UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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:
(Exact Name of Registrant as Specified in Its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address, including Zip Code of Principal Executive Offices)
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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
The number of shares of the registrant’s common stock, no par value, outstanding as of May 8, 2023, was
PART I – FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNIVERSAL LOGISTICS HOLDINGS, INC.
Unaudited Consolidated Balance Sheets
(In thousands, except share data)
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April 1, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable – net of allowance for credit losses of $ |
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Other receivables |
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Prepaid expenses and other |
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Due from affiliates |
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Total current assets |
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Property and equipment – net of accumulated depreciation of $ |
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Operating lease right-of-use asset |
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Goodwill |
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Intangible assets – net of accumulated amortization of $ |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Current portion of long-term debt |
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Current portion of operating lease liabilities |
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Accrued expenses and other current liabilities |
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Insurance and claims |
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Due to affiliates |
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Income taxes payable |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt, net of current portion |
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Operating lease liabilities, net of current portion |
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Deferred income taxes |
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Other long-term liabilities |
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Total long-term liabilities |
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Shareholders' equity: |
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Common stock, |
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Paid-in capital |
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Treasury stock, at cost; |
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Retained earnings |
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Accumulated other comprehensive (loss): |
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Interest rate swaps, net of income taxes of $ |
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Foreign currency translation adjustments |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
2
UNIVERSAL LOGISTICS HOLDINGS, INC.
Unaudited Consolidated Statements of Income
(In thousands, except per share data)
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Thirteen Weeks Ended |
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April 1, |
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April 2, |
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Operating revenues: |
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Truckload services |
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$ |
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$ |
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Brokerage services |
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Intermodal services |
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Dedicated services |
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Value-added services |
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Total operating revenues |
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Operating expenses: |
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Purchased transportation and equipment rent |
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Direct personnel and related benefits |
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Operating supplies and expenses |
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Commission expense |
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Occupancy expense |
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General and administrative |
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Insurance and claims |
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Depreciation and amortization |
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Total operating expenses |
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Income from operations |
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Interest income |
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Interest expense |
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( |
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Other non-operating income |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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Earnings per common share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average number of common shares outstanding: |
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Basic |
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Diluted |
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Dividends declared per common share |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
3
UNIVERSAL LOGISTICS HOLDINGS, INC.
Unaudited Consolidated Statements of Comprehensive Income
(In thousands)
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Thirteen Weeks Ended |
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April 1, |
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April 2, |
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Net Income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Unrealized changes in fair value of interest rate swaps, net of income taxes of |
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( |
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Foreign currency translation adjustments |
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( |
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( |
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Total other comprehensive income (loss) |
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( |
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Total comprehensive income |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
4
UNIVERSAL LOGISTICS HOLDINGS, INC.
Unaudited Consolidated Statements of Cash Flows
(In thousands)
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Thirteen Weeks Ended |
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April 1, |
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April 2, |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Noncash lease expense |
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Loss (gain) on marketable equity securities |
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( |
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Gain on disposal of property and equipment |
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( |
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Amortization of debt issuance costs |
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Stock-based compensation |
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Provision for credit losses |
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Deferred income taxes |
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( |
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Change in assets and liabilities: |
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Trade and other accounts receivable |
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( |
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Prepaid expenses and other assets |
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( |
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( |
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Principal reduction in operating lease liabilities |
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( |
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( |
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Accounts payable, accrued expenses, income taxes payable, |
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Due to/from affiliates, net |
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( |
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( |
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Other long-term liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
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Proceeds from the sale of property and equipment |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from borrowing - revolving debt |
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Repayments of debt - revolving debt |
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Proceeds from borrowing - term debt |
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Repayments of debt - term debt |
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( |
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( |
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Dividends paid |
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( |
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( |
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Purchases of treasury stock |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Net increase in cash |
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Cash and cash equivalents – beginning of period |
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Cash and cash equivalents – end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
5
UNIVERSAL LOGISTICS HOLDINGS, INC.
Unaudited Consolidated Statements of Shareholders’ Equity
(In thousands, except per share data)
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Common |
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Paid-in |
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Treasury |
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Retained |
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Accumulated |
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Total |
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Balances – December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Comprehensive income (loss) |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends ($ |
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— |
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— |
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— |
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( |
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— |
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( |
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Purchases of treasury stock |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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Balances – April 2, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Balances – December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Comprehensive income (loss) |
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— |
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— |
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— |
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— |
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( |
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( |
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Dividends ($ |
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— |
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— |
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— |
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( |
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— |
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( |
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Stock based compensation |
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— |
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— |
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— |
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Balances – April 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
6
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements of Universal Logistics Holdings, Inc. and its wholly-owned subsidiaries (“Universal”) have been prepared by the Company’s management. In these notes, the terms “us,” “we,” “our,” or the “Company” refer to Universal and its consolidated subsidiaries. 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. All intercompany transactions and balances have been eliminated in consolidation. 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, 2022 and 2021 and for each of the years in the three-year period ended December 31, 2022 included 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.
Our fiscal year ends on December 31 and consists of four quarters, each with thirteen weeks.
Current Economic Conditions
The Company makes estimates and assumptions that affect reported amounts and disclosures included in its financial statements and accompanying notes and assesses certain accounting matters that require consideration of forecasted financial information. The Company's assumptions about future conditions important to these estimates and assumptions are subject to uncertainty, including the negative impact inflationary pressures can have on our operating costs. Prolonged periods of inflation could cause interest rates, equipment, maintenance, labor and other operating costs to continue to increase.
On January 1, 2023, the Company adopted ASU 2016-13, Accounting for Credit Losses (Topic 326). The ASU requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The adoption of this standard did not have a material impact on our consolidated financial statements.
Universal is a holding company that owns subsidiaries engaged in providing customized transportation and logistics services. For financial reporting, we broadly group the services provided by our consolidated subsidiaries into the following categories: truckload, brokerage, intermodal, dedicated and value-added. We disaggregate these categories and report our service lines separately on the Consolidated Statements of Income.
Truckload services include dry van, flatbed, heavy-haul and refrigerated operations. We transport a wide variety of general commodities, including automotive parts, machinery, building materials, paper, food, consumer goods, furniture, steel and other metals on behalf of customers in various industries.
To complement our available capacity, we provide customers with freight brokerage services by utilizing third-party transportation providers to move freight. Brokerage services also include full-service domestic and international freight forwarding and customs brokerage.
Intermodal services include rail-truck, steamship-truck and support services. Our intermodal support services are primarily short- to medium-distance delivery of rail and steamship containers between the railhead or port and the customer.
Dedicated services are primarily provided in support of automotive and retail customers using van equipment. Our dedicated services are primarily short-run or round-trip moves within a defined geographic area.
Transportation services are short-term in nature; agreements governing their provision generally have a term of
We determine revenue in-transit using the input method, under which revenue is recognized based on the duration of time that has lapsed from the departure date (start of transportation services) to the arrival date (completion of transportation services). Measurement of revenue in-transit requires the application of significant judgment. We calculate the estimated percentage of an order’s transit time that is complete at period end, and we apply that percentage of completion to the order’s estimated revenue.
7
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
Value-added services, which are typically dedicated to individual customer requirements, include material handling, consolidation, sequencing, sub-assembly, cross-dock services, kitting, repacking, warehousing and returnable container management. Value-added revenues are substantially driven by the level of demand for outsourced logistics services. Major factors that affect value-added service revenue include changes in manufacturing supply chain requirements and production levels in specific industries, particularly the North American automotive and Class 8 heavy-truck industries.
Revenue is recognized as control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to receive in exchange for its services. We have elected to use the “right to invoice” practical expedient to recognize revenue, reflecting that a customer obtains the benefit associated with value-added services as they are provided. The contracts in our value-added services businesses are negotiated agreements, which contain both fixed and variable components. The variability of revenues is driven by volumes and transactions, which are known as of an invoice date. Value-added service contracts typically have terms that extend beyond one year, and they do not include financing components.
The following table provides information related to contract balances associated with our contracts with customers (in thousands):
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April 1, |
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December 31, |
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Prepaid expenses and other - contract assets |
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$ |
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$ |
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We generally receive payment for performance obligations within
The Company accounts for its marketable equity securities in accordance with ASC Topic 321 “Investments- Equity Securities.” ASC Topic 321 requires companies to measure equity investments at fair value, with changes in fair value recognized in net income. The Company’s investments in marketable securities consist of equity securities with readily determinable fair values. The cost basis of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).
Marketable equity securities are carried at fair value, with gains and losses in fair market value included in the determination of net income. The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note 7.
The following table sets forth market value, cost basis, and unrealized gains on equity securities (in thousands):
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April 1, |
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December 31, |
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Fair value |
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$ |
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$ |
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Cost basis |
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Unrealized gain |
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$ |
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$ |
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The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities (in thousands):
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April 1, |
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December 31, |
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Gross unrealized gains |
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$ |
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$ |
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Gross unrealized losses |
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( |
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( |
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Net unrealized gains |
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$ |
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$ |
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The Company did
During the thirteen-week week periods ended April 1, 2023 and April 2, 2022, our marketable equity securities portfolio experienced a net unrealized pre-tax gain (loss) in market value of approximately $(
8
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
Accrued expenses and other current liabilities are comprised of the following (in thousands):
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April 1, |
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December 31, |
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Accrued payroll |
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$ |
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$ |
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Accrued payroll taxes |
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Driver escrow liabilities |
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Legal settlements and claims |
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Commissions, other taxes and other |
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Total |
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$ |
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$ |
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Debt is comprised of the following (in thousands):
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Interest Rates |
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April 1, |
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December 31, |
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Outstanding Debt: |
|
|
|
|
|
|
|
|
||
Revolving Credit Facility (1) (2) |
|
|
$ |
— |
|
|
$ |
— |
|
|
UACL Credit Agreement (2) |
|
|
|
|
|
|
|
|
||
Term Loan |
|
|
|
|
|
|
|
|||
Revolver |
|
|
|
— |
|
|
|
— |
|
|
Equipment Financing (3) |
|
|
|
|
|
|
|
|||
Real Estate Facility (4) |
|
|
|
|
|
|
|
|||
Margin Facility (5) |
|
|
|
— |
|
|
|
— |
|
|
Unamortized debt issuance costs |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||
Less current portion of long-term debt |
|
|
|
|
|
|
|
|
||
Total long-term debt, net of current portion |
|
|
|
$ |
|
|
$ |
|
||
(1)
(2)
(3)
9
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(4)
(5)
The Company is also party to an interest rate swap agreement that qualifies for hedge accounting. The Company executed the swap agreement to fix a portion of the interest rate on its variable rate debt. Under the swap agreement, the Company receives interest at Term SOFR and pays a fixed rate of
FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” 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 and expanded disclosures with respect to fair value measurements.
FASB ASC Topic 820 also 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:
10
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
We have segregated all financial assets and liabilities 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 tables below (in thousands):
|
|
April 1, |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value Measurement |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Marketable securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Interest rate swap |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
December 31, |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value Measurement |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Marketable securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Interest rate swap |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
The valuation techniques used to measure fair value for the items in the tables above are as follows:
Our Revolving Credit Facility and our Real Estate Facility consist of variable rate borrowings. We categorize these borrowings as Level 2 in the fair value hierarchy. The carrying value of these borrowings approximate fair value because the applicable interest rates are adjusted frequently based on short-term market rates.
For our Equipment Financing, the fair values are estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements. We categorize these borrowings as Level 2 in the fair value hierarchy.
|
|
Carrying Value |
|
|
Estimated Fair |
|
||
Equipment promissory notes |
|
$ |
|
|
$ |
|
||
We have not elected the fair value option for any of our financial instruments.
11
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
ASU 2016-02, Leases, requires us to recognize a right-of-use asset and a corresponding lease liability on our balance sheet for most leases classified as operating leases under previous guidance. Right-of-use assets represent our right to use an underlying asset over the lease term and lease liabilities represent the obligation to make lease payments resulting from the lease agreement. We recognize a right-of-use asset and a lease liability on the effective date of a lease agreement.
As of April 1, 2023, our obligations under operating lease arrangements primarily related to the rental of office space, warehouses, freight distribution centers, terminal yards and equipment. Our lease obligations typically do not include options to purchase the leased property, nor do they contain residual value guarantees or material restrictive covenants. Options to extend or terminate an agreement are included in the lease term when it becomes reasonably certain the option will be exercised. As of April 1, 2023, we were not reasonably certain of exercising any renewal or termination options, and as such, no adjustments were made to the right-of-use lease assets or corresponding liabilities.
We did not separate lease and non-lease components of contracts for purposes of determining the right-of use lease asset and corresponding liability. Variable lease components that do not depend on an index or a rate, and variable nonlease components were also not contemplated in the calculation of the right-of-use asset and corresponding liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay the lessors an estimate that is adjusted to actual expense on a quarterly or annual basis depending on the underlying contract terms. For equipment leases, variable lease costs may include additional fees associated with using equipment in excess of estimated amounts. Leases with an initial term of 12 months or less, short-term leases, are not recorded on the balance sheet. Lease expense for short-term and long-term operating leases is recognized on a straight-line basis over the lease term.
The following table summarizes our lease costs for the thirteen weeks ended April 1, 2023 and April 2, 2022 (in thousands):
|
|
Thirteen Weeks Ended April 1, 2023 |
|
|||||||||
|
|
With Affiliates |
|
|
With Third Parties |
|
|
Total |
|
|||
Lease cost |
|
|
|
|
|
|
|
|
|
|||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|||
Sublease income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
Thirteen Weeks Ended April 2, 2022 |
|
|||||||||
|
|
With Affiliates |
|
|
With Third Parties |
|
|
Total |
|
|||
Lease cost |
|
|
|
|
|
|
|
|
|
|||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|||
Sublease income |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
12
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
The following table summarizes other lease related information as of and for the thirteen week periods ended April 1, 2023 and April 2, 2022 (in thousands):
|
|
April 1, 2023 |
|
|||||||||
|
|
With |
|
|
With Third |
|
|
Total |
|
|||
Other information |
|
|
|
|
|
|
|
|
|
|||
Cash paid for amounts included in the measurement of operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Right-of-use assets change due to lease termination |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
|
|
|
|||
Weighted-average discount rate |
|
|
% |
|
|
% |
|
|
% |
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
April 2, 2022 |
|
|||||||||
|
|
With |
|
|
With Third |
|
|
Total |
|
|||
Other information |
|
|
|
|
|
|
|
|
|
|||
Cash paid for amounts included in the measurement of operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Right-of-use asset change due to lease termination |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
|
|
|
|||
Weighted-average discount rate |
|
|
% |
|
|
% |
|
|
% |
|||
Future minimum lease payments under these operating leases as of April 1, 2023, are as follows (in thousands):
|
|
With Affiliates |
|
|
With Third Parties |
|
|
Total |
|
|||
2023 (remaining) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2024 |
|
|
|
|
|
|
|
|
|
|||
2025 |
|
|
|
|
|
|
|
|
|
|||
2026 |
|
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total required lease payments |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Less amounts representing interest |
|
|
|
|
|
|
|
|
( |
) |
||
Present value of lease liabilities |
|
|
|
|
|
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
13
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
In the ordinary course of business, companies owned or controlled by our controlling shareholder, Matthew T. Moroun, provide us with certain supplementary administrative support services, including legal, human resources, tax, and IT infrastructure services. Universal’s audit committee reviews and approves related party transactions. The cost of these services is based on the actual or estimated utilization of the specific service.
Universal also purchases other services from companies owned or controlled by our controlling shareholder.
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
||
|
|
|
|
|
|
|
||
Insurance |
|
$ |
|
|
$ |
|
||
Real estate rent and related costs |
|
|
|
|
|
|
||
Administrative support services |
|
|
|
|
|
|
||
Truck fuel, maintenance and other operating costs |
|
|
|
|
|
|
||
Contracted transportation services |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
We pay the direct variable cost of maintenance, fueling and other operational support costs for services delivered at our affiliate’s trucking terminals that are geographically remote from our own facilities. Such costs are billed when incurred, paid on a routine basis, and reflect actual labor utilization, repair parts costs or quantities of fuel purchased.
We lease
We purchase employee medical, workers’ compensation, property and casualty, cargo, warehousing and other general liability insurance from an insurance company controlled by our controlling shareholder. In our Consolidated Balance Sheets, we record our insured claims liability and the related recovery in insurance and claims, and other receivables. At April 1, 2023 and December 31, 2022, there were $
Other services from affiliates, including contracted transportation services, are delivered to us on a per-transaction basis or pursuant to separate contractual arrangements provided in the ordinary course of business. At April 1, 2023 and December 31, 2022, amounts due to affiliates were $
During the thirteen weeks ended April 1, 2023, we purchased used tractors from an affiliate totaling $
In June 2022, we executed a real estate contract with an affiliate to acquire a multi-building, office complex located in Warren, Michigan for $
Services provided by Universal to Affiliates
We periodically assist companies that are owned by our controlling shareholder by providing selected transportation and logistics services in connection with their specific customer contracts or purchase orders. Truck fueling and administrative expenses are presented net in operating expense.
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
||
Contracted transportation services |
|
$ |
|
|
$ |
|
||
Facilities and related support |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
At April 1, 2023 and December 31, 2022, amounts due from affiliates were $
14
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
On April 23, 2014, our Board of Directors adopted our 2014 Amended and Restated Stock Incentive Plan. The Plan was approved at the 2014 annual meeting of shareholders and became effective as of the date our Board adopted it. In May 2022, the Company’s shareholders approved an amendment to the Plan to increase the number of shares of common stock authorized for issuance by
On March 24, 2023, the Company granted
On September 9, 2021, the Company granted
On February 5, 2020, the Company granted
On January 10, 2020, the Company granted
A grantee’s vesting of restricted stock awards may be accelerated under certain conditions, including retirement.
The following table summarizes the status of the Company’s non-vested shares and related information for the period indicated:
|
|
Shares |
|
|
Weighted |
|
||
Non-vested at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
— |
|
|
$ |
— |
|
Balance at April 1, 2023 |
|
|
|
|
$ |
|
||
In each of the thirteen week periods ended April 1, 2023 and April 2, 2022, the total grant date fair value of vested shares recognized as compensation costs was $
Basic earnings per common share amounts are based on the weighted average number of common shares outstanding, excluding outstanding non-vested restricted stock. Diluted earnings per common share include dilutive common stock equivalents determined by the treasury stock method. For the thirteen weeks ended April 1, 2023 and April 2, 2022, there were
For the thirteen weeks ended April 1, 2023 and April 2, 2022, we excluded
15
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
On
We report our financial results in
Operations aggregated in our contract logistics segment deliver value-added and/or dedicated transportation services to support in-bound logistics to original equipment manufacturers (OEMs) and major retailers on a contractual basis, generally pursuant to terms of one year or longer. Our intermodal segment is associated with local and regional drayage moves coordinated by company-managed terminals using a mix of owner-operators, company equipment and third-party capacity providers (broker carriers). Operations aggregated in our trucking segment are associated with individual freight shipments coordinated primarily by our agents using a mix of owner-operators, company equipment and broker carriers. Our company-managed brokerage segment provides for the pick-up and delivery of individual freight shipments using broker carriers, coordinated by our company-managed operations. Other non-reportable segments are comprised of the Company’s subsidiaries that provide support services to other subsidiaries.
Separate balance sheets are not prepared by segment, and we do not provide asset information by segment to the chief operating decision maker.
The following tables summarize information about our reportable segments for the thirteen week periods ended April 1, 2023 and April 2, 2022 (in thousands):
|
|
Operating Revenues |
|
|||||
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
||
Contract logistics |
|
$ |
|
|
$ |
|
||
Intermodal |
|
|
|
|
|
|
||
Trucking |
|
|
|
|
|
|
||
Company-managed brokerage |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total operating revenues |
|
$ |
|
|
$ |
|
||
|
|
Eliminated Inter-segment Revenues |
|
|||||
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
||
Contract logistics |
|
$ |
|
|
$ |
|
||
Intermodal |
|
|
|
|
|
|
||
Trucking |
|
|
|
|
|
|
||
Company-managed brokerage |
|
|
|
|
|
|
||
Total eliminated inter-segment revenues |
|
$ |
|
|
$ |
|
||
16
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
|
|
Income from Operations |
|
|||||
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
||
Contract logistics |
|
$ |
|
|
$ |
|
||
Intermodal |
|
|
|
|
|
|
||
Trucking |
|
|
|
|
|
|
||
Company-managed brokerage |
|
|
( |
) |
|
|
|
|
Other |
|
|
|
|
|
|
||
Total income from operations |
|
$ |
|
|
$ |
|
||
Our principal commitments relate to long-term real estate leases and payment obligations to equipment vendors.
The Company is involved in certain other claims and pending litigation arising from the ordinary conduct of business. We also provide accruals for claims within our self-insured retention amounts. Based on the knowledge of the facts, and in certain cases, opinions of outside counsel, in the Company’s opinion the resolution of these claims and pending litigation will not have a material effect on our financial position, results of operations or cash flows. However, if we experience claims that are not covered by our insurance or that exceed our estimated claim reserve, it could increase the volatility of our earnings and have a materially adverse effect on our financial condition, results of operations or cash flows.
At April 1, 2023, approximately
On
17
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,” “expect,” “believe,” “targets,” “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 Part I, Item 1A in our Form 10-K for the year ended December 31, 2022 and Part II, Item 1A of this Form 10-Q, as well as any other cautionary language in these filings, 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
Universal Logistics Holdings, Inc. is a holding company that owns subsidiaries engaged in providing a variety of customized transportation and logistics solutions throughout the United States, and in Mexico, Canada and Colombia. Our operating subsidiaries provide customers with a broad array of services across their entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.
Our operating subsidiaries provide a comprehensive suite of transportation and logistics solutions that allow our customers and clients to reduce costs and manage their global supply chains more efficiently. We market our services through a direct sales and marketing network focused on selling our portfolio of services to large customers in specific industry sectors, through a network of agents who solicit freight business directly from shippers, and through company-managed facilities and full-service freight forwarding and customs house brokerage offices. We believe our flexible business model is highly scalable and will continue to support our growth with comparatively modest capital expenditure requirements. Our business model, combined with a disciplined approach to contract structuring and pricing, creates a highly flexible cost structure that allows us to expand and contract quickly in response to changes in demand from our customers.
We generate substantially all of our revenues through fees charged to customers for the transportation of freight and for the customized logistics services we provide. We also derive revenue from fuel surcharges, where separately identifiable, loading and unloading activities, equipment detention, container management and storage and other related services. Operations aggregated in our transportation segment are associated with individual freight shipments coordinated by our agents, company-managed terminals and specialized services operations. In contrast, operations aggregated in our logistics segment deliver value-added services and transportation services to specific customers on a dedicated basis, generally pursuant to contract terms of one year or longer. Our segments are distinguished by the amount of forward visibility we have in regard to pricing and volumes, and also by the extent to which we dedicate resources and Company-owned equipment.
The following discussion of the Company’s financial condition and results of operations should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 and the unaudited Consolidated Financial Statements and related notes contained in this Quarterly Report on Form 10-Q.
Current Economic Conditions
A prolonged period of inflationary pressures could cause interest rates, equipment, maintenance, labor and other operating costs to continue to increase. If the Company is unable to offset rising costs through corresponding customer rate increases, such increases could adversely affect our results of operations.
18
While operating cash flows may be negatively impacted by inflation-driven cost increases, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities. Should the impact of inflation-driven cost increases last longer than anticipated, and/or our cash flow from operations decline more than expected, we may need to obtain additional financing. The Company’s ability to fund future operating expenses and capital expenditures, as well as its ability to meet future debt service obligations or refinance indebtedness will depend on future operating performance, which will be affected by general economic, financial, and other factors beyond our control.
Operating Revenues
For financial reporting, we broadly group our services into the following categories: truckload services, brokerage services, intermodal services, dedicated services and value-added services. Our truckload, brokerage and intermodal services associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services to specific customers on a contractual basis, generally pursuant to contract terms of one year or longer. The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks ended April 1, 2023 and April 2, 2022, presented as a percentage of total operating revenues:
|
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
|||
Operating revenues: |
|
|
|
|
|
|
|||
Truckload services |
|
|
10.6 |
% |
|
|
11.0 |
% |
|
Brokerage services |
|
|
15.7 |
|
|
|
20.5 |
|
|
Intermodal services |
|
|
25.4 |
|
|
|
30.1 |
|
|
Dedicated services |
|
|
19.5 |
|
|
|
14.4 |
|
|
Value-added services |
|
|
28.8 |
|
|
|
24.0 |
|
|
Total operating revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
Results of Operations
The following table sets forth items derived from our consolidated statements of income for the thirteen weeks ended April 1, 2023 and April 2, 2022, presented as a percentage of operating revenues:
|
|
Thirteen Weeks Ended |
|
|||||
|
|
April 1, |
|
|
April 2, |
|
||
Operating revenues: |
|
|
100.0 |
% |
|
|
100.0 |
% |
Operating expenses: |
|
|
|
|
|
|
||
Purchased transportation and equipment rent |
|
|
35.7 |
|
|
|
44.3 |
|
Direct personnel and related benefits |
|
|
32.0 |
|
|
|
26.1 |
|
Operating supplies and expenses |
|
|
10.6 |
|
|
|
8.0 |
|
Commission expense |
|
|
1.9 |
|
|
|
1.9 |
|
Occupancy expense |
|
|
2.5 |
|
|
|
1.9 |
|
General and administrative |
|
|
2.6 |
|
|
|
1.9 |
|
Insurance and claims |
|
|
1.8 |
|
|
|
1.6 |
|
Depreciation and amortization |
|
|
4.2 |
|
|
|
3.1 |
|
Total operating expenses |
|
|
91.3 |
|
|
|
89.0 |
|
Income from operations |
|
|
8.7 |
|
|
|
11.0 |
|
Interest and other non-operating expense, net |
|
|
(1.1 |
) |
|
|
(0.3 |
) |
Income before income taxes |
|
|
7.6 |
|
|
|
10.7 |
|
Income tax expense |
|
|
1.9 |
|
|
|
2.7 |
|
Net income |
|
|
5.7 |
% |
|
|
8.0 |
% |
19
Thirteen Weeks Ended April 1, 2023 Compared to Thirteen Weeks Ended April 2, 2022
Operating revenues. Operating revenues for the thirteen weeks ended April 1, 2023 decreased $86.5 million, or 16.5%, to $437.4 million from $523.9 million for the thirteen weeks ended April 2, 2022. Included in operating revenues are separately-identified fuel surcharges of $33.9 million for the thirteen weeks ended April 1, 2023 compared to $34.6 million for the thirteen weeks ended April 2, 2022. Consolidated income from operations decreased $19.7 million, or 34.0%, to $38.2 million for the first quarter 2023 compared to $57.8 million during the same period last year. First quarter 2023 operating results were negatively impacted by a $1.2 million pre-tax charge for settlement of an auto liability claim in excess of policy limits.
In the contract logistics segment, which includes value-added and dedicated services, operating revenues increased $9.7 million, or 4.8%, to $211.3 million in the first quarter 2023 compared to $201.6 million in the previous year. Income from operations in the contract logistics segment increased $4.3 million, or 18.3%, to $27.8 million for the thirteen weeks ended April 1, 2023 compared to $23.5 million in the same period last year. In the first quarter of 2023, Universal managed 65 value-added programs compared to 63 in the prior year period. Included in dedicated transportation revenue for the first quarter 2023 were $9.7 million in separately identified fuel surcharges, compared to $8.8 million in the same period last year. As a percentage of revenue, operating margin in the contract logistics segment for the first quarter 2023 was 13.1% compared to 11.6% during the same period last year.
In the intermodal segment, operating revenues decreased $46.6 million, or 29.6%, to $111.0 million in the first quarter 2023 compared to $157.6 million in the previous year. Intermodal revenues for the thirteen weeks ended April 1, 2023 included $17.1 million in separately identified fuel surcharges, compared to $18.2 million in the same period last year. During the first quarter 2023, Universal moved 122,299 intermodal loads compared to 154,207 in the first quarter 2022, a decrease of 20.7%, while its average operating revenue per load, excluding fuel surcharges decreased 18.7% to $567 from $697. Intermodal segment revenues also include accessorial charges such as detention, demurrage and storage which totaled $26.0 million during the first quarter 2023, compared to $36.2 million one year earlier. Income from operations in the intermodal segment decreased $16.2 million to $6.8 million for the thirteen weeks ended April 1, 2023 compared to $23.0 million in the first quarter 2022. As a percentage of revenue, operating margin in the intermodal segment for the first quarter 2023 was 6.1%, compared to 14.6% during the same period last year.
In the trucking segment, operating revenues decreased $17.8 million, or 18.2%, to $79.7 million in the first quarter 2023 compared to $97.5 million in the prior year period. Included in trucking segment revenues for the first quarter 2023 were $7.2 million in separately identified fuel surcharges compared to $7.5 million during the first quarter 2022. Income from operations in the trucking segment decreased $3.6 million to $3.8 million for the first quarter 2023 compared to $7.4 million in the same period last year. During the recently completed quarter, Universal’s average operating revenue per load, excluding fuel surcharges, decreased 8.8% to $1,607 from $1,762 in the prior year period and load volumes decreased 11.8% to 44,855 from 50,860. As a percentage of revenue, operating margin in the trucking segment for the first quarter 2023 was 4.8%, compared to 7.6% during the same period last year.
In the company-managed brokerage segment, operating revenues decreased $31.3 million, or 47.9%, to $34.0 million in the thirteen weeks ending April 1, 2023 compared to $65.2 million in the thirteen weeks ending April 2, 2022. During the recently completed quarter, the average operating revenue per load decreased 22.1% to $1,696 from $2,176 and load volumes fell 18.9% to 19,956 from 24,610. First quarter 2023 results include a $1.2 million charge for the settlement of an auto liability claim. In the first quarter 2023, the company-managed brokerage segment experienced an operating loss of $(0.4) million compared to operating income of $3.9 million one year earlier. The first quarter 2023 operating results included a $1.2 million charge for settlement of an auto liability claim in excess of policy limits. As a percentage of revenue, operating margin for the first quarter 2023 was (1.1)% compared to 5.9% during the same period last year. The claims charge recorded in the first quarter 2023 adversely impacted the company-managed brokerage segment’s operating margin by 350 basis points.
Purchased transportation and equipment rent. Purchased transportation and equipment rental costs for the first quarter 2023 decreased $76.0 million, or 32.8%, to $156.1 million from $232.1 million during the same period last year. Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers. The increases or decreases are generally correlated with changes in demand for transactional transportation-related services, which includes truckload, brokerage, and intermodal services. The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services. First quarter 2023 transactional transportation-related service revenues decreased 29.8% compared to the first quarter of 2022. As a percentage of operating revenues, purchased transportation and equipment rent expense decreased to 35.7% compared to 44.3% during the same period last year due to a decrease in the mix of transactional transportation services revenue. As a percentage of total revenues, transactional transportation services revenue decreased to 51.7% for first quarter 2023 compared to 61.5% in the same period last year.
20
Direct personnel and related benefits. Direct personnel and related benefits for the thirteen weeks ended April 1, 2023 increased by $3.1 million, or 2.3%, to $139.8 million compared to $136.7 million during the same period last year. Trends in these expenses are generally correlated with changes in operating facilities and headcount requirements and, therefore, increase and decrease with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations. The increase in first quarter 2023 was primarily due to an increase in the number of employee drivers in our California intermodal operations. As a percentage of operating revenues, personnel and related benefits increased to 32.0% for the thirteen weeks ended April 1, 2023, compared to 26.1% for the thirteen weeks ended April 2, 2022. The percentage is derived on an aggregate basis from both existing and new programs, and from customer operations at various stages in their lifecycles. Individual operations may be impacted by additional production shifts or by overtime at selected operations. While generalizations about the impact of personnel and related benefits costs as a percentage of total revenue are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.
Operating supplies and expenses. Operating supplies and expenses increased by $4.1 million, or 9.7%, to $46.2 million for the thirteen weeks ended April 1, 2023 compared to $42.1 million for the thirteen weeks ended April 2, 2022. These expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand. The main elements driving the change were increases of $2.7 million in maintenance and $1.7 million in fuel expense on company tractors.
Commission expense. Commission expense for the first quarter 2023 decreased by $1.9 million, or 18.5%, to $8.2 million from $10.0 million for the first quarter 2022. Commission expense decreased due to decreased revenue in our agency-based truckload and intermodal businesses. As a percentage of operating revenues, commission expense was unchanged at 1.9%.
Occupancy expense. Occupancy expenses increased by $1.0 million, or 9.4%, to $11.2 million for the thirteen weeks ended April 1, 2023. This compares to $10.2 million for the thirteen weeks ended April 2, 2022. The increase was primarily attributable to an increase in building rents.
General and administrative. General and administrative expense for the thirteen weeks ended April 1, 2023 increased by $1.2 million, or 11.9%, to $11.3 million from $10.1 million in the thirteen weeks ended April 2, 2022. As a percentage of operating revenues, general and administrative expense was 2.6% for the first quarter 2023 compared to 1.9% for the first quarter 2022.
Insurance and claims. Insurance and claims expense for the first quarter 2023 decreased by $0.5 million to $8.1 million from $8.6 million in the first quarter 2022. As a percentage of operating revenues, insurance and claims increased to 1.8% for the thirteen weeks ending April 1, 2023 compared to 1.6% for the first quarter 2022. The decrease was attributable to a $2.6 million decrease in cargo and service failure claims. This was partially offset by an increase in auto liability premiums and contractor insurance as well as a $1.2 million settlement of an auto liability claim in excess of policy limits.
Depreciation and amortization. Depreciation and amortization expense for the thirteen weeks ended April 1, 2023 increased by $2.3 million, or 14.1%, to $18.5 million from $16.2 million for the first quarter 2022. Depreciation expense increased $2.7 million and amortization expense decreased $0.4 million.
Interest expense, net. Net interest expense was $5.0 million for the thirteen weeks ended April 1, 2023 compared to $2.4 million for the thirteen weeks ended April 2, 2022. The increase in net interest expense reflects an increase in interest rates on our outstanding borrowings. As of April 3, 2023, our outstanding borrowings totaled $381.9 million compared to $402.7 million at the same time last year.
Other non-operating income. Other non-operating income was $15 thousand for the first quarter 2023 compared to $1.0 million in the prior year period. Other non-operating income for the first quarter 2022 includes a $0.9 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income.
Income tax expense. Income tax expense for the first quarter 2023 was $8.4 million, compared to $14.4 million for the first quarter 2022, based on an effective tax rate of 25.2% and 25.5% respectively. The decrease in income taxes in 2023 is the result of a decrease in taxable income and in our effective tax rate for the thirteen weeks ended April 1, 2023 compared to the thirteen weeks ended April 2, 2022.
21
Liquidity and Capital Resources
Our primary sources of liquidity are funds generated by operations, loans and extensions of credit under our credit facilities, on margin against our marketable securities and from installment notes, and proceeds from the sales of marketable securities. We use secured asset lending to fund a substantial portion of purchases of tractors, trailers and material handling equipment.
We employ a flexible operating strategy which we believe lowers our capital expenditure requirements. In general, our facilities used in our value-added services are leased on terms that are either substantially matched to our customer’s contracts, are month-to-month or are provided to us by our customers. We also utilize owner-operators and third-party carriers to provide a significant portion of our transportation and specialized services. A significant portion of the tractors and trailers used in our business are provided by our owner-operators. In addition, our use of agents reduces our overall need for large terminals. As a result, our capital expenditure requirements are limited in comparison to most large transportation and logistics service providers, which maintain significant properties and sizable fleets of owned tractors and trailers.
During the thirteen weeks ended April 1, 2023, our capital expenditures totaled $31.3 million. These expenditures primarily consisted of transportation equipment and investments in support of our value-added service operations. Our flexible business model depends somewhat on the customized solutions we implement for specific customers. As a result, our capital expenditures will depend on specific new contracts and the overall age and condition of our owned transportation equipment. Due to shortages, production backlogs, and limited availability of transportation equipment, our expenditures are projected to be somewhat higher than the customary range of 4% to 5% of our operating revenues. Through the remainder of 2023, exclusive of acquisitions of businesses or strategic real estate, we expect our capital expenditures to be in the range of 7% to 8% of operating revenues. We expect to make these capital expenditures for the acquisition of transportation equipment, to support our new and existing value-added service operations, and for improvements to our existing terminal yard and container facilities. As equipment manufacturers identify and implement solutions enabling them to overcome supply-side constraints, we would expect to return to a normalized level of capital expenditures in future periods.
We have a cash dividend policy that anticipates a regular dividend of $0.42 per share of common stock, payable in quarterly increments of $0.105 per share of common stock. After considering the regular quarterly dividends made during the year, the Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year. The Board of Directors did not declare a special dividend in the first quarter of 2023. On April 27, 2023, our Board of Directors did declare the regular quarterly cash dividend of $0.105 per share of common stock payable July 3, 2023 to shareholders of record at the close of business on June 5, 2023. During the year ended December 31, 2022, we paid a total of $0.42 per common share, or $11.1 million. Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.
We expect that our cash flow from operations, working capital and available borrowings will be sufficient to meet our capital commitments, to fund our operational needs for at least the next twelve months, and to fund mandatory debt repayments. Based on the availability of borrowings under our credit facilities, against our marketable security portfolio 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. Depending on prospective consideration to be paid for an acquisition, any such opportunities would be financed first from available cash and cash equivalents and availability of borrowings under our credit facilities.
Revolving Credit, Promissory Notes and Term Loan Agreements
Our revolving credit facility (the “Revolving Credit Facility”) provides for a $400 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027. The Revolving Credit Facility, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring minimum fixed charge coverage and leverage ratios, and customary mandatory prepayments provisions. Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request. At April 1, 2023, we were in compliance with all its covenants, and $400.0 million was available for borrowing.
Our UACL Credit and Security Agreement (the “UACL Credit Agreement”) provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027. The UACL Credit Agreement, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring minimum fixed charge coverage and leverage ratios, and customary mandatory prepayments provisions. Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request. At April 1, 2023, we were in compliance with all its covenants, and $10.0 million was available for borrowing.
22
A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment (the “Equipment Financing”). The notes issued in connection with the Equipment Financing, which are secured by liens on specific titled vehicles, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 7.27%.
Certain wholly owned subsidiaries entered into a $165.4 million term loan facility to repay outstanding balances under a then-existing term loan and certain other real estate notes (the “Real Estate Facility”). The Real Estate Facility matures on April 29, 2032 and is secured by first-priority mortgages on specific parcels of real estate owned by the Company, including all land and real property improvements, and first-priority assignments of rents and related leases of the loan parties. The Real Estate Facility includes customary affirmative and negative covenants, and principal and interest is payable on the facility on a monthly basis, based on an annual amortization of 10%. The facility bears interest at Term SOFR, plus an applicable margin equal to 2.12%. At April 1, 2023, we were in compliance with all covenants under the facility.
We also maintain a short-term line of credit secured by our portfolio of marketable securities (the “Margin Facility”). It bears interest at Term SOFR plus 1.10%. The amount available under the Margin Facility is based on a percentage of the market value of the underlying securities. We did not have any amounts advanced against the line as of April 1, 2023, and the maximum available borrowings were $5.2 million.
Discussion of Cash Flows
At April 1, 2023, we had cash and cash equivalents of $76.8 million compared to $47.2 million at December 31, 2022. Operating activities provided $64.5 million in net cash, and we used $29.7 million in investing activities and $3.7 million in financing activities.
The $64.5 million in net cash provided by operations was primarily attributed to $24.9 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, losses on marketable equity securities, gains on equipment sales, amortization of debt issuance costs, stock-based compensation, and provisions for credit losses totaling $27.7 million, net. Net cash provided by operating activities also reflects an aggregate decrease in net working capital totaling $11.9 million. The primary drivers behind the decrease in working capital were decreases in trade accounts receivable and in prepaid expenses and other assets, and increases in accrued expenses and other current liabilities, accruals for insurance and claims, and in income taxes payable. These were partially offset by principal reductions in operating lease liabilities during the period, an increase in other receivables and decreases in trade accounts payable and other long-term liabilities. Affiliate transactions decreased net cash provided by operating activities by $3.1 million primarily resulting from an decrease in accounts payable to affiliates.
The $29.7 million in net cash used in investing activities consisted of $31.3 million in capital expenditures, which was partially offset by $1.6 million in proceeds from the sale of equipment.
We used $3.7 million in financing activities during the thirteen weeks ended April 1, 2023. We had outstanding borrowings totaling $381.9 million at April 1, 2023 compared to $382.9 million at December 31, 2022. During the period, we made payments on our term loan and equipment and real estate notes totaling $16.9 million, and we borrowed $15.9 million for new equipment. During the period, we also paid cash dividends of $2.8 million.
Off Balance Sheet Arrangements
None.
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, 2022. There have been no changes in our accounting policies during the thirteen weeks ended April 1, 2023.
Seasonality
Generally, demand for our value-added services delivered to existing customers increases during the second calendar quarter of each year as a result of the automotive industry’s spring selling season. Conversely, such demand generally decreases during the third quarter of each year due to the impact of scheduled OEM customer plant shutdowns in July for vacations and changeovers in production lines for new model years.
Our value-added services business is also impacted in the fourth quarter by plant shutdowns during the December holiday period. Prolonged adverse weather conditions, particularly in winter months, can also adversely impact margins due to productivity declines and related challenges meeting customer service requirements.
Additionally, our transportation services business, excluding dedicated transportation tied to specific customer supply chains, is generally impacted by decreased activity during the post-holiday winter season and, in certain states during hurricane season, because some shippers reduce their shipments and inclement weather impedes trucking operations or underlying customer demand.
23
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have not been any material changes to the Company’s market risk during the thirteen weeks ended April 1, 2023. For additional information, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of 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 paragraph (b) of Rule 13a-15 or 15d-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 April 1, 2023, 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 (i) 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 and (ii) to be accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Controls
There have been no changes in our internal controls over financial reporting during the thirteen weeks ended April 1, 2023 identified in connection with our evaluation that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
24
PART II – OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 14 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report.
ITEM 1A: RISK FACTORS
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, 2022.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5: OTHER INFORMATION
None.
25
ITEM 6: EXHIBITS
The exhibits listed on the Exhibit Index are furnished as part of this quarterly report on Form 10-Q.
Exhibit |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3(i)-1 and 3(i)-2 to the Registrant’s Current Report on Form 8-K filed on November 1, 2012) |
|
|
|
3.3 |
|
|
|
|
|
3.4 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1** |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document |
|
|
|
101.SCH* |
|
Inline XBRL Schema Document |
|
|
|
101.CAL* |
|
Inline XBRL Calculation Linkbase Document |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB* |
|
Inline XBRL Labels Linkbase Document |
|
|
|
101.PRE* |
|
Inline XBRL Presentation Linkbase Document |
|
|
|
104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
** Furnished herewith.
26
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 Logistics Holdings, Inc. |
|
|
|
|
|
|
(Registrant) |
|
|
|
|
|||
Date: May 11, 2023 |
|
|
|
By: |
|
/s/ Tim Phillips |
|
|
|
|
|
|
Tim Phillips Chief Executive Officer |
|
|
|
|
|||
Date: May 11, 2023 |
|
|
|
By: |
|
/s/ Jude Beres |
|
|
|
|
|
|
Jude Beres Chief Financial Officer |
27
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Tim Phillips, certify that:
Date: May 11, 2023
|
/s/ Tim Phillips |
|
Tim Phillips |
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Jude Beres, certify that:
Date: May 11, 2023
|
/s/ Jude Beres |
|
Jude Beres |
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report, or the Report, of Universal Logistics Holdings, Inc., or the Company, on Form 10-Q for the period ended April 1, 2023, as filed with the Securities and Exchange Commission on the date hereof, each of the undersigned, Tim Phillips, as Chief Executive Officer of the Company, and Jude Beres, as Chief Financial Officer of the Company, each certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, respectively, that (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 11, 2023
|
/s/ Tim Phillips |
|
Tim Phillips |
|
Chief Executive Officer |
|
|
|
/s/ Jude Beres |
|
Jude Beres |
|
Chief Financial Officer |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.