Universal Logistics (ULH) 10-Q 2005 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 1, 2005

or

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

For the transition period from                    to                    .

Commission File Number: 0-120510

UNIVERSAL TRUCKLOAD SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Michigan
(State or other jurisdiction of
incorporation or organization) 38-3640097
(I.R.S. Employer
Identification No.)

11355 Stephens Road
Warren, Michigan 48089
(Address, including Zip Code of Principal Executive Offices)

(586) 920-0100
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 such filing requirements for the past 90 days.

Yesþ                                Noo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

Yeso                                Noþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso                                Noþ

The number of shares of the registrant’s common stock, no par value, issued and outstanding as of November 10, 2005, was 16,117,500.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	ITEM 1: FINANCIAL STATEMENTS
	ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4: CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1: LEGAL PROCEEDINGS
	ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3: DEFAULTS UPON SENIOR SECURITIES
	ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5: OTHER INFORMATION
	ITEM 6: EXHIBITS
SIGNATURES
EXHIBIT INDEX
Fifth Amendment to Loan Agreement
Fourth Amendment to Security Agreement
Fourth Amendment to Security Agreement
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive & Chief Financial Officers

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

UNIVERSAL TRUCKLOAD SERVICES, INC.
Consolidated Balance Sheets
(In thousands, except share data)

	October 1,			December 31,
	2005			2004
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	13,759		$	904
Marketable securities		17,475			—
Accounts receivable – net of allowance of $3,717 and $3,439		70,188			59,441
Due from CenTra and affiliates		284			502
Loan receivable from CenTra		—			1,764
Prepaid income taxes		534			—
Prepaid expenses and other		3,839			5,195
Deferred income taxes		1,610			796
Total current assets		107,689			68,602
Property and equipment		49,597			41,219
Less accumulated depreciation		(19,648	)		(17,388	)
Property and equipment — net		29,949			23,831
Deferred income taxes		—			586
Goodwill		4,002			3,192
Intangible assets — net of accumulated amortization of $1,531 and $869		7,994			8,656
Other assets		574			417
Total	$	150,208		$	105,284
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities:
Dividend payable	$	—		$	50,000
Lines of credit		—			31,598
Current portion of long-term debt		—			2,290
Accounts payable		27,507			21,154
Accrued expenses		11,186			10,879
Income taxes payable		—			224
Due to CenTra		1,362			1,375
Total current liabilities		40,055			117,520
Long-term liabilities:
Long-term debt		—			4,110
Deferred income taxes		772			—
Other long-term liabilities		941			479
Total long-term liabilities		1,713			4,589
Shareholders’ equity (deficit):
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 16,117,500 and 10,022,500 shares, respectively		16,118			10,023
Paid-in capital		79,780			—
Retained earnings		12,513			—
Distributions in excess of CenTra’s contributed capital		—			(26,848	)
Accumulated other comprehensive income		29			—
Total shareholders’ equity (deficit)		108,440			(16,825	)
Total	$	150,208		$	105,284

See accompanying notes to unaudited consolidated financial statements.

2

UNIVERSAL TRUCKLOAD SERVICES, INC.
Unaudited Consolidated Statements of Income
October 1, 2005 and October 2, 2004
(In thousands, except per share data)

	Thirteen Weeks Ended					Thirty-nine Weeks Ended
	2005		2004			2005				2004
Operating revenues:
Truckload	$	84,166	$	69,044		$	238,184			$	175,280
Brokerage		38,444		18,709			110,406				46,690
Intermodal		13,027		9,203			35,508				25,937
Total operating revenues		135,637		96,956			384,098				247,907
Operating expenses:
Purchased transportation		104,227		72,507			292,898				184,402
Commissions expense		8,741		7,260			24,661				19,380
Other operating expense, net		1,668		1,492			5,088				3,589
Selling, general, and administrative		8,771		7,090			27,966				18,666
Insurance and claims		3,722		2,711			10,212				6,578
Depreciation and amortization		1,106		1,109			3,166				2,713
Total operating expenses		128,235		92,169			363,991				235,328
Income from operations		7,402		4,787			20,107				12,579
Interest income		198		24			383				69
Interest expense		—		(213	)		(200	)			(468	)
Income before provision for income taxes		7,600		4,598			20,290				12,180
Provision for income taxes		2,955		1,753			7,777				4,545
Net income	$	4,645	$	2,845		$	12,513			$	7,635
Earnings per common share:
Basic	$	0.29	$	0.28		$	0.83			$	0.76
Diluted	$	0.29	$	0.28		$	0.83			$	0.76
Average common shares outstanding:
Basic		16,118		10,023			15,124		��		10,023
Diluted		16,118		10,023			15,124				10,023

See accompanying notes to unaudited consolidated financial statements.

3

UNIVERSAL TRUCKLOAD SERVICES, INC.
Unaudited Consolidated Statements of Shareholders’ Equity (Deficit)
Thirty-nine weeks ended October 1, 2005
(In thousands)

							Distributions
							in excess of			Accumulated
							CenTra’s			Other
	Common		Paid-in		Retained		Contributed			Comprehensive
	stock		capital		earnings		Capital			Income		Total
Balances — January 1, 2005	$	10,023	$	—	$	—	$	(26,848	)	$	—	$	(16,825	)
Net income		—		—		12,513		—			—		12,513
Capital contribution (Note 2)		—		1,835		—		—			—		1,835
Proceeds from issuance of common stock, net of offering costs		6,095		77,945		—		26,848			—		110,888
Unrealized gain on available for sale investments, net of income taxes		—		—		—		—			29		29
Balances — October 1, 2005	$	16,118	$	79,780	$	12,513	$	—		$	29	$	108,440

See accompanying notes to unaudited consolidated financial statements.

4

UNIVERSAL TRUCKLOAD SERVICES, INC.
Unaudited Consolidated Statements of Cash Flows
Thirty-nine Weeks ended October 1, 2005 and October 2, 2004
(In thousands)

	2005			2004
Cash flows from operating activities:
Net income	$	12,513		$	7,635
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,166			2,713
Loss (gain) on disposal of property and equipment		26			(6	)
Bad debt expense		1,191			1,227
Deferred income taxes		(710	)		(466	)
Change in assets and liabilities:
Accounts receivable and due from CenTra and affiliates		(11,720	)		(7,424	)
Prepaid expenses and other		1,199			(2,776	)
Accounts payable, accrued expenses and income taxes payable		6,364			5,637
Due to CenTra		(13	)		(464	)
Net cash provided by operating activities		12,016			6,076
Cash flows from investing activities:
Capital expenditures		(5,786	)		(2,873	)
Proceeds from the sale of property and equipment		98			53
Purchases of marketable securities		(17,425	)		—
Loans to CenTra		—			(4,043	)
Repayment of loans to CenTra		1,764			—
Additions to goodwill		(602	)		—
Acquisition of business		(100	)		(13,334	)
Net cash used in investing activities		(22,051	)		(20,197	)
Cash flows from financing activities:
Repayments of long-term debt		(6,400	)		(1,841	)
Long-term debt borrowings		—			1,968
Net (repayments) borrowings under lines of credit		(31,598	)		16,127
Payment of dividend		(50,000	)		—
Proceeds from the issuance of common stock		113,367			—
Payment of offering costs		(2,479	)		—
Net cash provided by financing activities		22,890			16,254
Net increase in cash and cash equivalents		12,855			2,133
Cash and cash equivalents — beginning of period		904			423
Cash and cash equivalents — end of period	$	13,759		$	2,556
Supplemental cash flow information:
Cash paid for interest	$	312		$	500
Cash paid for taxes	$	9,289		$	547

See accompanying notes to unaudited consolidated financial statements.

5

UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Statements of Cash Flows — Continued

Thirty-nine Weeks ended October 1, 2005 and October 2, 2004

Non-Cash investing transactions:

During the thirty-nine weeks ended October 1, 2005, UTSI exchanged trailers with a subsidiary of CenTra, Inc. (CenTra, Inc. and its subsidiaries and affiliates are referred to as “CenTra”), whereby the Company transferred 429 trailers with a book value of $915,000 to CenTra in exchange for 300 trailers. The trailers received by UTSI were recorded at CenTra’s net book value of $4,875,000. A deferred tax liability of $1,125,000 was recorded resulting from the difference in the book and tax bases of the trailers received less the deferred tax liability that existed on the trailers given. Additionally, UTSI recorded a deemed capital contribution of $1,835,000 in connection with this transaction (Note 2)

See accompanying notes to unaudited consolidated financial statements.

6

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements

(1)	Basis of Presentation
	Pursuant to the rules and regulations of the Securities and Exchange Commission, the accompanying consolidated financial statements of Universal Truckload Services, Inc. and its wholly-owned subsidiaries (the Company or UTSI) have been prepared by UTSI, without audit by an independent registered public accounting firm. In the opinion of management, the unaudited consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements as of December 31, 2004 and 2003 and for each of the years in the three-year period ended December 31, 2004 in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 30, 2005.
	Through December 31, 2004, UTSI was a wholly-owned subsidiary of CenTra, Inc. On December 31, 2004, CenTra, Inc. distributed all of UTSI’s common stock to Matthew T. Moroun and a trust controlled by Manuel J. Moroun, the sole shareholders of CenTra, Inc.. CenTra, Inc., its subsidiaries and affiliates are referred to as “CenTra”.
	Effective August 8, 2004, UTSI completed the acquisition of all the issued and outstanding common shares of AFA Enterprises, Inc. (AFA). The accounts of AFA and its wholly-owned subsidiaries are included in the Company’s consolidated balance sheets as of October 1, 2005 and December 31, 2004 and the Company’s consolidated income statements for the thirteen and thirty-nine weeks ended October 1, 2005 and from the acquisition date to October 2, 2004.
	Effective November 1, 2004, UTSI completed the acquisition of certain assets of Nunn Yoest Principals & Associates, Inc. (NYP). The accounts of NYP are included in the Company’s consolidated balance sheets as of October 1, 2005 and December 31, 2004 and the Company’s consolidated income statements for the thirteen and thirty-nine weeks ended October 1, 2005.
	On November 1, 2004, the Company amended its Articles of Incorporation increasing the authorized common shares to 40,000,000 and authorizing 5,000,000 shares of preferred stock. On November 4, 2004, the Board of Directors approved a 211-for-1 stock split of the Company’s common stock. The stock split was payable in the form of a stock dividend on November 4, 2004. The capital stock accounts, all share data and earnings per share give effect to the stock split, applied retroactively, to all periods presented.
	The Company’s fiscal year ends on December 31. The Company’s fiscal year consists of four quarters, each with thirteen weeks.
	Certain reclassifications have been made to the December 31, 2004 balance sheet in order for it to conform to the October 1, 2005 presentation.

7

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(2)	Transactions with CenTra and Affiliates
	CenTra has historically provided management services to UTSI, including treasury, legal, human resources, and tax services. The cost of these services is based on the utilization of the specific services. Management believes the allocation methods are reasonable. However, the costs of these services charged to UTSI are not necessarily indicative of the costs that would have been incurred if UTSI had internally performed or acquired these services as a separate unaffiliated entity. In connection with the spin-off on December 31, 2004, UTSI entered into a Transition Services Agreement with CenTra that ensures UTSI will continue to have access to these services. Pursuant to the Transition Services Agreement, UTSI has agreed to pay CenTra $305,000 per year. The Transition Services Agreement terminates on December 31, 2006, which will permit UTSI to engage in an orderly transition of the services to our own administrative staff. The level of administrative services can be cut back by UTSI without penalty at any time, but CenTra is not obligated to provide substantial additional services beyond the current level.
	In addition to management services, UTSI reimburses CenTra for other services. Following is a schedule of services provided and amounts paid (in thousands):

	Thirteen weeks ended				Thirty-nine weeks ended
	October 1,		October 2,		October 1,		October 2,
	2005		2004		2005		2004
Management services	$	76	$	76	$	229	$	229
Building & terminal rents		57		174		178		221
Maintenance services		227		342		615		734
Trailer rents		17		27		48		50
Health insurance		257		180		802		614
Total	$	634	$	799	$	1,872	$	1,848

An affiliate of CenTra charged UTSI $2,579,000 and $1,858,000 for personal liability and property damage insurance for the thirteen weeks ended October 1, 2005 and October 2, 2004, respectively. Charges for the thirty-nine weeks ended October 1, 2005 and October 2, 2004 were $7,767,000 and $5,587,000, respectively.

Operating revenues for the thirteen weeks ended October 1, 2005 and October 2, 2004 includes $234,000 and $1,261,000, respectively, of freight services provided to CenTra. Operating revenues for the thirty-nine weeks ended October 1, 2005 and October 2, 2004 includes $748,000 and $3,075,000, respectively, of freight services provided to CenTra. Related accounts receivable due from CenTra and affiliates was $284,000 and $502,000 as of October 1, 2005 and December 31, 2004, respectively.

Purchased transportation for the thirteen and thirty-nine weeks ended October 1, 2005 includes $1,806,000 and $5,708,000, respectively, of transportation services provided by CenTra to CrossRoad Carriers. Related accounts payable due to CenTra was $579,000 at October 1, 2005. CenTra did not provide transportation services to the Company during the thirteen or thirty-nine weeks ended October 2, 2004.

The Company provides computer services to CenTra. Charges for such services totaled $29,000 and $14,000 for the thirteen weeks ended October 1, 2005 and October 2, 2004, respectively, and are reflected as a reduction of selling, general & administrative expenses in the statements of income. Charges for the thirty-nine weeks ended October 1, 2005 and October 2, 2004 totaled $88,000 and $41,000, respectively.

8

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(2)	Transactions with CenTra and Affiliates — continued
	In February, March and October of 2004, the Company loaned CenTra an aggregate $5,750,000, bearing interest at approximately 3.5%. In October 2004, the Company and CenTra agreed to treat $4,000,000 of these loans and all unpaid interest as a dividend to CenTra. The remaining $1,750,000 plus accrued interest was due on demand and repaid in February 2005. Interest income from CenTra for the thirty-nine weeks ended October 1, 2005 and October 2, 2004 was $8,000 and $69,000, respectively.
	On December 28, 2004, the Company’s board of directors declared a dividend of $50,000,000 payable to CenTra. The effect of the dividend was a reduction in the balances of retained earnings and paid-in capital to zero. The portion of the dividend in excess of retained earnings and paid-in capital was reflected as distributions in excess of CenTra’s contributed capital at December 31, 2004. Capital contributions in the Company were first allocated to the excess distributions account to reduce the balance to zero and subsequent capital contributions were allocated to paid-in capital. UTSI paid this dividend on February 15, 2005, from the proceeds of its initial public offering (see Note 6).
	In December 2004, CenTra assigned UTSI its right to acquire a terminal yard in Dearborn, Michigan from a third-party for $625,000. UTSI acquired the property in January 2005. Additionally, in February 2005, CenTra paid UTSI $12,500 for an option to acquire the property and a right of first refusal. Under the option, CenTra will have the right, for a three-year period, to purchase the property from UTSI for $688,000, plus the cost of any future improvements UTSI makes to the property. Under the right of first refusal, if UTSI receives a bona fide offer from a third-party to purchase or lease all or any portion of this property that UTSI decides to accept, UTSI must notify CenTra of this fact and CenTra may elect to lease or purchase, as applicable, the portion of the property that is subject to such offer on the same terms.
	In May 2005, the Company exchanged equipment with CenTra whereby UTSI transferred 429 of its older trailers with a net book value of $915,000 to CenTra in exchange for 300 newer trailers owned by CenTra. The Company believes the exchange qualifies as a tax-free exchange under the Internal Revenue Code. UTSI paid CenTra $1,000,000, the difference in fair values of the trailers given and received. UTSI recorded the trailers it received at $4,875,000, CenTra’s net book value. For tax purposes, UTSI recorded the property at $1,535,000, UTSI’s tax basis in the trailers given of $535,000 plus the $1,000,000 of consideration paid. A deferred tax liability of $1,125,000 was recorded resulting from the difference in the book and tax bases of the trailers received less the deferred tax liability that existed on the trailers given. Additionally, UTSI recorded a deemed capital contribution equaling $1,835,000, the net book value of trailers received less the net book value of the trailers given, the consideration paid and the deferred tax liability recorded.
(3)	Cash and Cash Equivalents
	Cash and cash equivalents consist of cash and all investments with an original maturity of three months or less.
(4)	Marketable Securities
	Marketable securities, all of which are available for sale, consist of common stocks and municipal bonds. Marketable securities are carried at fair value, with unrealized gains and losses, net of related income taxes, reported as accumulated other comprehensive income.

9

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(5)	Goodwill
	Goodwill represents the excess purchase price over the fair value of assets acquired in connection with the Company’s acquisitions. Under SFAS 142 “Goodwill and Other Intangible Assets”, UTSI is required to test goodwill for impairment annually or more frequently if an impairment indicator exists. During the thirteen weeks ended October 1, 2005, UTSI completed its goodwill impairment testing and determined that the fair value of each reporting unit exceeded the carrying value of the net assets of each reporting unit. Accordingly, no impairment loss was recognized.
(6)	Debt
	In March 2002, the Company established a line of credit with First Tennessee Bank, secured by the accounts receivable of Universal Am-Can, Ltd. (UACL) and Mason & Dixon Lines, Inc (MADL). The line of credit agreement provided for maximum borrowings of $20,000,000 and contained certain restrictive covenants to be maintained by UACL and MADL, including limitations on the payment of dividends. Borrowings on the line of credit were at an interest rate of LIBOR as of the first day of the calendar month plus 1.65%. On June 29, 2004, the Company’s line of credit agreement was amended, increasing its maximum borrowings to $40,000,000 and changing the interest rate to LIBOR as of the first day of the calendar month plus 1.80%. The amended line of credit agreement was secured by all of the Company’s accounts receivable, except AFA and CrossRoad Carriers, Inc., and contained various restrictive covenants. In August 2005, the Company’s line of credit was further amended, reducing its maximum borrowings to $20,000,000, decreasing the interest rate to LIBOR as of the first day of the calendar month plus 1.65% and extending its expiration date to August 31, 2006. The amended line of credit agreement is secured by the accounts receivable of UACL and MADL and contains various financial and restrictive covenants to be maintained by the Company, UACL and MADL. Amounts outstanding at October 1, 2005 and December 31, 2004 were $0 and $30,094,000, respectively.
	Great American Lines, Inc., or GAL, a subsidiary of AFA, maintained a secured line of credit with PNC Bank National Association allowing GAL to borrow up to a maximum of $6,000,000. GAL’s secured line of credit was collateralized by substantially all of AFA’s assets and bore interest at the bank’s prime rate or LIBOR plus 1.75%. In addition, the agreement, in certain circumstances, limited AFA’s ability and the ability of its subsidiaries to sell or dispose of assets, incur additional debt, pay dividends or distributions or redeem common stock. The agreement also contained customary representations and warranties, affirmative and negative covenants and events of default. The secured line of credit expired in June 2005. The Company did not renew or replace this line of credit.
	Equipment purchased by UACL from CenTra in 2002 was financed by three promissory notes with Key Equipment Finance in the amount $4,998,000 and were secured by the equipment. The notes contained certain restrictive covenants which the Company was required to maintain. The notes carried an interest rate of LIBOR as determined as of the 28th day of the month plus 1.53%. The notes were payable in monthly fixed principal payments of $147,000 plus interest, through January 2005.
	In 2003, the Company purchased 100 trailers from an unrelated party. The equipment purchase was financed by two promissory notes with Key Equipment Finance totaling $1,917,000. The loans were secured by the equipment. The notes carried an interest rate of LIBOR as determined as of the 28th day of the month plus 1.7%. The notes were payable in monthly fixed principal payments of $32,490 plus interest. These notes were paid in full in April 2005.

10

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(6)	Debt — continued
	In August and October 2004, UACL entered into three promissory notes with General Electric Capital Corporation totaling $2,460,000. The proceeds of these notes were used to finance the purchase of trailers. The notes were secured by the trailers purchased and were payable in monthly installments of $50,783, including interest at a weighted average rate of 5.57%. The agreements also contained customary representations and warranties, affirmative and negative covenants, and events of default. These loans were paid in full in April 2005.
	In October and December 2004, Mason Dixon Intermodal, Inc. entered into two promissory notes with Key Equipment Finance totaling $844,000. The proceeds from the notes were used to acquire container chassis. The notes were secured by the chassis purchased and were payable in monthly installments of $20,436 plus interest at rates ranging from LIBOR plus 1.75% to 4.98%. The loan agreement underlying these notes required Mason Dixon Intermodal to maintain various affirmative and negative covenants. These loans were paid in full in April 2005.
	AFA had twelve loans and capital lease obligations outstanding with various financial institutions, with outstanding balances totaling $1,640,000 as of December 31, 2004. These loans were paid in full at various times during the twenty-six weeks ended July 2, 2005.
(7)	Initial Public Offering
	On February 10, 2005, UTSI completed an initial public offering of 5,300,000 shares common stock at $20.00 per share. After underwriting discounts and the payment of offering costs, UTSI received net proceeds of $96,101,000. The proceeds from the offering were used to pay the $50,000,000 dividend declared to CenTra and to repay all amounts outstanding under UTSI’s secured lines of credit.
	On March 11, 2005, the underwriters exercised their over-allotment option to purchase an additional 795,000 shares of common stock. The aggregate offering price of the shares of common stock issued and sold in connection with the over-allotment option was $15,900,000. UTSI paid an additional $1,113,000 in underwriting discounts and commissions, resulting in additional proceeds of $14,787,000.
(8)	Earnings Per Share
	Basic earnings per common share amounts are based on the weighted average number of common shares outstanding, and diluted earnings per share amounts are based on the weighted average number of common shares outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options.
	At October 1, 2005, 260,000 options were outstanding to purchase shares of common stock, which have been excluded from the calculations of diluted earnings per share because such options were anti-dilutive.

11

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(9)	Stock Based Compensation
	In December 2004, UTSI’s board of directors adopted the 2004 Stock Incentive Plan ( “the Plan”), which became effective upon completion of the Company’s initial public offering. The Plan allows for the issuance of a total of 500,000 shares. The grants may be made in the form of restricted stock bonuses, restricted stock purchase rights, stock options, phantom stock units, restricted stock units, performance share bonuses, performance share units or stock appreciation rights. On February 11, 2005, UTSI granted 260,000 options to certain of its employees. The stock options granted vested immediately, mature in seven years and have an exercise price of $22.50 per share. The Company accounts for stock options issued under the Plan pursuant to the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. No stock-based employee compensation is reflected in net income from the Plan, as all options granted under the Plan had an exercise price equal to the fair market value of the underlying common stock on the date of grant.
	The following table illustrates the effect on net income and earnings per share from the Plan, as if UTSI had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation.”

					Thirty-nine weeks
	Thirteen weeks ended				ended
	October		October		October		October
	1, 2005		2, 2004		1, 2005		2, 2004
Net income, as reported	$	4,645	$	2,845	$	12,513	$	7,635
Less: Total stock based compensation determined using the fair value method, net of income tax		—		—		1,753		—
Pro forma net income	$	4,645	$	2,845	$	10,760	$	7,635
Earnings per common share — basic
As reported	$	0.29	$	0.28	$	0.83	$	0.76
Pro forma	$	0.29	$	0.28	$	0.71	$	0.76
Earnings per common share — diluted
As reported	$	0.29	$	0.28	$	0.83	$	0.76
Pro forma	$	0.29	$	0.28	$	0.71	$	0.76

The estimated grant date fair value of the stock options granted during the thirty-nine weeks ended October 1, 2005 was $10.88 per share and was determined using the Black-Scholes option-pricing model. The assumptions used in estimating the grant date fair value are as follows:

Underlying share price	$	22.50
Exercise price of the option	$	22.50
Expected dividend rate		0.0	%
Expected volatility		39.57	%
Expected term of the option (in years)		7
Risk-free interest rate		4.02	%

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(10)	Acquisition
	Effective January 1, 2005, UTSI acquired Xxtreme Trucking, LLC (Xxtreme). Xxtreme is a regional provider of truckload and brokerage services primarily in the Southern United States. The aggregate purchase price was $100,000 in cash. Under the purchase agreement, the Company is required to pay additional cash consideration to the former owner of Xxtreme based on a percentage of all revenues generated during the period from January 1, 2005 to December 31, 2007, up to an aggregate of $650,000. Any additional consideration paid to the former owners of Xxtreme will be treated as an additional cost of acquiring Xxtreme and will be recorded as goodwill. The pro forma effect of acquiring Xxtreme has been omitted as the effect is immaterial to UTSI’s results of operations, financial position and cash flows.
(11)	Comprehensive Income
	Comprehensive income includes the following for the thirteen and thirty-nine weeks ended October 1, 2005. UTSI did not have any transactions resulting in comprehensive income in 2004 (in thousands).

	Thirteen			Thirty-nine
	Weeks			Weeks
	Ended			Ended
	October 1,			October 1,
	2005			2005
Net income	$	4,645		$	12,513
Unrealized holding gains on available for sale investments, net of income tax		(17	)		29
Comprehensive income	$	4,628		$	12,542

(12)	Contingencies
	There are pending actions arising during the ordinary conduct of business. In the opinion of the Company, the liability, if any, arising from these actions will not have a material effect on the Company’s financial position, results of operations or cash flows.
(13)	Recent Accounting Pronouncements
	In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” to address the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123(R) requires an entity to recognize the grant date fair value of stock options and other equity based compensation issued to employees in the statement of income. The revised statement generally requires that an entity account for those transactions using the fair value based method and eliminates an entity’s ability to account for share-based compensation transactions using the intrinsic value method of accounting. SFAS 123(R) is effective for the Company beginning on January 1, 2006. UTSI will adopt this statement using a modified version of prospective application on January 1, 2006. The adoption of this statement will result in compensation expense being recorded for grants of stock or stock options on or after January 1, 2006.

13

UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements — Continued

(13)	Recent Accounting Pronouncements — continued
	In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3,” which changes the requirements for the accounting and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not believe the adoption of SFAS No. 154 will have a material impact on its financial position, results of operations or cash flows.
(14)	Subsequent Events
	Acquisition of Mark Largent, Inc.
	On October 14, 2005, UTSI acquired certain assets of Marc Largent, Inc. (Largent). Largent is a regional provider of intermodal services primarily in the Western United States. The aggregate purchase price was $1,000,000 in cash. Under the purchase agreement, the Company is required to pay additional cash consideration to the former owner of Largent based on a percentage of all revenues generated during the period from October 14, 2005 to October 13, 2008. Any additional consideration paid to the former owner of Largent will be treated as an additional cost of acquiring Largent.
	Acquisition of Property
��
	On August 24, 2005, UTSI acquired a thirty-nine acre property located in Cleveland, Ohio for $1,700,000 in cash. The Company intends to develop this property into an intermodal container facility.

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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Some of the statements and assumptions in this Form 10-Q are forward-looking statements. These statements identify prospective information. Important factors could cause actual results to differ, possibly materially, from those in the forward-looking statements. In some cases you can identify forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “plan,” “intend,” “may,” “should,” “will” and “would” or other similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other “forward-looking” information. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. The factors listed in the section captioned “Factors That May Affect Future Results or Forward Looking Statements” in Item 7 in our Form 10-K for the year ended December 31, 2004, as well as any other cautionary language in Item 7 of that Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements.

Unless the context indicates otherwise, “we,” “our” and “us” refers to Universal Truckload Services, Inc. and its subsidiaries.

Overview

We are a primarily non-asset based provider of transportation services to shippers throughout the United States and in the Canadian provinces of Ontario and Quebec. We offer flatbed and dry van trucking services, as well as rail-truck and steamship-truck intermodal and truck brokerage services. We primarily operate through a contractor network of independent sales agents and owner-operators of tractors and trailers. In return for their services, we pay our agents and owner-operators a percentage of the revenue they generate for us.

Our use of agents and owner-operators reduces our need to provide non-driver facilities and tractor and trailer fleets. The primary physical assets we provide to our agents and owner-operators include a portion of our trailer fleet, our headquarters facility, our management information systems and our intermodal depot facilities. Our business model provides us with a highly variable cost structure, allows us to grow organically using relatively small amounts of cash, gives us a higher return on assets compared to many of our asset-based competitors and preserves an entrepreneurial spirit among our agents and owner-operators that we believe leads to improved operating performance. For the thirteen and thirty-nine weeks ended October 1, 2005, approximately 88.1% and 87.2%, respectively, of our total operating expenses were variable in nature and our capital expenditures were $1.3 million and $5.8 million, respectively.

On August 8, 2004, we acquired all of the issued and outstanding common stock of AFA Enterprises, Inc., a Pennsylvania Corporation (or AFA), for aggregate consideration of $15.3 million in cash. Substantially all of AFA’s revenue is generated through one of its subsidiaries, Great American Lines, Inc., which is a primarily non-asset based provider of transportation services, operating primarily east of the Mississippi River. Great American Lines offers flatbed, dry van and brokerage services.

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On November 1, 2004, we acquired the furniture, fixtures, customer list and goodwill of Nunn Yoest Principals & Associates, Inc. (or NYP) for aggregate consideration of $1.6 million in cash. We used these assets to establish our CrossRoad Carriers operating subsidiary. In addition, under the asset purchase agreement entered into in connection with the transaction, we will pay additional cash consideration to the former owners of NYP equal to 1.5% of the operating revenues generated by our CrossRoad Carriers business, subject to certain limitations, through November 2007. CrossRoad Carriers is a rail and truck brokerage firm, operating primarily in the United States.

Results of Operations

The following table sets forth items derived from our consolidated statements of income for the thirteen and thirty-nine weeks ended October 1, 2005 and October 2, 2004, presented as a percentage of operating revenues:

							Thirty-nine Weeks
	Thirteen Weeks Ended						Ended
	October 1,			October 2,			October 1,			October 2,
	2005			2004			2005			2004
Operating revenues		100	%		100	%		100	%		100	%
Operating expenses:
Purchased transportation		76.8			74.8			76.3			74.4
Commissions expense		6.4			7.5			6.4			7.8
Other operating expenses		1.2			1.5			1.3			1.4
Selling, general and administrative		6.5			7.3			7.3			7.5
Insurance and claims		2.7			2.8			2.7			2.7
Depreciation and amortization		0.8			1.1			0.8			1.1
Total operating expenses		94.5			95.1			94.8			94.9
Operating income		5.5			4.9			5.2			5.1
Interest income (expense), net		0.1			(0.2	)		0.1			(0.2	)
Income before provision for income taxes		5.6			4.7			5.3			4.9
Provision for income taxes		2.2			1.8			2.0			1.8
Net income		3.4	%		2.9	%		3.3	%		3.1	%

Thirty-nine Weeks Ended October 1, 2005 Compared to Thirty-nine Weeks ended October 2, 2004

Operating revenues.Operating revenues for the thirty-nine weeks ended October 1, 2005 increased by $136.2 million, or 54.9%, to $384.1 million from $247.9 million for the thirty-nine weeks ended October 2, 2004. Approximately $51.8 million of the increase in operating revenues is attributable to AFA’s operations. AFA’s 2005 operating revenues consisted of $48.8 million from its truckload operations and $15.7 million from its brokerage operations. AFA’s operating revenues from the date of acquisition through October 1, 2004 were $12.7 million. Approximately $32.3 million of the increase in operating revenues is attributable to CrossRoad Carriers’ brokerage operations. The remaining revenue increase of $52.1 million was a result of improved economic conditions, which contributed to increased freight demand and higher rates. For the thirty-nine weeks ended October 1, 2005, our operating revenue per loaded mile, excluding fuel surcharges, from our combined truckload and brokerage operations increased to $1.99 from $1.79 for the thirty-nine weeks ended October 2, 2004. Excluding the effects of AFA and CrossRoad Carriers, revenue from our truckload operations increased by $22.6 million, or 13.71%, to $187.5 million for thirty-nine weeks ended October 1, 2005 from $164.9 million for the thirty-nine weeks ended October 2, 2004. Excluding the effects of AFA and CrossRoad Carriers, revenue from our brokerage operations increased by $18.9 million, or 42.5%, to $63.4 million for the thirty-nine weeks ended October 1, 2005 compared to $44.5 million for the thirty-nine weeks ended October 2, 2004. Revenue from our intermodal support services increased by $9.6 million, or 36.9%, to $35.5 million for the thirty-nine weeks ended October 1, 2005 from $25.9 million for the thirty-nine weeks ended October 2, 2004.

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Purchased transportation.Purchased transportation expense for the thirty-nine weeks ended October 1, 2005 increased by $108.5 million, or 58.8%, to $292.9 million from $184.4 million for the thirty-nine weeks ended October 2, 2004. As a percentage of operating revenues, purchased transportation expense increased to 76.3% for the thirty-nine weeks ended October 1, 2005 from 74.4% for the thirty-nine weeks ended October 2, 2004. The absolute increase was primarily due to the growth in our operating revenues. Purchased transportation expense generally increases or decreases in proportion to the revenues generated through owner-operators and other third-party providers. The increase in purchased transportation as a percent of operating revenues is due to a $15.7 million increase in fuel surcharges, which are passed through to owner-operators. Fuel surcharges for the thirty-nine weeks ended October 1, 2005 were $22.5 million compared to $6.8 million for the thirty-nine weeks ended October 2, 2004. Additionally, AFA’s and CrossRoad Carriers’ purchased transportation as a percent of operating revenues is higher than our historical averages.

Commissions expense.Commissions expense for the thirty-nine weeks ended October 1, 2005 increased by $5.3 million, or 27.2%, to $24.7 million from $19.4 million for the thirty-nine weeks ended October 2, 2004. As a percentage of operating revenues, commissions expense decreased to 6.4% for the thirty-nine weeks ended October 1, 2005 compared to 7.8% for thirty-nine weeks ended October 2, 2004. The absolute increase was primarily due to the growth in our operating revenues. The decrease in commissions expense as a percentage of revenue primarily results from CrossRoad Carriers having no commission expense associated with its revenue since they do not utilize agents. Additionally, AFA controls a substantial portion of its business, on which it does not pay any commissions. AFA commissions as a percent of its operating revenues are 4.1%.

Other operating expense.Other operating expense for the thirty-nine weeks ended October 1, 2005 increased by $1.5 million, or 41.8%, to $5.1 million from $3.6 million for the thirty-nine weeks ended October 2, 2004. As a percentage of operating revenues, other operating expense decreased slightly for the thirty-nine weeks ended October 1, 2005 to 1.3% from 1.4% for the thirty-nine weeks ended October 2, 2004. The absolute increase was primarily due to the inclusion of AFA’s and CrossRoad Carriers’ other operating expenses totaling $1.1 million, and a $442,000 increase in permit costs resulting primarily from increased flatbed revenue.

Selling, general and administrative.Selling, general and administrative expense for the thirty-nine weeks ended October 1, 2005 increased by $9.3 million, or 49.8%, to $28.0 million from $18.7 million for the thirty-nine weeks ended October 2, 2004. As a percentage of operating revenues, selling, general and administrative expense decreased to 7.3% for the thirty-nine weeks ended October 1, 2005 from 7.5% for the thirty-nine weeks ended October 2, 2004. The absolute increase in selling, general and administrative expense was primarily a result of the inclusion of AFA’s and CrossRoad Carriers’ selling, general and administrative expenses totaling $6.3 million, a $2.1 million increase in salaries and wages, and related payroll taxes and fringe benefits, a $470,000 increase in professional fees and a $275,000 legal settlement. The increase in professional fees is primarily attributable to costs incurred in connection with being a publicly held company and an increase in tax services provided by third parties resulting from CenTra no longer providing tax services to the Company in 2005.

Insurance and claims.Insurance and claims expense for the thirty-nine weeks ended October 1, 2005 increased by $3.6 million, or 55.2%, to $10.2 million from $6.6 million for the thirty-nine weeks ended October 2, 2004. As a percentage of operating revenues, insurance and claims remained constant at 2.7%. The absolute increase was primarily due to 1) the inclusion of AFA’s and CrossRoad Carriers’ insurance and claims expense totaling $1.3 million, 2) a $1.3 million increase in auto liability reserves, and 3) a $1.2 million increase in auto liability insurance premiums. The increase in auto liability reserves was based on the frequency and severity of claims incurred in the thirty-nine weeks ended October 1, 2005. We self-insure for amounts between $1.0 million and $10.0 million and for all amounts over $20.0 million, related to auto liability claims. The increase in auto liability insurance premiums is a result of the increase in the size of our owner-operator fleet, an increase in insurance rates and excess auto liability coverage obtained in December 2004. Prior to December 2004, we maintained auto liability coverage for claims up to $1.0 million. In December 2004, the Company purchased excess auto liability insurance for claims exceeding $10.0 million.

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Depreciation and amortization.Depreciation and amortization for the thirty-nine weeks ended October 1, 2005 increased by $453,000, or 16.7%, to $3.2 million from $2.7 million for the thirty-nine weeks ended October 2, 2004. As a percent of operating revenues, depreciation and amortization decreased to 0.8% for the thirty-nine weeks ended October 1, 2005 compared to 1.1% for the thirty-nine weeks ended October 2, 2004. The absolute increase was primarily due to the inclusion of AFA’s and CrossRoad Carriers’ depreciation and amortization totaling $655,000, offset by the effect of the change in the estimated salvage value of our trailers on January 1, 2005. Previously we estimated that our trailers had no salvage value at the end of their useful life of seven years. However, based on our evaluation of current market conditions, we estimate that our trailers will have a salvage value equal to 20% of their original cost. As a result, the estimated salvage value of all trailers owned as of January 1, 2005 has been revised to equal 20% of their original cost. Any trailers acquired after January 1, 2005, will have an estimated salvage value of 20% of their original cost. We expect net income for the year ended December 31, 2005, net of income taxes, to be $262,000 higher than it would have been had we not revised our estimated salvage values.

Interest expense (income), netNet interest income for the thirty-nine weeks ended October 1, 2005 was $183,000 compared to net interest expense of $399,000 for the thirteen weeks ended October 2, 2004. The decrease in net interest expense of $582,000 or 145.9% resulted from the repayment of $38.0 million under our secured lines of credit and secured equipment loans in 2005 using the proceeds from our initial public offering. Additionally, in 2005, interest income has been generated on the remaining proceeds from our offering.

Provision for income taxes.Provision for income taxes for the thirty-nine weeks ended October 1, 2005 increased by $3.2 million, or 71.1%, to $7.8 million from $4.5 million for the thirty-nine weeks ended October 2, 2004. For the thirty-nine weeks ended October 1, 2005 and October 2, 2004, we had an effective income tax rate of 38.3% and 37.3%, respectively, based upon our income before provision for income taxes. In 2004, as a wholly-owned subsidiary of CenTra, our taxes were included in CenTra’s consolidated return. However, each of our operating subsidiaries calculated its provision for income taxes as if it was preparing a separate federal income tax return on a non-consolidated, standalone basis and the amount of taxes owed (as reflected on these returns) was remitted to CenTra.

Thirteen Weeks Ended October 1, 2005 Compared to Thirteen Weeks ended October 2, 2004

Operating revenues.Operating revenues for the thirteen weeks ended October 1, 2005 increased by $38.7 million, or 39.9%, to $135.6 million from $97.0 million for the thirteen weeks ended October 2, 2004. Approximately $8.7 million of the increase in operating revenues is attributable to AFA’s operations. AFA’s operating revenues for the thirteen weeks ended October 1, 2005 consisted of $16.6 million from its truckload operations and $4.8 million from its brokerage operations. AFA’s operating revenues from the date of acquisition through October 2, 2004 were $12.7 million. Approximately $11.4 million of the increase in operating revenues is attributable to CrossRoad Carriers’ brokerage operations. The remaining revenue increase of $18.6 million was a result of improved economic conditions, which contributed to increased freight demand and higher rates. For the thirteen weeks ended October 1, 2005, our operating revenue per loaded mile, excluding fuel surcharges, from our combined truckload and brokerage operations increased to $2.08 from $1.87 for the thirteen weeks ended October 2, 2004. Excluding the effects of AFA and CrossRoad Carriers, revenue from our truckload operations increased by $8.7 million, or 14.8%, to $67.3 million for thirteen weeks ended October 1, 2005 from $58.6 million for the thirteen weeks ended October 2, 2004. Excluding the effects of AFA and CrossRoad Carriers, revenue from our brokerage operations increased by $6.1 million, or 37.0%, to $22.6 million for the thirteen weeks ended October 1, 2005 compared to $16.5 million for the thirteen weeks ended October 2, 2004. Revenue from our intermodal support services increased by $3.8 million, or 41.6%, to $13.0 million for the thirteen weeks ended October 1, 2005 from $9.2 million for the thirteen weeks ended October 2, 2004.

Purchased transportation.Purchased transportation expense for the thirteen weeks ended October 1, 2005 increased by $31.7 million, or 43.7%, to $104.2 million from $72.5 million for the thirteen weeks ended October 2, 2004. As a percentage of operating revenues, purchased transportation expense increased to 76.8% for the thirteen weeks ended October 1, 2005 from 74.8% for the thirteen weeks ended October 2, 2004. The absolute increase was primarily due to the growth in our operating revenues. Purchased transportation expense generally increases or decreases in proportion to the revenues generated through

18

owner-operators and other third-party providers. The increase in purchased transportation as a percent of operating revenues is primarily due to a $6.1 million increase in fuel surcharges, which are passed through to owner-operators. Fuel surcharges for the thirteen weeks ended October 1, 2005 were $9.4 million compared to $3.3 million for the thirteen weeks ended October 2, 2004. Additionally, AFA’s and CrossRoad Carriers’ purchased transportation as a percent of operating revenues are higher than our historical averages.

Commissions expense.Commissions expense for the thirteen weeks ended October 1, 2005 increased by $1.5 million, or 20.4%, to $8.7 million from $7.3 million for the thirteen weeks ended October 2, 2004. As a percentage of operating revenues, commissions expense decreased to 6.4% for the thirteen weeks ended October 1, 2005 compared to 7.5% for thirteen weeks ended October 2, 2004. The absolute increase was primarily due to the growth in our operating revenues. The decrease in commissions expense as a percentage of revenue primarily results from CrossRoad Carriers having no commission expense associated with its revenue, since they do not utilize agents. Additionally, AFA controls a substantial portion of its business, on which it does not pay any commissions. AFA commissions as a percent of its operating revenues is 4.1%.

Other operating expense.Other operating expense for the thirteen weeks ended October 1, 2005 increased by $176,000, or 11.8%, to $1.7 million from $1.5 million for the thirteen weeks ended October 2, 2004. As a percentage of operating revenues, other operating expense decreased to 1.2% for the thirteen weeks ended October 1, 2005 compared to 1.5% for the thirteen weeks ended October 2, 2004. The absolute increase was primarily due to inclusion of AFA’s and CrossRoad Carriers’ other operating expenses.

Selling, general and administrative.Selling, general and administrative expense for the thirteen weeks ended October 1, 2005 increased by $1.7 million, or 23.7%, to $8.8 million from $7.1 million for the thirteen weeks ended October 2, 2004. As a percentage of operating revenues, selling, general and administrative expense decreased to 6.5% for the thirteen weeks ended October 1, 2005 from 7.3% for the thirteen weeks ended October 2, 2004. The absolute increase in selling, general and administrative expense was primarily a result of the inclusion of AFA’s and CrossRoad Carriers’ selling, general and administrative expenses totaling $1.3 million and a $724,000 increase in salaries and wages and related payroll taxes and fringe benefits, offset by a $391,000 decrease in bad debt expense. The decrease in bad debt expense is primarily a result of increased collection efforts throughout the thirty-nine weeks ended October 1, 2005. The decrease in selling, general and administrative expenses as a percent of revenue is a result of increased revenues and our ability to hold the increase in selling, general & administrative expenses below the operating revenue growth rate primarily because rate increases were a substantial source of revenue growth and rate increases do not typically result in increased overhead expenses.

Insurance and claims.Insurance and claims expense for the thirteen weeks ended October 1, 2005 increased by $1.0 million, or 37.3%, to $3.7 million from $2.7 million for the thirteen weeks ended October 2, 2004. As a percentage of operating revenues, insurance and claims decreased slightly to 2.7% for the thirteen weeks ended October 1, 2005 from 2.8% for the thirteen weeks ended October 2, 2004. The absolute increase was primarily due to a $700,000 increase in our auto liability reserve, a $358,000 increase in insurance rates primarily resulting from the growth in our owner-operator provided fleet of tractors which are covered under our auto liability insurance policies and the inclusion of AFA’s and CrossRoad Carriers’ insurance and claims expense totaling $154,000. The increase in auto liability reserves was based on the frequency and severity of claims incurred in the thirteen weeks ended October 1, 2005. These increases were offset by a $251,000 decrease in cargo claims during the thirteen weeks ended October 1, 2005.

Depreciation and amortization.Depreciation and amortization for the thirteen weeks ended October 1, 2005 decreased by $3,000, or 0.3%, to $1.1 million from $1.1 million for the thirteen weeks ended October 2, 2004. As a percent of operating revenues, depreciation and amortization decreased to 0.8% for the thirteen weeks ended October 1, 2005 compared to 1.1% for the thirteen weeks ended October 2, 2004.

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Interest expense (income), net.Net interest income for the thirteen weeks ended October 1, 2005 was $198,000 compared to net interest expense of $189,000 for the thirteen weeks ended October 2, 2004. The decrease in net interest expense of $387,000 or 204.8% resulted from the repayment of $38.0 million under our secured lines of credit and secured equipment loans in 2005 using the proceeds from our initial public offering. Additionally, in 2005, interest income has been generated on the remaining proceeds from our offering.

Provision for income taxes.Provision for income taxes for the thirteen weeks ended October 1, 2005 increased by $1.2 million, or 68.6%, to $3.0 million from $1.8 million for the thirteen weeks ended October 2, 2004. For the thirteen weeks ended October 1, 2005 and October 2, 2004, we had an effective income tax rate of 38.9% and 38.1%, respectively, based upon our income before provision for income taxes. In 2004, as a wholly-owned subsidiary of CenTra, our taxes were included in CenTra’s consolidated return. However, each of our operating subsidiaries calculated its provision for income taxes as if it was preparing a separate federal income tax return on a non-consolidated, standalone basis and the amount of taxes owed (as reflected on these returns) was remitted to CenTra.

Liquidity and Capital Resources

Our primary sources of liquidity are the net proceeds from our initial public offering, funds generated by operations and our revolving secured line of credit with First Tennessee Bank.

We employ a primarily non-asset based operating strategy. Substantially all of the tractors and more than 50% of the trailers utilized in our business are provided by our owner-operators and we have no capital expenditure requirements relating to this equipment. As a result, our capital expenditure requirements are limited in comparison to most large trucking companies which maintain sizable fleets of owned tractors and trailers, requiring significant capital expenditures.

Through October 1, 2005, we have made capital expenditures totaling $5.8 million. These expenditures can be segregated into equipment purchases totaling $2.9 million and property acquisitions totaling $2.9 million. Equipment purchases consist primarily of trailers, computer equipment and other miscellaneous equipment. Property acquisitions consist of $2.2 million for a building in Warren, Michigan that will serve as our new corporate headquarters and $625,000 for a terminal yard in Dearborn, Michigan. In the last quarter of 2005, we expect to incur additional capital expenditures, exclusive of acquisitions, of approximately $4.9 million to $6.8 million, including approximately $2.6 million to $3.7 million for the acquisition of and improvements to two new container facilities, $250,000 to $750,000 for renovations and improvements to the Warren, Michigan building and $2.1 million to $2.4 million for tractors, trailers and other equipment.

In 2006, exclusive of acquisitions, we expect to incur capital expenditures of $8.2 million to $11.9 million relating to property acquisitions, for renovations and improvements to the Warren, Michigan building and additional terminal yards or container facilities. Additionally, we expect to incur capital expenditures of $4.6 million to $6.3 million for tractors, trailers and other equipment. We expect that our working capital and available borrowings will be sufficient to meet our capital commitments and fund our operational needs for at least the next twelve months. On a longer-term basis, based on the availability under our line of credit and other financing sources and assuming the continuation of our current level of profitability, we do not expect that we will experience any liquidity constraints in the foreseeable future.

We continue to evaluate business development opportunities, including potential acquisitions that fit our strategic plans. There can be no assurance that we will identify any opportunities that fit our strategic plans or will be able to execute any such opportunities on terms acceptable to us. Any such opportunities will be financed from available cash on hand and our secured line of credit.

On December 28, 2004, our board of directors declared a special dividend of $50.0 million payable out of the proceeds of our initial public offering to CenTra, our sole shareholder on the record date for this dividend. We paid this dividend immediately following our initial public offering in February 2005. We currently intend to retain our future earnings to finance our growth and do not anticipate paying subsequent cash dividends in the future.

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Secured Lines of Credit

Under our secured line of credit with First Tennessee Bank, as amended on August 31, 2005, our maximum borrowings are $20.0 million. The secured line of credit is collateralized by the accounts receivable of Universal Am-Can, Ltd. (UACL) and Mason & Dixon Lines, Inc. (MADL) and bears interest at a rate equal to LIBOR plus 1.65%. The agreement governing our secured line of credit contains various financial and restrictive covenants to be maintained by us, UACL and MADL, including requiring us to maintain a tangible net worth of at least $20.0 million and a ratio of total liabilities to tangible net worth ratio not to exceed 2 to 1. Additionally, UACL and MADL are required to maintain tangible net worth of $3.5 million and $12.5 million, respectively. For purposes of this agreement, net worth is defined as the difference between our total assets and total liabilities and tangible net worth is defined as net worth, plus subordinated debt, less the value assigned to intangibles in accordance with generally accepted accounting principles. In addition, the agreement may, in certain circumstances, limit our ability and the ability of our subsidiaries to sell or dispose of assets, incur additional debt, pay dividends or distributions or redeem common stock. The agreement also contains customary representations and warranties, affirmative and negative covenants and events of default. As of October 1, 2005, there are no amounts outstanding under our line of credit.

Great American Lines maintained a secured line of credit with PNC Bank National Association allowing it to borrow up to a maximum of $6.0 million. In February 2005, we repaid the outstanding balance under this secured line of credit, using a portion of the net proceeds of our initial public offering. This secured line of credit expired in June 2005 and was not renewed or replaced.

Secured Equipment Loans and Capital Lease Obligations

All secured equipment loans and capital lease obligations outstanding at December 31, 2004 were repaid at various times during the thirty-nine weeks ended October 1, 2005 using a portion of the proceeds from our initial public offering.

Discussion of Cash Flows

Historically, we have funded our operations through cash flow from operations and short term-borrowings under our secured line of credit with First Tennessee Bank.

The $12.0 million of net cash provided by operating activities for the thirty-nine weeks ended October 1, 2005 was generated primarily from $12.5 million in net income and the add back of non-cash items such as depreciation and amortization, bad debt expense and deferred income taxes totaling $3.7 million. Net cash provided by operating activities also reflects a decrease due to changes in net working capital of $4.2 million. The net working capital decrease resulted primarily from an increase in accounts receivable of $11.7 million, offset by a $1.2 million decrease in prepaid expenses and other assets and a $6.4 million increase in accounts payable, accrued liabilities and income taxes payable.

Net cash used in investing activities for the thirty-nine weeks ended October 1, 2005 was $22.1 million, consisting primarily of capital expenditures of $5.8 million, $100,000 paid in connection with the acquisition of Xxtreme Trucking LLC (Xxtreme) in January 2005, the purchase of marketable securities totaling $17.4 million and contingent payments to the former owners of CrossRoad Carriers and Xxtreme of $602,000, offset by proceeds from the repayment of a $1.8 million loan to CenTra and proceeds received from the sale of equipment totaling $98,000.

Net cash provided by financing activities for the thirty-nine weeks ended October 1, 2005 was $22.9 million, resulting primarily from the net proceeds received from the initial public offering of common stock of $110.9 million, offset by the payment to CenTra of the $50.0 million cash dividend declared in December 2004, the repayment of $31.6 million borrowed under our secured lines of credit and the repayment of $6.4 million of long-term debt.

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Off Balance Sheet Arrangements

In connection with the acquisition of NYP on November 1, 2004, we agreed to pay the former owners an amount equal to 1.5% of operating revenues generated by CrossRoad Carriers subject to certain limitations, through November 2007.

In connection with this acquisition of Xxtreme on January 1, 2005, we agreed to pay the former owner an amount equal to 2.5% of operating revenues generated from these assets, up to an aggregate of $650,000, through December 2007.

On October 14, 2005, we acquired certain assets of Marc Largent, Inc. (Largent). In connection with the acquisition we agreed to pay former owner an amount equal to 1.0% of operating revenues generated from these assets, subject to certain limitations, through October 13, 2008.

Critical Accounting Policies

A summary of critical accounting policies is presented in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” of our Form 10-K for the year ended December 31, 2004. There have been no changes in the accounting policies followed by us during the thirty-nine weeks ended October 1, 2005.

Effect of Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”, to address the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123(R) requires an entity to recognize the grant-date fair-value of stock options and other equity-based compensation issued to employees in the statement of income. The revised SFAS No. 123(R) generally requires that an entity account for those transactions using the fair-value based method, and eliminates an entity’s ability to account for share-based compensation transactions using the intrinsic value method of accounting under APB Opinion No. 25, “Accounting for Stock Issued to Employees.’’ SFAS No. 123(R) is effective for us beginning January 1, 2006. We will adopt this statement using a modified version of prospective application on January 1, 2006.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3,” which changes the requirements for the accounting and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. .SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe the adoption of SFAS No. 154 will have a material impact on our financial position, results of operations or cash flows.

Effects of Inflation

Management does not believe general inflation has had a material impact on our results of operations or financial condition in the past five years. However, inflation higher than that experienced in the past five years might have an adverse effect on our future results of operations.

Seasonality

Our operations are subject to seasonal trends common to the trucking industry. Results of operations in the first quarter are typically lower than the second, third and fourth quarters.

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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our market risk is affected by changes in interest rates. Our secured line of credit bears interest at a floating rate equal to LIBOR plus 1.80%. Accordingly, changes in LIBOR would affect the interest rate on and therefore our cost under the line of credit. We currently do not have a balance outstanding under the line of credit.

Included in cash and cash equivalents are $10.1 million in short-term investment grade instruments. The interest rates on these instruments are adjusted to market rates at least monthly. In addition, we have the ability to put these instruments back to the issuer at any time. Accordingly, any future interest rate risk on these short-term investments would not be material.

Included in marketable securities are $16.1 million in short-term investment grade instruments. The interest rates on these instruments are adjusted to market rates at least monthly. Accordingly, any future interest rate risk on these short-term investments would not be material.

We did not have any interest rate swap agreements as of the date of this Form 10-Q.

Commodity Price Risk

Fluctuations in fuel prices can affect our profitability by affecting our ability to retain or recruit owner-operators. Our owner-operators bear the costs of operating their tractors, including the cost of fuel. The tractors operated by our owner-operators consume large amounts of diesel fuel. Diesel fuel prices fluctuate greatly due to economic, political and other factors beyond our control. To address fluctuations in fuel prices, we seek to impose fuel surcharges on our customers and pass these surcharges on to our owner-operators. Historically, these arrangements have not fully protected our owner-operators from fuel price increases. If costs for fuel escalate significantly it could make it more difficult to attract additional qualified owner-operators and retain our current owner-operators. If we lose the services of a significant number of owner-operators or are unable to attract additional owner-operators, it could have a materially adverse effect on our financial condition and results of operations.

ITEM 4: CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended (or the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of October 1, 2005, our disclosure controls and procedures were effective in causing the material information required to be disclosed in the reports that it files or submits under the Exchange Act to be recorded, processed, summarized and reported, to the extent applicable, within the time periods required for us to meet the Securities and Exchange Commission’s (or SEC) filing deadlines for these reports specified in the SEC’s rules and forms.

Internal Controls

There have been no changes in our internal controls over financial reporting during the thirteen weeks ended October 1, 2005 identified in connection with our evaluation that has materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The nature of our business routinely results in litigation incidental to the ordinary course of our business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. We believe all such litigation is adequately covered by insurance or otherwise reserved for and that adverse results in one or more of those cases would not have a materially adverse effect on our financial condition, operating results and cash flows. We are not currently involved in any material legal proceedings or litigation.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the thirteen weeks ended October 1, 2005.

ITEM 5: OTHER INFORMATION

None.

ITEM 6: EXHIBITS

(a) Exhibits

The exhibits listed on the Exhibit Index are furnished as part of this quarterly report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

		Universal Truckload Services, Inc.
		(Registrant)
Date: November 14, 2005
	By:	/S/ Robert E. Sigler
		Robert E. Sigler, Vice President, Chief Financial Officer, Secretary and Treasurer
Date: November 14, 2005
	By:	/S/ Donald B. Cochran
		Donald B. Cochran, President and Chief Executive Officer

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EXHIBIT INDEX

Exhibit
No.	Description
2.1	Purchase Agreement, dated as of August 12, 2004, between Angelo A. Fonzi and Universal Truckload Services, Inc. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
3.1	Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
3.2	Amended and Restated Bylaws, as amended on December 10, 2004 (Incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
4.1	Registration Rights Agreement, dated as of December 31, 2004, among the Registrant, Matthew T. Moroun and The Manuel J. Moroun Trust (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
4.2	Specimen Common Share Certificate (Incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.1+	Form of indemnification agreement entered into by the Registrant with each of its directors and officers (Incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.2+	Universal Truckload Services, Inc. Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.3+	Employment Agreement, dated as of September 13, 2004, by and between Universal Truckload Services, Inc. and Don Cochran (Incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.4+	Employment Agreement, dated as of September 13, 2004, by and between Universal Truckload Services, Inc. and Bob Sigler (Incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.5+	Employment Agreement, dated as of September 13, 2004, by and between Universal Truckload Services, Inc. and Leo Blumenauer (Incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.6+	Consulting Agreement, dated as of August 12, 2004, between Universal Am-Can, Ltd. And Angelo A. Fonzi (Incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.7+	Covenant Not to Compete, dated as of August 12, 2004, between Angelo A. Fonzi, Universal Am-Can, Ltd. and Universal Truckload Services, Inc. (Incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.8	Second Amendment to Loan Agreement, dated as of June 29, 2004, by and among Universal Truckload Services, Inc., Universal Am-Can, Ltd., The Mason and Dixon Lines, Inc., Mason-Dixon Intermodal, Inc., Economy Transport, Inc., Louisiana Transportation, Inc. and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.9	Second Amendment to Security Agreement, dated as of June 29, 2004, by and between Universal Am-Can, Ltd. and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.10	Second Amendment to Security Agreement, dated as of June 29, 2004, by and between The Mason and Dixon Lines, Inc. and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.11	First Amendment to Security Agreement, dated as of June 29, 2004, by and between Mason Dixon Intermodal, Inc. and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.12	Security Agreement, dated as of June 29, 2004, by and between Economy Transport, Inc. and First

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	Tennessee Bank National Association (Incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.13	Security Agreement, dated as of June 29, 2004, by and between Louisiana Transportation, Inc. and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed on November 15, 2004 (Commission File No. 333-120510))
10.14	Tax Separation Agreement, dated as of December 31, 2004, between CenTra, Inc. and the Registrant (Incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.15	Transitional Services Agreement, dated as of December 31, 2004, between the Registrant and CenTra, Inc. (Incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.16	Fourth Amendment to Loan Agreement, dated as of December 27, 2004, by and among Universal Truckload Services, Inc., Universal Am-Can, Ltd., The Mason and Dixon Lines, Inc., Mason Dixon Intermodal, Inc., Economy Transport, Inc., Louisiana Transportation, Inc., Great American Logistics, Inc. and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.17	Debt Subordination Agreement, dated as of December 27, 2004, by and among CenTra, Inc., Universal Truckload Services, Inc., and First Tennessee Bank National Association (Incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1 filed on January 7, 2005 (Commission File No. 333-120510))
10.18+	Universal Truckload Services, Inc. Incentive Compensation Plan C, Calendar Years 2004 – 2006 (Incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K filed on March 30, 2005 (Commission File No. 000-51142))
10.19+	Amendment No. 1, dated September 28, 2005, to Consulting Agreement dated August 12, 2004 between Universal Am-Can, Ltd. and Angelo A. Fonzi. (Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on September 30, 2004 (Commission File No. 000-51142))
10.20*	Fifth Amendment to Loan Agreement, dated as of August 31, 2005, by and among Universal Truckload Services, Inc., Universal Am-Can, Ltd., The Mason and Dixon Lines, Inc., Mason Dixon Intermodal, Inc., Economy Transport, Inc., Louisiana Transportation, Inc., Great American Lines, Inc., Great American Logistics, Inc. and First Tennessee Bank National Association
10.21*	Fourth Amendment to Security Agreement, dated as of August 31, 2005, by and between Universal Am-Can, Ltd. and First Tennessee Bank National Association
10.22*	Fourth Amendment to Security Agreement, dated as of August 31, 2005, by and between The Mason and Dixon Lines, Inc. and First Tennessee Bank National
31.1*	Chief Executive Officer certification, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Chief Financial Officer certification, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Chief Executive Officer and Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

*	Filed herewith.
**	Furnished herewith
+	Indicates a management contract, compensatory plan or arrangement.

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