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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 April 2, 2022 

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 9, 2022, was 26,441,738.

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

April 2,

2022

 

 

December 31,

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,922

 

 

$

13,932

 

Marketable securities

 

 

8,980

 

 

 

8,031

 

Accounts receivable – net of allowance for doubtful accounts of $9,117

   and $7,841, respectively

 

 

392,951

 

 

 

341,398

 

Other receivables

 

 

28,531

 

 

 

26,318

 

Prepaid expenses and other

 

 

30,775

 

 

 

30,209

 

Due from affiliates

 

 

1,593

 

 

 

807

 

Total current assets

 

 

477,752

 

 

 

420,695

 

Property and equipment – net of accumulated depreciation of $341,980 and

   $333,833, respectively

 

 

337,025

 

 

 

345,583

 

Operating lease right-of-use asset

 

 

112,400

 

 

 

105,859

 

Goodwill

 

 

170,730

 

 

 

170,730

 

Intangible assets – net of accumulated amortization of $111,026 and $107,461, respectively

 

 

84,784

 

 

 

88,349

 

Deferred income taxes

 

 

2,060

 

 

 

2,060

 

Other assets

 

 

4,411

 

 

 

4,215

 

Total assets

 

$

1,189,162

 

 

$

1,137,491

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

130,516

 

 

$

117,837

 

Current portion of long-term debt

 

 

60,470

 

 

 

61,160

 

Current portion of operating lease liabilities

 

 

26,909

 

 

 

24,566

 

Accrued expenses and other current liabilities

 

 

55,085

 

 

 

43,627

 

Insurance and claims

 

 

48,656

 

 

 

43,357

 

Due to affiliates

 

 

16,101

 

 

 

17,839

 

Income taxes payable

 

 

18,096

 

 

 

4,323

 

Total current liabilities

 

 

355,833

 

 

 

312,709

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

341,229

 

 

 

366,188

 

Operating lease liabilities, net of current portion

 

 

90,495

 

 

 

85,984

 

Deferred income taxes

 

 

61,250

 

 

 

61,250

 

Other long-term liabilities

 

 

6,641

 

 

 

9,150

 

Total long-term liabilities

 

 

499,615

 

 

 

522,572

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, no par value. Authorized 100,000,000 shares; 30,993,577 and

   30,986,702 shares issued; 26,669,069 and 26,919,455 shares outstanding,

   respectively

 

 

30,995

 

 

 

30,988

 

Paid-in capital

 

 

4,794

 

 

 

4,639

 

Treasury stock, at cost; 4,324,508 and 4,067,247 shares, respectively

 

 

(87,639

)

 

 

(82,385

)

Retained earnings

 

 

395,260

 

 

 

356,071

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

Interest rate swaps, net of income taxes of $22 and $(60), respectively

 

 

63

 

 

 

(178

)

Foreign currency translation adjustments

 

 

(9,759

)

 

 

(6,925

)

Total shareholders’ equity

 

 

333,714

 

 

 

302,210

 

Total liabilities and shareholders’ equity

 

$

1,189,162

 

 

$

1,137,491

 

 

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

 

 

 

April 2,

2022

 

 

April 3,

2021

 

Operating revenues:

 

 

 

 

 

 

 

 

Truckload services

 

$

57,483

 

 

$

59,702

 

Brokerage services

 

 

107,172

 

 

 

96,919

 

Intermodal services

 

 

157,613

 

 

 

103,716

 

Dedicated services

 

 

75,487

 

 

 

47,961

 

Value-added services

 

 

126,106

 

 

 

106,933

 

Total operating revenues

 

 

523,861

 

 

 

415,231

 

Operating expenses:

 

 

 

 

 

 

 

 

Purchased transportation and equipment rent

 

 

232,131

 

 

 

189,331

 

Direct personnel and related benefits

 

 

136,667

 

 

 

107,552

 

Operating supplies and expenses

 

 

42,124

 

 

 

37,092

 

Commission expense

 

 

10,024

 

 

 

7,324

 

Occupancy expense

 

 

10,195

 

 

 

8,180

 

General and administrative

 

 

10,063

 

 

 

9,176

 

Insurance and claims

 

 

8,581

 

 

 

6,335

 

Depreciation and amortization

 

 

16,228

 

 

 

19,085

 

Total operating expenses

 

 

466,013

 

 

 

384,075

 

Income from operations

 

 

57,848

 

 

 

31,156

 

Interest income

 

 

-

 

 

 

18

 

Interest expense

 

 

(2,433

)

 

 

(3,181

)

Other non-operating income

 

 

953

 

 

 

1,006

 

Income before income taxes

 

 

56,368

 

 

 

28,999

 

Income tax expense

 

 

14,360

 

 

 

7,344

 

Net income

 

$

42,008

 

 

$

21,655

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

1.56

 

 

$

0.80

 

Diluted

 

$

1.56

 

 

$

0.80

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

26,864

 

 

 

26,916

 

Diluted

 

 

26,865

 

 

 

26,930

 

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

 

 

 

April 2,

2022

 

 

April 3,

2021

 

Net Income

 

$

42,008

 

 

$

21,655

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized changes in fair value of interest rate swaps, net of income taxes of

   $82 and $33, respectively

 

 

241

 

 

 

133

 

Foreign currency translation adjustments

 

 

(2,834

)

 

 

1,067

 

Total other comprehensive income (loss)

 

 

(2,593

)

 

 

1,200

 

Total comprehensive income

 

$

39,415

 

 

$

22,855

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

4


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

Thirteen Weeks Ended

 

 

 

April 2,

2022

 

 

April 3,

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

42,008

 

 

$

21,655

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

16,228

 

 

 

19,085

 

Noncash lease expense

 

 

7,194

 

 

 

6,392

 

Gain on marketable equity securities

 

 

(949

)

 

 

(999

)

Gain on disposal of property and equipment

 

 

(1,079

)

 

 

(219

)

Amortization of debt issuance costs

 

 

120

 

 

 

120

 

Stock-based compensation

 

 

162

 

 

 

162

 

Provision for doubtful accounts

 

 

1,848

 

 

 

1,621

 

Deferred income taxes

 

 

(81

)

 

 

(21

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade and other accounts receivable

 

 

(55,994

)

 

 

(8,936

)

Prepaid expenses and other assets

 

 

(1,050

)

 

 

293

 

Principal reduction in operating lease liabilities

 

 

(6,501

)

 

 

(6,158

)

Accounts payable, accrued expenses and other current liabilities, insurance

   and claims, and income taxes payable

 

 

43,925

 

 

 

10,382

 

Due to/from affiliates, net

 

 

(2,524

)

 

 

185

 

Other long-term liabilities

 

 

(2,187

)

 

 

(425

)

Net cash provided by operating activities

 

 

41,120

 

 

 

43,137

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(6,047

)

 

 

(4,940

)

Proceeds from the sale of property and equipment

 

 

2,607

 

 

 

760

 

Purchases of marketable securities

 

 

 

 

 

(114

)

Proceeds from sale of marketable securities

 

 

 

 

 

117

 

Net cash used in investing activities

 

 

(3,440

)

 

 

(4,177

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowing - revolving debt

 

 

107,961

 

 

 

83,784

 

Repayments of debt - revolving debt

 

 

(122,200

)

 

 

(102,579

)

Proceeds from borrowing - term debt

 

 

4,344

 

 

 

3,035

 

Repayments of debt - term debt

 

 

(15,873

)

 

 

(15,443

)

Dividends paid

 

 

(5,646

)

 

 

(5,692

)

Purchases of treasury stock

 

 

(5,254

)

 

 

 

Net cash used in financing activities

 

 

(36,668

)

 

 

(36,895

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(22

)

 

 

(29

)

Net increase in cash

 

 

990

 

 

 

2,036

 

Cash and cash equivalents – beginning of period

 

 

13,932

 

 

 

8,763

 

Cash and cash equivalents – end of period

 

$

14,922

 

 

$

10,799

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,336

 

 

$

3,086

 

Cash paid for income taxes

 

$

602

 

 

$

9,786

 

 

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, 2020

 

$

30,981

 

 

$

4,484

 

 

$

(82,385

)

 

$

293,643

 

 

$

(7,150

)

 

$

239,573

 

Net income

 

 

 

 

 

 

 

 

 

 

 

21,655

 

 

 

 

 

 

21,655

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,200

 

 

 

1,200

 

Dividends paid ($0.105 per share)

 

 

 

 

 

 

 

 

 

 

 

(2,824

)

 

 

 

 

 

(2,824

)

Stock based compensation

 

 

7

 

 

 

155

 

 

 

 

 

 

 

 

 

 

 

 

162

 

Balances – April 3, 2021

 

$

30,988

 

 

$

4,639

 

 

$

(82,385

)

 

$

312,474

 

 

$

(5,950

)

 

$

259,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances – December 31, 2021

 

$

30,988

 

 

$

4,639

 

 

$

(82,385

)

 

$

356,071

 

 

$

(7,103

)

 

$

302,210

 

Net income

 

 

 

 

 

 

 

 

 

 

 

42,008

 

 

 

 

 

 

42,008

 

Comprehensive (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,593

)

 

 

(2,593

)

Dividends paid ($0.105 per share)

 

 

 

 

 

 

 

 

 

 

 

(2,819

)

 

 

 

 

 

(2,819

)

Purchases of treasury stock

 

 

 

 

 

 

 

 

(5,254

)

 

 

 

 

 

 

 

 

(5,254

)

Stock based compensation

 

 

7

 

 

 

155

 

 

 

 

 

 

 

 

 

 

 

 

162

 

Balances – April 2, 2022

 

$

30,995

 

 

$

4,794

 

 

$

(87,639

)

 

$

395,260

 

 

$

(9,696

)

 

$

333,714

 

 

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, 2021 and 2020 and for each of the years in the three-year period ended December 31, 2021 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.

COVID-19

In March of 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a pandemic.  The Company remains committed to doing its part to protect its employees, customers, vendors and the general public from the spread of COVID-19. We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.

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 impacts of the COVID-19 pandemic.  

Although we estimate COVID-19 had the largest impact on our business during the second quarter 2020, we are unable to predict with any certainty the future impact COVID-19 may have on our operational and financial performance.  The Company will continue to monitor these conditions in future periods as new information becomes available and will update its analyses accordingly.  

 

(2)

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”  The ASU was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The Company has evaluated the provisions of this standard and determined that it is applicable to our primary term loan and revolving credit facility, real estate promissory notes and investment margin credit facility. The London Interbank Offered Rate (“LIBOR”) is the basis for interest charges on outstanding borrowings for both our line of credit and investment margin account. The scheduled discontinuation of LIBOR is not expected to materially alter any provisions of either of these debt instruments, except for the identification of a replacement reference rate. The Company has evaluated the new guidance and does not expect it to have a material impact on its financial condition, results of operations, or cash flows.

In June 2016, the FASB issued ASU 2016-13 (“ASU 2016-13”), Accounting for Credit Losses (Topic 326). ASU 2016-13 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 new standard will become effective for us beginning with the first quarter 2023. The Company is evaluating the new guidance, but does not expect it to have a material impact on our consolidated financial statements.

7


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(3)

Revenue Recognition

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 Universal’s 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. Truckload services also include our final mile and ground expedited services.  

To complement our available capacity, we provide customers 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 and drayage services.

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 less than one year. 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 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):

 

 

 

April 2,

2022

 

 

December 31,

2021

 

Prepaid expenses and other - contract assets

 

$

2,737

 

 

$

2,023

 

 

We generally receive payment for performance obligations within 45 days of completion of transportation services and 65 days for completion of value-added services. Contract assets in the table above generally relate to revenue in-transit at the end of the reporting period. 

 

 

8


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

 

(4)

Marketable Securities

 

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):

 

 

 

April 2,

2022

 

 

December 31,

2021

 

Fair value

 

$

8,980

 

 

$

8,031

 

Cost basis

 

 

6,426

 

 

 

6,426

 

Unrealized gain

 

$

2,554

 

 

$

1,605

 

 

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

 

 

 

April 2,

2022

 

 

December 31,

2021

 

Gross unrealized gains

 

$

3,268

 

 

$

2,574

 

Gross unrealized losses

 

 

(714

)

 

 

(969

)

Net unrealized gains

 

$

2,554

 

 

$

1,605

 

 

The following table shows the Company’s net realized gains on marketable equity securities (in thousands):

 

 

 

Thirteen weeks ended

 

 

 

April 2,

2022

 

 

April 3,

2021

 

Realized gain:

 

 

 

 

 

 

 

 

Sale proceeds

 

$

 

 

$

117

 

Cost basis of securities sold

 

 

 

 

 

92

 

Realized gain

 

$

 

 

$

25

 

 

 

 

 

 

 

 

 

 

Realized gain, net of taxes

 

$

 

 

$

19

 

 

 

 

 

 

 

 

 

 

The Company did not sell marketable equity securities during the thirteen-week period April 2, 2022.

During the thirteen-week periods ended April 2, 2022 and April 3, 2021, our marketable equity securities portfolio experienced a net unrealized pre-tax gain in market value of approximately $949,000 and $974,000, respectively, which was reported in other non-operating income for the period.

 

9


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

 

(5)

Accrued Expenses and Other Current Liabilities

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

 

 

 

April 2,

2022

 

 

December 31,

2021

 

Accrued payroll

 

$

16,169

 

 

$

13,645

 

Accrued payroll taxes

 

 

10,117

 

 

 

7,132

 

Driver escrow liabilities

 

 

3,691

 

 

 

3,754

 

Legal settlements and claims

 

 

14,160

 

 

 

9,350

 

Commissions, other taxes and other

 

 

10,948

 

 

 

9,746

 

Total

 

$

55,085

 

 

$

43,627

 

 

(6)

Debt

Debt is comprised of the following (in thousands):

 

 

 

Interest Rates

at April 2, 2022

 

 

April 2,

2022

 

 

December 31,

2021

 

Outstanding Debt:

 

 

 

 

 

 

 

 

 

 

 

 

Credit and Security Agreement (1)

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan

 

1.95%

 

 

$

116,250

 

 

$

120,000

 

Revolver

 

1.95%

 

 

 

149,018

 

 

 

163,257

 

Equipment Financing (2)

 

2.25% to 5.13%

 

 

 

97,516

 

 

 

103,298

 

Real Estate Financing (3)

 

2.30% to 2.70%

 

 

 

39,888

 

 

 

41,887

 

Margin Facility (4)

 

1.55%

 

 

 

 

 

 

 

Unamortized debt issuance costs

 

 

 

 

 

 

(973

)

 

 

(1,094

)

 

 

 

 

 

 

 

401,699

 

 

 

427,348

 

Less current portion of long-term debt

 

 

 

 

 

 

60,470

 

 

 

61,160

 

Total long-term debt, net of current portion

 

 

 

 

 

$

341,229

 

 

$

366,188

 

 

(1) Our Credit and Security Agreement (the “Credit Agreement”) provides for maximum borrowings of $350 million in the form of a $150 million term loan and a $200 million revolver.  Term loan proceeds were advanced on November 27, 2018 and mature on November 26, 2023.  The term loan will be repaid in consecutive quarterly installments, as defined in the Credit Agreement, commencing March 31, 2019, with the remaining balance due at maturity.  Borrowings under the revolving credit facility may be made until and mature on November 26, 2023. Borrowings under the Credit Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each based on the Company’s leverage ratio.  The 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 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 April 2, 2022, we were in compliance with all covenants under the facility, and $51.0 million was available for borrowing on the revolver.

(2) 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, include certain affirmative and negative covenants, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 5.13%.

(3) Our Real Estate Financing consists of a series of promissory notes issued by a wholly owned subsidiary. The promissory notes, which are secured by first mortgages and assignment of leases on specific parcels of real estate and improvements, include certain affirmative and negative covenants and are generally payable in 120 monthly installments. Each of the notes bears interest at a variable rate ranging from LIBOR plus 1.85% to LIBOR plus 2.25%. At April 2, 2022, we were in compliance with all covenants.

 

10


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

 

(6)

Debt – continued

(4) Our Margin Facility is a short-term line of credit secured by our portfolio of marketable securities. It bears interest at LIBOR 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 April 2, 2022, the maximum available borrowings under the line of credit were $4.4 million.

The Company is also party to two interest rate swap agreements that qualify for hedge accounting. The Company executed the swap agreements to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $10.2 million at April 2, 2022. Under the swap agreements, the Company receives interest at the one-month LIBOR rate plus 2.25% and pays a fixed rate. The first swap became effective in October 2016, has a rate of 4.16% (amortizing notional amount of $10.0 million) and expires in July 2026. The second swap became effective in October 2016, has a rate of 3.83% (amortizing notional amount of $0.2 million) and expires in May 2022. At April 2, 2022, the fair value of the swap agreements was an asset of $0.1 million. Since these swap agreements qualify 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: