Notes to Unaudited Consolidated Financial Statements
(1)
|
Basis of Presentation
|
The accompanying unaudited consolidated financial statements of Universal Logistics Holdings, Inc., formerly known as Universal Truckload Services, Inc., and its wholly-owned subsidiaries (“we”, “us”, “our”, “Universal”, or “the Company”), have been prepared by the Company’s management. 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, 2015 and 2014 and for each of the years in the three-year period ended December 31, 2015 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.
Certain immaterial reclassifications have been made to the prior financial statements in order for them to conform to the July 2, 2016 presentation.
(2)
|
Marketable Securities
|
At July 2, 2016 and December 31, 2015, marketable securities, all of which are available-for-sale, consist of common and preferred stocks. Marketable securities are carried at fair value, with unrealized gains and losses, net of related income taxes, reported as accumulated other comprehensive income, except for losses from impairments which are determined to be other-than-temporary. Realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in the determination of net income and are included in other non-operating income (expense), at which time the average cost basis of these securities are adjusted to fair value. Fair values are based on quoted market prices at the reporting date. Interest and dividends on available-for-sale securities are included in other non-operating income (expense).
The cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of available-for-sale securities by type were as follows (in thousands):
|
|
Cost
|
|
|
Gross
unrealized
holding
gains
|
|
|
Gross
unrealized
holding
(losses)
|
|
|
Fair
Value
|
|
At July 2, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
10,515
|
|
|
$
|
4,618
|
|
|
$
|
(879
|
)
|
|
$
|
14,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
10,614
|
|
|
$
|
3,958
|
|
|
$
|
(1,141
|
)
|
|
$
|
13,431
|
|
Included in equity securities at July 2, 2016 are securities with a fair value of $4.0 million with a cumulative loss position of $0.9 million, the impairment of which we consider to be temporary. We consider several factors in our determination as to whether declines in value are judged to be temporary or other-than-temporary, including the severity and duration of the decline, the financial condition and near-term prospects of the specific issuers and the industries in which they operate, and our intent and ability to hold these securities. We may incur future impairment charges if declines in market values continue and/or worsen and impairments are no longer considered temporary.
6
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(2)
|
Marketable Securities - continued
|
The fair value and gross unrealized holding losses of our marketable securities that are not deemed to be other-than-temporarily impaired aggregated by type and length of time they have been in a continuous unrealized loss position were as follows (in thousands):
|
|
Less
than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
At July 2, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
2,650
|
|
|
$
|
369
|
|
|
$
|
1,399
|
|
|
$
|
510
|
|
|
$
|
4,049
|
|
|
$
|
879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
3,099
|
|
|
$
|
987
|
|
|
$
|
345
|
|
|
$
|
154
|
|
|
$
|
3,444
|
|
|
$
|
1,141
|
|
Our portfolio of equity securities in a continuous loss position, the impairment of which we consider to be temporary, consists primarily of common stocks in the oil and gas, banking, communications, and transportation industries. The fair value and unrealized losses are distributed in 37 publicly traded companies, with no single industry or company representing a material or concentrated unrealized loss. We have evaluated the near-term prospects of the various industries, as well as the specific issuers within our portfolio, in relation to the severity and duration of the impairments, and based on that evaluation, as well as our ability and intent to hold these investments for a reasonable period of time to allow for a recovery of fair value, we do not consider these investments to be other-than-temporarily impaired at July 2, 2016.
We may, from time to time, invest cash in excess of our current needs in marketable securities, much of which is held in equity securities, which are actively traded on public exchanges. It is our philosophy to minimize the risk of capital loss without foregoing the potential for capital appreciation through investing in value-and-income oriented investments. However, holding equity securities subjects us to fluctuations in the market value of our investment portfolio based on current market prices, and a decline in market prices or other unstable market conditions could cause a loss in the value of our marketable securities classified as available-for-sale.
(3)
|
Accrued Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities is comprised of the following (in thousands):
|
|
July 2,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
Payroll related items
|
|
$
|
9,058
|
|
|
$
|
6,833
|
|
Driver escrow liabilities
|
|
|
4,970
|
|
|
|
4,486
|
|
Commissions, taxes and other
|
|
|
7,211
|
|
|
|
7,670
|
|
Total
|
|
$
|
21,239
|
|
|
$
|
18,989
|
|
7
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
Debt is comprised of the following (in thousands):
|
|
Interest Rates
at July 2, 2016
|
|
|
July 2,
2016
|
|
|
December 31,
2015
|
|
Outstanding Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
PNC $120 million revolving credit facility
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR rate advance
|
|
LIBOR + 1.50%
|
|
|
$
|
50,000
|
|
|
$
|
55,000
|
|
Domestic rate advance
|
|
Prime + 0.50%
|
|
|
|
3,900
|
|
|
|
4,569
|
|
Key equipment notes
|
|
|
3.75%
|
|
|
|
72,470
|
|
|
|
83,578
|
|
Daimler equipment notes
|
|
|
3.23%
|
|
|
|
6,437
|
|
|
|
-
|
|
PACCAR equipment notes
|
|
3.24% to 3.69%
|
|
|
|
21,948
|
|
|
|
-
|
|
Comerica syndicated credit facility
|
|
|
|
|
|
|
|
|
|
|
|
$40 million term loan
|
|
LIBOR + 2.50%
|
|
|
|
37,000
|
|
|
|
40,000
|
|
$20 million revolving credit facility
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR rate advance
|
|
LIBOR + 2.00%
|
|
|
|
2,500
|
|
|
|
6,000
|
|
PRIME rate advance
|
|
Prime + 1.00%
|
|
|
|
—
|
|
|
|
5,766
|
|
Flagstar real estate notes
|
|
LIBOR + 2.25%
|
|
|
|
32,508
|
|
|
|
-
|
|
Flagstar Bank $40 million unsecured term loan
|
|
LIBOR + 3.50%
|
|
|
|
3,619
|
|
|
|
40,000
|
|
UBS secured borrowing facility
|
|
LIBOR + 1.10%
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
230,381
|
|
|
|
234,913
|
|
Less current portion
|
|
|
|
|
|
|
33,430
|
|
|
|
61,488
|
|
Total long-term debt
|
|
|
|
|
|
$
|
196,951
|
|
|
$
|
173,425
|
|
8
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
At July 2, 2016 and December 31, 2015, long-term debt and current maturities of long-term debt are presented net of debt issuance cost totaling $1.6 million and $1.5 million, respectively, in our Consolidated Balance sheets.
During the twenty-six weeks ended July 2, 2016, a wholly-owned subsidiary of the Company entered into installment obligations totaling approximately $29.3 million for the purpose of purchasing revenue equipment. The promissory notes will be repaid in 60 monthly installments at interest rates ranging from 3.23% to 3.69%. At July 2, 2016, the aggregate principal outstanding pursuant to the promissory notes totaled $28.4 million.
Real Estate Credit Agreement
On June 21, 2016, UTSI Finance, Inc. (“UTSI Finance”), a wholly-owned subsidiary of the Company, entered into a Loan and Financing Agreement with Flagstar Bank, F.S.B (“Flagstar”), along with ten accompanying promissory notes and commercial mortgages (collectively, the “Real Estate Credit Agreement”). Under the Real Estate Credit Agreement, UTSI Finance borrowed approximately $32.8 million to refinance a portion of the Company’s existing indebtedness with Flagstar pursuant to its $40 million unsecured term loan. The promissory notes bear interest at a rate of LIBOR plus 2.25%, and will be repaid in consecutive monthly installment payments, plus interest, beginning July 1, 2016. The promissory notes are due on or before June 30, 2026. At July 2, 2016, the aggregate principal outstanding pursuant to the ten promissory notes was $32.5 million and interest accrued at 2.71%.
As security for all indebtedness pursuant to the Real Estate Credit Agreement, Flagstar was granted first mortgages and assignment of leases on specific parcels of real estate and improvements included in the collateral pool, as defined in the agreement. Except for obligations subject to interest rate swap agreements with Flagstar, as defined in the Real Estate Credit Agreement, UTSI Finance may prepay all or a portion of the loans, plus applicable breakage charges and fees.
The Real Estate Credit Agreement also contains customary affirmative and negative covenants and events of default, and requires UTSI Finance to maintain a debt service coverage ratio of not less than 1.02:1, as defined in the Real Estate Credit Agreement. The first test for compliance is due after the fourth quarter of 2016.
December 2015 Debt Refinancing
On December 23, 2015, Universal and certain of its wholly-owned subsidiaries entered into a combination of secured and unsecured loans with certain lenders. The Company undertook the action as part of its ongoing organizational streamlining efforts to better align sources of capital used in its asset-light businesses and to fix a portion of its variable interest rate bearing debt. Upon closing, the Company and subsidiaries involved borrowed approximately $234.9 million to pay off existing indebtedness, to terminate its syndicated Comerica Bank Revolving Credit and Term Loan Agreement, and to pay fees and expenses associated with the new credit agreements.
$120 million Revolving Credit Facility
Universal Truckload, Inc., Universal Dedicated, Inc., Mason Dixon Intermodal, Inc., Logistics Insight Corp., Universal Logistics Solutions International, Inc., Universal Specialized, Inc., Cavalry Logistics, LLC and Universal Management Services, Inc., (each a wholly-owned subsidiary of the Company, a “Borrowing Subsidiary” and, collectively, the “Borrowing Subsidiaries”) entered into a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”) to provide for a revolving credit facility of up to $120 million (which amount may be increased by up to $30 million upon request). Borrowings under the revolving credit facility may be made until, and mature on, December 23, 2020.
To support daily borrowing and other operating requirements, the revolving credit facility contains a $10.2 million Swing Loan sub-facility and provides for $3.0 million in letters of credit. There were no amounts outstanding under the Swing Loan sub-facility at July 2, 2016 and December 31, 2015, and no letters of credit were issued against the line.
9
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
Borrowings under the Revolving Credit and Security Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each. The applicable margin fluctuates based on the Borrowing Subsidiaries’ quarterly average excess availability, as defined in the Revolving Credit and Security Agreement. Interest on the unpaid balance of all base rate advances is payable quarterly in arrears on the first day of each calendar quarter. Interest on the unpaid balance of each LIBOR based advance of the revolving credit facility is payable on the last day of the applicable LIBOR interest period. At July 2, 2016, interest on a $50.0 million LIBOR rate advance accrued at 1.96% based on 30-day LIBOR, and interest on a $3.9 million domestic rate advance accrued at 4.0% based on PNC’s prime rate.
The Revolving Credit and Security Agreement includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring a minimum fixed charge coverage ratio to be maintained after a triggering event, as defined in the Revolving Credit and Security Agreement. The Revolving Credit and Security Agreement also includes customary mandatory prepayments provisions and is subject to an unused revolving credit line fee of 0.25%. At July 2, 2016, we were in compliance with the debt covenants.
As security for all indebtedness pursuant to the Revolving Credit and Security Agreement, PNC was granted a first priority perfected security interest in cash, deposits and accounts receivable of the Borrowing Subsidiaries and selected other assets. At July 2, 2016, our $53.9 million revolver advance was secured by, among other assets, net eligible accounts receivable totaling $92.8 million. At July 2, 2016, availability, as defined in the Revolving Credit and Security Agreement, was $32.2 million.
Equipment Credit Agreement
LGSI Equipment of Indiana, LLC, a wholly-owned subsidiary of the Company (the “Equipment Borrowing Subsidiary”), entered into a Master Security Agreement and five Promissory Notes (collectively the “Equipment Credit Agreement”) with Key Equipment Finance, a division of KeyBank National Association (“KeyBank”). Under the Equipment Credit Agreement, the Equipment Borrowing Subsidiary borrowed approximately $83.6 million. The promissory notes are being paid in 60 monthly installments, including interest, beginning on January 23, 2016 and bear interest at a fixed rate of 3.75%.
Additionally, all obligations under the Equipment Credit Agreement are guaranteed by Universal Dedicated, Inc., Logistics Insight Corp., Universal Truckload, Inc., Universal Specialized, Inc. and Mason Dixon Intermodal, Inc. (each a wholly-owned subsidiary of the Company) in connection with each subsidiary’s lease of equipment. The Equipment Credit Agreement also includes financial covenants requiring the Equipment Borrowing Subsidiary to maintain a ratio of operating cash flow to fixed charges of not less than 1.1:1, as defined in the agreement. At July 2, 2016, we were in compliance with the debt covenants.
As security for all indebtedness pursuant to the Equipment Credit Agreement, KeyBank was granted liens on selected titled vehicles of the Equipment Borrowing Subsidiary set forth on various collateral schedules. The Equipment Borrowing Subsidiary may sell or dispose of equipment secured under the Equipment Credit Agreement provided the disposed equipment is replaced with acceptable equipment as collateral, if we pay down of a portion of the loan plus breakage charges and handling charges, as defined in the promissory notes, or if KeyBank, at its option, releases the equipment without pay down or pre-payment. At July 2, 2016, the aggregate principal outstanding pursuant to the five promissory notes totaled $72.5 million.
10
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
$60 million Revolving Credit and Term Loan Agreement
Westport Axle Corp., a wholly-owned subsidiary of the Company (“Westport”), entered into a Revolving Credit and Term Loan Agreement (the “Credit Agreement”), with and among the lenders party thereto and Comerica Bank, as administrative agent, arranger and documentation agent, providing for aggregate borrowing facilities of up to $60 million. The Credit Agreement consists of a $40 million term loan and a $20 million revolving credit facility. Borrowings under the term loan were advanced on December 23, 2015 and mature on December 23, 2020. The term loan shall be repaid in 20 equal quarterly installments of $1.5 million over five years beginning March 1, 2016, with the remaining balance due at maturity. Borrowings under the revolving credit facility may be made until, and mature on, December 23, 2020.
Borrowings under the Credit Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each. The applicable margin fluctuates based on Westport’s total debt to EBITDA ratio, as defined in the Credit Agreement. At July 2, 2016, interest on the $37.0 million term loan accrued at 2.97% based on 30-day LIBOR, and interest on the $2.5 million LIBOR rate revolving credit advance accrued at 2.47% based on 30-day LIBOR.
To support daily borrowing and other operating requirements, the revolving credit facility contains a $4.0 million Swing Line sub-facility and provides for $2.0 million in letters of credit. Swing Line borrowings incur interest at either the base rate plus the applicable margin or, alternatively, at a quoted rate offered by Comerica Bank in its sole discretion. There were no amounts outstanding under the Swing Line at July 2, 2016 and December 31, 2015, and no letters of credit were issued against the line.
Interest on the unpaid balance of all revolving credit facility and swing line base rate advances is payable quarterly in arrears commencing on March 1, 2016, and on the first day of each June, September, December and March thereafter. Interest on the unpaid balance of each Eurodollar-based advance of the revolving credit facility is payable on the last day of the applicable Eurodollar interest period. Interest on the unpaid balance of each quoted rate based advance of the swing line is payable on the last day of the applicable quoted rate interest period.
Interest on the unpaid principal of all term loan base rate advances is payable quarterly in arrears commencing on January 1, 2016, and on the first day of each April, July, October and January thereafter. Interest on the unpaid principal of each Eurodollar-based advance of the term loan is payable on the last day of the applicable Eurodollar interest period.
The revolving credit facility is subject to a facility fee, which is payable quarterly in arrears, of either 0.25% or 0.50%, depending on Westport’s ratio of total debt to EBITDA. Other than in connection with Eurodollar-based advances or quoted rate advances that are paid off and terminated prior to an applicable interest period, there are no premiums or penalties resulting from prepayment. Borrowings outstanding at any time under the revolving credit facility are limited to the value of eligible accounts receivable and inventory of Westport, pursuant to a monthly borrowing base certificate. At July 2, 2016, our $2.5 million revolver advance was secured by, among other assets, net eligible accounts receivable and inventory of $14.6 million and $5.0 million, respectively. At July 2, 2016, availability, as defined in the Credit Agreement, was $12.4 million.
The Credit Agreement requires Westport to repay the borrowings made under the term loan and the revolving credit facility as follows: 50% (which percentage shall be reduced to zero subject to Westport attaining a certain leverage ratio) of Westport’s annual excess cash flow, as defined; 100% of the net cash proceeds if we sell Westport’s machining division; 50% of net proceeds from certain equity issuances; 100% of proceeds from the issuance of certain indebtedness; and 100% of net proceeds from the sale of certain assets, insurance and condemnation proceeds.
11
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
As security for all indebtedness pursuant to the syndicated Credit Agreement, Comerica Bank, as lead arranger, was granted first perfected security interest on all of Westport’s tangible and intangible property and in assets acquired in the future. The Company also pledged 100% of its equity interest in Westport. The Credit Agreement also contains a “springing” guaranty requiring the Company to guarantee the indebtedness under certain events, as defined in the Credit Agreement and guarantee.
The Credit Agreement includes financial covenants requiring Westport to maintain a minimum fixed charge coverage ratio, minimum quarterly EBITDA amounts, as defined in the Credit Agreement, and a maximum debt to EBITDA ratio, as well as customary affirmative and negative covenants and events of default. At July 2, 2016, Westport was in compliance with the debt covenants.
$40 million Loan and Financing Agreement
The Company entered into a Loan and Financing Agreement (the “Loan Agreement”) with Flagstar to provide for a $40.0 million unsecured term loan. Proceeds of the unsecured term loan were advanced on December 23, 2015, and the outstanding principal balance is due on or before July 15, 2016. Borrowings under the unsecured term loan bear interest at LIBOR, plus 3.5%, and interest on the unpaid balance is payable monthly commencing on February 1, 2016. The Company may voluntarily repay the loan in whole or in part at any time, subject to certain customary breakage costs. On June 21, 2016, UTSI Finance borrowed approximately $32.8 million to refinance a portion of the Company’s existing indebtedness with Flagstar pursuant to the $40 million unsecured term loan. At July 2, 2016, the outstanding principal balance was $3.6 million and interest accrued at 3.97%.
Swap Agreements
The Company is party to two forward interest rate swap agreements that qualify for hedge accounting. The swap agreements were executed to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $15.7 million at July 2, 2016. Under the swap agreements, the Company receives interest at the one-month LIBOR rate plus 2.25%, and pays a fixed rate. The March 2016 forward swap (swap A) is effective October 2016, has a rate of 4.16% (amortizing notional amount of $10.0 million) and expires July 2026, and the March 2016 forward swap (swap B) is effective October 2016, has a rate of 3.83% (amortizing notional amount of $5.7 million) and expires May 2022. The Company is also party to a third interest rate swap agreement that qualifies for hedge accounting. The swap agreement was executed to fix a portion of its variable rate debt with a notional amount of $12.0 million and expires February 2018 (swap C). Under swap C, the Company receives interest at the one-month LIBOR rate, and pays a fixed rate of 0.78%. The fair value of the three swap agreements was a liability of $0.7 million at July 2, 2016. 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 5 for additional information pertaining to interest rate swaps.
12
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
UBS Secured Borrowing Facility
We also maintain a secured borrowing facility at UBS Financial Services, Inc., or UBS, using our marketable securities as collateral for the short-term line of credit. The line of credit bears an interest rate equal to LIBOR plus 1.10% (effective rate of 1.56% at July 2, 2016), and interest is adjusted and billed monthly. No principal payments are due on the borrowing; however, the line of credit is callable at any time. The amount available under the line of credit is based on a percentage of the market value of the underlying securities. If the equity value in the account falls below the minimum requirement, we must restore the equity value, or UBS may call the line of credit. At both July 2, 2016 and December 31, 2015, there were no amounts outstanding under the line of credit, and the maximum available borrowings were $7.4 million.
(5)
|
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.
|
13
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(5)
|
Fair Value Measurements
and Disclosures – 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):
|
|
July 2,
2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Asset/(Liability) Fair Value Measurement
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
Marketable securities
|
|
|
14,254
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,254
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
—
|
|
|
|
(697
|
)
|
|
|
—
|
|
|
|
(697
|
)
|
Total
|
|
$
|
14,272
|
|
|
$
|
(697
|
)
|
|
$
|
—
|
|
|
$
|
13,575
|
|
|
|
December 31,
2015
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Asset/(Liability) Fair Value Measurement
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
96
|
|
Marketable securities
|
|
|
13,431
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,431
|
|
Total
|
|
$
|
13,527
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,527
|
|
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 swaps - The fair value of our interest rate swaps, as provided by a third party service provider, 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 and term loan agreements, and real estate promissory notes with PNC, Comerica Bank and Flagstar 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 promissory notes, 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 borrowings under this credit agreement as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of these promissory notes at July 2, 2016 is summarized as follows:
|
|
Carrying Value
|
|
|
Estimated Fair
Value
|
|
Equipment promissory notes
|
|
$
|
100,855
|
|
|
$
|
101,891
|
|
14
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(6)
|
Transactions with Affiliates
|
Through December 31, 2004, we were a wholly-owned subsidiary of CenTra, Inc. On December 31, 2004, CenTra distributed all of our common stock to the shareholders of CenTra. Subsequent to our initial public offering in 2005, our majority shareholders retained and continue to hold a controlling interest in Universal. In the normal course of business, CenTra and affiliates of CenTra provide administrative support services to us, including legal, human resources, tax, and IT infrastructure services. The cost of these services is based on the actual or estimated utilization of the specific service.
In addition to the administrative support services described above, we purchase other services from affiliates. Following is a schedule of cost incurred for services provided by affiliates for the thirteen weeks and twenty-six ended July 2, 2016 and June 27, 2015 (in thousands):
|
|
Thirteen weeks ended
|
|
|
Twenty-six weeks ended
|
|
|
|
July 2,
2016
|
|
|
June 27,
2015
|
|
|
July 2,
2016
|
|
|
June 27,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative support services
|
|
$
|
682
|
|
|
$
|
781
|
|
|
$
|
1,358
|
|
|
$
|
1,493
|
|
Truck fuel, tolls and maintenance
|
|
|
639
|
|
|
|
463
|
|
|
|
1,245
|
|
|
|
610
|
|
Real estate rent and related costs
|
|
|
4,232
|
|
|
|
3,328
|
|
|
|
8,241
|
|
|
|
6,429
|
|
Insurance and employee benefit plans
|
|
|
10,995
|
|
|
|
12,844
|
|
|
|
22,306
|
|
|
|
23,984
|
|
Contracted transportation services
|
|
|
27
|
|
|
|
254
|
|
|
|
226
|
|
|
|
468
|
|
Total
|
|
$
|
16,575
|
|
|
$
|
17,670
|
|
|
$
|
33,376
|
|
|
$
|
32,984
|
|
In connection with our transportation services, we also routinely cross the Ambassador Bridge between Detroit, Michigan and Windsor, Ontario, and we pay tolls and other fees to certain related entities which are under common control with CenTra. CenTra also charges us for the direct variable cost of various maintenance, fueling and other operational support costs for services delivered at their trucking terminals that are geographically remote from our own facilities. Such activities are billed when incurred, paid on a routine basis, and reflect actual labor utilization, repair parts costs or quantities of fuel purchased.
A significant number of our transportation and logistics service operations are located at facilities leased from affiliates. At 36 facilities, occupancy is based on either month-to-month or contractual, multi-year lease arrangements which are billed and paid monthly. Leasing properties provided by an affiliate that owns a substantial commercial property portfolio affords us significant operating flexibility. However, we are not limited to such arrangements.
We purchase workers’ compensation, property and casualty, cargo, warehousing and other general liability insurance from an insurance company controlled by our majority shareholders. Our employee health care benefits and 401(k) programs are also provided by this affiliate.
Other services from affiliates, including leased real estate, insurance and employee benefit plans, and 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 July 2, 2016 and December 31, 2015, amounts due to affiliates were $5.4 million and $3.4 million, respectively. In our Consolidated Balance Sheets, we record our insured claims liability and the related recovery from an affiliate insurance provider in insurance and claims, and other receivables. At July 2, 2016 and December 31, 2015, there were $7.7 million and $11.5 million, respectively, included in each of these accounts for insured claims.
We used an affiliate to provide real property improvements to us totaling $1.0 million during the twenty-six weeks ended July 2, 2016, and also purchased $1.4 million of wheels and tires for new trailering equipment and an additional $0.2 million in revenue equipment components from an affiliate during the same period. During the twenty-six weeks ended June 27, 2015, we purchased used snow removal equipment from an affiliate for $18,000.
We periodically use the law firm of Sullivan Hincks & Conway to provide us legal services. Daniel C. Sullivan, a member of our Board, is a partner at Sullivan Hincks & Conway. Not included in the table above are amounts paid for legal services during the twenty-six weeks ended June 27, 2015 of $1,400. No amounts were paid for legal services during the thirteen weeks or twenty-six weeks ended July 2, 2016, or during the thirteen weeks ended June 27, 2015.
15
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(6)
|
Transactions with Affiliates – continued
|
Services provided by Universal to Affiliates
We may assist our affiliates with selected transportation and logistics services in connection with their specific customer contracts or purchase orders. Following is a schedule of services provided to affiliates for the thirteen weeks and twenty-six weeks ended July 2, 2016 and June 27, 2015 (in thousands):
|
|
Thirteen weeks ended
|
|
|
Twenty-six weeks ended
|
|
|
|
July 2,
2016
|
|
|
June 27,
2015
|
|
|
July 2,
2016
|
|
|
June 27,
2015
|
|
Transportation and intermodal services
|
|
$
|
147
|
|
|
$
|
9
|
|
|
$
|
342
|
|
|
$
|
181
|
|
Truck fueling and maintenance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
147
|
|
|
$
|
9
|
|
|
$
|
342
|
|
|
$
|
181
|
|
At July 2, 2016 and December 31, 2015, amounts due from affiliates were $2.1 million and $1.9 million, respectively.
Comprehensive income includes the following (in thousands):
|
|
Thirteen weeks ended
|
|
|
Twenty-six weeks ended
|
|
|
|
July 2,
2016
|
|
|
June 27,
2015
|
|
|
July 2,
2016
|
|
|
June 27,
2015
|
|
Unrealized holding gains (losses) on available-for-sale
investments arising during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount
|
|
$
|
871
|
|
|
$
|
91
|
|
|
$
|
884
|
|
|
$
|
(33
|
)
|
Income tax (expense) benefit
|
|
|
(316
|
)
|
|
|
(25
|
)
|
|
|
(319
|
)
|
|
|
25
|
|
Net of tax amount
|
|
$
|
555
|
|
|
$
|
66
|
|
|
$
|
565
|
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized (gains) losses on available-for-sale
investments reclassified into income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount
|
|
$
|
—
|
|
|
$
|
(276
|
)
|
|
$
|
39
|
|
|
$
|
(276
|
)
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
100
|
|
|
|
(14
|
)
|
|
|
100
|
|
Net of tax amount
|
|
$
|
—
|
|
|
$
|
(176
|
)
|
|
$
|
25
|
|
|
$
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on interest rate swaps
arising during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount
|
|
$
|
(328
|
)
|
|
$
|
—
|
|
|
$
|
(697
|
)
|
|
$
|
—
|
|
Income tax benefit
|
|
|
125
|
|
|
|
—
|
|
|
|
263
|
|
|
|
—
|
|
Net of tax amount
|
|
$
|
(203
|
)
|
|
$
|
—
|
|
|
$
|
(434
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
(456
|
)
|
|
$
|
(243
|
)
|
|
$
|
(697
|
)
|
|
$
|
(766
|
)
|
16
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(8)
|
Stock Based Compensation
|
On April 23, 2014, our Board of Directors adopted the 2014 Amended and Restated Stock Incentive Plan, or the Plan. The Plan was approved by our shareholders at the 2014 Annual Meeting and became effective as of the date it was adopted by the Board of Directors. The Plan replaced our 2004 Stock Incentive Plan and carried forward the shares of common stock that remained available for issuance under the 2004 Stock Incentive Plan. The grants may be made in the form of stock options, restricted stock bonuses, restricted stock purchase rights, stock appreciation rights, phantom stock units, restricted stock units or unrestricted common stock. A grantee’s vesting may be accelerated under certain conditions, including retirement. Restricted stock awards currently outstanding under the 2004 Stock Incentive Plan will remain outstanding in accordance with the terms of that plan.
On December 23, 2015, the Company granted 50,000 shares of restricted stock to certain of its employees. The restricted stock grants have a grant date fair value of $14.93 per share, based on the closing price of the Company’s stock, of which 25% vested immediately, and an additional 25% will vest in three equal increments on each December 20 in 2016, 2017 and 2018.
On March 5, 2015, the Company granted an additional 10,000 shares of restricted stock to its Chief Executive Officer. The restricted stock grants vested 25% on March 5, 2015, and an additional 25% will vest on each anniversary of the grant through March 5, 2018, subject to continued employment with the Company. On April 29, 2015, the Company granted an additional 20,000 shares of restricted stock to the Chief Executive Officer. These restricted stock grants vested 25% on April 29, 2015, and an additional 25% will vest in three equal increments on each March 5 in 2016, 2017 and 2018. On February 24, 2016, the Company granted and additional 10,000 shares of restricted stock to the Chief Executive Officer. These restricted stock grants vested 25% on February 24, 2016, and an additional 25% will vest in three equal increments on each March 5 in 2017, 2018 and 2019.
On December 20, 2012, the Company granted 178,137 shares of restricted stock to certain of its employees. The restricted stock grants vested 20% on December 20, 2012, and an additional 20% will vest on each anniversary of the grant through December 20, 2016, subject to continued employment with the Company.
The following table summarizes the status of the Company’s non-vested shares and related information for the period indicated:
|
|
Shares
|
|
|
Weighted
Average
Grant
Date
Fair Value
|
|
Non-vested at January 1, 2016
|
|
|
68,225
|
|
|
$
|
17.80
|
|
Granted
|
|
|
10,000
|
|
|
$
|
15.55
|
|
Vested
|
|
|
(15,577
|
)
|
|
$
|
19.13
|
|
Forfeited
|
|
|
—
|
|
|
$
|
—
|
|
Balance at July 2, 2016
|
|
|
62,648
|
|
|
$
|
17.11
|
|
During the twenty-six weeks ended July 2, 2016 and June 27, 2015, the total grant date fair value of vested shares recognized as compensation costs was $0.3 million and $0.2 million respectively. During the thirteen weeks ended July 2, 2016 and June 27, 2015, the total grant date fair value of vested shares recognized as compensation cost was $0.1 million and $0.1 million, respectively. As of July 2, 2016, there was approximately $1.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize stock-based compensation expense of $0.2 million during the remainder of 2016, and $0.4 million, $0.4 million, and $0.1 million in 2017, 2018, and 2019, respectively.
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. In each of the thirteen weeks and twenty-six weeks ended July 2, 2016, there were zero weighted average non-vested shares of restricted stock included in the denominator for the calculation of diluted earnings per share, respectively. For the thirteen weeks and twenty-six weeks ended June 27, 2015, there were 1,905 and 4,967 weighted average non-vested shares of restricted stock included in the denominator for the calculation of diluted earnings per share, respectively.
In each the thirteen weeks and twenty-six weeks ended July 2, 2016, 68,225 shares of non-vested restricted stock were excluded from the calculation of diluted earnings per share because such shares were anti-dilutive. No shares were excluded from the calculation of diluted earnings per share for the thirteen weeks or twenty-six weeks ended June 27, 2015.
17
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
On April 29, 2016, our Board of Directors declared a quarterly cash dividend of $0.07 per share of common stock, payable to shareholders of record at the close of business on May 9, 2016 and paid on May 19, 2016. Declaration of future cash dividends is subject to final determination by the Board of Directors each quarter after its review of our financial condition, results of operations, capital requirements, any legal or contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant.
We report our financial results in two reportable segments, the transportation segment and the logistics segment, based on the nature of the underlying customer commitment and the types of investments required to support these commitments. This presentation reflects the manner in which management evaluates our operating segments, including an evaluation of economic characteristics and applicable aggregation criteria.
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 or transportation services to specific customers on a dedicated basis, generally pursuant to contract terms of one year or longer. Other non-reportable operating segments are comprised of the Company’s subsidiaries that provide support services to other subsidiaries and to owner-operators, including shop maintenance and equipment leasing.
The following tables summarize information about our reportable segments as of and for the thirteen week and twenty-six week periods ended July 2, 2016 and June 27, 2015 (in thousands):
|
|
Thirteen weeks ended July 2, 2016
|
|
|
|
Transportation
|
|
|
Logistics
|
|
|
Other
|
|
|
Total
|
|
Operating revenues
|
|
$
|
169,286
|
|
|
$
|
107,229
|
|
|
$
|
298
|
|
|
$
|
276,813
|
|
Eliminated inter-segment revenues
|
|
|
377
|
|
|
|
2,005
|
|
|
|
-
|
|
|
|
2,382
|
|
Income from operations
|
|
|
6,919
|
|
|
|
10,609
|
|
|
|
(754
|
)
|
|
|
16,774
|
|
Total assets
|
|
|
235,308
|
|
|
|
270,077
|
|
|
|
31,608
|
|
|
|
536,993
|
|
|
|
Thirteen weeks ended June 27, 2015
|
|
|
|
Transportation
|
|
|
Logistics
|
|
|
Other
|
|
|
Total
|
|
Operating revenues
|
|
$
|
188,724
|
|
|
$
|
106,181
|
|
|
$
|
102
|
|
|
$
|
295,007
|
|
Eliminated inter-segment revenues
|
|
|
905
|
|
|
|
1,411
|
|
|
|
—
|
|
|
|
2,316
|
|
Income from operations
|
|
|
9,166
|
|
|
|
12,725
|
|
|
|
1,029
|
|
|
|
22,920
|
|
Total assets
|
|
|
238,446
|
|
|
|
261,983
|
|
|
|
38,986
|
|
|
|
539,415
|
|
|
|
Twenty-six weeks ended July 2, 2016
|
|
|
|
Transportation
|
|
|
Logistics
|
|
|
Other
|
|
|
Total
|
|
Operating revenues
|
|
$
|
326,832
|
|
|
$
|
209,786
|
|
|
$
|
589
|
|
|
$
|
537,207
|
|
Eliminated inter-segment revenues
|
|
|
944
|
|
|
|
4,001
|
|
|
|
-
|
|
|
|
4,945
|
|
Income from operations
|
|
|
12,807
|
|
|
|
19,158
|
|
|
|
(1,261
|
)
|
|
|
30,704
|
|
Total assets
|
|
|
235,308
|
|
|
|
270,077
|
|
|
|
31,608
|
|
|
|
536,993
|
|
|
|
Twenty-six weeks ended June 27, 2015
|
|
|
|
Transportation
|
|
|
Logistics
|
|
|
Other
|
|
|
Total
|
|
Operating revenues
|
|
$
|
355,957
|
|
|
$
|
202,412
|
|
|
$
|
199
|
|
|
$
|
558,568
|
|
Eliminated inter-segment revenues
|
|
|
1,522
|
|
|
|
2,608
|
|
|
|
—
|
|
|
|
4,130
|
|
Income from operations
|
|
|
15,516
|
|
|
|
21,498
|
|
|
|
973
|
|
|
|
37,987
|
|
Total assets
|
|
|
238,446
|
|
|
|
261,983
|
|
|
|
38,986
|
|
|
|
539,415
|
|
18
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(12)
|
Commitments and Contingencies
|
Our principal commitments relate to long-term real estate leases and payment obligations to equipment vendors.
We are involved in certain 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.
At July 2, 2016, approximately 29% of our employees in the United States, Canada and Colombia, and 90% of our employees in Mexico are subject to collective bargaining agreements that are renegotiated periodically, less than 1% of which are subject to contracts that expire in 2016.
(13)
|
Recent Accounting Pronouncements
|
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provided new accounting guidance related to revenue recognition. The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. The new guidance was originally effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 for public companies. Early adoption was originally not permitted. Entities have the option of using either a full retrospective or modified approach to adopt ASU 2014-09. In July 2015, the FASB voted to delay of the effective date of the new standard by one year. As a result of the delay, the revenue recognition standard will be effective for public companies in 2018, with early adoption permitted. We are evaluating the effect, if any, that adopting this new accounting standard will have on our consolidated financial statements and related disclosures.
In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest, which is intended to simplify the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this update. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2015 for public companies. On January 1, 2016, the Company adopted this ASU on a retrospective basis. Adoption resulted in a reclassification in the Company’s current prepaid expenses and other, and noncurrent other assets in its consolidated balance sheet as of December 31, 2015 of $0.3 million and $1.2 million, respectively. The corresponding decreases were in the net presentation of the Company’s debt liability to the current portions of long-term debt and noncurrent long-term debt, respectively.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which is intended to simplify the presentation of deferred income taxes. The ASU requires that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet. The new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 for public companies. The Company has early adopted this ASU effective January 1, 2016 on a retrospective basis. Adoption resulted in a reclassification of the Company’s deferred tax liability in its consolidated balance sheet as of December 31, 2015. The reclassification resulted in a $6.4 million decrease in the current deferred income tax asset and a corresponding increase in the noncurrent deferred tax asset.
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UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
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Recent Accounting Pronouncements
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In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among other things, the ASU requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The amendments are to be applied by means of a cumulative-effect adjustment to the balance sheet and are effective for interim and annual periods beginning after December 15, 2017. With certain exceptions, early adoption is not permitted. We are evaluating the effect that adopting this new accounting standard will have on our consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases. The objective of the new standard is to establish principles for lessees and lessors to report information about the amount, timing, and uncertainty of cash flows arising from a lease. The ASU will require a lessee to recognize the assets and liabilities that arise from leases, including operating leases. Under the new requirements, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and the right-of-use asset representing the right to the underlying asset for the lease term. For leases with a term of 12 months or less, the lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendment is permitted. We are evaluating the effect that adopting this new accounting standard will have on our consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation. The ASU identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. ASU 2016-09 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the effect that adopting this standard will have on the Company’s financial condition, results of operations, or cash flows.
On July 28, 2016, our Board of Directors declared a quarterly cash dividend of $0.07 per share of common stock, payable to shareholders of record at the close of business on August 8, 2016 and expected to be paid on August 18, 2016. Declaration of future cash dividends is subject to final determination by the Board of Directors each quarter after its review of our financial condition, results of operations, capital requirements, any legal or contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant.
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