UNIVERSAL LOGISTICS HOLDINGS, INC. - Quarter Report: 2008 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 27, 2008

or

For the transition period from              to             .

Commission File Number: 0-120510

UNIVERSAL TRUCKLOAD SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)

12755 E. Nine Mile 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.    Yes  x    No  ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock, no par value, outstanding as of October 27, 2008, was 16,033,183.

PART I – FINANCIAL INFORMATION

UNIVERSAL TRUCKLOAD SERVICES, INC.

Consolidated Balance Sheets

September 27, 2008 and December 31, 2007

(In thousands, except share data)

See accompanying notes to unaudited consolidated financial statements.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Statements of Income

September 27, 2008 and September 29, 2007

(In thousands, except per share data)

See accompanying notes to unaudited consolidated financial statements.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Statements of Cash Flows

Thirty-nine Weeks ended September 27, 2008 and September 29, 2007

(In thousands)

See accompanying notes to unaudited consolidated financial statements.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements

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, or 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 U.S. generally accepted accounting principles 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, 2007 and 2006 and for each of the years in the three-year period ended December 31, 2007 in the Company’s Form 10-K filed with the Securities and Exchange Commission. The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates.

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 prior financial statements in order for them to conform to the September 27, 2008 presentation.

Historically, UTSI’s former parent, CenTra, Inc., or CenTra, provided management services to UTSI, including legal and human resources. The cost of these services was based on the estimated utilization of specific services and an annual allocation charge was agreed upon at the beginning of each fiscal year. Management believed the allocation methods were reasonable. However, the costs of these services charged to UTSI were 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. Beginning in 2008, the Company has agreed to pay CenTra management service fees based on the actual use of services rendered to the Company. The amounts charged to UTSI for the thirteen and thirty-nine weeks ended September 27, 2008 and September 29, 2007 are presented in the table below.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

In addition to the management services described above, UTSI purchases other services from CenTra. Following is a schedule of services provided and amounts paid to CenTra (in thousands):

An affiliate of CenTra charged UTSI $4,221,000 and $3,605,000 for personal liability and property damage insurance for the thirteen weeks ended September 27, 2008 and September 29, 2007, respectively. Charges for the thirty-nine weeks ended September 27, 2008 and September 29, 2007 were $11,919,000 and $10,837,000, respectively.

Operating revenues for the thirteen weeks ended September 27, 2008 and September 29, 2007 include approximately $62,000 and $137,000, respectively, of freight services provided to CenTra. Operating revenues for the thirty-nine weeks ended September 27, 2008 and September 29, 2007 include approximately $200,000 and $352,000, respectively, of freight services provided to CenTra. Related accounts payable due to CenTra and affiliates were $57,000 as of September 27, 2008, and related accounts receivable due from CenTra and affiliates were $44,000 as of December 31, 2007.

Purchased transportation for the thirteen weeks ended September 27, 2008 and September 29, 2007 includes $1,769,000 and $2,705,000, respectively, of transportation services provided by CenTra to CrossRoad Carriers. Purchased transportation for the thirty-nine weeks ended September 27, 2008 and September 29, 2007 includes $5,282,000 and $11,107,000, respectively, of transportation services provided by CenTra to CrossRoad Carriers. Related accounts payable of $213,000 and $465,000 at September 27, 2008 and December 31, 2007, respectively, are included in accounts payable in the accompanying balance sheet.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

Universal Truckload Services, Inc. and KeyBank National Association, or KeyBank, entered into a loan agreement dated October 29, 2007 for the period October 29, 2007 to October 28, 2008. Under the line of credit with KeyBank, our maximum permitted borrowings and letters of credit in the aggregate may not exceed $20 million. The line of credit is unsecured, and bears interest at a rate equal to the lesser of the Prime Rate minus 1.75% or LIBOR plus 1.05% (effective rate of 3.25% at September 27, 2008). The agreement governing our unsecured line of credit contains various financial and restrictive covenants to be maintained by us including requiring us to maintain a tangible net worth of at least $85.0 million, a debt to tangible net worth ratio not to exceed 1 to 1, and quarterly net profits of at least one dollar. For purposes of this agreement, tangible net worth is defined as total assets, excluding all intangible assets, less total debt. The agreement also may, in certain circumstances, limit our ability to pay dividends or distributions. The agreement also contains customary representations and warranties, affirmative and negative covenants and events of default. The Company did not have any amounts outstanding under its line of credit at September 27, 2008 or December 31, 2007, and there were $839,000 and $6,400 letters of credit issued against the line, respectively.

On May 1, 2006, UTS Realty, LLC, or Realty, received a $1,000,000 loan from the County of Cuyahoga, Ohio, which we will refer to as the County for this section, to be used for improvements to its Cleveland, Ohio container storage facility. The loan agreement requires quarterly interest payments at an annual rate of 5.0%. Through January 31, 2011, subject to certain conditions, the County will forgive $450,000 of the principal amount owed. On January 31, 2007, the Company began recording the forgiveness as a reduction in the cost of the underlying improvements at a rate of $90,000 per annum. The remaining principal of $550,000 is due at maturity. As of September 27, 2008 and December 31, 2007, the outstanding balance under the loan was $820,000 and $910,000, respectively. The loan matures on January 31, 2011; however, at Realty’s option, the maturity date may be extended until January 31, 2021. In connection with this loan, Realty and the Company entered into an environmental indemnity agreement with the County and the Company issued a $820,000 standby letter of credit that expires January 15, 2009. Under the terms of the environmental indemnity agreement, Realty and the Company have agreed to indemnify the County, without limitation, against any loss attributable to the generation, storage, release or presence of Regulated Materials, as defined in the environmental indemnity agreement, at the container storage facility. In connection with the acquisition of the Cleveland, Ohio property in August 2005, Realty received indemnity from the seller from any and all claims, which Realty may incur as a direct consequence of any environmental condition of which the seller had actual knowledge as of the date of the acquisition of the property. The Company believes the fair value of this debt approximates the carrying value based on current rates available for similar issues.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

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.

The following table provides a reconciliation of the number of average common shares outstanding used to calculate basic earnings per share to the weighted average number of common shares and common share equivalents outstanding used in calculating diluted earnings per share (in thousands):

For the thirty-nine weeks ended September 27, 2008, 190,000 options were outstanding to purchase shares of common stock, which were excluded from the calculation of diluted earnings per share because such options were anti-dilutive. For both the thirteen and thirty-nine weeks ended September 29, 2007, 250,000 options were outstanding to purchase shares of common stock, which were excluded from the calculation of diluted earnings per share because such options were anti-dilutive.

In December 2004, UTSI’s board of directors adopted the 2004 Stock Incentive Plan, or 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, have a life of seven years and have an exercise price of $22.50 per share. Prior to January 1, 2006, the Company accounted 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 was reflected in net income prior to fiscal year 2006, 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 intrinsic value of all outstanding options as of September 27, 2008 and September 29, 2007 was $378,000 and $0, respectively.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

The following table summarizes the stock option activity and related information for the period indicated:

Comprehensive income includes the following (in thousands):

Accumulated other comprehensive income at September 27, 2008 of $165,000 represents the unrealized holding gains on available–for-sale investments of $267,000, net of related income tax expense of $102,000. At September 27, 2008, the gross unrealized holding gains and gross unrealized holding losses on available-for-sale investments were $991,000 and $724,000, respectively.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

In 2008, UTSI acquired the following companies for a total cost of $3,753,000.

The pro forma effect of these acquisitions has been omitted, as the effect is immaterial to the Company’s results of operations, financial position and cash flows. The allocation of the purchase price of these companies is as follows (in thousands):

The intangible assets acquired represent the acquired company’s customer relationships and are amortized over a period of seven years.

Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

The Company’s adoption of SFAS No. 157 did not have a material impact on our financial position, results of operations, or cash flows. The Company has segregated all financial assets that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. FASB Staff Position FAS 157-2 delayed the effective date for all non-financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis until January 1, 2009.

Effective January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”, which provides entities the option to measure many financial instruments and certain other items at fair value. Entities that choose the fair value option will recognize unrealized gains and losses on items for which the fair value option was elected in earnings at each subsequent reporting date. The Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with U.S. generally accepted accounting principles.

The following table summarizes the Company’s assets measured at fair value on a recurring basis (in thousands):

The valuation techniques used to measure fair value for the items in the table above are as follows:

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

Marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. Realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities, if any, are included in the determination of net income and are included in non-operating income (expense).

The cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of available-for-sale securities by type as of September 27, 2008 is as follows (in thousands):

Included in equity securities at September 27, 2008 are $5.7 million of securities with a cumulative loss position of $724 thousand, the impairment of which the Company considers to be temporary. The Company considers several factors in its determination as to whether declines in value are judged to be temporary or other-than-temporary, including the severity and duration of the decline, the financial condition and near-term prospects of the specific issuer, and our intent and ability to hold these securities.

There were no equity securities in a cumulative loss position for a period of 12 months or greater; however, during the thirteen and thirty-nine weeks ended September 27, 2008, the Company recorded pre-tax other-than-temporary impairment charges of $495 thousand and $2.7 million, respectively, for marketable equity securities classified as available-for-sale. These charges resulted primarily from our equity holdings in the financial sector and were driven mainly by the declines in the value caused by current credit market conditions. As such, the amortized cost basis of these securities has been adjusted to fair value, and the charges have been included in the statements of income for the thirteen and thirty-nine weeks ended September 27, 2008.

The Company is involved in claims and litigation arising in the ordinary course of business. These matters primarily involve claims for personal injury and property damage incurred in the transportation of freight. Management believes all such claims and litigation are 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 the Company’s financial condition. However, if the ultimate outcome of these matters, after provisions thereof, is materially different from the Company’s estimates, they could have a material effect on the Company’s operating results and cash flows in any given quarter or year.

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UNIVERSAL TRUCKLOAD SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements – Continued

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”, or SFAS 141R, which replaces SFAS No. 141. This Statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination, measures contingent consideration at the acquisition-date fair value and requires transaction costs to be recognized as expense in the period in which they are incurred. SFAS 141R is effective for the Company January 1, 2009, and will be applicable prospectively for business combinations with an acquisition date on or after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of Accounting Research Bulletin No. 51”, or SFAS 160. This Statement establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements to provide disclosures to clearly identify and distinguish between the interest of the parent and the interests of the noncontrolling owner. SFAS 160 is effective for the Company as of January 1, 2009. The Company believes once adopted, SFAS 160 will not have a significant impact on the Company’s financial statements.

In light of the recent tightening of available credit from lending institutions, on September 29, 2008, the Company drew down $19.0 million on its unsecured line of credit with KeyBank. These funds were immediately invested in a highly liquid money market fund consisting primarily of commercial paper, US government issuances, bank obligations, and corporate notes. On November 3, 2008, the Company fully repaid the $19.0 million on its unsecured line of credit.

The Company and KeyBank entered into a First Amendment to Loan Agreement and First Amendment to Promissory Note, or the Agreement, dated October 28, 2008 for the period October 28, 2008 to October 27, 2009, amending the previous loan agreement dated October 29, 2007 for the period October 29, 2007 to October 28, 2008, which terminated due to the expiration of its term. Under the new Agreement with KeyBank, our maximum permitted borrowings and letters of credit in the aggregate may not exceed $20 million. The line of credit is unsecured, and bears interest at a rate equal to the lesser of the Prime Rate minus 1.75% or LIBOR plus 1.05%. The agreement governing our unsecured line of credit contains various financial and restrictive covenants to be maintained by us including requiring us to maintain a tangible net worth of at least $100 million, a debt to tangible net worth ratio not to exceed 1 to 1, and quarterly net profits of at least one dollar. For purposes of this agreement, tangible net worth is defined as total assets, excluding all intangible assets, less total debt. The agreement also may, in certain circumstances, limit our ability to pay dividends or distributions. The agreement also contains customary representations and warranties, affirmative and negative covenants and events of default.

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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 “Risk Factors” in Item 1A in our Form 10-K for the year ended December 31, 2007, as well as any other cautionary language in 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.

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 September 27, 2008, approximately 88.6% and 87.6%, respectively, of our total operating expenses were variable in nature and our capital expenditures were $1.3 million and $5.6 million, respectively.

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Results of Operations

The following table sets forth items derived from our consolidated statements of income for the thirteen and thirty-nine weeks ended September 27, 2008 and September 29, 2007, as a percentage of operating revenues:

Thirty-nine Weeks Ended September 27, 2008 Compared to Thirty-nine Weeks Ended September 29, 2007

Operating revenues. Operating revenues for the thirty-nine weeks ended September 27, 2008 increased by $73.7 million, or 14.5%, to $582.5 million from $508.8 million for the thirty-nine weeks ended September 29, 2007. Approximately $29.2 million of the increase in operating revenues is attributable to acquisitions made since the fourth quarter of 2007. The increase in operating revenues relating to these acquisitions consisted of a $19.8 million increase in truckload operations, a $2.8 million increase in brokerage operations, and a $6.6 million increase in intermodal operations. For the thirty-nine weeks ended September 27, 2008, our operating revenue per loaded mile, excluding fuel surcharges, from our combined truckload and brokerage operations increased to $2.37 from $2.10 for the thirty-nine weeks ended September 29, 2007. Excluding the effects of acquisitions made since the fourth quarter of 2007, revenue from our truckload operations increased by $18.4 million, or 6.1%, to $320.5 million for the thirty-nine weeks ended September 27, 2008 from $302.1 million for the thirty-nine weeks ended September 29, 2007. Excluding the effects of acquisitions made since the fourth quarter of 2007, revenue from our brokerage operations increased by $24.5 million, or 19.3%, to $151.4 million for the for the thirty-nine weeks ended September 27, 2008 compared to $126.9 million for the thirty-nine weeks ended September 29, 2007. Excluding the effects of acquisitions made in the first half of 2008, revenue from our intermodal support services increased by $1.6 million, or 2.0%, to $81.5 million for the thirty-nine weeks ended September 27, 2008 from $79.9 million for the thirty-nine weeks ended September 29, 2007.

Purchased transportation. Purchased transportation expense for the thirty-nine weeks ended September 27, 2008 increased by $66.9 million, or 17.2%, to $455.6 million from $388.7 million for the thirty-nine weeks ended September 29, 2007. As a percentage of operating revenues, purchased transportation expense increased to 78.2% for the thirty-nine weeks ended September 27, 2008 from 76.4% for the thirty-nine weeks ended September 29, 2007. 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 primarily due to an increase in fuel surcharges, which are passed through to owner-operators. Fuel surcharges for the thirty-nine weeks ended September 27, 2008 were $81.1 million compared to $47.6 million for the thirty-nine weeks ended September 29, 2007.

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Commissions expense. Commissions expense for the thirty-nine weeks ended September 27, 2008 increased by $2.0 million, or 5.8%, to $35.4 million from $33.4 million for the thirty-nine weeks ended September 29, 2007. As a percentage of operating revenues, commissions expense decreased to 6.1% for the thirty-nine weeks ended September 27, 2008 compared to 6.6% for thirty-nine weeks ended September 29, 2007. The absolute increase was primarily due to the growth in our operating revenues. As a percentage of revenues, commissions expense decreased primarily due to $33.4 million of the increase in operating revenues being attributable to an increase in fuel surcharges, which are passed on through to our owner operators and, as such, no commissions are paid.

Other operating expense. Other operating expense for the thirty-nine weeks ended September 27, 2008 decreased by $0.6 million, or 7.9%, to $7.0 million from $7.6 million for the thirty-nine weeks ended September 29, 2007. As a percentage of operating revenues, other operating expense decreased to 1.2% for the thirty-nine weeks ended September 27, 2008 compared to 1.5% for thirty-nine weeks ended September 29, 2007. The decrease was primarily due to a decrease in repairs and maintenance cost.

Selling, general and administrative. Selling, general and administrative expense for the thirty-nine weeks ended September 27, 2008 increased by $2.4 million, or 6.6%, to $38.8 million from $36.4 million for the thirty-nine weeks ended September 29, 2007. As a percentage of operating revenues, selling, general and administrative expense remained decreased to 6.7% for the thirty-nine weeks ended September 27, 2008 compared to 7.1% for thirty-nine weeks ended September 29, 2007. The absolute increase in selling, general and administrative expense was primarily the result of a $1.5 million increase in salaries, wages and benefit costs primarily attributable to a higher average headcount and acquisitions made in the first half of 2008, a $0.7 million increase in building rents primarily due to rental costs related to acquisitions made in the first half of 2008 and various other rental increases, and $0.3 million in additional travel costs for training and acquisition related travel costs. These increases were partially offset by a decrease in legal and professional fees of $0.5 million.

Insurance and claims. Insurance and claims expense for the thirty-nine weeks ended September 27, 2008 increased by $1.0 million, or 6.1%, to $16.9 million from $15.9 million for the thirty-nine weeks ended September 29, 2007. As a percentage of operating revenues, insurance and claims decreased to 2.9% for the thirty-nine weeks ended September 27, 2008 from 3.1% for the thirty-nine weeks ended September 29, 2007. The absolute increase is the result of a $0.7 million increase in auto liability insurance premiums and claims expense and a $0.3 million increase in cargo claims expense.

Depreciation and amortization. Depreciation and amortization for the thirty-nine weeks ended September 27, 2008 increased by $1.1 million, or 19.4%, to $7.1 million from $6.0 million for the thirty-nine weeks ended September 29, 2007. As a percent of operating revenues, depreciation and amortization remained consistent at 1.2% for the thirty-nine weeks ended September 27, 2008 compared to the thirty-nine weeks ended September 29, 2007. The absolute increase is primarily a result of a $0.7 million increase in depreciation expense relating to the $5.6 million in capital expenditures made during the thirty-nine weeks ended September 27, 2008 and equipment acquired in connection with the acquisitions made in the first half of 2008 and a $0.4 million increase in amortization expense primarily attributable to the acquisitions made since the fourth quarter of 2007.

Interest expense (income), net. Net interest income for the thirty-nine weeks ended September 27, 2008 was $66 thousand compared to net interest income of $231 thousand for the thirty-nine weeks ended September 29, 2007. The decrease in net interest income of $165 thousand or 71.4% is the result of lower average invested balances in interest bearing accounts.

Other non-operating income (expense). Other non-operating expense for the thirty-nine weeks ended September 27, 2008 was $1.8 million compared to other non-operating income of $291 thousand for the thirty-nine weeks ended September 29, 2007. Included in other non-operating expense for the thirty-nine weeks ended September 27, 2008 were $2.7 million of pre-tax charges for other-than-temporary impairments of marketable equity securities classified as available-for-sale. Excluding these charges, there was an increase in other non-operating income of $647 thousand or 222% which was primarily the result of increased dividends on available-for-sale investments.

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Provision for income taxes. Provision for income taxes for the thirty-nine weeks ended September 27, 2008 decreased by $0.6 million, or 6.6%, to $7.8 million from $8.4 million for the thirty-nine weeks ended September 29, 2007. For the thirty-nine weeks ended September 27, 2008 and September 29, 2007, we had an effective income tax rate of 38.9% and 39.1%, respectively, based upon our income before provision for income taxes.

Thirteen Weeks Ended September 27, 2008 Compared to Thirteen Weeks Ended September 29, 2007

Operating revenues. Operating revenues for the thirteen weeks ended September 27, 2008 increased by $41.2 million, or 24.0%, to $213.0 million from $171.8 million for the thirteen weeks ended September 29, 2007. Approximately $14.1 million of the increase in operating revenues is attributable to acquisitions made since the fourth quarter of 2007. The increase in operating revenues relating to these acquisitions consisted of a $9.8 million increase in truckload operations, a $1.4 million increase in brokerage operations, and a $2.9 million increase in intermodal operations. For the thirteen weeks ended September 27, 2008, our operating revenue per loaded mile, excluding fuel surcharges, from our combined truckload and brokerage operations increased to $2.52 from $2.17 for the thirteen weeks ended September 29, 2007. Excluding the effects of acquisitions made since the fourth quarter of 2007, revenue from our truckload operations increased by $10.7 million, or 10.6%, to $112.3 million for the thirteen weeks ended September 27, 2008 compared to $101.6 million for the thirteen weeks ended September 29, 2007. Excluding the effects of acquisitions made since the fourth quarter of 2007, revenue from our brokerage operations increased by $16.0 million, or 37.4%, to $58.8 million for the thirteen weeks ended September 27, 2008 compared to $42.8 million for the thirteen weeks ended September 29, 2007. Excluding the effects of acquisitions made in the first half of 2008, revenue from our intermodal support services increased by $0.4 million, or 1.5%, to $27.8 million for the thirteen weeks ended September 27, 2008 from $27.4 million for the thirteen weeks ended September 29, 2007.

Purchased transportation. Purchased transportation expense for the thirteen weeks ended September 27, 2008 increased by $37.3 million, or 28.5%, to $168.2 million from $130.9 million for the thirteen weeks ended September 29, 2007. As a percentage of operating revenues, purchased transportation expense increased to 79.0% for the thirteen weeks ended September 27, 2008 from 76.2% for the thirteen weeks ended September 29, 2007. 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 primarily due to an increase in fuel surcharges, which are passed through to owner-operators. Fuel surcharges for the thirteen weeks ended September 27, 2008 were $32.2 million compared to $16.0 million for the thirteen weeks ended September 29, 2007.

Commissions expense. Commissions expense for the thirteen weeks ended September 27, 2008 increased by $1.3 million, or 11.3%, to $12.6 million from $11.3 million for the thirteen weeks ended September 29, 2007. As a percentage of operating revenues, commissions expense decreased to 5.9% for the thirteen weeks ended September 27, 2008 compared to 6.6% for thirteen weeks ended September 29, 2007. As a percentage of revenues, commissions expense decreased primarily due to $16.2 million of the increase in operating revenues being attributable to an increase in fuel surcharges, which are passed on through to our owner operators and as such, no commissions are paid.

Other operating expense. Other operating expense for the thirteen weeks ended September 27, 2008 decreased by $0.1 million, or 5.3%, to $2.1 million from $2.2 million for the thirteen weeks ended September 29, 2007. As a percentage of operating revenues, other operating expense decreased to 1.0% for the thirteen weeks ended September 27, 2008 compared to 1.3% for the thirteen weeks ended September 29, 2007.

Selling, general and administrative. Selling, general and administrative expense for the thirteen weeks ended September 27, 2008 increased by $1.3 million, or 11.3%, to $13.2 million from $11.9 million for the thirteen weeks ended September 29, 2007. As a percentage of operating revenues, selling, general and administrative expense decreased to 6.2% for the thirteen weeks ended September 27, 2008 from 6.9% for

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the thirteen weeks ended September 29, 2007. The absolute increase in selling, general and administrative expense was primarily the result of a $1.1 million increase in salaries, wages and benefit costs primarily attributable to a higher average headcount and acquisitions made in the first half of 2008, a $0.3 million increase in building rents primarily due to rental costs related to acquisitions made in the first half of 2008 and various other rental increases, and $0.1 million in additional travel costs for training and acquisition related travel costs. These increases were partially offset by a decrease in legal and professional fees of $0.4 million.

Insurance and claims. Insurance and claims expense for the thirteen weeks ended September 27, 2008 increased by $0.3 million or 6.0%, to $5.4 million from $5.1 million for the thirteen weeks ended September 29, 2007. As a percentage of operating revenues, insurance and claims decreased to 2.6% for the thirteen weeks ended September 27, 2008 from 3.0% for the thirteen weeks ended September 29, 2007. The absolute increase is the result of a $0.6 million increase in auto liability insurance premiums and claims expense, which was partially offset by a $0.3 million decrease in cargo claims expense.

Depreciation and amortization. Depreciation and amortization for the thirteen weeks ended September 27, 2008 increased by $0.5 million, or 24.8%, to $2.5 million from $2.0 million for the thirteen weeks ended September 29, 2007. As a percent of operating revenues, depreciation and amortization remained consistent at 1.2% for the thirteen weeks ended September 27, 2008 compared to the thirteen weeks ended September 29, 2007. The absolute increase is primarily the result of a $0.3 million increase in depreciation expense relating to the $5.6 million in capital expenditures made during the thirty-nine weeks ended September 27, 2008 and equipment acquired in connection with the acquisitions made in the first half of 2008 and a $0.2 million increase in amortization expense primarily attributable to the acquisitions made since the fourth quarter of 2007.

Interest income, net. Net interest income for the thirteen weeks ended September 27, 2008 was $47 thousand compared to $90 thousand for the thirteen weeks ended September 29, 2007. The decrease in net interest income of $43 thousand or 48.0% is the result of lower average invested balances in interest bearing accounts.

Other non-operating income (expense). Other non-operating income for the thirteen weeks ended September 27, 2008 was $2 thousand compared to other non-operating income of $101 thousand for the thirteen weeks ended September 29, 2007. Included in other non-operating income for the thirteen weeks ended September 27, 2008 was a $495 thousand pre-tax charge for other-than-temporary impairments of marketable equity securities classified as available–for-sale. Excluding this charge, there was an increase in other non-operating income of $396 thousand or 392% which was primarily the result of increased dividends on available-for-sale investments.

Provision for income taxes. Provision for income taxes for the thirteen weeks ended September 27, 2008 increased by $0.1 million or 4.5%, to $3.4 million from $3.3 million for the thirteen weeks ended September 29, 2007. For the thirteen weeks ended September 27, 2008 and September 29, 2007, we had an effective income tax rate of 38.9% and 39.1%, respectively, based upon our income before provision for income taxes.

Liquidity and Capital Resources

Our primary sources of liquidity are funds generated by operations and our revolving unsecured line of credit with KeyBank.

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.

During the thirteen and thirty-nine weeks ended September 27, 2008, we made capital expenditures totaling $1.3 million and $5.6 million, respectively. These expenditures primarily consisted of land improvements, building improvements, and tractors and trailers.

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Through the end of 2008, exclusive of acquisitions, we expect to incur additional capital expenditures of $1.5 million to $2.0 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. Based on the availability under our line of credit 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 that we 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 unsecured line of credit.

We currently intend to retain our future earnings to finance our growth and do not anticipate paying cash dividends in the foreseeable future.

Unsecured Lines of Credit

The Company and KeyBank National Association entered into a loan agreement dated October 29, 2007 for the period October 29, 2007 to October 28, 2008. Under the line of credit with KeyBank, our maximum permitted borrowings and letters of credit in the aggregate may not exceed $20 million. The line of credit is unsecured, and bears interest at a rate equal to the lesser of the Prime Rate minus 1.75% or LIBOR plus 1.05% (effective rate of 3.25% at September 27, 2008). The agreement governing our unsecured line of credit contains various financial and restrictive covenants to be maintained by us including requiring us to maintain a tangible net worth of at least $85.0 million, a debt to tangible net worth ratio not to exceed 1 to 1, and quarterly net profits of at least one dollar. For purposes of this agreement, tangible net worth is defined as total assets, excluding all intangible assets, less total debt. The agreement also may, in certain circumstances, limit our ability to pay dividends or distributions. The agreement also contains customary representations and warranties, affirmative and negative covenants and events of default. The Company did not have any amounts outstanding under its line of credit at September 27, 2008 or December 31, 2007, and there were $839,000 and $6,400 letters of credit issued against the line, respectively. However, in light of the recent tightening of available credit from lending institutions, on September 29, 2008, the Company drew down $19.0 million on its unsecured line of credit with KeyBank. These funds were immediately invested in a highly liquid money market fund consisting primarily of commercial paper, US government issuances, bank obligations, and corporate notes. On November 3, 2008, the Company fully repaid the $19.0 million on its unsecured line of credit.

Discussion of Cash Flows

At September 27, 2008, we had cash and cash equivalents of $5.8 million compared to $5.4 million at December 31, 2007. The increase in cash and cash equivalents of $0.4 million for the thirty-nine weeks ended September 27, 2008 resulted from $7.5 million in cash generated from operations offset by $7.1 million used in investing activities.

The $7.5 million in cash provided by operations was primarily attributed to $12.3 million of net income and $7.1 million of non-cash charges for depreciation and amortization, $2.7 million of impairment charges on marketable securities classified as available–for-sale, $1.0 million of non-cash charges for bad debt expense, and an increase in the working capital position of the Company of $14.2 million. The increase in the working capital position is primarily the result of an increase in accounts receivable due to increased revenue, and an increase in prepaid expenses and other, consisting primarily of prepaid auto liability insurance premiums. The increase is partially offset by an increase in accounts payable and accrued expenses.

The $7.1 million in net cash used in investing activities for the thirty-nine weeks ended September 27, 2008 consisted of capital expenditures of $5.6 million, $4.3 million for the acquisition of businesses, purchases of marketable securities totaling $12.5 million, and sales of marketable securities totaling $15.4 million.

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Off Balance Sheet Arrangements

In connection with the 2005 acquisition of Diamond Logistics of Houston, Inc., or Diamond, we are required to pay cash consideration to the former owners of Diamond based on a percentage of revenues generated through November 2008.

In connection with the 2006 acquisition of Assure Intermodal, LLC, or Assure, we are required to pay cash consideration to the former owners of Assure based on a percentage of revenues generated through January 2009.

In connection with the 2006 acquisition of Djewels, Inc., or Djewels, we are required to pay cash consideration to the former owner of Djewels based on a percentage of revenues generated through February 2009.

In connection with the 2006 acquisition of TriStar Express N.C., Inc., or TriStar, we are required to pay cash consideration to the former owners of TriStar based on a percentage of revenues generated through July 2009.

In connection with the 2007 acquisition of Glenn National Carriers, Inc., or Glenn, we are required to pay cash consideration to the former owners of Glenn based on a percentage of revenues generated through November 2010.

In connection with the 2008 acquisition of Overnite, we are required to pay cash consideration to the former owners of Overnite based on a percentage of revenues generated through June 2010.

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, 2007. There have been no changes in the accounting policies followed by us during the thirty-nine weeks ended September 27, 2008.

Effect of Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (SFAS 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses on these instruments in earnings. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 was effective for us on January 1, 2008. The adoption of SFAS 159 did not have an impact on our financial position, results of operations, or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Statement applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. SFAS 157 was effective for us on January 1, 2008. The adoption of SFAS 157 did not have an impact on our financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”, or SFAS 141R, which replaces SFAS No. 141. For information on this Statement, see Part I, Item 1, Note (11) to the Notes to Unaudited Consolidated Financial Statements in this report.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of Accounting Research Bulletin No. 51”, or SFAS 160. For information on this Statement, see Part I, Item 1, Note (11) to the Notes to Unaudited Consolidated Financial Statements in this report.

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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.

Interest Rate Risk

Our market risk is affected by changes in interest rates. Our unsecured line of credit bears interest at a floating rate equal to the lesser of the Prime Rate minus 1.75% or LIBOR plus 1.05%. Accordingly, changes in the Prime Rate or LIBOR would affect the interest rate on and therefore our cost under the line of credit. As of September 27, 2008 we did not have a balance outstanding under the line of credit, however see Part I, Item 1, Note (12) of the “Notes to Unaudited Consolidated Financial Statements.”

Included in cash and cash equivalents is $5.2 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.

We did not have any interest rate swap agreements as of September 27, 2008.

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.

Short Term Investments

The Company from time to time invests cash in excess of its current needs in marketable securities, much of which is held in equity securities, which are actively traded on public exchanges. Holding equity securities subjects the Company to fluctuations in the market value of its investment portfolio based on current market prices. A drop in market prices or other unstable market conditions could cause a loss in the value of the Company’s short term investments.

Marketable securities are carried at fair value and are marked to market at the end of each quarter, with the unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income, unless the declines in value are judged to be other-than-temporary, in which case an impairment charge would be included in the determination of net income. See Part I, Item 1, Note (9) of “Notes to Unaudited Consolidated Financial Statements.”

As of September 27, 2008 the value of equity securities held as short term investments was $11.2 million compared to $8.6 million at December 31, 2007. The increase during the thirty-nine weeks ended September 27, 2008 represents additional purchases of $5.7 million, partially offset by other-than-temporary charges of $2.5 million on our remaining holdings, sales of $0.9 million, and other net unrealized holding gains of $0.3 million.

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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 September 27, 2008, 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 thirty-nine weeks ended September 27, 2008 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

Information with respect to legal proceedings and other exposures appears in Part I, Item 1, Note (10) of the “Notes to Unaudited Consolidated Financial Statements,” and in the Company’s Annual Report on Form 10-K for the year ending December 31, 2007.

There have been no material changes to our risk factors as previously disclosed in Item 1A to Part 1 of our Form 10-K for the fiscal year ended December 31, 2007.

None.

None.

None.

None.

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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.

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