2.	Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could be material. Significant estimates include useful lives of property and equipment and related salvage value, claims reserves for liability and workers’ compensation claims and valuation allowance for deferred tax assets.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investment instruments with an original maturity of

three

months or less.

Customer Receivables and Allowances

Customer receivables are recorded at the invoiced amount, net of allowances for uncollectible accounts and revenue adjustments. The allowances for uncollectible accounts and revenue adjustments are based on historical experience as well as any known trends or uncertainties related to customer billing and account collectability. The Company reviews the adequacy of its allowance for doubtful accounts on a quarterly basis. Past due balances over contractual payment terms and exceeding specified amounts are reviewed individually for collectability. Receivable balances are written off when collection is deemed unlikely.

Operating Supplies

Operating supplies consist primarily of parts, materials and supplies for servicing the Company’s revenue and service equipment. Operating supplies are recorded at the lower of cost (on a

first

-in,

first

-out basis) or market. Tires purchased as part of revenue and service equipment are capitalized as part of the cost of the equipment. Replacement tires are charged to expense when placed in service.

Assets Held for Sale

Assets held for sale are comprised of revenue equipment

longer being utilized in continuing operations which are available and ready for sale. Assets held for sale are

longer subject to depreciation and are recorded at the lower of depreciated book value or fair market value less selling costs. The Company expects to sell these assets within the next

twelve

months. At

December 31, 2018,

assets held for sale included revenue equipment of approximately

$5.2

million and assets of a business held for sale of approximately

$28.0

million. At

December 31, 2017,

assets held for sale was comprised solely of revenue equipment. See Note

Assets Held for Sale

for more discussion related to the sale of our interest in Xpress Internacional S.A. de C.V. (Xpress Internacional) during

January 2019.

Property and Equipment

Property and equipment are carried at cost. Depreciation of property and equipment is computed using the straight-line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful lives of the related assets (net of salvage values ranging from

25.0%

50.0%

of revenue equipment). The Company periodically evaluates the estimated useful lives and salvage values of its revenue equipment, due to changes in business needs and expected usage of the equipment. Upon the retirement of property and equipment, the related asset cost and accumulated depreciation are removed from the accounts and any gain or loss is included in depreciation and amortization expense in the Company’s consolidated statements of comprehensive income. Expenditures for normal maintenance and repairs are expensed. Renewals or betterments that affect the nature of an asset or increase its useful life are capitalized.

Impairment of Long Lived Assets

The Company reviews its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset

may

not

be recoverable. Expected future cash flows are used to analyze whether an impairment has occurred. If the sum of the expected undiscounted cash flows is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the impairment loss by comparing the fair value of the asset to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate.

Goodwill

2013,

the Company adopted Accounting Standards Update (ASU)

2011

08,

Testing Goodwill for Impairment,

which allows companies to

first

assess qualitative factors to determine whether it is necessary to perform the

two

-step quantitative goodwill impairment test. Under this standard, the Company would

not

be required to calculate the fair value of a reporting unit unless the Company determines, based on the qualitative review, that it is more likely than

not

that its fair value is less than its carrying amount. The standard includes events and circumstances for the Company to consider when conducting the qualitative assessment.

The quantitative impairment test consists of

two

different steps. The

first

step identifies potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value exceeds its carrying amount, goodwill is

not

considered impaired and the

second

step of the test is unnecessary. If the carrying amount of a reporting unit’s goodwill exceeds its fair value, the

second

step measures the impairment loss, if any. The

second

step compares the implied fair value of goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The Company performs an annual goodwill impairment analysis at the reporting unit level as of

October 1

each year or when an event occurs which might cause or indicate impairment. In the

fourth

quarter of

2018,

the Company performed the quantitative impairment test of goodwill due to the decline in our stock price and concluded that the fair value of our Truckload reporting unit is greater than its carrying amount. The Company performed the qualitative assessment in the

fourth

quarter of

2017

and concluded it was more likely than

not

that the fair value of the Truckload reporting unit was greater than its carrying amount.

Intangible Assets

Customer relationships are valued as part of acquisition-related transactions using the income appraisal methodology. The income appraisal methodology includes a determination of the present value of future monetary benefits to be derived from the anticipated income, or ownership, of the subject asset. The value of customer relationships includes the value expected to be realized from existing contracts as well as from expected renewals of such contracts and is calculated using unweighted and weighted total undiscounted cash flows as part of the income appraisal methodology. Customer relationships are amortized over

seven

fifteen

years. The Company tests intangible assets with definite lives for impairment if conditions exist that indicate the carrying value

may

not

be recoverable. There was

impairment of customer relationships in

2018

and

2017.

Trade names are valued based on various factors including the projected revenue stream associated with the intangible asset. The Company’s trade names have an indefinite life and are

not

amortized. In the

fourth

quarter of

2018

and

2017,

the Company performed the qualitative assessment of its trade name assets and concluded it was more likely than

not

that the fair value of each of the assets is greater than its carrying amount. Therefore, the Company concluded it was

not

necessary to perform the quantitative impairment test.

Book Overdraft

Book overdraft represents outstanding checks in excess of current cash levels. The Company funds its book overdraft from its line of credit and operating cash flows.

Deferred Financing Costs

The Company presents debt issuance costs as a direct deduction from the related debt, consistent with debt discounts. Debt issuance costs associated with revolving line-of-credit arrangements are presented as an asset. All such debt issuance costs are amortized ratably over the term of the arrangement. Term loan debt issuance costs excluding original issue discount, net of accumulated amortization were

$1.3

million and

$6.5

million at

December 31, 2018

and

2017,

respectively. Revolver gross debt issuance costs were

$1.5

million and

$3.2

million at

December

31,

2018

and

2017,

respectively, offset by accumulated amortization of

$0.2

million and

$2.5

million at

December

31,

2018

and

2017,

respectively. Debt issuance cost amortization expense excluding original issue discount was

$1.6

million,

$3.4

million and

$4.9

million in

2018,

2017

and

2016,

respectively.

Recognition of Revenue

The Company generates revenues primarily from shipments executed by the Company’s Truckload and Brokerage operations. Those shipments are the Company’s performance obligations, arising under contracts we have entered into with customers. Under such contracts, revenue is recognized when obligations are satisfied, which occurs over time with the transit of shipments from origin to destination. This is appropriate as the customer simultaneously receives and consumes the benefits as the Company performs its obligation. Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing services. The most significant judgment used in recognition of revenue is the determination of miles driven as the basis for determining the amount of revenue to be recognized for partially fulfilled obligations. Accessorial charges for fuel surcharge, loading and unloading, stop charges, and other immaterial charges are part of the consideration we receive for the single performance obligation of delivering shipments. Contracts entered into with our customers do

not

contain material financing components.

The majority of revenue contracts with our customers have a duration of

one

year or less and do

not

require any significant start-up costs, and as such, costs incurred to obtain contracts associated with these contracts are expensed as incurred. For contracts with durations exceeding

one

year, incremental start-up costs are capitalized and amortized on a straight line basis over the contract period which materially represents the period of revenue generation. Incremental capitalized start-up costs totaled

$3.3

million with accumulated amortization of

$1.5

million at

December 31, 2018

and are included in other currents assets in our consolidated balance sheets.

Through the Company’s Brokerage operations, the Company outsources the transportation of the loads to

third

-party carriers. The Company is a principal in these arrangements, and therefore records revenue associated with these contracts on a gross basis. The Company has the primary responsibility to meet the customer’s requirements. The Company invoices and collects from its customers and also maintains discretion over pricing. Additionally, the Company is responsible for selection of

third

-party transportation providers to the extent used to satisfy customer freight requirements.

The timing of revenue recognition, billings, cash collections, and allowance for doubtful accounts results in billed and unbilled receivables on our consolidated balance sheet. The Company receives the unconditional right to bill when shipments are delivered to their destination. We generally receive payment within

days of completion of performance obligations. Unbilled receivables recorded on the consolidated balance sheet were

$2.9

million at

December 31, 2018

and are included in customer receivables in the consolidated balance sheets. The amount of revenue to be recognized related to the Company’s remaining performance obligations was

$2.4

million at

December 31, 2018.

The following table presents the effect of the adoption of Accounting Standard Codification

606

“Revenue from Contracts with Customers” (ASC

606

) on our consolidated financial statements for the year ended

December 31, 2018 (

in thousands, except per share amounts):

(in thousands, except for per share amounts)
	As Reported for the		Adjustments			Under ASC 605
	Year Ended		Due to			For the Year Ended
	December 31, 2018		ASC 606			December 31, 2018

Consolidated Statement of Comprehensive Income (Loss)
Operating revenues	$	1,804,915	$	(945	)	$	1,805,860
Total operating expenses		1,726,009		(1,847	)		1,727,856
Operating income		78,906		902			78,004
Income before income tax provision		33,966		902			33,064
Income tax provision		7,860		262			7,598
Net income		26,106		640			25,466
Net income attributable to controlling interest		24,899		640			24,259
Basic earnings per share		0.84		0.02			0.82
Basic weighted average shares outstanding		29,470		29,470			29,470
Diluted earnings per share		0.83		0.02			0.81
Diluted weighted average shares outstanding		30,133		30,133			30,133

	Reported			Adjustments		Under ASC 605
	Balance at			Due to		Balance at
	December 31, 2018			ASC 606		December 31, 2018

Consolidated Balance Sheet
Customer receivables	$	190,254		$	2,906	$	187,348
Other current assets		13,374			1,812		11,562
Total current assets		285,534			4,718		280,816
Total assets		910,487			4,718		905,769
Accounts payable		63,808			1,892		61,916
Other accrued liabilities		8,120			349		7,771
Deferred income taxes		19,978			378		19,600
Accumulated deficit		(17,335	)		2,099		(19,434	)
Stockholders' equity (deficit)		234,891			2,099		232,792
Total stockholder's equity (deficit)		238,387			2,099		236,288
Total liabilities, redeemable restricted units and stockholder's equity (deficit)		910,487			4,718		905,769

	As Reported for the			Adjustments			Under ASC 605
	Year Ended			Due to			For the Year Ended
	December 31, 2018			ASC 606			December 31, 2018

Operating Cash Flows
Net income	$	26,106		$	640		$	25,466
Receivables		(8,972	)		945			(9,917	)
Other assets		(3,438	)		(1,348	)		(2,090	)
Accounts payable and other accrued liabilities		(21,020	)		(499	)		(20,521	)
Deferred income tax provision		5,691			262			5,429

Income Taxes

Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

The Company evaluates the need for a valuation allowance on deferred tax assets based on whether it believes that it is more likely than

not

all deferred tax assets will be realized. A consideration of future taxable income is made as well as on-going prudent feasible tax planning strategies in assessing the need for valuation allowances. In the event it is determined all or part of a deferred tax asset would

not

be able to be realized, management would record an adjustment to the deferred tax asset and recognize a charge against income at that time.

The Company’s estimate of the potential outcome of any uncertain tax issue is subject to its assessment of relevant risks, facts and circumstances existing at that time. The Company accounts for uncertain tax positions in accordance with ASC

740,

Income Taxes

, and records a liability when such uncertainties meet the more likely than

not

recognition threshold. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.

The Act subjects a US shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic

740,

No.

Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected the latter method and will provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

Concentration of Credit Risk

Concentrations of credit risk with respect to customer receivables are limited due to the large number of entities comprising the Company’s customer base and their dispersion across many different industries. Revenues from the Company’s largest customer accounted for

11.8%

of total consolidated revenues before fuel surcharge during

2018.

The Company performs ongoing credit evaluations and generally does

not

require collateral.

Foreign Currency

Foreign currency activity is reported in accordance with ASC

830,

Foreign Currency Matters

. The loss from foreign currency transactions is included in the consolidated statements of comprehensive income as a component of other expense. (Gains) losses were

$0.1

million, $(

0.3

) million and

$0.8

million for the years ended

December

31,

2018,

2017

and

2016,

respectively.

Stock-Based Compensation

The Company has stock-based compensation plans that provide for grants of equity to its management in the form of stock options, stock appreciation rights, stock awards, restricted stock units, performance awards, performance units, and any other form established by the Compensation Committee. Stock-based compensation is recognized over the period for which an employee is required to provide service in exchange for the award. Stock-based compensation expense is included in salaries, wages, and benefits in the consolidated statements of comprehensive income.

Claims and Insurance Accruals

Claims and insurance accruals consist of cargo loss, physical damage, group health, liability (personal injury and property damage) and workers’ compensation claims and associated legal and other expenses within the Company’s established retention levels. Claims in excess of retention levels are generally covered by insurance in amounts the Company considers adequate. Claims accruals represent the uninsured portion of the loss and if we are the primary obligor, the insured portion of pending claims at

December

31,

2018

and

2017,

plus an estimated liability for incurred but

not

reported claims and the associated expense. Accruals for cargo loss, physical damage, group health, liability and workers’ compensation claims are estimated based on the Company’s evaluation of the type and severity of individual claims and future development based on historical trends. At

December

31,

2018

and

2017,

the amount recorded for both workers’ compensation and auto liability were based in part upon actuarial studies performed by a

third

-party actuary.

December 31, 2018

and

2017,

the Company had a claim accrual and corresponding receivable for the amount above its self-insured retention of

$0.4

million and

$0.8

million, respectively, which the Company believes should be sufficient to resolve the remaining claims. The Company believes the insurers will provide their portion of the remaining claims.

Investment in Affiliated Companies

The Company consolidates operating companies in which it has a controlling financial interest. The usual condition for a controlling financial interest is ownership of a majority of the voting interest. Operating companies in which the Company is able to exercise significant influence but does

not

control are accounted for under the equity method. The Company accounted for its

10%

investment in Xpress Global Systems (XGS) under the equity method of accounting as it was deemed to have significant influence due to the structure of XGS. During

December 2018,

our interest in XGS was extinguished and we recognized an impairment charge of

$0.9

million.

Recently Issued Accounting Standards

January 2017,

the FASB issued ASU

2017

04,

“Intangibles—Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment,” which eliminates Step

from the goodwill impairment testing process. Step

measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the new standard, a goodwill impairment loss is measured as the excess of the carrying value of a reporting unit over its fair value. The provisions of this update are effective for fiscal years beginning after

December 15, 2019.

The Company has evaluated the provisions of the pronouncement and does

not

expect the adoption of ASU

2018

will have a material impact on the consolidated financial statements.

February 2016,

the FASB issued ASU

2016

02,

as amended by subsequent accounting standard updates (collectively, “Topic

842”

), to increase transparency and comparability by recognizing right-of-use assets (ROU assets) and lease liabilities on the balance sheet and disclosing key information about the leasing arrangements. Topic

842,

through an alternative transition method, permits an entity to adopt the provisions of ASU

2016

by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. ASU

2016

also provides an election for a package of practical expedients which permits an entity to

not

reassess whether any expired or existing contracts contain leases, the classification of the lease, and any initial direct costs. We expect to apply these practical expedients as part of our adoption.

The adoption of this guidance on

January 1, 2019

is expected to result in our recording between

$175.0

$185.0

million of ROU assets and lease liabilities on our consolidated balance sheet as of

January 1, 2019

for leases that were classified as operating leases under ASC

840.

The implementation will

not

have an impact on our debt-covenant compliance under our current agreements. The ASU requires increased disclosures which will be included in our quarterly and annual consolidated financial statements beginning with our

2019

reporting periods.

Recently Adopted Accounting Standards

March 2018,

the Financial Accounting Standards Board (FASB) issued ASU

2018

05,

“Income Taxes (Topic

740

): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin

No.

118.”

The standard adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin

No.

118,

which expresses the view of the SEC Staff regarding application of Topic

740,

Income Taxes, in the reporting period that includes

December 22, 2017 -

the date on which the Act was signed into law. The application of this guidance did

not

have a material impact on the consolidated financial statements. See Note

Income Taxes.

August 2016,

the FASB issued ASU

2016

15,

“Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments,” which addresses

eight

specific cash flow issues with the objective of reducing the existing diversity in practice. Entities must apply the guidance retrospectively to all periods presented but

may

apply it prospectively if retrospective application would be impracticable. The provisions of this update are effective for fiscal years beginning after

December 15, 2017.

The Company adopted ASU

2016

effective

January 1, 2018.

The application of this guidance did

not

have a material impact on the consolidated financial statements.

The Company adopted ASU

2014

09,

“Revenue from Contracts with Customers (Topic

606

)” effective

January 1, 2018

by using the modified retrospective transition approach and recognizing the cumulative effect of the change in retained earnings. The primary impact of adopting ASC

606

is the earlier recognition of revenue for loads that are in route as of the balance sheet date. Prior to adopting ASC

606,

the Company recognized revenue and direct costs when shipments were delivered. Under ASC

606,

the Company is required to recognize revenue and related direct costs over time as the shipment is being delivered. ASC

606

also requires substantial new disclosures regarding the nature, amount, timing and uncertainty of recognized revenue, which are provided under the heading “Recognition of Revenue” above. The adoption of ASC

606

resulted in a cumulative positive adjustment to opening equity at

December 31, 2017

of approximately

$1.5

million.