10-Q 1 ulh-20240330.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

For the quarterly period ended March 30, 2024

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: 0-51142

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Michigan

38-3640097

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

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)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

ULH

The NASDAQ Stock Market LLC

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 No

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). Yes No

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

 

Accelerated filer

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

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 6, 2024, was 26,317,326.

 


 

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

March 30,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,124

 

 

$

12,511

 

Marketable securities

 

 

11,762

 

 

 

10,772

 

Accounts receivable – net of allowance for credit losses of $9,803
   and $
11,229, respectively

 

 

280,604

 

 

 

287,946

 

Contract assets

 

 

11,451

 

 

 

729

 

Other receivables

 

 

27,109

 

 

 

22,633

 

Prepaid expenses and other

 

 

23,932

 

 

 

30,171

 

Due from affiliates

 

 

1,143

 

 

 

710

 

Total current assets

 

 

367,125

 

 

 

365,472

 

Property and equipment – net of accumulated depreciation of $382,583 and
   $
370,273, respectively

 

 

613,642

 

 

 

561,089

 

Operating lease right-of-use asset

 

 

82,687

 

 

 

87,208

 

Goodwill

 

 

170,730

 

 

 

170,730

 

Intangible assets – net of accumulated amortization of $139,312 and $134,514, respectively

 

 

56,497

 

 

 

61,296

 

Contract assets, net of current portion

 

 

85,790

 

 

 

 

Deferred income taxes

 

 

1,225

 

 

 

1,225

 

Other assets

 

 

6,905

 

 

 

6,503

 

Total assets

 

$

1,384,601

 

 

$

1,253,523

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

73,947

 

 

$

64,102

 

Current portion of long-term debt

 

 

73,461

 

 

 

70,689

 

Current portion of operating lease liabilities

 

 

23,373

 

 

 

29,998

 

Accrued expenses and other current liabilities

 

 

64,317

 

 

 

43,062

 

Insurance and claims

 

 

29,433

 

 

 

25,464

 

Due to affiliates

 

 

23,314

 

 

 

20,737

 

Income taxes payable

 

 

12,757

 

 

 

6,364

 

Total current liabilities

 

 

300,602

 

 

 

260,416

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

340,647

 

 

 

311,235

 

Operating lease liabilities, net of current portion

 

 

65,635

 

 

 

63,620

 

Deferred income taxes

 

 

90,846

 

 

 

79,567

 

Other long-term liabilities

 

 

2,925

 

 

 

6,487

 

Total long-term liabilities

 

 

500,053

 

 

 

460,909

 

Shareholders' equity:

 

 

 

 

 

 

Common stock, no par value. Authorized 100,000,000 shares; 26,317,738 and
 
31,007,100 shares issued; 26,317,738 and 26,284,223 shares outstanding,
   respectively

 

 

26,318

 

 

 

31,008

 

Paid-in capital

 

 

4,939

 

 

 

5,103

 

Treasury stock, at cost; 0 and 4,722,877 shares

 

 

 

 

 

(96,840

)

Retained earnings

 

 

553,859

 

 

 

595,450

 

Accumulated other comprehensive (loss):

 

 

 

 

 

 

Interest rate swaps, net of income taxes of $659 and $457, respectively

 

 

1,957

 

 

 

1,350

 

Foreign currency translation adjustments

 

 

(3,127

)

 

 

(3,873

)

Total shareholders’ equity

 

 

583,946

 

 

 

532,198

 

Total liabilities and shareholders’ equity

 

$

1,384,601

 

 

$

1,253,523

 

See accompanying notes to consolidated financial statements.

2


 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

Thirteen Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

Operating revenues:

 

 

 

 

 

 

Truckload services

 

$

42,030

 

 

$

46,401

 

Brokerage services

 

 

59,614

 

 

 

68,673

 

Intermodal services

 

 

76,715

 

 

 

111,026

 

Dedicated services

 

 

88,316

 

 

 

85,232

 

Value-added services

 

 

225,232

 

 

 

126,064

 

Total operating revenues

 

 

491,907

 

 

 

437,396

 

Operating expenses:

 

 

 

 

 

 

Purchased transportation and equipment rent

 

 

124,633

 

 

 

156,085

 

Direct personnel and related benefits

 

 

140,805

 

 

 

139,092

 

Operating supplies and expenses

 

 

92,824

 

 

 

46,189

 

Commission expense

 

 

6,610

 

 

 

8,172

 

Occupancy expense

 

 

10,568

 

 

 

11,152

 

General and administrative

 

 

13,507

 

 

 

11,916

 

Insurance and claims

 

 

7,167

 

 

 

8,079

 

Depreciation and amortization

 

 

20,701

 

 

 

18,515

 

Total operating expenses

 

 

416,815

 

 

 

399,200

 

Income from operations

 

 

75,092

 

 

 

38,196

 

Interest income

 

 

218

 

 

 

752

 

Interest expense

 

 

(6,297

)

 

 

(5,727

)

Other non-operating income

 

 

1,104

 

 

 

15

 

Income before income taxes

 

 

70,117

 

 

 

33,236

 

Income tax expense

 

 

17,660

 

 

 

8,360

 

Net income

 

$

52,457

 

 

$

24,876

 

Earnings per common share:

 

 

 

 

 

 

Basic

 

$

1.99

 

 

$

0.95

 

Diluted

 

$

1.99

 

 

$

0.95

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

Basic

 

 

26,307

 

 

 

26,281

 

Diluted

 

 

26,328

 

 

 

26,314

 

Dividends declared per common share

 

$

0.105

 

 

$

0.105

 

 

See accompanying notes to consolidated financial statements.

 

3


 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

Thirteen Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

Net Income

 

$

52,457

 

 

$

24,876

 

Other comprehensive income (loss):

 

 

 

 

 

 

Unrealized changes in fair value of interest rate swaps, net of income taxes of
   $
202 and $(277), respectively

 

 

607

 

 

 

(820

)

Foreign currency translation adjustments

 

 

746

 

 

 

(89

)

Total other comprehensive income (loss)

 

 

1,353

 

 

 

(909

)

Total comprehensive income

 

$

53,810

 

 

$

23,967

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

4


 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

Thirteen Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

52,457

 

 

$

24,876

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

20,701

 

 

 

18,515

 

Noncash lease expense

 

 

7,510

 

 

 

7,593

 

Loss (gain) on marketable equity securities

 

 

(990

)

 

 

13

 

Gain on disposal of property and equipment

 

 

(85

)

 

 

(902

)

Amortization of debt issuance costs

 

 

241

 

 

 

189

 

Stock-based compensation

 

 

700

 

 

 

161

 

Provision for credit losses

 

 

(819

)

 

 

2,130

 

Deferred income taxes

 

 

11,279

 

 

 

 

Change in assets and liabilities:

 

 

 

 

 

 

Trade and other accounts receivable

 

 

3,578

 

 

 

12,840

 

Prepaid expenses and other assets

 

 

(89,883

)

 

 

(725

)

Principal reduction in operating lease liabilities

 

 

(7,703

)

 

 

(7,435

)

Accounts payable, accrued expenses, income taxes payable,
   insurance and claims and other current liabilities

 

 

41,313

 

 

 

15,377

 

Due to/from affiliates, net

 

 

2,143

 

 

 

(3,086

)

Other long-term liabilities

 

 

(3,561

)

 

 

(5,065

)

Net cash provided by operating activities

 

 

36,881

 

 

 

64,481

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(68,572

)

 

 

(31,336

)

Proceeds from the sale of property and equipment

 

 

202

 

 

 

1,588

 

Net cash used in investing activities

 

 

(68,370

)

 

 

(29,748

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from borrowing - revolving debt

 

 

114,785

 

 

 

 

Repayments of debt - revolving debt

 

 

(98,945

)

 

 

 

Proceeds from borrowing - term debt

 

 

47,091

 

 

 

15,949

 

Repayments of debt - term debt

 

 

(30,989

)

 

 

(16,914

)

Dividends paid

 

 

(2,762

)

 

 

(2,759

)

Net cash provided by (used in) financing activities

 

 

29,180

 

 

 

(3,724

)

Effect of exchange rate changes on cash and cash equivalents

 

 

922

 

 

 

(1,415

)

Net increase (decrease) in cash

 

 

(1,387

)

 

 

29,594

 

Cash and cash equivalents – beginning of period

 

 

12,511

 

 

 

47,181

 

Cash and cash equivalents – end of period

 

$

11,124

 

 

$

76,775

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

6,108

 

 

$

5,479

 

Cash paid for income taxes

 

$

159

 

 

$

1,477

 

 

See accompanying notes to consolidated financial statements.

5


 

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Shareholders’ Equity

(In thousands, except per share data)

 

 

Common
stock

 

 

Paid-in
capital

 

 

Treasury
stock

 

 

Retained
earnings

 

 

Accumulated
other
comprehensive
income (loss)

 

 

Total

 

Balances – December 31, 2022

 

$

30,997

 

 

$

4,852

 

 

$

(96,706

)

 

$

513,589

 

 

$

(5,802

)

 

$

446,930

 

Net income

 

 

 

 

 

 

 

 

 

 

 

24,876

 

 

 

 

 

 

24,876

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(909

)

 

 

(909

)

Dividends ($0.105 per share)

 

 

 

 

 

 

 

 

 

 

 

(2,759

)

 

 

 

 

 

(2,759

)

Stock based compensation

 

 

6

 

 

 

155

 

 

 

 

 

 

 

 

 

 

 

 

161

 

Balances – April 1, 2023

 

$

31,003

 

 

$

5,007

 

 

$

(96,706

)

 

$

535,706

 

 

$

(6,711

)

 

$

468,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances – December 31, 2023

 

$

31,008

 

 

$

5,103

 

 

$

(96,840

)

 

$

595,450

 

 

$

(2,523

)

 

$

532,198

 

Net income

 

 

 

 

 

 

 

 

 

 

 

52,457

 

 

 

 

 

 

52,457

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,353

 

 

 

1,353

 

Dividends ($0.105 per share)

 

 

 

 

 

 

 

 

 

 

 

(2,762

)

 

 

 

 

 

(2,762

)

Stock based compensation

 

 

33

 

 

 

667

 

 

 

 

 

 

 

 

 

 

 

 

700

 

Retirement of treasury stock

 

 

(4,723

)

 

 

(831

)

 

 

96,840

 

 

 

(91,286

)

 

 

 

 

 

 

Balances – March 30, 2024

 

$

26,318

 

 

$

4,939

 

 

$

-

 

 

$

553,859

 

 

$

(1,170

)

 

$

583,946

 

 

See accompanying notes to consolidated financial statements.

 

 

6


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

(1)
Basis of Presentation

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, 2023 and 2022 and for each of the years in the three-year period ended December 31, 2023 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.

The Company made certain immaterial reclassifications to items in its prior financial statements so that their presentation is consistent with the format in the financial statements for the period ended March 30, 2024. These reclassifications, however, had no effect on reported consolidated net income, comprehensive income, earnings per common share, cash flows, total assets or shareholders’ equity as previously reported.

In January 2024, the Company’s value-added business began performing specialty project development services for certain customers. Contract assets represent amounts for which the Company has recognized revenue in excess of billings pursuant to the revenue recognition guidance. As of March 30, 2024 and December 31, 2023, contract assets associated with certain contracts with customers recognized over time are included as contract assets in the Company’s consolidated balance sheets. Contract assets associated with other contracts with customers were reclassified from prepaid expenses and other on the consolidated balance sheets to contract assets.

During the first quarter of 2024, the Company identified certain triggering events related to a component of the intermodal reporting segment. In accordance with FASB Accounting Standards Codification (“ASC”) 350 Intangibles—Goodwill and Other and ASC 360 Property, Plant, and Equipment, the Company evaluated certain indefinite and long lived tangible and intangible assets for impairment. The results of those procedures concluded that no impairments were present. After performing the evaluation, it was determined that a change in the estimated useful lives of certain definite lived intangible assets was appropriate and was adjusted during the period. The change resulted in additional amortization expense of $2.2 million recorded during the quarter ended March 30, 2024 ($1.7 million net of tax, or $0.06 per basic and diluted share).

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.

(2)
Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). The ASU expands disclosures related to a public entity's reportable segment and requires more enhanced information about significant segment expenses, including in interim periods. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, using a retrospective approach. Early adoption is permitted. We are currently evaluating the impact of the new standard, which is limited to financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU modifies income tax disclosures by requiring greater disaggregation of information in the rate reconciliations and disclosure of income taxes paid disaggregated by jurisdiction. This ASU is effective for fiscal years beginning after December 31, 2024, using a prospective approach. Early adoption and retrospective application are permitted. We are currently evaluating the impact of the new standard, which is limited to financial statement disclosures.

7


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(3)
Revenue Recognition

The Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers. The Company broadly groups its services into the following categories: truckload services, brokerage services, intermodal services, dedicated services and value-added services. 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 one year or less. They do not contain significant financing components. The Company recognizes revenue over the period transportation services are provided to the customer, including service performed as of the end of the reporting period for loads currently in-transit, in order to recognize the value that is transferred to a customer over the course of the transportation service.

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.

Value-added services, which are typically dedicated to individual customer requirements, include material handling, consolidation, sequencing, sub-assembly, cross-dock services, kitting, repacking, warehousing, returnable container management and specialty project development. Value-added revenues are substantially driven by the level of demand for outsourced logistics services and speciality project needs. 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. For the majority of our programs, 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 typically do not include financing components.

Beginning in 2024, value-added services also includes specialty project development services for customers. The specialty project development service is generally accounted for as a single unit of account (i.e., as a single performance obligation). Revenue is recognized over time as the Company continuously transfers control of the project to the customer. Because we transfer control of the project over time, we recognize revenue to the extent of our progress towards completion of our performance obligations. We generally use the cost-to-cost method for these contracts, which measures progress towards completion for each performance obligation based on the ratio of costs incurred to date to the total estimated costs at completion for the applicable performance obligation. Incurred cost represents work performed, which corresponds with and thereby best represents the transfer of control to the customer. Revenue, including estimated fees or profits, is recorded proportionately as costs are incurred. Cost of operations consists of labor, materials, subcontractor costs, and other direct and indirect costs, and we include them in operating supplies and expenses on the consolidated statements of income. Due to the nature of the work we are required to perform under these types of contracts, estimating total revenue and cost at completion is complex, subject to many variables and requires significant judgment. Changes to the total estimated contract revenue or cost for a given project, either due to unexpected events or revisions to management’s initial estimates, are recognized in the period in which they are determined.

8


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(3)
Revenue Recognition – continued

The following table provides information related to contract balances associated with our contracts with customers (in thousands):

 

 

March 30,
2024

 

 

December 31,
2023

 

Contract assets

 

$

11,451

 

 

$

729

 

Contract assets, net of current portion

 

 

85,790

 

 

 

 

Total

 

$

97,241

 

 

$

729

 

We generally receive payment for performance obligations within 45 days of completion of transportation services and 65 days for completion of value-added services. As it relates to our specialty development project, we will receive payments in 120 equal monthly installments commencing the month following substantial completion of the project. Contract assets in the table above generally relates to revenue recognized in excess of billings for its specialty development project, as well as revenue in-transit at the end of the reporting period.

(4)
Marketable Securities

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):

 

 

March 30,
2024

 

 

December 31,
2023

 

Fair value

 

$

11,762

 

 

$

10,772

 

Cost basis

 

 

7,316

 

 

 

7,316

 

Unrealized gain

 

$

4,446

 

 

$

3,456

 

 

 

 

 

 

 

 

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities (in thousands):

 

 

March 30,
2024

 

 

December 31,
2023

 

Gross unrealized gains

 

$

5,074

 

 

$

4,124

 

Gross unrealized losses

 

 

(628

)

 

 

(668

)

Net unrealized gains

 

$

4,446

 

 

$

3,456

 

 

 

 

 

 

 

 

The Company did not sell marketable equity securities during either of the thirteen-week week periods ended March 30, 2024 or April 1, 2023.

During the thirteen-week week periods ended March 30, 2024 and April 1, 2023, our marketable equity securities portfolio experienced a net unrealized pre-tax gain (loss) in market value of approximately $990,000 and $(13,000), respectively, which was reported in other non-operating income for the period.

(5)
Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following (in thousands):

 

 

 

March 30,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Accrued payroll

 

$

18,234

 

 

$

18,047

 

Accrued payroll taxes

 

 

5,906

 

 

 

3,149

 

Accrued contract costs

 

 

17,160

 

 

 

 

Driver escrow liabilities

 

 

3,081

 

 

 

3,275

 

Legal settlements and claims

 

 

4,050

 

 

 

4,050

 

Commissions, other taxes and other

 

 

15,886

 

 

 

14,541

 

Total

 

$

64,317

 

 

$

43,062

 

 

9


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(6)
Debt

Debt is comprised of the following (in thousands):

 

 

 

Interest Rates
at March 30, 2024

 

March 30,
2024

 

 

December 31,
2023

 

Outstanding Debt:

 

 

 

 

 

 

 

 

Revolving Credit Facility (1) (2)

 

6.92%

 

$

37,774

 

 

$

21,934

 

UACL Credit Agreement (2)

 

 

 

 

 

 

 

 

Term Loan

 

7.17%

 

 

55,500

 

 

 

69,000

 

Revolver

 

7.17%

 

 

 

 

 

 

Equipment Financing (3)

 

2.25% to 7.27%

 

 

190,077

 

 

 

156,341

 

Real Estate Facility (4)

 

7.44%

 

 

135,036

 

 

 

139,170

 

Margin Facility (5)

 

6.42%

 

 

 

 

 

 

Unamortized debt issuance costs

 

 

 

 

(4,279

)

 

 

(4,521

)

 

 

 

 

 

414,108

 

 

 

381,924

 

Less current portion of long-term debt

 

 

 

 

73,461

 

 

 

70,689

 

Total long-term debt, net of current portion

 

 

 

$

340,647

 

 

$

311,235

 

(1) Our Revolving Credit Facility provides us with a revolving credit commitment of up to $400 million. We may borrow under the Revolving Credit Facility until maturity on September 30, 2027, and this indebtedness bears interest at index-adjusted SOFR, or a base rate, plus an applicable margin based on the Company’s leverage ratio. The Revolving Credit Facility is secured by a first-priority pledge of the capital stock of applicable subsidiaries, as well as first-priority perfected security interests in cash, deposits, accounts receivable, and selected other assets of the applicable borrowers. The Revolving Credit Facility 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. At March 30, 2024, we were in compliance with all covenants under the facility, and $362.2 million was available for borrowing on the revolver.

(2) Our UACL Credit Agreement provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver. The term loan matures on September 30, 2027 and is repaid in consecutive quarterly installments. The remaining term loan balance is due at maturity. We may borrow under the revolving credit facility until maturity on September 30, 2027. Borrowings bear interest at index-adjusted SOFR, or a base rate, plus an applicable margin based on the borrowers’ leverage ratio. The UACL Credit Agreement is secured by a first-priority pledge of the capital stock of applicable subsidiaries, as well as first-priority perfected security interest in cash, deposits, accounts receivable, and selected other assets of the applicable borrowers. The UACL Credit Agreement 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. At March 30, 2024, we were in compliance with all covenants under the facility, and $10.0 million was available for borrowing on the revolver.

(3) Our Equipment Financing consists of a series of promissory notes issued by a wholly owned subsidiary. The equipment notes, 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%.

(4) Our Real Estate Facility facilitated a $165.4 million term loan, and the facility matures on April 29, 2032. Obligations under the facility are 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 credit agreement includes customary affirmative and negative covenants, and principal and interest are 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 March 30, 2024, we were in compliance with all covenants under the facility.

10


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(6)
Debt – continued

(5) Our Margin Facility is a short-term line of credit secured by our portfolio of marketable securities. It bears interest at Term SOFR plus 1.10%. The amount available under the line of credit is based on a percentage of the market value of the underlying securities. At March 30, 2024, the maximum available borrowings under the line of credit were $5.7 million.

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 2.88%. The swap agreement has an effective date of April 29, 2022, a maturity date of April 30, 2027, and an amortizing notional amount of $80.8 million. At March 30, 2024, the fair value of the swap agreement was an asset of $2.6 million. Since the swap agreement qualifies for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. See Note 7 for additional information pertaining to interest rate swaps.

(7)
Fair Value Measurements and Disclosures

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:

Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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):

 

 

March 30,
2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

21

 

 

$

 

 

$

 

 

$

21

 

Marketable securities

 

 

11,762

 

 

 

 

 

 

 

 

 

11,762

 

Interest rate swap

 

 

 

 

 

2,616

 

 

 

 

 

 

2,616

 

Total

 

$

11,783

 

 

$

2,616

 

 

$

 

 

$

14,399

 

 

 

 

December 31,
2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

168

 

 

$

 

 

$

 

 

$

168

 

Marketable securities

 

 

10,772

 

 

 

 

 

 

 

 

 

10,772

 

Interest rate swap

 

 

 

 

 

1,807

 

 

 

 

 

 

1,807

 

Total

 

$

10,940

 

 

$

1,807

 

 

$

 

 

$

12,747

 

 

11


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(7)
Fair Value Measurements and Disclosures – continued

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

Cash equivalents – This category consists of money market funds which are listed as Level 1 assets and measured at fair value based on quoted prices for identical instruments in active markets.
Marketable securities – Marketable securities represent equity securities, which consist of common and preferred stocks, are actively traded on public exchanges and are listed as Level 1 assets. Fair value was measured based on quoted prices for these securities in active markets.
Interest rate swap – The fair value of our interest rate swap is determined using a methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash receipts (or payments) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. The fair value measurement also incorporates credit valuation adjustments to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk.

Our Revolving Credit Facility, UACL Credit Agreement and Real Estate Facility consist of variable rate borrowings. We categorize borrowings under these credit agreements 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. The carrying value and estimated fair value of these promissory notes at March 30, 2024 is summarized as follows:

 

 

Carrying Value

 

 

Estimated Fair
Value

 

Equipment promissory notes

 

$

190,077

 

 

$

186,944

 

 

We have not elected the fair value option for any of our financial instruments.

(8)
Leases

As of March 30, 2024, our obligations under operating lease arrangements primarily related to the rental of office space, warehouses, freight distribution centers, terminal yards and equipment. 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. These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using our incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable.

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 March 30, 2024, 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.

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. 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.

12


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(8)
Leases – continued

The following table summarizes our lease costs for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):

 

 

Thirteen Weeks Ended March 30, 2024

 

 

 

With Affiliates

 

 

With Third Parties

 

 

Total

 

Lease cost

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

2,426

 

 

$

6,375

 

 

$

8,801

 

Short-term lease cost

 

 

17

 

 

 

2,735

 

 

 

2,752

 

Variable lease cost

 

 

242

 

 

 

1,207

 

 

 

1,449

 

Sublease income

 

 

 

 

 

 

 

 

 

Total lease cost

 

$

2,685

 

 

$

10,317

 

 

$

13,002

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended April 1, 2023

 

 

 

With Affiliates

 

 

With Third Parties

 

 

Total

 

Lease cost

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

2,411

 

 

$

6,619

 

 

$

9,030

 

Short-term lease cost

 

 

7

 

 

 

4,029

 

 

 

4,036

 

Variable lease cost

 

 

199

 

 

 

599

 

 

 

798

 

Sublease income

 

 

 

 

 

 

 

 

 

Total lease cost

 

$

2,617

 

 

$

11,247

 

 

$

13,864

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes other lease related information as of and for the thirteen week periods ended March 30, 2024 and April 1, 2023 (in thousands):

 

 

Thirteen Weeks Ended March 30, 2024

 

 

 

With
Affiliates

 

 

With Third
Parties

 

 

Total

 

Other information

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of operating leases

 

$

2,439

 

 

$

6,545

 

 

$

8,984

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

2,271

 

 

$

343

 

 

$

2,614

 

Weighted-average remaining lease term (in years)

 

 

4.3

 

 

 

3.0

 

 

 

3.4

 

Weighted-average discount rate

 

 

7.7

%

 

 

5.5

%

 

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

April 1, 2023

 

 

 

With
Affiliates

 

 

With Third
Parties

 

 

Total

 

Other information

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of operating leases

 

$

2,382

 

 

$

6,499

 

 

$

8,881

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

 

 

$

12,188

 

 

$

12,188

 

Right-of-use asset change due to lease termination

 

$

(64

)

 

$

 

 

$

(64

)

Weighted-average remaining lease term (in years)

 

 

4.7

 

 

 

3.8

 

 

 

4.1

 

Weighted-average discount rate

 

 

7.1

%

 

 

5.2

%

 

 

5.8

%

 

13


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(8)
Leases – continued

Future minimum lease payments under these operating leases as of March 30, 2024, are as follows (in thousands):

 

 

With Affiliates

 

 

With Third Parties

 

 

Total

 

2024 (remaining)

 

$

7,183

 

 

$

19,188

 

 

$

26,371

 

2025

 

 

8,013

 

 

 

21,088

 

 

 

29,101

 

2026

 

 

5,481

 

 

 

17,201

 

 

 

22,682

 

2027

 

 

4,375

 

 

 

8,158

 

 

 

12,533

 

2028

 

 

4,189

 

 

 

1,333

 

 

 

5,522

 

Thereafter

 

 

3,672

 

 

 

 

 

 

3,672

 

Total required lease payments

 

$

32,913

 

 

$

66,968

 

 

$

99,881

 

Less amounts representing interest

 

 

 

 

 

 

 

 

(10,873

)

Present value of lease liabilities

 

 

 

 

 

 

 

$

89,008

 

 

 

 

 

 

 

 

 

 

 

 

(9)
Transactions with Affiliates

Matthew T. Moroun is Chair of our Board of Directors and his son, Matthew J. Moroun, is a member of our Board of Directors. Certain Moroun family trusts beneficially own a majority of our outstanding shares. Matthew T. Moroun is trustee of these trusts with investment authority over the shares, and Frederick P. Calderone, a member of our Board of Directors, is special trustee of these trusts with voting authority over the shares. The Moroun family also owns or significantly influences the management and operating policies of other businesses engaged in transportation, insurance, business services, and real estate development and management. In the ordinary course of business, we procure from these companies certain supplementary administrative support services, including legal, human resources, tax, and IT infrastructure services. The Audit Committee of our Board of Directors reviews and approves related party transactions. The cost of these services is based on the actual or estimated utilization of the specific service.

We also purchase other services from our affiliates. Following is a schedule of cost incurred and included in operating expenses for services provided by affiliates for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):

 

 

Thirteen Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

 

 

 

 

 

 

 

Insurance

 

$

21,421

 

 

$

20,256

 

Real estate rent and related costs

 

 

3,508

 

 

 

3,266

 

Administrative support services

 

 

1,867

 

 

 

1,605

 

Truck fuel, maintenance and other operating costs

 

 

4,341

 

 

 

1,938

 

Contracted transportation services

 

 

36

 

 

 

113

 

Total

 

$

31,173

 

 

$

27,178

 

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 29 facilities from related parties. Our occupancy is based on either month-to-month or contractual, multi-year lease arrangements that are billed and paid monthly. Leasing properties from a related party affords us significant operating flexibility; however, we are not limited to such arrangements. See Note 8, “Leases” for further information regarding the cost of leased properties.

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 March 30, 2024 and December 31, 2023, there were $16.1 million and $