Mexican peso, and are then translated into U.S. dollars at the applicable exchange rate for inclusion in our consolidated financial statements. Appreciation of the U.S. dollar against the Canadian dollar, Mexican peso or Nigerian naira will have a negative impact on our reported operating revenues and operating income while depreciation of the U.S. dollar against such currencies will have a positive effect on our operating revenues and operating income. In addition, our currency exchange losses with respect to the Nigerian naira may be magnified by Nigerian exchange control regulations that restrict our ability to convert Nigerian naira into U.S. dollars.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect investor confidence in our reported financial information.

We are subject to the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), which requires, among other things, SEC reporting companies to maintain disclosure controls and procedures to ensure timely disclosure of material information, and management to attest to the effectiveness of those controls on a quarterly basis. Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States (“GAAP”). Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. In addition, due to an exemption established by rules of the SEC, we are not required to have and have not had our independent registered public accounting firm perform an evaluation of our internal control over financial reporting as of the end of our fiscal year in accordance with the provisions of the Sarbanes-Oxley Act of 2002. Had our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act of 2002, control deficiencies may have been identified by our independent registered public accounting firm and those control deficiencies could have also represented one or more material weaknesses. We may in the future discover areas of our internal controls that need improvement. We cannot be certain that we will be successful in implementing or maintaining adequate internal control over our financial reporting and financial processes. Furthermore, as we grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. Additionally, the existence of any material weaknesses or significant deficiencies could require management to devote significant time and incur significant expense to remediate any such material weakness or significant deficiency, and management may not be able to remediate any such material weakness or significant deficiency in a timely manner. The existence of any material weakness or significant deficiency in our internal control over financial reporting could also

result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.

We may incur significant additional legal, compliance and accounting costs as a result of being subject to the Sarbanes‑Oxley Act, and our management may be required to devote significant time or incur significant additional expense in order to comply with such requirements and to remediate any material weaknesses or deficiencies that may be identified. In addition, it could increase the difficulty and expense of obtaining director and officer liability insurance, and make it harder for us to attract and retain qualified directors and executive officers. Any inability to comply with such requirements may negatively impact our results of operations, our financial condition, or our reputation.

Risks Related To Our Indebtedness

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations.

We have a significant amount of indebtedness. As of December 31, 2016, we had $560.0 million of indebtedness outstanding (excluding accrued interest and deferred financing costs), including $71.0 million related to the Credit Facility, $62.5 million related to our MSD Term Loan and $41.0 million related to our Solus Term Loan.

As a result of our substantial indebtedness, a significant portion of our cash flow will be required to pay interest and principal on our indebtedness outstanding from time to time. Our total interest expense, net for the years ended December 31, 2016, 2015 and 2014 was $46.6 million, $46.9 million and $41.4 million, respectively. This could have important consequences, including making it more difficult for us to satisfy our financial obligations; increasing our vulnerability to general adverse economic, industry and competitive conditions; reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes because we will be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness; limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; cause our customers to use other providers or to start providing automotive transport services in-house, placing us at a competitive disadvantage compared to our competitors that are less highly leveraged and that, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting, and limiting our ability to borrow additional funds.

Our ability to make scheduled payments on or to refinance our indebtedness and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. This ability, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under our revolving credit facility or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before the maturity of the debt. We cannot assure you that we will be able to refinance any of our indebtedness, on commercially reasonable terms or at all.

The Credit Facility and MSD Term Loan bear interest at variable rates, subject to, in the case of the MSD Term Loan, a minimum LIBOR rate of 3.0%. If market interest rates increase, we will have higher debt service requirements, which could materially adversely affect our cash flow available for reinvestment.

In December 2016, we completed the Public Exchange Offer and the Private Exchange, which helped us reduce the aggregate amount of our outstanding indebtedness, and we have had discussions regarding a range of potential additional deleveraging transactions with an ad hoc group of holders of the 2020 Notes that have represented to us that they hold approximately 82% of the 2020 Notes as well as a portion of the JCEI Notes. Any additional deleveraging transactions could include a variety of transaction structures, including exchange offers for new indebtedness, convertible preferred equity, equity or other securities or other consideration. We expect to continue to pursue these and other alternatives to reduce the aggregate amount of our outstanding indebtedness. However, there can be no assurance that any of these proposed transactions will be available on terms acceptable to us or at all or will be accepted by holders of our indebtedness, including the ad hoc group, or result in any additional exchange offers or other deleveraging transactions. If we are unable to achieve additional deleveraging, there can be no assurance that we will be able to make interest and principal payments as they become due, which would have a material adverse effect on our business.

A reduction in the Company’s credit ratings could materially and adversely affect our business, financing condition and results of operations.

On November 17, 2016, Moody’s Investors Service (“Moody’s) downgraded the rating on the 2020 Notes to “Caa3”. Moody’s has a negative outlook on its rating. The Company cannot be sure that any of its current ratings on the 2020 Notes will remain in effect for any given period of time or that a rating will not be lowered by a rating agency if, in its judgment, circumstances in the future so warrant. The above mentioned downgrade, or any further downgrade by Moody’s, could increase the Company’s borrowing costs, which would adversely affect the Company’s financial results. The Company would likely be required to pay a higher interest rate in future financings, and its potential pool of investors and funding sources could decrease. The rating(s) from credit agencies are not recommendations to buy, sell or hold the Company’s securities, and such rating(s) should be evaluated independently of any other rating.

Despite current indebtedness levels, we may still be able to incur substantially more debt. This ability could further exacerbate the risks associated with our substantial leverage.

We may incur additional indebtedness, including additional secured indebtedness, in the future. Although the Indenture and the agreements governing our Credit Facility and term loans contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If we incur additional indebtedness, the related risks that we now face would intensify and could further exacerbate the risks associated with our substantial leverage.

We may be unable to generate sufficient cash to service our debt obligations in the future.

Our ability to pay our expenses and to pay the principal and interest on the 2020 Notes, the Credit Facility and any other debt depends on our ability to generate positive cash flows in the future. Our operations may not generate cash flows in any amount sufficient to enable us to pay the principal and interest on our debt, including the 2020 Notes, or to fund our other liquidity needs. If we do not have sufficient cash flows from operations, we may be required to incur additional indebtedness, refinance all or part of our existing debt or sell assets. Our ability to borrow funds under the Credit Facility in the future will depend on our meeting the financial covenants contained in the Credit Facility and the other affirmative and negative covenants in the indentures governing the JCEI Notes and our 2020 Notes, as well as the Credit Facility, and sufficient borrowings may not be available to us. In addition, the terms of existing or future debt agreements may restrict us from affecting any of these alternatives absent consent from our lenders and holders of the 2020 Notes. Any inability to generate sufficient cash flows or refinance our debt on favorable terms could significantly and adversely affect our financial condition.

The indebtedness of our parent company, JCEI, may cause JCEI to make decisions with respect to our operations or require dividends and other distributions from us to service its debt at times when such decisions might not be in the best interests of the Company and the holders of the 2020 Notes.

As of December 31, 2016, JCEI had outstanding $55.5 million in principal amount of unsecured senior JCEI Notes accruing payment‑in‑kind interest at a rate of 11.25% per annum. Neither we nor any of our subsidiaries are obligors on the JCEI Notes; however, in order to fund required cash payments of interest or principal under the JCEI Notes or repurchase the JCEI Notes, JCEI may require that we pay dividends to it or otherwise advance funds to it periodically, subject to the covenants under our debt documents. The JCEI Notes were issued pursuant to the JCEI Indenture. Under the JCEI Notes, JCEI is required to make cash interest payments at a rate of 10.5% per annum except in circumstances where we are not able to make payments to JCEI in the form of dividends or other distributions under our outstanding debt obligations, subject to certain caveats and exceptions set out in the JCEI Indenture, in which case JCEI is required to pay interest as paid-in-kind at a higher rate of 11.25% per annum. Therefore, JCEI would be motivated to request the payment of dividends or other advancements of funds, including intercompany loans, subject to approval of our Board of Directors, when we have capacity to make such payments. Our Board of Directors may decide to make such payments as requested by JCEI at times that such cash could otherwise be used to grow our operations or pay interest and principal on our other indebtedness. Further, we and our subsidiaries are considered “restricted subsidiaries” under the JCEI Indenture. Therefore, JCEI is required to cause us and our subsidiaries to comply with covenants set forth in the JCEI Indenture. These covenants are substantially similar to the covenants in the Indenture; however, in situations where holders of the 2020 Notes might be willing to waive or amend the covenants in the Indenture, we may still be restricted by the JCEI Indenture from engaging in certain activities. Finally, if JCEI were to default under the JCEI Indenture, holders of the

JCEI Notes could attempt to pursue us and our subsidiaries through claims for veil piercing or other equitable considerations notwithstanding that we are not obligors on the JCEI Notes.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2020 Notes.

Any default under the agreements governing our indebtedness, including a default under our Credit Facility, MSD Term Loan and Solus Term Loan, not waived by the required lenders, and the remedies sought by the holders of such indebtedness, could make us unable to pay principal, premium, if any, and interest on the 2020 Notes and substantially decrease the market value of the 2020 Notes. We would also be unable to make distributions to JCEI to service the JCEI Notes, which could substantially decrease their market value. If we are unable to generate sufficient cash flows and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the agreements governing our indebtedness, including our Credit Facility, MSD Term Loan and Solus Term Loan, we could be in default. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed under such agreements to be due and payable, together with accrued and unpaid interest, the lenders under our Credit Facility could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may need to obtain waivers from the required lenders under our Credit Facility, MSD Term Loan and Solus Term Loan or other debt that we may incur in the future to avoid being in default. If we breach our covenants under our Credit Facility, MSD Term Loan or Solus Term Loan and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our Credit Facility, MSD Term Loan or Solus Term Loan, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, such as the lenders under our Credit Facility, MSD Term Loan, Solus Term Loan and holders of the 2020 Notes, could proceed against the collateral securing the debt. Because the Indenture, Credit Facility, MSD Term Loan and Solus Term Loan have cross‑default provisions, if the indebtedness under the 2020 Notes or under our Credit Facility or any of our other debt is accelerated, we may be unable to repay or finance the amounts due.

The Credit Facility and the indentures governing the JCEI Notes and 2020 Notes contain a variety of covenants imposing significant operating and financial restrictions, which may limit our ability to operate our business.

The Credit Facility requires us to maintain specified financial ratios and minimum availability levels under the Credit Facility. In addition, the Credit Facility, the term loans and the indentures governing the JCEI Notes and 2020 Notes have affirmative and negative covenants customary for financings of that type, which limit our ability to, among other things, borrow money, make investments and extend credit, engage in transactions with our affiliates, consummate certain asset sales, consolidate or merge with another entity or sell, transfer, lease or otherwise dispose of all or substantially all of our assets, and create liens on our assets. It is possible these covenants could adversely impact our ability to finance our future operations or capital needs or to pursue available business opportunities. Additionally, a failure to comply with any of these covenants could lead to an event of default under the Credit Facility, the term loans and/or our indentures, which could result in an acceleration of the indebtedness under any such facility, which may in turn limit our ability to operate our business.

We are a holding company and depend upon the earnings of our subsidiaries to make payments on the 2020 Notes.

We are a holding company and conduct all of our operations through our subsidiaries. All of our operating income is generated by our operating subsidiaries. We must rely on dividends and other advances and transfers of funds from our subsidiaries, and earnings from our investments in cash, to provide the funds necessary to meet our debt service obligations, including payment of principal and interest on the 2020 Notes. Although we are the sole stockholder of each of our operating subsidiaries and therefore able to control their respective declarations of dividends, applicable laws may prevent our operating subsidiaries from being able to pay such dividends. In addition, such payments may be restricted by claims against our subsidiaries by their creditors, such as suppliers, vendors, lessors, and employees, and by any applicable bankruptcy, reorganization, or similar laws applicable to our operating subsidiaries. The availability of funds, and therefore the ability of our operating subsidiaries to pay dividends or make other payments or advances to us, will depend upon their operating results.

Sales of assets by us or the guarantors could reduce the pool of assets securing the 2020 Notes and the guarantees.

The security documents relating to the 2020 Notes allow us and the guarantors to remain in possession of, retain exclusive control over, freely operate and collect and invest and dispose of any income from, the collateral securing the 2020 Notes. To the extent we sell any assets that constitute such collateral, the proceeds from such sale will be subject to the liens securing the 2020 Notes only to the extent such proceeds would otherwise constitute “collateral” securing the 2020 Notes and the subsidiary guarantees under the security documents, and will also be subject to the security interest of creditors other than the holders of the 2020 Notes, some of which may be senior or prior to the second‑priority liens held by the holders of the 2020 Notes, such as the lenders under our Credit Facility and our term loans, who have a first‑priority lien in such collateral. To the extent the proceeds from any such sale of collateral do not constitute “collateral” under the security documents, the pool of assets securing the 2020 Notes and the guarantees would be reduced and the 2020 Notes and the guarantees would not be secured by such proceeds.

The collateral is subject to casualty risks and there may not be sufficient collateral to pay all or any portion of the 2020 Notes.

We are obligated under the collateral arrangements to maintain adequate insurance or otherwise insure against hazards. There are, however, certain losses that may be either uninsurable or not economically insurable, in-whole or in-part. It is possible that the insurance proceeds will not compensate us fully for our losses.

Indebtedness and other obligations under our Credit Facility, the term loans, the 2020 Notes and certain other senior secured indebtedness that we may incur in the future will be secured by liens on substantially all of our assets. Pursuant to the terms of an intercreditor agreement, the lien on all our and the guarantors’ assets that will secure the 2020 Notes and the guarantees will be contractually subordinated to a lien that will secure our Credit Facility, our term loans and certain other permitted indebtedness. Additionally, certain permitted indebtedness may be secured by liens that have priority by law. Consequently, the 2020 Notes and the guarantees will be effectively subordinated to borrowings under our Credit Facility and certain other permitted indebtedness to the extent of the value of such assets. Therefore, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, or an acceleration of our indebtedness under our Credit Facility or any other contractually senior claims, the assets that secure these contractually senior claims on a first priority basis must be used first to pay these contractually senior claims in full before any payments are made therewith on the 2020 Notes.

The value of the assets pledged as collateral for the 2020 Notes could be impaired in the future as a result of changing economic conditions, competition or other future trends. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, no assurance can be given that the proceeds from any sale or liquidation of the collateral will be sufficient to pay our obligations under the 2020 Notes, in full or at all, after first satisfying our obligations in full under contractually senior claims. Accordingly, there may not be sufficient collateral to pay all or any of the amounts due on the 2020 Notes. Any claim for the difference between the amount, if any, realized by holders of the 2020 Notes from the sale of the collateral securing the 2020 Notes and the obligations under the notes would rank equally in right of payment with all of our unsecured senior indebtedness.

Additionally, the terms of the Indenture governing the 2020 Notes allows us to issue additional notes in certain circumstances, subject to compliance with applicable debt and lien incurrence covenants. The Indenture does not require that we maintain the current level of collateral or maintain a specific ratio of indebtedness to asset values. Any additional notes issued pursuant to the Indenture will rank pari passu with the 2020 Notes and be entitled to the same rights and priority with respect to the collateral. Thus, the issuance of additional notes pursuant to the Indenture may have the effect of significantly diluting noteholders’ ability to recover payment in full from the then existing pool of collateral. In addition, releases of collateral from the liens securing the 2020 Notes are permitted under some circumstances.

The security interest in after‑acquired property may not be perfected promptly or at all.

Applicable law requires that security interests in certain property, such as motor vehicles, acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that the trustee or the collateral agent will monitor, or that we will inform such trustee or collateral agent of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after‑acquired collateral. Neither the trustee nor the collateral agent has an obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any

security interest. Such failure may result in the loss of the security interest in certain of the after‑acquired collateral or the priority of the security interest in favor of the 2020 Notes against third parties.

There are circumstances other than repayment or discharge of the 2020 Notes under which the collateral securing the 2020 Notes and guarantees will be released automatically, without your consent or the consent of the trustee.

Under various circumstances, all or a portion of the collateral securing the 2020 Notes and the guarantees may be released, including to enable the sale, transfer or other disposal of such collateral in a transaction not prohibited under the Indenture governing the 2020 Notes or the agreement governing our Credit Facility, including the sale of any entity in its entirety that owns or holds such collateral; and with respect to collateral held by a guarantor, upon the release of such guarantor from its guarantee.

In addition, the guarantee of a guarantor will be released in connection with a sale of such guarantor in a transaction not prohibited by the Indenture. Also, in certain instances after the disposition of assets or the ownership interest of a guarantor such assets and such guarantor will be released if the first lien holders of first priority claims have also released their liens.

Corporate benefit laws and other limitations on the guarantees may adversely affect the validity and enforceability of the guarantees of the 2020 Notes.

The guarantees of the 2020 Notes by the guarantors provide the holders of the 2020 Notes with a claim against the assets of the guarantors. Each of the guarantees and the amount recoverable under the guarantees, however, will be limited to the maximum amount that can be guaranteed by a particular guarantor without rendering the guarantee, as it relates to that guarantor, voidable or otherwise ineffective under applicable law. In addition, enforcement of any of these guarantees against any guarantor will be subject to certain defenses available to guarantors generally. These laws and defenses include those that relate to fraudulent conveyance or transfer, voidable preference, corporate purpose or benefit, preservation of share capital, thin capitalization and regulations or defenses affecting the rights of creditors generally. If one or more of these laws and defenses are applicable, a guarantor may have no liability or decreased liability under its guarantee.

Rights of holders of 2020 Notes may be adversely affected by bankruptcy proceedings.

The right of the collateral agent for the 2020 Notes to repossess and dispose of the collateral securing the 2020 Notes upon acceleration is likely to be significantly impaired by federal bankruptcy law if bankruptcy proceedings are commenced by or against us prior to or possibly even after the collateral agent has repossessed and disposed of the collateral. Under the U.S. Bankruptcy Code, a secured creditor, such as the collateral agent for the 2020 Notes, is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from a debtor, without bankruptcy court approval. Moreover, bankruptcy law permits the debtor to continue to retain and to use collateral, and the proceeds, products, rents, or profits of the collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances, but it is intended in general to protect the value of the secured creditor’s interest in the collateral and may include cash payments or the granting of additional security, if and at such time as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the 2020 Notes could be delayed following commencement of a bankruptcy case, whether or when the collateral agent would repossess or dispose of the collateral, or whether or to what extent holders of the 2020 Notes would be compensated for any delay in payment or loss of value of the collateral through the requirements of “adequate protection.” Furthermore, in the event the bankruptcy court determines that the value of the collateral is not sufficient to repay all amounts due on the 2020 Notes, the holders of the 2020 Notes would have “undersecured claims” as to the difference. Federal bankruptcy laws do not permit the payment or accrual of interest, costs, and attorneys’ fees for “undersecured claims” during the debtor’s bankruptcy case.

Under certain circumstances, a court could cancel the 2020 Notes or the guarantees.

Our issuance of the 2020 Notes and the issuance of the guarantees may be subject to review under federal or state fraudulent transfer law. If we become a debtor in a case under the U.S. Bankruptcy Code or encounter other financial

difficulty, a court might avoid or cancel our obligations under the 2020 Notes. The court might do so, if it found that when we issued the 2020 Notes: (i) we received less than reasonably equivalent value or fair consideration and (ii) we either (a) were or were rendered insolvent, (b) were left with inadequate capital to conduct our business or (c) believed or reasonably should have believed that we would incur debts beyond our ability to pay. The court might also avoid the 2020 Notes, without regard to factors (i) and (ii), if it found that we issued the 2020 Notes with actual intent to hinder, delay or defraud our creditors.

Similarly, if one of the guarantors becomes a debtor in a case under the U.S. Bankruptcy Code or encounters other financial difficulties, a court might cancel its guarantee, if it found that when the guarantor issued its guarantee, or in some jurisdictions, when payments became due under the guarantee, factors (i) and (ii) above applied to the guarantor, or if it found that the guarantor issued its guarantee with actual intent to hinder, delay or defraud its creditors.

A court would likely find that neither we nor any guarantor received reasonably equivalent value or fair consideration for incurring our obligations under the 2020 Notes and guarantees unless we or the guarantors benefited directly or indirectly from the 2020 Notes’ issuance. In other instances, courts have found that an issuer did not receive reasonably equivalent value or fair consideration if the proceeds of the issuance were used to finance an acquisition of the issuer, although we cannot predict how a court would rule in this case.

The test for determining solvency for purposes of the foregoing will vary depending on the law of the jurisdiction being applied. In general, a court would consider an entity insolvent either if the sum of its existing debts exceeds the fair value of all of its property, or its assets’ present fair saleable value is less than the amount required to pay the probable liability on its existing debts as they become due. For this analysis, “debts” includes contingent and unliquidated debts.

The Indenture governing the 2020 Notes limits the liability of each guarantor on its guarantee to the maximum amount that the guarantor can incur without risk that the guarantee will be subject to avoidance as a fraudulent transfer. We cannot assure you that this limitation will protect the guarantees from fraudulent transfer claim or, if it does, that the remaining amount due and collectible under the guarantees would suffice, if necessary, to pay the 2020 Notes in full when due. If a court voided our obligations under the 2020 Notes and the obligations of all of the guarantors under their guarantees, you would cease to be our creditors or creditors of the guarantors and likely have no source from which to recover amounts due under the 2020 Notes. Even if the guarantee of a guarantor is not avoided as a fraudulent transfer, a court may subordinate the guarantee to that guarantor’s other debt. In that event, the guarantees would be structurally subordinated to all of the guarantor’s other debt.

Risks Related To Our Industry

Our business is subject to several general economic and business factors, which affect the broader industry, exist beyond our control, and any of which could have a material adverse effect on our operating results.

We are subject to general economic and business factors that impact our industry. These factors include limited or excess capacity in the trucking industry and changes in automotive demand, deficits or surpluses in the market for used equipment, interest rates, license and registration fees and insurance premiums.

We may be affected by pricing pressures in our industry.

We operate in a highly competitive and fragmented industry, and our business may suffer if we are unable to adequately address downward pricing pressures and other factors that may adversely affect our ability to compete with other carriers. Some of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates, maintain our margins or maintain significant growth in our business, which may have an adverse effect on our financial condition and operating results.

Automotive OEMs may choose to integrate vertically and provide services in house.

To our knowledge, only Toyota and Chrysler provide a portion of their automotive transport service needs in-house. If they or any other automotive OEMs choose to increase the amount of transportation services they provide for themselves or if any of our other existing customers decide to provide such services in‑house, we may experience a loss

ITEM 2: PROPERTIES

Our executive offices are located at 1100 Walnut Street, Suite 2400, Kansas City, Missouri. In addition, we and our subsidiaries lease and occupy two general office buildings in Atlanta, Georgia; one owned and one leased. We also lease general offices in Southfield, Michigan; Hamilton, Ontario; Mountainside, New Jersey; Joplin, Missouri; and Guadalajara, Mexico.

As of December 31, 2016, the Transport segment operated from 53 terminals, located at or near manufacturing plants, ports and railway terminals, six of which are owned and 47 of which are leased. The Logistics segment operates out of the Atlanta, Southfield and Mountainside locations noted above, one location in Baltimore, Maryland and four locations in Mexico. In addition, the Logistics off‑lease rental return, off‑lease and vehicle inspection and title activities occur in 20 locations throughout the U.S., primarily on‑site of our customers:

Owned /

Facility

Activities

Leased

Facility

Activities

Leased

•

Edmonton, AB

Truck, maintenance

Leased

•

Detroit Gateway, MI

Truck

Leased

•

Calgary, AB

Truck, maintenance

Leased

•

Flint, MI

Truck, maintenance

Leased

•

Birmingham, AL

Truck

Leased

•

Lake Orion, MI

Truck

Leased

•

Gavin, AR

Truck, maintenance

Leased

•

Lansing, MI

Truck, maintenance

Leased

•

Vancouver, BC

Truck

Leased

•

Wayne, MI

Truck, maintenance

Leased

•

Jacksonville, FL

Truck

Leased

•

Dilworth, MN

Truck, maintenance

Leased

•

Orlando, FL

Truck, maintenance

Leased

•

Claycomo, MO

Truck, yard, maintenance

Owned

•

Tampa, FL

Truck

Leased

•

Wentzville, MO

Truck, maintenance

Owned

•

Atlanta, GA

Truck, maintenance

Leased

•

Wentzville, MO

Rail, yard

Leased

•

Belvidere, IL

Truck

Leased

•

Meridian, MS

Truck

Leased

•

West Chicago, IL

Truck

Leased

•

Hermosillo, MX

Yard

Leased

•

Elkhart, IN

Truck

Leased

•

Cuautitlán, MX

Yard

Leased

•

Princeton, IN

Truck

Leased

•

Guadalajara, MX

Yard

Leased

•

Fort Wayne, IN

Rail, yard

Leased

•

Monterrey, MX

Yard

Leased

•

Fort Wayne, IN

Truck, maintenance

Owned

•

Moncton, NB

Truck

Leased

•

Fairfax 1 & 2, KS

Truck, rail, yard, maintenance

Leased

•

Newark, NJ

Truck, maintenance

Leased

•

Bowling Green, KY

Truck, yard

Leased

•

Halifax 1 & 2, NS

Truck

Leased

•

Georgetown, KY

Truck

Owned

•

Buffalo, NY

Truck, maintenance

Owned

•

KTP—Louisville, KY

Truck, rail, yard

Leased

•

Avon Lake, OH

Truck, maintenance

Leased

•

Louisville, KY

Truck, maintenance

Leased

•

Oshawa, ON

Truck

Leased

•

Shelbyville, KY

Truck, maintenance

Leased

•

Chamy, QC

Truck

Leased

•

New Orleans, LA

Truck, maintenance

Leased

•

Chamy 2, QC

Truck

Leased

•

East Brookfield, MA

Truck, maintenance

Leased

•

Montreal, QC

Truck

Leased

•

Winnipeg, MB

Truck, rail, yard, maintenance

Leased

•

Saskatoon, SK

Truck

Leased

•

Annapolis Junction, MD

Maintenance

Leased

•

Nashville, TN

Truck

Leased

•

Jessup 1 & 2, MD

Truck

Leased

•

Arlington, TX

Truck, yard, maintenance

Owned

•

Dearborn, MI

Truck

Leased

•

Petersburg, VA

Truck

Leased

•

Detroit (Chassis), MI

Truck, yard

Leased

•

Prescott 1 & 2, WI

Truck, maintenance

Leased

See “Item 1 – Business” for information regarding business combinations affecting the comparability of our results and measurements detailed below.


(in thousands)	December 31,		December 31,		December 31,		December 31,		December 31,
For the Year Ended:	2016		2015		2014		2013		2012
Operating revenues, less fuel surcharge	$	646,981	$	688,974	$	709,339	$	459,412	$	456,733
Fuel surcharge		20,868		39,615		73,941		55,277		58,932
Operating revenues		667,849		728,589		783,280		514,689		515,665
Operating income (loss)		13,300		(15,052)		(16,237)		7,186		21,407
Net loss attributable to JCHC		(33,274)		(69,916)		(62,734)		(52,306)		(4,807)

At Year-End:
Total assets	$	279,112	$	294,969	$	336,682	$	373,013	$	207,532
Long-term debt, including current maturities and Credit Facility (excluding deferred financing costs)	$	559,993	$	503,350	$	464,698	$	442,769	$	172,310
Total stockholders' deficit	$	(349,853)	$	(293,431)	$	(226,961)	$	(180,031)	$	(102,398)

Selected Financial and Operating Data:
Fleet capex (1)	$	17,487	$	24,658	$	13,755	$	15,973	$	12,678
Adjusted EBITDA (2)	$	75,171	$	58,528	$	54,234	$	57,870	$	57,376
Revenue per loaded mile	$	8.18	$	7.77	$	7.45	$	7.23	$	6.82
Units carried (in 000s)		3,713		4,139		4,065		2,592		2,623
Number of active rigs (3)		2,050		2,421		2,499		2,430		1,588

(1)

Fleet Capex is the component of our total capital expenditures that reflects the amount we spend on our fleet. During the year ended December 31, 2016, we purchased $1.1 million of new trailers and spent $16.3 million on rig refurbishments and modifications. During the year ended December 31, 2015, we purchased 180 rigs for an aggregate of $5.8 million as their operating leases expired, in addition to purchasing $5.1 million of new trailers and spending $13.8 million on rig refurbishments and modifications. During the year ended December 31, 2013, the fleet capex included additional rigs acquired in the Allied Acquisition.

(2)

EBITDA, a non-GAAP financial measure, represents income (loss) from continuing operations plus provision (benefit) for income tax expense (benefit), interest expense, net and depreciation and amortization. Adjusted EBITDA, a non-GAAP financial measure, as used herein is defined as EBITDA further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing core operating performance or are non-cash items such as: net loss attributable to non-controlling interests; adjustments for legacy workers’ compensation charge (benefit) related to programs in-place prior to our current ownership; severance and employment agreement charges; professional fees associated with potential transactions and consummated acquisitions; goodwill and intangible asset impairments, pension withdrawal liabilities; fuel surcharge reductions; stock based compensation; and other, net, primarily comprised of non-cash impact of foreign currency changes on certain intercompany notes that are other than long-term in nature. You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. We present EBITDA and Adjusted EBITDA because we consider these measures to (a) be important supplemental measures of our performance; (b) provide more useful information to investors as indicators of our ability to meet our debt payments and working capital requirements; (c) provide an overall evaluation of our financial condition and (d) are frequently used by securities analysts, investors, lenders and other interested parties in the evaluation of companies in our industries with similar capital structures. We also use EBITDA and Adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors and evaluating short-term and long-term operating trends in our business. Our definitions of EBITDA and Adjusted EBITDA are not necessarily comparable to that of other similarly titled measures reported by other companies. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.

EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to net loss, as determined under GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; they do not reflect changes in, or cash requirements for, our working capital needs; they

do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; and other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Additionally, Adjusted EBITDA excludes (1) non-cash stock based compensation expenses which are and will remain a key element of our overall long-term compensation packages and (2) certain costs related to multi-employer pension plan partial withdrawals, which we expect are reasonably likely to occur in future periods.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only for supplemental purposes. Please see our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The following table is a reconciliation of net loss to EBITDA and Adjusted EBITDA.

(3)

Represents all units handled.


	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
(in thousands)	December 31,		December 31,		December 31,		December 31,		December 31,
Reconciliation of Net Loss to EBITDA	2016		2015		2014		2013		2012
Net loss attributable to JCHC	$	(33,274)	$	(69,916)	$	(62,734)	$	(52,306)	$	(4,807)
Net loss attributable to noncontrolling interests		—		—		—		—		(417)
Net loss		(33,274)		(69,916)		(62,734)		(52,306)		(5,224)
Provision (benefit) for income taxes		809		1,029		1,219		(967)		(267)
Interest expense, net		46,617		46,912		41,364		59,602		26,745
Depreciation and amortization		49,277		50,941		50,441		25,314		24,824
EBITDA	$	63,429	$	28,966	$	30,290	$	31,643	$	46,078
Adjusted EBITDA Calculation
EBITDA	$	63,429	$	28,966	$	30,290	$	31,643	$	46,078
Plus (less):
Net loss attributable to noncontrolling interests		—		—		—		—		417
Other, net(A)		(852)		6,923		3,914		857		153
Loss on sale of assets		1,387		2,426		1,117		34		249
Legacy workers' compensation charge(B)		(487)		903		650		488		1,470
Pension withdrawal liability(C)		3,315		579		2,794		8,380		4,363
Fuel surcharge reductions(D)		—		—		—		—		978
Professional fees(E)		5,840		960		4,178		10,604		3,266
Severance and employment agreement charges(F)		1,720		1,513		3,162		—		—
Stock based compensation(G)		819		906		1,725		318		402
Acquisition integration costs(H)		—		—		6,404		883		—
Goodwill and intangible asset impairment(I)		—		15,352		—		4,663		—
Adjusted EBITDA	$	75,171	$	58,528	$	54,234	$	57,870	$	57,376

Primarily represents non-cash foreign currency transaction (gains) losses on intercompany loans denominated in currencies other than the reporting currency.

Represents the charge (benefit) taken for legacy workers’ compensation claims related to claims from the period January 1, 2008 through July 26, 2009, most of which were incurred prior to the acquisition of Jack Cooper by its current ownership group and we do not believe to be reflective of the Company’s ongoing operations as operated by the Company’s current management. Charges (benefits) are included in compensation and benefits on the condensed consolidated statements of comprehensive loss.

Represents estimated partial multi-employer defined benefit pension plan withdrawals.

On January 21, 2014, we received a notice of assessment of partial withdrawal from the Teamsters of Philadelphia and Vicinity Pension Plan, or the Philadelphia Plan, due to a decline in our contributions to the fund during the three year period from 2007 to 2009. The withdrawal liability of $1.6 million was payable in quarterly installments through September 2015 of principal and interest totaling less than $0.3 million. We previously estimated that we had triggered a partial pension withdrawal liability of $3.5 million as of December 31, 2014 due to declines in contributions to the Philadelphia Plan during the periods since 2009. On July 9, 2015, the Company received a notification from the Philadelphia Plan of the partial withdrawal liability of $3.7 million related to the portion of the declines in contributions to the fund during the periods since 2009, and as a result the Company recorded $0.2 million of additional liability during the year ended December 31, 2015. During the year ended December 31, 2016, the Company estimated it had triggered a $2.9 million full withdrawal liability, net of previously recorded partial withdrawal liabilities, from the Philadelphia Plan due to the closure of one terminal during the second quarter of 2016.

In addition, we previously estimated that we had triggered a partial pension withdrawal liability of $4.4 million as of December 31, 2012 due to declines in contributions to Western Conference Pension Trust during periods between 2010 and 2012. We recorded additional liabilities of $0.6 million during the year ended December 31, 2013 as a result of declines in contributions during the periods then ended, which are used to estimate the liability. On June 13, 2014, we received the assessment of our partial withdrawal liability for the periods noted above and as a result recorded less than $0.1 million additional liability during the year ended December 31, 2014. During 2013, we recorded $2.6 million for estimated partial withdrawal liabilities during the periods between 2010 and 2013. During 2014, we recorded $2.2 million for estimated partial withdrawal liabilities during the periods between 2012 and 2014 and an additional $0.5 million estimate related to withdrawal liabilities during periods between 2010 and 2013. On August 10, 2015, we received an assessment from the Western Conference Pension Trust indicating we had a partial withdrawal liability of $3.4 million related to the portion of the declines in contributions to the fund during the periods between 2011 and 2013, and as a result we recorded $0.3 million of additional liability during the third quarter of 2015. On January 10, 2017, we received an assessment from Western Conference Pension Trust indicating we had a partial withdrawal liability of $0.3 million related to the 2013 plan year, and as a result we recorded $0.3 million of additional liability during the year ended December 31, 2016.

In December of 2016, we estimated that we had triggered a full pension withdrawal liability of $0.2 million from the Central Pennsylvania Teamsters Defined Benefit Plan. As a result, we recorded an estimated lability of $0.2 million during the year ended December 31, 2016.

A customer modified its calculation of fuel surcharge without notice. The Company requested modified hauling rates from its customer to offset the reduction in fuel. The values shown here reflect the fuel surcharge that was permanently lost during the period of modified fuel surcharge rates without corresponding hauling rate adjustments.

Represents charges for third-party legal, consulting and accounting expenses related to potential and consummated transactions and acquisitions, and related diligence, including exchange transactions and the Allied Acquisition, which are included in selling, general, and administrative expenses in the condensed consolidated statements of comprehensive loss. We believe excluding professional fees associated with transactions outside the normal operations of the Company, which fluctuate based on factors unrelated to our ongoing business operations, provides for a more complete understanding of factors and trends affecting our business operations.

During the year ended December 31, 2016, costs related to payments under severance and labor agreement obligations associated with the closure of four terminal locations and the elimination of certain corporate overhead roles. During the year ended December 31, 2015, costs related to payments under severance and labor agreement obligations associated with the planned closure of two Canadian terminal locations in the first half of 2016. During the year ended December 31, 2014, costs related to separation, non-compete, and consulting agreements executed in connection with the resignation of two of our officers. These charges are reflected in compensation and benefits and selling, general and administrative expenses in the consolidated statements of comprehensive loss. We believe these costs are not indicative of our ongoing operations and are excluded for purposes of facilitating a comparison of our operating performance on a constant basis from period to period.

Represents the compensation expense for stock options granted during 2013, 2014 and 2015. The fair value of the options was determined using the Black-Scholes model. The expense is included in selling, general and administrative expenses on the consolidated statements of comprehensive loss.

Costs associated with the integration of the Allied Acquisition primarily related to systems transition, transitional associates, information services, travel and fleet relocation.

During the second quarter of 2015, the Company completed an interim impairment test of goodwill and intangible assets of AES resulting in an impairment charge to goodwill of $14.1 million and $1.2 million intangible asset impairment. The charge was a result of reduced rates of growth of sales, profit, and cash flow and revised expectations for future performance that were below the Company’s previous projections, largely as a result of increased price competition and weak export demand for vehicles to Nigeria, a major market within which AES operates. During the fourth quarter of 2013, the Company completed its annual impairment test of the Logistics segment reporting unit resulting in an impairment charge of $4.7 million related to the goodwill of AES. The charge is a result of revised sales growth rates, profits, and cash flows that were below the Company’s previous projections, partially as a result of governmental budgetary issues which have curtailed capital investment for infrastructure projects in Nigeria.

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with “Selected Consolidated Financial Data,” our consolidated financial statements and the related notes and the other financial information appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed below and contained elsewhere in this Annual Report on Form 10-K, particularly under “Risk Factors,” and “Forward-Looking Statements.” All forward-looking statements are based on information available to us as of the date hereof, and we assume no obligation to update any such forward-looking statements.

Overview

We are a growth-oriented, specialty transportation and other logistics provider and the largest over-the-road FVL company in North America. Through our Transport and Logistics segments, we provide premium asset-heavy and asset-light solutions to the global new and POV markets, specializing in finished vehicle transportation and other logistics services for major automotive OEMs and fleet ownership companies, remarketers, dealers and auctions. We offer a broad, complementary suite of asset-heavy and asset-light transportation and logistics solutions through a fleet of 2,050 active rigs and a network of 53 strategically located terminals across North America as of December 31, 2016. We believe our scale and full range of over-the-road transportation and value-added logistics services, offered in over 80 locations across the U.S., Canada and Mexico allow us to operate efficiently and deliver superior customer service. In 2016, we transported over 3.7 million finished vehicles, which we believe is significantly higher than the number of units transported by our nearest competitor.

Since 2008, we have undertaken a number of strategic operational initiatives and completed five acquisitions as part of our focus on profitable growth. Most recently, we completed the Allied Acquisition in December 2013, creating the largest over‑the‑road FVL provider in North America. As a result of these efforts, for the period from 2010 through 2016, we have increased our annual operating revenues and Adjusted EBITDA by a 16.1% and 27.1% compound annual growth rate (“CAGR”), respectively, despite operating through one of the worst automotive markets in recent history. We believe we are positioned to capitalize on favorable growth and modal shifts in the global FVL industry (which includes all modes of transportation, whether truck, rail or ship), as well as expand into other industry verticals that require highly specialized or customized asset and non‑asset based solutions.

We provide a critical component of the automotive supply chain, serving as a primary link in the delivery of finished vehicles from manufacturing plants, vehicle distribution centers, or VDCs, seaports and railheads to new vehicle dealerships. We operate in the short haul segment of the U.S. automotive transportation market for primarily new and, to a lesser extent, POVs. We haul four and two door automobiles, light trucks, sport utility vehicles and transit vans, with an average length of haul of approximately 170 miles, although our length of haul ranges from less than a mile up to approximately 2,400 miles. We operate the largest active fleet in the North American auto hauling industry, with 2,705 useable rigs as of December 31, 2016, of which 2,050 are active. We believe our sufficiently large fleet of useable rigs allows us to flex capacity and meet future customer needs. Our excess capacity is a direct result of the Allied Acquisition, and we do not believe any of our competitors have this spare capacity.

In addition to our asset-heavy transportation solutions, we provide our customers with a full range of complementary asset-light logistics and value-added services. Logistics services provides a range of asset‑light services to the POV market, including inspections, automated claims management, title and key storage services, brokerage and export services, port processing, third‑party logistics management, and other technical services. We believe we are one of the largest inspectors of used vehicles in the United States. We independently report on the condition of POVs to both close the lessee‑lessor contracts (e.g., when a POV is returned to a dealership by a customer) and to remarket the vehicle through both wholesale and retail channels. We also help our customers move vehicles to and from dealerships, inspection lots, auctions, and overseas markets by coordinating transportation from third party trucking, rail, or ocean shipping providers. We further provide value added services across the supply chain, such as our vehicle inspection application, PhotoBooth, which provides high‑definition photo technology to vehicle dealers and remarketers who, for marketing purposes, normally take a large number of photos of each vehicle they plan to sell.

Our business is highly dependent on our largest customers, GM, Ford, and Toyota. Our largest customers have expressed concern about our financial condition and our significant leverage and have indicated that they are closely monitoring our financial situation as they consider our position as a significant supplier to them. We believe that our recent loss of business related to certain traffic lanes from one of our three largest customers during the bidding process during 2016 was in-part related to their concerns about our significant leverage. We estimate that the lost business will result, starting in 2017, in annual revenue declines of between $14 million and $16 million and reduced earnings of between $3.5 million and $4.5 million. We are engaged in ongoing discussions with that customer and other customers about our financial position, and also believe that concerns about our financial condition are impeding some of our customers from entering into extended terms of service agreements with us.

Most of the Company’s U.S. employees are represented by the Teamsters and are covered by the Master Agreement, which expired on August 31, 2015. The NATLD have negotiated with the TNATINC a tentative new Master Agreement on which Teamster members intend to vote by March 31, 2017. The NATLD and the Teamsters have mutually agreed to keep all terms and provisions of the Master Agreement in effect and adhere to labor laws until a new agreement is entered into.

On December 4, 2015, the FAST Act was signed into law. The FAST Act will allow us to transport non-auto based cargo on the trailers of our rigs, which we expect will allow us to leverage our fleet to transport on our backhauls materials ranging from commodities, such as timber, to specialty products, such as utility vehicles. The FAST Act also provides for an additional five feet of total length for automobile transporters, changing the current federal limit from 75 feet to 80 feet. Additionally, front and rear overhang limits are now increased by three feet in the front and four feet in the rear, to a total allowance of four feet front overhang and six feet rear overhang. This results in a total load length (truck with overhang) of 90 feet, which we believe would allow us to increase our load factor and improve our margins in future periods without incremental equipment investment.

Key 2016 Events

Public Exchange Offer. On November 1, 2016, JCEI commenced an unregistered offer to exchange up to $80,450,000 of JCEI Notes for (i) cash and (ii) warrants to purchase shares of Class B Common Stock of the JCEI, par value $0.0001 per share (the “Class B Common Stock”), that are each exercisable into one share of Class B Common Stock. In the Public Exchange Offer, consideration, for each $1,000 of principal amount of JCEI Notes exchanged, the tendering holder received (i) $125 in cash (or $135 in cash if the holder tendered prior to an early deadline), and (ii) 3.5783 warrants to purchase shares of JCEI’s Class B Common Stock. $34.3 million aggregate principal amount of JCEI Notes were validly tendered in the Public Exchange Offer. The consideration transferred for the tendered JCEI Notes through the Public Exchange Offer was $4.4 million cash and 122,608 Exchange Warrants.

Concurrent Private Exchange. Concurrent with the commencement of the Public Exchange Offer, JCEI entered into a note purchase agreement with certain holders (including the T. Michael Riggs Irrevocable Trust) of the JCEI Notes that beneficially owned approximately 51.9% of the JCEI Notes ($96.9 million aggregate principal amount of JCEI Notes). Pursuant to the Note Purchase Agreement, the Private Exchange Noteholders agreed not to participate in the Public Exchange Offer and to exchange 100% of their JCEI Notes in a private exchange transaction which occurred concurrently with the closing of the Public Exchange Offer. The exchange by the Private Exchange Noteholders is referred to herein as the “Private Exchange”. As consideration for the exchange of their JCEI Notes, concurrently with the closing of the Public Exchange Offer, the Private Exchange Noteholders received (i) cash in the amount of $135 per $1,000 of JCEI Notes exchanged, which the aggregate amount of approximately $13.1 million was placed into escrow for the benefit of the Private Exchange Noteholders concurrently with the execution of the Note Purchase Agreement, and (ii) their pro rata portion of 346,804 Exchange Warrants. In addition, because the Public Exchange Offer was not fully subscribed, the Private Exchange Noteholders received their pro rata portion of an additional amount of cash equal to the total amount of cash being offered in the Public Exchange offer less the cash used in the Public Exchange Offer. The consideration transferred for the JCEI Notes tendered through the Private Exchange was $19.6 million cash and 346,804 Exchange Warrants.

The exchange transactions resulted in (i) the retirement of $34.3 million aggregate principal amount of JCEI Notes through the Public Exchange Offer, and (ii) the retirement of $96.9 million aggregate principal amount of the JCEI Notes through the Private Exchange, resulting in a total of $131.1 million of JCEI Notes being retired during 2016.

Intercompany Loan and Credit Facility Draw. Following the closing of the Solus Term Loan, the Company and JCEI entered into a loan whereby the Company loaned approximately $24.0 million of the net proceeds from the Solus Term Loan to JCEI to use as the cash consideration for the Public Exchange Offer and the Private Exchange. The loan bears interest at an annual rate of 1.5% payable-in-kind beginning 121 days after October 28, 2016 and has a maturity date of June 17, 2019. On October 26, 2016, the Company drew $21.5 million from its Credit Facility to ensure availability of liquidity from the Credit Facility. As of December 31, 2016, the Company has availability under the Credit Facility of approximately $12.5 million. However, our ability to borrow these funds is limited to approximately $4.0 million pursuant to certain restrictions under the indenture governing our 2020 Notes.

Terminal Closures. In the fourth quarter of 2015, management made the determination to close two Canadian terminals due to continued losses attributable to those locations. The closure of the terminals occurred during the second quarter of 2016. Further, also during the second quarter of 2016, the Company closed two U.S. terminals due to not meeting management’s performance expectations. As a result of one of the U.S. closures the Company estimated it had triggered a $2.9 million full withdrawal liability, net of previously recorded partial withdrawal liabilities, from the Teamsters of Philadelphia and Vicinity Pension Plan, or the Philadelphia Plan.

Our Segments

We operate in two reportable segments, the Transport segment and the Logistics segment, which are further described below.

Transport Segment

The Transport segment provides automotive transportation services to OEMs of automobiles and light trucks in the U.S. and Canada. Specific services include: (i) transportation of new vehicles from OEM assembly centers, vehicle distribution centers and port sites to dealers or other intermediate destinations and (ii) certain asset‑light services such as rail car loading and gate releasing services at OEM assembly centers and related new vehicle inspection services. The average length of haul is approximately 170 miles, though our length of haul ranges from less than a mile up to approximately 2,400 miles. The Transport segment’s revenues represented 90.8% and 91.5% of the Company’s total revenues for the years ended December 31, 2016 and 2015, respectively.

Logistics Segment

The Logistics segment engages in the global asset‑light automotive supply chain for new and used finished vehicles and includes: (i) brokering the transportation of used vehicles, including vehicles sold through an automotive auction process and (ii) services within the growing remarketed vehicle sector in which our customers are typically OEM

remarketing departments, automotive auction companies and logistics brokers, including brokering of the international shipment of cars and trucks from various ports in the United States to various international destinations; and inspection and title storage services for pre‑owned and off‑lease vehicles. The Logistics segment’s revenues represented 9.2% and 8.5% of the Company’s total revenues for the years ended December 31, 2016 and 2015, respectively.

Factors Affecting Our Performance

Revenues

We primarily earn revenues from the intrastate and interstate transportation of vehicles. Most of our sales and costs are significantly concentrated among three major customers: GM, Ford and Toyota, which accounted for approximately 87%, 83%, and 81% of total revenues for the years ended December 31, 2016, 2015, and 2014, respectively, and GM alone accounted for 47%, 40%, and 38%, respectively. We generate a significant portion of our revenues by transporting automobiles and light trucks for our customers. Generally, we are paid per vehicle transported, per mile. We also derive revenues from fuel surcharges, yard management services, including rail loading and unloading activities, brokering of transportation of used vehicles, brokering of international shipments of cars, trucks, and construction equipment from various ports in the U.S. to various international destinations by third‑party ships, and inspection and titles storage services for pre‑owned and off‑lease vehicles.

The main factors that affect our revenues is the number of vehicles manufactured by our customers, the type of vehicle models and the distance between origin location and destination location, the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, the number of rigs operating and changes in fuel prices. These factors relate to, among other things, the U.S. economy, inventory levels, the level of truck capacity in our markets, customer demand by location for each vehicle model, timing of OEM production, changeovers and recalls, and our average length of haul.

As is common in the industry, we recover a portion of certain fuel costs from fuel surcharges charged to customers. Changes in fuel costs will not result in a direct offset to fuel surcharges due to the nature of the calculation of fuel surcharges, which is customer‑specific and fluctuates as a result of miles driven, changes in the number and types of units hauled per customer, as well as the relationship of the national average cost of fuel (the national average diesel price index) or other contractually determined customer index benchmarks compared to actual fuel prices paid at the pump.

Financial Overview

During the year ended December 31, 2016, operating revenues decreased by 8.3%, or $60.8 million, as compared to the year ended December 31, 2015 primarily as a result (i) a 9.3% decrease in the volume of vehicles delivered mainly due to the closing of four of our terminals during the second quarter of 2016, two in Canada and two in the U.S., and an increase in OEM plant shut-downs partially due to shortages in parts inventory at certain OEMs as a result of the Japanese earthquakes in April 2016, and (ii) an $18.7 million decrease in fuel surcharges received primarily due to a 8.2% decrease in the miles driven as well as the overall reduction in average diesel fuel prices throughout the U.S. The main factor offsetting the decrease in revenues was the continuing impact of contractual increases in customer rates during the third quarter of 2015, which include changes in pricing and payment terms and certain operational improvements.

During the year ended December 31, 2015, revenues decreased by 7.0% as compared to 2014, primarily as a result of (i) decreased fuel surcharges due to the overall reduction in average fuel prices throughout the U.S., (ii) a decrease of 6.2% in miles driven during the year ended December 31, 2015 as compared to 2014, primarily due to the Company’s decision to exit certain unprofitable hauling routes, and (iii) reduced revenues from the Company’s brokerage operations and international export shipping operations of cars, trucks and construction equipment during the year mainly due to lower used vehicle brokerage volumes and decreased shipments at AES during the year ended December 31, 2015. These effects were partially offset by less severe weather conditions during 2015 as compared to 2014. We experienced 28 terminal shut‑down days associated with severe weather conditions during the first quarter of 2015, compared to 102 terminal shut‑down days during the same period of 2014. A terminal shut‑down day is defined as one eight hour Monday through Friday operating day for a single terminal. Decreased revenues were also offset by contractual changes made with certain customers during the third quarter of 2015, which include changes in pricing and payment terms and certain operational improvements. These contractual amendments partially offset the revenue decrease discussed above, contributing $6.0 million of additional revenue during the year ended December 31, 2015.

Expenses and Profitability

The main expenses that impact our profitability are the variable costs of transporting vehicles for our customers. These costs include fuel expenses, driver‑related expenses, such as wages and benefits, rig maintenance costs and insurance costs such as workers’ compensation and cargo claims. These expenses generally vary with the miles we travel and number of vehicles hauled, but also have a controllable component based on safety, fleet age, efficiency, and other factors. Our main fixed costs include the acquisition and financing of long‑term assets, primarily revenue equipment, terminal non‑driver, non‑maintenance personnel costs and facilities expenses.

Cyclicality and Seasonality

Our business is cyclical and is tied to auto manufacturing output and customer demand for new automobiles. The second fiscal quarter of our year is typically the strongest contributor to revenues and earnings due to strong consumer demand for vehicles during the spring and summer months, workforce efficiencies due to favorable weather and low customer plant down‑times. The third fiscal quarter contribution to revenue is typically less than the second quarter due to plant shut‑downs necessary for automobile model‑year changes by our customers. A significant swing in business volume over a short period as a result of events such as a plant shut‑down leads to decreased operating efficiencies and margins during the relevant periods. Fourth quarter revenues are typically strong but, similar to the first quarter, can be negatively impacted by weather conditions, which not only decrease vehicle delivery volumes, but also decrease driver productivity, as well as negatively impacted by fewer working days due to the concentration of holidays during such period.

Foreign Currency Exchange Rates

Our reported financial condition and results of operations have been converted to U.S. dollars from the Canadian dollar and Mexican peso. Our revenues and certain expenses are affected by fluctuations in the value of the U.S. dollar against these local currencies. When we refer to changes in foreign currency exchange rates, we are referring to the differences between the foreign currency exchange rates we use to translate our international operations’ results from local currencies into U.S. dollars for reporting purposes. The impacts of foreign currency exchange rate fluctuations are calculated as the difference between current period activities translated using the current period’s currency exchange rates and the comparable prior year period’s currency exchange rates. We use this method for all countries where the functional currency is not the U.S. dollar.

Key Performance Metrics

EBITDA and Adjusted EBITDA. EBITDA represents income (loss) from continuing operations plus provision (benefit) for income tax expense (benefit), interest expense, net, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, as detailed in “Selected Historical Consolidated Financial and Other Data.” The following table sets out our EBITDA and Adjusted EBITDA for the years ended December 31, 2016, 2015 and 2014:


	2016		2015		2014
	(in thousands)
EBITDA	$	63,429	$	28,966	$	30,290
Adjusted EBITDA	$	75,171	$	58,528	$	54,234

A reconciliation from net earnings (loss), a GAAP measure, to EBITDA and Adjusted EBITDA, and other information relating to the use of these non-GAAP measures, can be found in “Selected Historical Consolidated Financial and Other Data.”

Results of Operations

For the Years Ended December 31, 2016 and 2015

Operating Revenues. Total operating revenues decreased by $60.8 million to $667.8 million for the year ended December 31, 2016 from $728.6 million for the same period in 2015, a decrease of 8.3%. The decrease in operating revenues resulted from an $18.7 million decrease in fuel surcharges, a $41.6 million decrease in the Transport segment’s

revenues, and a $0.5 million decrease in the Logistics segment’s revenues. Foreign currency exchange fluctuations had no material impact on the Company’s operating revenues.

The Transport segment revenues, exclusive of fuel surcharge, decreased by $41.6 million, or 6.6%, for the year ended December 31, 2016 as compared to the year ended December 31, 2015. The decrease in revenues was primarily a result of the closure of four of the Company’s terminals during the second quarter of 2016 due to continued losses attributable to those locations as well as increases in OEM plant shut-downs partially due to shortages in parts inventory at certain OEMs as a result of the Japanese earthquakes in April 2016. OEM plant shut-downs and terminal closures collectively contributed to a 9.3% decrease in the volume of vehicles we delivered and an 8.2% decrease in miles driven in the year ended December 31, 2016 as compared to the year ended December 31, 2015. The decrease in revenues for 2016 were partially offset by increased rates per vehicle hauled for certain customers resulting from certain contractual changes made during the third quarter of 2015.

The Logistics segment revenues decreased by $0.5 million, or 0.8%, for the year ended December 31, 2016 primarily as a result of decreased revenues from our used vehicle brokerage operations and from our international shipment brokering operations, largely due to increased price competition in the market, as well as reduced demand for the export of vehicles to Nigeria. This decrease was partially offset by an increase in our vehicle inspections and title management services.

Fuel surcharges included in the Transport segment’s revenues for the years ended December 31, 2016 and 2015 were $20.9 million and $39.6 million, or 3.6% and 6.3%, of the Transport segment’s revenues before fuel surcharge, respectively. Fuel surcharges decreased for the year ended December 31, 2016 as compared to the year ended December 31, 2015 primarily due to the overall decrease in average fuel prices throughout the U.S. as compared to the pre‑determined customer index benchmarks. Average fuel prices throughout the U.S. were approximately $2.35 per gallon for the year ended December 31, 2016 and $2.76 per gallon during the same period in 2015. Further contributing to the variance was a decrease in total miles driven, which decreased 8.2% for the year ended December 31, 2016 as compared to the year ended December 31, 2015. Additionally, fuel surcharges decreased as a percentage of revenues due to contractual price increases received from certain customers during the third quarter of 2015, with no corresponding changes in the customer‑specific fuel surcharge rates. Fuel surcharges offset approximately 40.0% and 58.4% of fuel expenses for the years ended December 31, 2016 and 2015, respectively.

Operating Expenses. Total operating expenses were $654.5 million and $743.6 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $89.1 million, or 12.0%. Foreign currency exchange fluctuations had no material impact on the change in the Company’s operating expenses for the years ended December 31, 2016 and 2015.

The Transport segment’s operating expenses decreased by $72.9 million and the Logistic segment’s operating expenses decreased by $16.4 million for the year ended December 31, 2016, as compared to the year ended December 31, 2015. The decrease in Transport and Logistics operating expenses were partially offset by an increase of $0.2 million in corporate operating expenses.

The following table details the operating expense for the years ended December 31, 2016 and 2015:


(in thousands)	2016		2015
Compensation and benefits	$	341,804	$	373,469
Fuel		52,198		67,796
Depreciation and amortization		49,277		50,941
Repairs and maintenance		49,982		54,395
Other operating expenses		107,530		122,985
Selling, general and administrative		52,371		56,277
Loss on disposal of property and equipment		1,387		2,426
Goodwill and intangible asset impairment		—		15,352
Total	$	654,549	$	743,641

Compensation and Benefits. Compensation and benefits includes wages and benefits for drivers, maintenance and yard employees who are members of collective bargaining units, the majority of which are Teamsters. Benefit costs include

health, welfare and contributions made to various multi‑employer pension funds, premiums for workers’ compensation insurance, and payroll taxes.

Compensation and benefits were $341.8 million and $373.5 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $31.7 million, or 8.5%. The decrease in compensation and benefits was attributable to a $31.5 million decrease from the Transport segment and a $0.2 million increase from the Logistics segment. The primary factor leading to the decrease from the Transport segment was reduced wages paid to drivers as a result of decreased miles driven during 2016, along with a decrease in workers’ compensation expense. The decrease in miles was mainly due to productivity improvements as a result of operational efficiency initiatives undertaken during the second half of 2015, as well as result of decreased volume of vehicles delivered during the year ended December 31, 2016. The decrease in workers’ compensation expense was primarily related to the Company’s strategic initiative to reduce the number of claims incurred as well as to improve claims processing. Also contributing to the decrease, in the fourth quarter of 2015, management made the determination to close two Canadian terminals due to continued losses attributable to those locations. This determination resulted in a severance accrual of $1.5 million in 2015, and an additional severance accrual of $0.3 million in 2016, resulting in a $1.2 million decrease in severance expense between the periods. The decrease was partially offset by $3.3 million estimated or assessed withdrawal liabilities recorded during 2016, net of previously recorded partial withdrawal liabilities, primarily related to the Teamsters of Philadelphia and Vicinity Pension Plan due to the closure of one U.S. terminal.

Fuel Expenses. Consolidated fuel expenses (including federal and state fuel taxes) were $52.2 million and $67.8 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $15.6 million, or 23.0%, which was entirely attributable to the Transport segment. The decrease in fuel expense was due primarily to the overall decrease in average fuel prices throughout the U.S. for the year ended December 31, 2016 as compared to the year ended December 31, 2015, as well as the decrease in miles driven as noted above.

Depreciation and Amortization. Depreciation and amortization expense was $49.3 million and $50.9 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $1.6 million, or 3.1%. The decrease was attributable to a $1.1 million decrease from the Transport segment and a $0.5 million decrease from the Logistics segment, and is a result of lower average outstanding balances of amortizable intangible assets in the current period as compared to the prior period.

Repairs and Maintenance. Repairs and maintenance expense, which consists primarily of vehicles tires, parts and outside vendor maintenance, was $50.0 million and $54.4 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $4.4 million, or 8.1%. The decrease was substantially attributable to the Transport segment, and was lower due to decreases in the amount of repairs required to Company rigs as a result of fewer miles driven during the current comparable period, in addition to a decrease in average active rigs in the current comparable period.

Other Operating Expenses. Other operating expenses include rent expenses, license fees and taxes, vehicle insurance expenses, cargo claim loss expenses, general supplies, other miscellaneous expenses and brokerage fees paid for services performed on our behalf as part of our non-asset based logistics services, including payments for international shipments on third-party ships. Other operating expenses were $107.5 million and $123.0 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $15.5 million, or 12.6%, and were comprised of decreases in other operating expenses of approximately $13.6 million for our Transport segment and approximately $1.9 million for our Logistics segment.

The Transport segment’s other operating expenses includes a $2.1 million decrease in vehicle rental expense primarily due to fewer rigs being leased in the year ended December 31, 2016 as a result of the Company’s purchase during 2015 of 180 rigs previously operated under operating leases. Further contributing to the Transport segment’s decrease in other operating expense was a $6.5 million decrease in lodging, tolls, utilities and other operating supplies and expenses as well as a reduction in other general supplies and expenses of $2.4 million, primarily as a result of fewer miles driven, operational efficiencies implemented since the prior comparable period and the Company’s continued emphasis on cost reductions. Additionally, the Transport segment’s decrease in other operating expense in the current comparable period included a $0.7 million decrease in insurance expenses mainly due to fewer cargo losses during the period, and a $0.9 million decrease in bad debt expense and $0.4 million decrease in license, other taxes and fees.

The Logistics segment experienced a decrease in brokerage fees of international shipments of $3.5 million, mainly due to decreased shipments at AES during the year ended December 31, 2016, largely due to increased price

competition in the market. The Logistics segment’s other operating expenses was further reduced by decreases in insurance, utilities, general supplies and other miscellaneous expenses of $0.6 million as a result of the Company’s continued emphasis on cost reductions. The decrease in the Logistics segment’s other operating expenses was partially offset by increases in inspection costs of $1.7 million, and brokerage fees of $0.5 million mainly due to increased used vehicle brokerage volumes during the year ended December 31, 2016.

Selling, General and Administrative. Expenses reported within selling, general and administrative expenses on the consolidated statements of comprehensive loss consist of administrative salaries, benefits and related payroll taxes, as well as professional services and other miscellaneous administrative expenses. Selling, general and administrative expenses were $52.4 million and $56.3 million for the years ended December 31, 2016 and 2015, respectively, a decrease of $3.9 million, or 6.9%. The decrease was mainly attributable to a $5.7 million decrease in selling, general and administrative expenses from the Transport segment, partially offset by a $1.6 million and a $0.2 million increase from the Logistics segment and for corporate expenses, respectively. The decrease at the Transport segment was primarily due to a $4.8 million decrease in professional service costs associated with consulting agreements related to our operational improvement initiatives in 2015. The increase at the Logistics segment was primarily due to a $1.1 million increase in communications expenses and professional services.

Goodwill and Intangible Asset Impairment. During the second quarter of 2015, the Company completed an interim impairment test of goodwill and intangible assets of AES within the Logistics segment reporting unit, resulting in an impairment charge of $14.1 million of goodwill impairment and $1.2 million intangible asset impairment. The charge was a result of reduced rates of growth of sales, profit, and cash flow and revised expectations for future performance that are below the Company’s previous projections, partially as a result of increased price competition starting in the second quarter of 2015 and weak export demand of vehicles to Nigeria, a major market in which AES operates. These issues have caused one revenue stream of our logistics business for the shipment of vehicles from the U.S. to Nigeria to decline. There were no goodwill or intangible asset impairment charges incurred during the year ended December 31, 2016.

Operating Income (Loss). Operating income was $13.3 million for the year ended December 31, 2016, compared to an operating loss of ($15.1) million for the same period in 2015, an improvement of $28.4 million, or 188.1%. Corporate expenses contributed $1.8 million and $1.6 million of operating loss for the years ended December 31, 2016 and December 31, 2015, respectively. The Transport and Logistics segments contributed $12.4 million and $2.7 million of operating income for the year ended December 31, 2016, respectively, and contributed ($0.3) million and ($13.2) million of operating loss for the year ended December 31, 2015, respectively. The improvement over the comparable period was primarily attributable to the recognition of a goodwill impairment during the year ended December 31, 2015 with no comparable charge during the year ended December 31, 2016, as well as the continuing effect of the increased contractual rates agreed to with certain customers and operational efficiencies and cost reductions implemented since the prior comparable period.

Other Expense (Income). Other expense (income) consists of interest expense, net and other, net, the majority of which is attributable to foreign currency transaction losses.

Interest expense, net was $46.6 million for the year ended December 31, 2016 compared to $46.9 million for the same period in 2015, a decrease of $0.3 million, or 0.6%. Other, net was income of ($0.9) million for the year ended December 31, 2016 compared to an other, net expense of $6.9 million for the year ended December 31, 2015, a decrease of $7.8 million. During the year ended December 31, 2016, there were foreign currency transaction gains primarily associated with intercompany transactions between operations in the U.S., Canada, and Mexico due to the slight weakening of the U.S. dollar over the comparable period. During the year ended December 31, 2015, there were large foreign currency transaction losses due to the heavy strengthening of the U.S. dollar over the comparable period.

Provision for Income Taxes. Our effective tax rate for the years ended December 31, 2016 and 2015 was (2.5)% and (1.5)%, respectively. The accounting for income taxes requires deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2016 and December 31, 2015, we had $96.5 million and $85.4 million recorded for valuation allowance, respectively.

For the Years Ended December 31, 2015 and 2014

Operating Revenues. Total operating revenues decreased by $54.7 million to $728.6 million for the year ended December 31, 2015 from $783.3 million for the same period in 2014, a decrease of 7.0%. The decrease in operating

The following table details the operating expense for the years ended December 31, 2015 and 2014:


(in thousands)	2015		2014
Compensation and benefits	$	373,469	$	383,278
Fuel		67,796		109,333
Depreciation and amortization		50,941		50,441
Repairs and maintenance		54,395		53,802
Other operating expenses		122,985		140,840
Selling, general and administrative		56,277		60,706
Loss on disposal of property and equipment		2,426		1,117
Goodwill and intangible asset impairment		15,352		—
Total	$	743,641	$	799,517

Compensation and Benefits. Compensation and benefits were $373.5 million and $383.3 million for the years ended December 31, 2015 and 2014, respectively, a decrease of $9.8 million, or 2.6%. The decrease in compensation and benefits was attributable to a $10.2 million decrease from the Transport segment, partially offset by a $0.4 million increase from the Logistics segment. The primary factor leading to the decrease from the Transport segment was reduced wages paid to drivers as a result of decreased miles driven during 2015, mainly due to productivity improvements as a result of operational efficiency initiatives undertaken during 2015, as well as the Company’s decision to exit certain unprofitable hauling routes, partially offset by an overall increase in driver wages due to year‑over‑year contractual wage increases.

Fuel Expenses. Consolidated fuel expenses (including federal and state fuel taxes) were $67.8 million and $109.3 million for the years ended December 31, 2015 and 2014, respectively, a decrease of $41.5 million, or 38.0%, which was entirely attributable to the Transport segment. The decrease in gross fuel expense was due primarily to the overall decrease in average fuel prices throughout the U.S. for the year ended December 31, 2015 as compared to the year ended December 31, 2014, as well as the decrease in miles driven as noted above. The decrease in fuel expense was partially offset by an increase in an estimated $1.6 million in costs as a result of a mid-Western fuel refinery that supplies retailors from which the Company purchases a significant amount of fuel being off-line in the fourth quarter of 2015. Fuel costs, net of fuel surcharge were 4.5% and 5.5% of Transport revenues before fuel surcharge for the years ended December 31, 2015 and 2014, respectively.

Depreciation and Amortization. Depreciation and amortization expense was $50.9 million and $50.4 million for the years ended December 31, 2015 and 2014, respectively, an increase of $0.5 million, or 1.0%. The increase was attributable to a $1.2 million increase from the Transport segment, partially offset by a $0.7 million decrease from the Logistics segment, and related primarily to an increase in the average gross outstanding balance of depreciable assets from the same period in the prior year.

Repairs and Maintenance. Repairs and maintenance expense was $54.4 million and $53.8 million for the years ended December 31, 2015 and 2014, respectively, an increase of $0.6 million, or 1.1%. The increase was entirely attributable to the Transport segment. The repairs and maintenance expense was comparable due to the average number of rigs in operations being comparable during both periods.

Other Operating Expenses. Other operating expenses were $123.0 million and $140.8 million for the years ended December 31, 2015 and 2014, respectively, a decrease of $17.8 million, or 12.6%, and were comprised of decreases in other operating expenses of approximately $11.2 million for our Transport segment and approximately $6.6 million for our Logistics segment. The total decrease in both segments consisted of decreases in (i) brokerage fees of $8.5 million related to our brokering of used vehicles and international shipments, (ii) insurance and cargo claim costs of $3.2 million, (iii) license fees and taxes of $1.4 million, (iv) rent expense of $5.6 million, and (v) general supplies and other miscellaneous expenses of $0.2 million, offset by an increase in bad debt expense of $1.1 million.

The decrease in the Transport segment’s other operating expenses included decreases in insurance and cargo claims costs of $3.2 million and license fees and taxes of $1.3 million as a result of the reduced costs associated with having 78 fewer active rigs as of December 31, 2015 as compared to at December 31, 2014, as well as the Company incurring less first-time licensing fees during 2015 as compared to the licensing and titling fees incurred during 2014 as a result of the rigs acquired in the Allied Acquisition. The $5.5 million decrease in rent expense attributable to our Transport segment was mainly due to decreased revenue equipment rent due to the purchase of 180 rigs during the year ended December 31, 2015 as their operating leases expired as well as a decline in required revenue equipment rentals, primarily

due to the Company’s decision to exit certain unprofitable hauling routes in 2015. The decrease in the Transport segment’s other operating expenses also included decreased brokerage fees of $0.7 million and decreases in general supplies and other miscellaneous expenses of $1.6 million, partially offset by an increase in bad debt expense of $1.1 million.

The decrease in the Logistics segment’s other operating expenses included a decrease in brokerage fees on used vehicles of $4.4 million and a decrease in brokerage fees of international shipments of $3.4 million, mainly due to decreased shipments at AES and lower used vehicle brokerage volumes during the year ended December 31, 2015, largely due to increased price competition in the market, as described above. The reduction in Logistics segment’s brokerage fees was partially offset by increases in licensing fees and taxes, insurance, and general supplies and other miscellaneous expenses of $1.2 million.

Selling, General and Administrative. Selling, general and administrative expenses were $56.3 million and $60.7 million for the years ended December 31, 2015 and 2014, respectively, a decrease of $4.4 million, or 7.2%. The decrease was attributable to a $3.9 million decrease in selling, general and administrative expenses from the Transport segment and a $0.5 million decrease from the Logistics segment, partially offset by a $0.3 million increase in corporate expenses. The decrease at the Transport segment was primarily due to a decrease in compensation & benefits expense of $5.6 million, largely attributable to discretionary incentives paid out during the year ended December 31, 2014 for the successful completion of the Allied Acquisition, with no similar expense during the year ended December 31, 2015, as well as $3.2 million of expenses incurred that related to separation and non‑compete agreements executed in connection with the resignation of two of our officers, including our former chief executive officer, with no comparable expense during the year ended December 31, 2015. These decreases were partially offset by an increase in salary expense associated with increased administrative personnel and an increase in professional service costs associated with consulting agreements related to our operational improvement initiatives, which costs have significantly decreased during the fourth quarter of 2015.

Goodwill and Intangible Asset Impairment. During the second quarter of 2015, the Company completed an interim impairment test of goodwill and intangible assets of AES within the Logistics segment reporting unit, resulting in an impairment charge of $14.1 million of goodwill impairment and $1.2 million intangible asset impairment. The charge was a result of reduced rates of growth of sales, profit, and cash flow and revised expectations for future performance that are below the Company’s previous projections, primarily as a result of increased price competition starting in the second quarter of 2015 and weak export demand of vehicles to Nigeria, a major market in which AES operates. These issues have caused one revenue stream of our Logistics segment for the shipment of vehicles from the U.S. to Nigeria to decline. There were no goodwill or intangible asset impairment charges incurred during the year ended December 31, 2014.

Operating Loss. Operating loss was $15.1 million and $16.2 million for the years ended December 31, 2015 and December 31, 2014, respectively. Corporate expenses contributed $1.6 million and $0.9 million of operating loss for the years ended December 31, 2015 and December 31, 2014, respectively. The Logistics and Transport segment contributed $13.2 million and $0.3 million of operating loss for the year ended December 31, 2015, respectively. The decrease in operating loss over the comparable period was primarily attributable to the decrease in operating revenues, as discussed above, as well as $14.1 million of goodwill impairment and $1.2 million intangible asset impairment at our Logistics segment, partially offset by reduced expenses for the Transport segment from fewer miles driven, mainly due to the Company’s decision to exit certain unprofitable hauling routes, as well as productivity improvements as a result of operational efficiency initiatives undertaken during 2015. The decrease in operating loss over the comparable period was also driven by the additional costs incurred as a result of the severe weather conditions experienced during the year ended December 31, 2014 and the integration of the Allied Acquisition, and for certain separation and non‑compete agreements, for which no comparable costs were incurred during the year ended December 31, 2015.

Other Expense (Income). Other expense (income) consists of interest expense, net and other, net, the majority of which is attributable to foreign currency transaction losses. Interest expense, net was $46.9 million for the year ended December 31, 2015 compared to $41.4 million for the same period in 2014, an increase of $5.5 million, or 13.4%. The increase in interest expense, net was a result of the interest rate paid on the outstanding MSD Term Loan balance during the year ended December 31, 2015, which was not outstanding during the same period in 2014. Other, net was an expense of $6.9 million for the year ended December 31, 2015 compared to an other, net expense of $3.9 million for the year ended December 31, 2014, an increase of $3.0 million. The increase was attributable to foreign currency transaction losses primarily associated with intercompany transactions between operations in the U.S., Canada, and Mexico due to the strengthening of the U.S. dollar over the comparable period.

Provision for Income Taxes. Our effective tax rate for the years ended December 31, 2015 and 2014 was (1.5)% and (2.0)%, respectively. The accounting for income taxes requires deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2015 and December 31, 2014, we had $85.4 million and $66.7 million recorded for valuation allowance, respectively.

Liquidity and Capital Resources

Overview

Our cash is primarily generated from operations and specific financing arrangements with lenders, customers and vendors. Our core cash requirements include operating expenses, capital expenditures for equipment (including buyout payments under certain equipment leases), payments under borrowing arrangements and operating leases for equipment, deposits of cash collateral and payments to workers’ compensation, auto and general liability insurers and withdrawal payments to multi-employer pension funds in which we participate. We project that cash generated by our operating activities, borrowings under the Credit Facility, and cash of $17.9 million as of December 31, 2016 will be sufficient to satisfy our core cash needs for the twelve months following the date the financial statements are issued.

As of December 31, 2016, the Company has availability under the Credit Facility of approximately $12.5 million. However, our ability to borrow these funds is limited to approximately $4.0 million pursuant to certain restrictions under the indenture governing our 2020 Notes. Changes in customer sales volumes can impact our ability to borrow against our Credit Facility, which is collateralized in-part by our customer account receivables. Because the Credit Facility provides short term working capital needs as necessary, we have classified borrowings thereunder within short term liabilities on our consolidated balance sheets. As we repay the $71.0 million outstanding under the Credit Facility at December 31, 2016, we may incur new borrowings for working capital needs and expect to have an outstanding balance under the Credit Facility as of December 31, 2017.

During the year ended December 31, 2016, approximately 47%, 30%, and 10% of our revenues were from our three largest customers, GM, Ford, and Toyota, respectively. As discussed above, our largest customers have expressed concern about our financial condition and our significant leverage and have indicated that they are closely monitoring our financial situation as they consider our position as a significant supplier to them. We believe that our recent loss of business related to certain traffic lanes from one of our three largest customers during the bidding process in 2016 was in-part related to their concerns about our significant leverage. We estimate that the lost business will result, starting in 2017, in annual revenue declines of between $14 million and $16 million and reduced earnings of between $3.5 million and $4.5 million. Further, under our current contract with another one of our three largest customers, which expires in December 2018, the customer has the right to terminate or renegotiate the terms of the agreement if we have failed to achieve a Debt to EBITDA ratio, as defined in the agreement, of 3.3x as of December 31, 2016. JCEI’s Debt to EBITDA ratio as defined by the agreement for the year ended December 31, 2016 was 8.2x. The Public Exchange Offer and Private Exchange was intended to address the concerns that customer and our other customers have expressed to us; however, the Public Exchange Offer and Private Exchange did not bring us into compliance with the aforementioned contract provision. While no modification to our business volumes with our customers has occurred subsequent to the Public Exchange Offer and Private Exchange, the customer with whom we have the aforementioned contract provision has further indicated to our management that unless we further address our leverage as required by the contract and provide them with assurances regarding our continued financial stability, they will seek to diversify their suppliers of transport services, will enforce this contract provision and will move a large portion of their transport business currently managed by us to other suppliers. We are engaged in ongoing discussions with that customer and other customers about our financial position, and also believe that concerns about our financial condition are impeding some of our customers from entering into extended terms of service agreements with us.

The Public Exchange Offer and Private Exchange were intended to address the concerns that customer and our other customers have expressed to us; however, the Public Exchange Offer and Private Exchange did not bring us into compliance with the aforementioned contract provision. Although we intend to continue to explore a transaction to bring us in compliance with the customer contract provision, there can be no assurance that we will be successful in achieving such goal. Accordingly, there can be no assurance that completion of any future transaction will otherwise satisfy our customers’ concerns and that they will not move a significant portion of our business to other suppliers.

In addition, we incurred additional debt in connection with the issuance of the Solus Term Loan, which will increase our cash interest payment obligations going forward by an estimated $4.3 million annually. We intend to pursue a wide variety of alternatives to reduce our indebtedness, and routinely evaluate market conditions and the availability of

additional financing in the form of debt and equity capital and intend to seek additional funding when conditions are appropriate, and further may conduct near-term and long-term capital raises, financing and refinancing transactions, restricted payment transactions, and other strategic or financing transactions, including, without limitation, near term and long term high-yield offerings and other debt offerings, private and public equity offerings (including an initial public offering), redemptions, repurchases, dividends, distributions, other transactions with respect to the Company’s debt, equity, and/or derivative securities and corporate reorganizations, acquisitions, divestitures and mergers. The availability of additional financing or equity capital will depend on our financial condition and results of operations as well as prevailing market conditions. There can be no assurance that we will be able to incur additional debt or refinance our existing debt as it becomes due or that we will receive additional equity capital.

Changes to payment terms with customers and vendors impact our working capital needs. During the third quarter of 2015, we entered into contractual changes with certain customers, which included favorable changes in pricing and payment terms and certain operational improvements. The payment term changes included a decrease of payment terms by approximately 23 days for one customer for no less than one year, and delayed the increase in payment terms with another customer. We anticipate that these improved payment terms will continue over the periods of the revised contractual terms.

During the third quarter of 2016 and upon the expiration of our workers compensation insurance agreement, we entered into a new one year workers compensation insurance agreement. The agreement requires the Company to make collateral payments totaling $5.8 million as well as $22.4 million of premium payments, the installments for which are to be paid over nine months. As of December 31, 2016, $9.2 million remains to be paid through the second quarter of 2017. We anticipate the new arrangement will result in improved claims management as well as additional improved coverage, which the agreement provides through a $0.5 million stop-loss limit per claim (exclusive of certain expenses).

Capital Expenditures. When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial capital expenditures to maintain a modern fleet of rigs, refresh our fleet and fund growth of our fleet. During the year ended December 31, 2016, we purchased $1.1 million of new trailers and spent $16.4 million on revenue equipment, including tractor engine and drive train replacements, refurbishments and modifications, and $3.1 million for IT equipment and leasehold improvements. We expect net cash capital expenditures of approximately $18 million to $20 million during the year ending December 31, 2017.

Cash Flows. The following tables present selected measures of our liquidity and financial condition as of December 31, 2016, 2015 and 2014 and for the years then ended:


(in thousands)	2016		2015		2014
Cash and cash equivalents	$	17,934	$	2,571	$	7,100
Working capital deficit		(52,094)		(60,344)		(69,306)
Amounts available under Credit Facility		12,535		39,289		21,832
Long-term debt, including current maturities and Credit Facility (excluding deferred financing costs)		559,993		503,350		464,698
Stockholders’ deficit		(349,853)		(293,431)		(226,961)


(in thousands)	2016		2015		2014
Depreciation and amortization	$	49,277	$	50,941	$	50,441
Capital expenditures		20,654		31,187		20,819
Cash flows provided by (used in) operating activities		3,725		131		(6,553)
Cash flows used in investing activities		(17,808)		(30,264)		(17,928)
Cash flows provided by financing activities		29,721		27,382		29,026

Summary of Sources and Uses of Cash. Cash and cash equivalents increased $15.3 million to $17.9 million at December 31, 2016 from $2.6 million at December 31, 2015. Significant sources of cash during the year ended December 31, 2016 included $41.0 million in net proceeds from the issuance of the Solus Term Loan, net loss exclusive of non-cash items of $20.2 million, $2.8 million in proceeds from the sale of property and equipment, and $20.4 million in net borrowings under the Credit Facility. Significant uses of cash during the year ended December 31, 2016 included cash interest payments of $48.4 million, capital expenditures of $20.7 million, $24.0 million issuance of note receivable from JCEI, $2.0 million in deferred financing costs, $5.7 million in principal payments on long-term debt, $11.2 million of changes in working capital, and $5.3 million of changes in non-current assets and liabilities.

Cash and cash equivalents decreased $4.5 million to $2.6 million at December 31, 2015 from $7.1 million at December 31, 2014. Significant sources of cash during the year ended December 31, 2015 included $59.4 million in net proceeds from the issuance of the MSD Term Loan, net loss exclusive of non-cash items of $9.0 million, $1.5 million in proceeds from the issuance of an intercompany note, $0.8 million in proceeds from the sale of property and equipment, $0.2 million in proceeds from the sale of marketable securities held-for-sale, and $6.5 million of changes in working capital. Significant uses of cash during the year ended December 31, 2015 included net payments of $22.0 million on our Credit Facility, cash interest payments of $44.1 million, capital expenditures of $31.2 million, $2.6 million in deferred financing costs, $8.8 million in principal payments on long-term debt, and $15.4 million of changes in non-current assets and liabilities.

Cash flows provided by operating activities. Cash flows provided by operations were $3.7 million for the year ended December 31, 2016, compared to cash flows provided by operations of $0.1 million for the year ended December 31, 2015. This $3.6 million increase in operating cash inflows was primarily a result of a reduction of net loss exclusive of non-cash items due to operational efficiencies realized during 2016, partially offset by increased cash interest payments on long-term debt as a result of the issuance of the Solus Term Loan and penalty interest associated with the registration rights prior to the completion of our Form S-4 registration of the 2020 Notes, as well as timing of accrued expenses and accounts payable disbursements.

Cash flows provided by operations were $0.1 million for the year ended December 31, 2015, compared to cash flows used in operations of $6.6 million for the year ended December 31, 2014. This $6.7 million decrease in operating cash flows outflows was primarily a result of a reduction of net loss exclusive of non-cash items due to operational efficiencies realized during 2015, partially offset by increased cash interest payments on long-term debt as a result of the issuance of the MSD Term Loan, and favorable changes in working capital primarily due to a decrease of payment terms by approximately 23 days for one customer, partially offset by the timing of accrued expenses and accounts payable disbursements. Further offsetting the decrease in operating cash outflows was a use of cash related to an increase in workers compensation deposits of $11.7 million.

Cash flows used in investing activities. Cash flows used in investing activities were $17.8 million and $30.3 million for the years ended December 31, 2016 and 2015, respectively. For the year ended December 31, 2016, net cash used in investing activities consisted of $20.7 million of capital expenditures, partially offset by $2.9 million in proceeds from the sale of property and equipment. For the year ended December 31, 2015, net cash used in investing activities consisted of $31.2 million of capital expenditures, partially offset by $0.8 million in proceeds from the sale of property and equipment and $0.2 million in proceeds from the sale of marketable securities held‑for‑sale.

Cash flows used in investing activities were $30.3 million and $17.9 million for the years ended December 31, 2015 and 2014, respectively. For the year ended December 31, 2015, net cash used in investing activities consisted of $31.2 million of capital expenditures, partially offset by $0.8 million in proceeds from the sale of property and equipment and $0.2 million in proceeds from the sale of marketable securities held-for-sale. For the year ended December 31, 2014, net cash used in investing activities consisted of $20.8 million of capital expenditures, partially offset by $2.9 million in proceeds from the sale of property and equipment.

Net cash provided by financing activities. Cash flows provided by financing activities were $29.8 million and $27.4 million for the years ended December 31, 2016 and 2015, respectively. For the year ended December 31, 2016, net cash provided by financing activities was primarily attributable to $41.0 million in net proceeds from the issuance of the Solus Term Loan and $20.4 million net borrowings on the Credit Facility, partially offset by $5.7 million of principal payments on long‑term debt, $2.0 million of deferred financing costs payments, along with the issuance of a $24.0 million note receivable from JCEI. For the year ended December 31, 2015, net cash provided by financing activities was primarily attributable to $59.4 million in net proceeds from the issuance of the MSD Term Loan, $1.5 million in proceeds from the issuance of an intercompany note, partially offset by net payments on the Credit Facility of $22.0 million, principal payments on long‑term debt of $8.8 million, and payments of deferred financing costs of $2.6 million.

The change in the amount outstanding under the Credit Facility as of December 31, 2016, as compared to December 31, 2015, was the result of net borrowings of $20.4 million. The average outstanding Credit Facility balance during the year ended December 31, 2016 was $64.5 million, which had a weighted average interest rate of approximately 3.2%.

Cash flows provided by financing activities were $27.4 million and $29.0 million for the years ended December 31, 2015 and 2014, respectively. For the year ended December 31, 2015, net cash provided by financing activities was primarily attributable to $59.4 million in net proceeds from the issuance of the Solus Term Loan, $1.5 million in proceeds from the issuance of an intercompany note, partially offset by net payments on the Credit Facility of $22.0 million, principal payments on long‑term debt of $8.8 million, and payments of deferred financing costs of $2.6 million. For the year ended December 31, 2014, net cash provided by financing activities was primarily attributable to $21.2 million in net borrowings on the Credit Facility and a net capital contribution from JCEI of $13.1 million, partially offset by principal payments of long-term debt of $4.3 million, purchase of treasury stock of $0.5 million and payment of dividends declared during 2013 of $0.4 million.

The change in the amount outstanding under the Credit Facility as of December 31, 2015, as compared to December 31, 2014, was the result of net payments of $22.0 million. The average outstanding Credit Facility balance during the year ended December 31, 2015 was $46.5 million, which had a weighted average interest rate of approximately 3.0%.

Debt and Financing Arrangements

Solus Term Loan. On October 28, 2016, the Company entered into a new credit agreement for a $41.0 million senior secured term loan facility with Wilmington Trust, National Association, as agent for Solus as the lender thereto. The Solus Term Loan bears interest at a rate per annum equal to 10.5% payable quarterly in arrears. The Solus Term Loan will mature on October 28, 2020, subject to a springing maturity as more fully described in the Solus Term Loan agreement. The Solus Term Loan is secured by substantially all of the assets of the Company and its domestic subsidiaries on a subordinated basis to the liens securing the Credit Facility and the MSD Term Loan. The Solus Term Loan is secured on a senior basis, with respect to the ABL Collateral (as defined in the indenture governing the 2020 Notes), and on a subordinated basis, with respect to the Notes Collateral (as defined in the indenture governing the 2020 Notes), to the liens securing the 2020 Notes. Approximately $24.0 million of the proceeds from the Solus Term Loan were loaned to JCEI to be used to fund the cash portion of the consideration for the Public Exchange Offer and the Private Exchange. In connection with the Solus Term Loan, certain entities affiliated with, or managed by, Solus were issued an aggregate of 74,046 warrants to purchase shares of the non-voting Class B Common Stock of JCEI, at an exercise price of $0.01. The Solus Term Loan provides for voluntary prepayments as well as mandatory prepayments in certain circumstances and is subject to certain prepayment premiums. The Solus Term Loan also contains customary affirmative and negative covenants and events of default for financings of its type.

MSD Term Loan. On March 31, 2015, we entered into a senior secured term loan facility in the principal amount of $62.5 million, issued at a 4.0% discount, with MSDC. We used the proceeds from the MSD Term Loan to pay down outstanding borrowings on our Credit Facility and for other corporate purposes. On December 23, 2015, we amended the MSD Term Loan to, among other things, extend the maturity date of the MSD Term Loan to October 18, 2018, and effective January 2, 2016, increase the applicable interest rate on the MSD Term Loan by 1.0% per annum. As a result, effective January 2, 2016, the MSD Term Loan bears interest at a rate of LIBOR plus 7.0% per annum, subject to a LIBOR floor of 3.0% per annum. If the MSD Term Loan is prepaid with the proceeds of a qualified equity raise, the Company will pay an additional premium equal to the present value of the additional 1.0% interest applicable since January 2, 2016 if paid through the maturity date, as a make whole premium.

The MSD Term Loan is guaranteed by JCHC’s domestic subsidiaries and is secured by substantially all of the assets of JCHC and its domestic subsidiaries and a pledge of the outstanding equity of JCHC’s domestic subsidiaries and 65% of the outstanding equity of JCHC’s first‑tier foreign subsidiaries. MSDC’s liens under the MSD Term Loan have first priority status on the ABL Collateral (as defined in the indenture governing the 2020 Notes) and second priority status on the Notes Collateral (as defined in the indenture governing the 2020 Notes) to the same extent as the liens of the lenders under the Credit Facility in such assets, but are junior to the liens of the lenders under the Credit Facility. The MSD Term Loan provides for voluntary prepayments as well as mandatory prepayments in certain circumstances and is subject to certain prepayment premiums. The MSD Term Loan also contains certain customary affirmative and negative covenants and events of default for financings of its type. On October 28, 2016, the Company entered into that certain amendment number two to the MSD Term Loan to, among other things, permit the incurrence of the Solus Term Loan, and, subject to certain conditions, permit the deleveraging events effectuated through the Private Exchange and the Public Exchange Offer.

Credit Facility. On June 18, 2013, we entered into the Credit Facility which, as amended on August 6, 2013, provides $100 million in aggregate borrowing capacity, subject to a borrowing base. Loans under the Credit Facility bear interest at a floating rate and may be maintained as base rate loans (tied to the greatest of the prime rate, the federal funds rate plus 0.5% and the one month LIBOR rate plus 1%) or as LIBOR rate loans (determined by reference to the applicable rate for LIBOR loans for the selected interest period) plus an applicable margin, which is determined based upon the amount outstanding. The Credit Facility is guaranteed by all of our domestic subsidiaries and is secured by a first-priority security interest in most of our assets, including rigs and other vehicles, accounts receivable, inventory, deposit and security accounts and tax refunds, and a second lien on certain of our other assets. The Credit Facility matures at the earlier of (i) June 18, 2018, (ii) the date that is 90 days prior to the then extant maturity date of the MSD Term Loan, (iii) the date that is 90 days prior to the then extant maturity date of the Solus Term Loan or (iv) the date that is 90 days prior to the then extant maturity date of the 2020 Notes.

The Credit Facility contains customary representations, warranties and covenants including, but not limited to, certain limitations on our ability to incur additional debt, guarantee other obligations, create or incur liens on assets, make investments or acquisitions, make certain dispositions of assets, make optional payments or modifications of certain debt instruments, pay dividends or other payments to our equity holders, engage in mergers or consolidations, sell assets, change our line of business and engage in transactions with affiliates. If availability under the Credit Facility falls below 12.50% of the maximum revolver amount, the Company will be required to maintain a fixed charge coverage maintenance ratio of at least 1.10:1.00 for a specified time. If excess availability under the Credit Facility falls below 12.50% of the maximum revolver amount, the lender may automatically sweep funds from our cash accounts to pay down the revolver. At December 31, 2016 and 2015, our availability under the Credit Facility exceeded the specified threshold amounts and accordingly, we were not in a financial covenant period. During the year ended December 31, 2016, borrowings under the Credit Facility ranged from $50.0 million to $79.0 million. As of December 31, 2016, the Company had $12.5 million available for borrowings under the Credit Facility, without consideration of the maximum revolver amount threshold discussed above. On October 28, 2016, the Company entered into that certain fourth amendment to the Credit Facility to, among other things, permit the incurrence of the Solus Term Loan, and, subject to certain conditions, permit the deleveraging events effectuated through the Private Exchange and the Public Exchange Offer.

2020 Notes. The Company has outstanding $375 million principal amount of 9.25% Senior Secured Notes due 2020 (the “2020 Notes”), issued and sold through a private placement to qualified institutional buyers pursuant to Rule 144A, promulgated under the Securities Act. The 2020 Notes were issued pursuant to an indenture dated June 18, 2013 (the “Indenture”), by and among the Company, the guarantors party thereto, and U.S. Bank National Association, as trustee. Interest on the 2020 Notes is payable semi-annually in cash in arrears on June 1 and December 1 of each year.

The 2020 Notes are guaranteed on a full and unconditional basis by all of the Company’s domestic subsidiaries. In connection with the issuance of the 2020 Notes, the Company and certain of its subsidiaries entered into a Security Agreement (the “Security Agreement”), pursuant to which the 2020 Notes and related guarantees are secured by (i) a second‑priority security interest in the assets that secure the Credit Facility (including rigs and other vehicles, accounts receivable, inventory, deposit and security accounts and tax refunds), and (ii) a first‑priority security interest in certain other of the Company’s assets, including the outstanding equity of the Company’s domestic subsidiaries and 65% of the outstanding equity of the Company’s first‑tier foreign subsidiaries. Further, the Security Agreement provides that in the event that Rule 3‑16 of Regulation S‑X under the Securities Act requires or would require the filing with the Securities and Exchange Commission of separate financial statements of any guarantor of the Company due to the fact that such guarantors’ securities secure the 2020 Notes, then such securities shall to the extent necessary to eliminate the need for such filing, automatically be deemed not to constitute security for the 2020 Notes (the “Collateral Cutback Provision”). Rule 3‑16 of Regulation S‑X requires separate financial statements for any subsidiary whose securities are collateral, if the par value, book value or market value, whichever is greater, of its capital stock pledged as collateral equals 20% or more of the aggregate principal amount of the notes secured thereby.

The collateral under the Security Agreement includes capital stock of the following companies:

(i)Areta, S. de R.L. de C.V.,

(ii)Auto Export Shipping, Inc.,

(iii)Axis Logistica, S. de R.L. de C.V.,


	Forward-Looking Statements	iii

PART I

Item 1.	Business	1
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	28
Item 3.	Legal Proceedings	29
Item 4.	Mine Safety Disclosures	29

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities	30
Item 6.	Selected Historical Consolidated Financial and Other Data	30
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	104
Item 9A	Controls and Procedures	104
Item 9B.	Other Information	104

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	105
Item 11.	Executive Compensation	110
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	117
Item 13.	Certain Relationships and Related Transactions, and Director Independence	119
Item 14.	Principal Accountant Fees and Services	120

PART IV

Item 15.	Exhibits and Financial Statement Schedules	121
SIGNATURES		125