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 (collectively, “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, 2020 and 2019 and for each of the years in the three-year period ended December 31, 2020 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
The Company broadly groups its services 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 3,
2021
|
|
|
December 31,
2020
|
|
Prepaid expenses and other - contract assets
|
|
$
|
1,989
|
|
|
$
|
2,520
|
|
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 3,
2021
|
|
|
December 31,
2020
|
|
Fair value
|
|
$
|
7,530
|
|
|
$
|
6,534
|
|
Cost basis
|
|
|
6,426
|
|
|
|
6,579
|
|
Unrealized gain (loss)
|
|
$
|
1,104
|
|
|
$
|
(45
|
)
|
The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities (in thousands):
|
|
April 3,
2021
|
|
|
December 31,
2020
|
|
Gross unrealized gains
|
|
$
|
2,171
|
|
|
$
|
1,627
|
|
Gross unrealized losses
|
|
|
(1,067
|
)
|
|
|
(1,672
|
)
|
Net unrealized gains (losses)
|
|
$
|
1,104
|
|
|
$
|
(45
|
)
|
The following table shows the Company’s net realized gains on marketable equity securities (in thousands):
|
|
Thirteen weeks ended
|
|
|
|
April 3,
2021
|
|
|
April 4,
2020
|
|
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 4, 2020.
During the thirteen-week periods ended April 3, 2021 and April 4, 2020, our marketable equity securities portfolio experienced a net unrealized pre-tax gain (loss) in market value of approximately $974,000 and $(3,400,000), respectively, which was reported in other non-operating income (expense) 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 3,
2021
|
|
|
December 31,
2020
|
|
Accrued payroll
|
|
$
|
13,042
|
|
|
$
|
11,536
|
|
Accrued payroll taxes
|
|
|
14,112
|
|
|
|
11,601
|
|
Driver escrow liabilities
|
|
|
3,937
|
|
|
|
4,045
|
|
Legal settlements and claims
|
|
|
3,700
|
|
|
|
3,700
|
|
Commissions, taxes and other
|
|
|
8,525
|
|
|
|
8,706
|
|
Total
|
|
$
|
43,316
|
|
|
$
|
39,588
|
|
Debt is comprised of the following (in thousands):
|
|
Interest Rates
at April 3, 2021
|
|
|
April 3,
2021
|
|
|
December 31,
2020
|
|
Outstanding Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit and Security Agreement (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
1.86%
|
|
|
$
|
128,438
|
|
|
$
|
131,250
|
|
Revolver
|
|
1.86%
|
|
|
|
132,531
|
|
|
|
151,326
|
|
Equipment Financing (2)
|
|
2.25% to 5.13%
|
|
|
|
122,272
|
|
|
|
129,870
|
|
Real Estate Financing (3)
|
|
1.96% to 2.36%
|
|
|
|
47,250
|
|
|
|
49,248
|
|
Margin Facility (4)
|
|
1.21%
|
|
|
|
—
|
|
|
|
—
|
|
Unamortized debt issuance costs
|
|
|
|
|
|
|
(1,454
|
)
|
|
|
(1,574
|
)
|
|
|
|
|
|
|
|
429,037
|
|
|
|
460,120
|
|
Less current portion of long-term debt
|
|
|
|
|
|
|
60,022
|
|
|
|
59,713
|
|
Total long-term debt, net of current portion
|
|
|
|
|
|
$
|
369,015
|
|
|
$
|
400,407
|
|
(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 3, 2021, we were in compliance with all covenants under the facility, and $67.5 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 3, 2021, we were in compliance with all covenants.
10
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - 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 3, 2021, the maximum available borrowings under the line of credit were $4.2 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 $12.6 million at April 3, 2021. 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 $2.6 million) and expires in May 2022. At April 3, 2021, the fair value of the swap agreements was a liability of $0.5 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:
|
•
|
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):
|
|
April 3,
2021
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
Measurement
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
Marketable securities
|
|
|
7,530
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,530
|
|
Total assets
|
|
$
|
7,535
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
452
|
|
Total liabilities
|
|
$
|
—
|
|
|
$
|
452
|
|
|
$
|
—
|
|
|
$
|
452
|
|
11
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(7)
|
Fair Value Measurements and Disclosures – continued
|
|
|
December 31,
2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
Measurement
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9
|
|
Marketable securities
|
|
|
6,534
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,534
|
|
Total assets
|
|
$
|
6,543
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
619
|
|
|
$
|
—
|
|
|
$
|
619
|
|
Total liabilities
|
|
$
|
—
|
|
|
$
|
619
|
|
|
$
|
—
|
|
|
$
|
619
|
|
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 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 Credit Agreement and our Real Estate Financing consist of variable rate borrowings. We categorize these borrowings as Level 2 in the fair value hierarchy. The carrying value of these borrowings approximate fair value because the applicable interest rates are adjusted frequently based on short-term market rates.
For our Equipment Financing, the fair values are estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements. We categorize these borrowings as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of these promissory notes at April 3, 2021 is summarized as follows:
|
|
Carrying Value
|
|
|
Estimated Fair
Value
|
|
Equipment promissory notes
|
|
$
|
122,272
|
|
|
$
|
124,744
|
|
We have not elected the fair value option for any of our financial instruments.
12
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
On January 1, 2019, we adopted ASU 2016-02, Leases, which required us to recognize a right-of-use asset and a corresponding lease liability on our balance sheet for most leases classified as operating leases under previous guidance. Right-of-use assets represent our right to use an underlying asset over the lease term and lease liabilities represent the obligation to make lease payments resulting from the lease agreement. We recognize a right-of-use asset and a lease liability on the effective date of a lease agreement.
As of April 3, 2021, our obligations under operating lease arrangements primarily related to the rental of office space, warehouses, freight distribution centers, terminal yards and equipment. Our lease obligations typically do not include options to purchase the leased property, nor do they contain residual value guarantees or material restrictive covenants. Options to extend or terminate an agreement are included in the lease term when it becomes reasonably certain the option will be exercised. As of April 3, 2021, we were not reasonably certain of exercising any renewal or termination options, and as such, no adjustments were made to the right-of-use lease assets or corresponding liabilities.
We did not separate lease and nonlease components of contracts for purposes of determining the right-of use lease asset and corresponding liability. Variable lease components that do not depend on an index or a rate, and variable nonlease components were also not contemplated in the calculation of the right-of-use asset and corresponding liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which we pay the lessors an estimate that is adjusted to actual expense on a quarterly or annual basis depending on the underlying contract terms. For equipment leases, variable lease costs may include additional fees associated with using equipment in excess of estimated amounts. Leases with an initial term of 12 months or less, short-term leases, are not recorded on the balance sheet. Lease expense for short-term and long-term operating leases is recognized on a straight-line basis over the lease term.
The following table summarizes our lease costs for the thirteen week periods ended April 3, 2021 and April 4, 2020 (in thousands):
|
|
April 3, 2021
|
|
|
|
With
Affiliates
|
|
|
With Third
Parties
|
|
|
Total
|
|
Lease cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
2,526
|
|
|
$
|
5,803
|
|
|
$
|
8,329
|
|
Short-term lease cost
|
|
|
-
|
|
|
|
1,157
|
|
|
|
1,157
|
|
Variable lease cost
|
|
|
210
|
|
|
|
589
|
|
|
|
799
|
|
Sublease income
|
|
|
-
|
|
|
|
(759
|
)
|
|
|
(759
|
)
|
Total lease cost
|
|
$
|
2,736
|
|
|
$
|
6,790
|
|
|
$
|
9,526
|
|
|
|
April 4, 2020
|
|
|
|
With
Affiliates
|
|
|
With Third
Parties
|
|
|
Total
|
|
Lease cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
2,836
|
|
|
$
|
5,984
|
|
|
$
|
8,820
|
|
Short-term lease cost
|
|
|
241
|
|
|
|
1,198
|
|
|
|
1,439
|
|
Variable lease cost
|
|
|
226
|
|
|
|
793
|
|
|
|
1,019
|
|
Sublease income
|
|
|
-
|
|
|
|
(879
|
)
|
|
|
(879
|
)
|
Total lease cost
|
|
$
|
3,303
|
|
|
$
|
7,096
|
|
|
$
|
10,399
|
|
13
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
The following table summarizes other lease related information as of and for the thirteen week periods ended April 3, 2021 and April 4, 2020 (in thousands):
|
|
April 3, 2021
|
|
|
|
With
Affiliates
|
|
|
With Third
Parties
|
|
|
Total
|
|
Other information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of
operating leases
|
|
$
|
2,403
|
|
|
$
|
5,685
|
|
|
$
|
8,088
|
|
Future right-of-use asset change due to lease signed with a future
commencement date
|
|
$
|
2,733
|
|
|
$
|
-
|
|
|
$
|
2,733
|
|
Right-of-use assets obtained in exchange for new operating
lease liabilities
|
|
$
|
2,604
|
|
|
$
|
909
|
|
|
$
|
3,513
|
|
Weighted-average remaining lease term (in years)
|
|
|
6.1
|
|
|
|
4.8
|
|
|
|
5.3
|
|
Weighted-average discount rate
|
|
|
7.1
|
%
|
|
|
6.1
|
%
|
|
|
6.5
|
%
|
|
|
April 4, 2020
|
|
|
|
With
Affiliates
|
|
|
With Third
Parties
|
|
|
Total
|
|
Other information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of
operating leases
|
|
$
|
2,814
|
|
|
$
|
5,622
|
|
|
$
|
8,436
|
|
Right-of-use asset change due to lease termination
|
|
$
|
-
|
|
|
$
|
(1,109
|
)
|
|
$
|
(1,109
|
)
|
Right-of-use assets obtained in exchange for new operating
lease liabilities
|
|
$
|
1,739
|
|
|
$
|
11,092
|
|
|
$
|
12,831
|
|
Weighted-average remaining lease term (in years)
|
|
|
6.4
|
|
|
|
5.3
|
|
|
|
5.6
|
|
Weighted-average discount rate
|
|
|
7.6
|
%
|
|
|
6.1
|
%
|
|
|
6.6
|
%
|
Future minimum lease payments under operating leases as of April 3, 2021, are as follows (in thousands):
|
|
With Affiliates
|
|
|
With Third
Parties
|
|
|
Total
|
|
Year one
|
|
$
|
6,751
|
|
|
$
|
14,025
|
|
|
$
|
20,776
|
|
Year two
|
|
|
7,638
|
|
|
|
15,142
|
|
|
|
22,780
|
|
Year three
|
|
|
6,695
|
|
|
|
12,266
|
|
|
|
18,961
|
|
Year four
|
|
|
6,794
|
|
|
|
10,167
|
|
|
|
16,961
|
|
Year five
|
|
|
5,350
|
|
|
|
8,701
|
|
|
|
14,051
|
|
Thereafter
|
|
|
12,301
|
|
|
|
11,024
|
|
|
|
23,325
|
|
Total required lease payments
|
|
$
|
45,529
|
|
|
$
|
71,325
|
|
|
$
|
116,854
|
|
Less amounts representing interest
|
|
|
|
|
|
|
|
|
|
|
(19,768
|
)
|
Present value of lease liabilities
|
|
|
|
|
|
|
|
|
|
$
|
97,086
|
|
14
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(9)
|
Transactions with Affiliates
|
CenTra, Inc. (“CenTra”), an affiliate of the Company that is owned by our controlling shareholders, provides administrative support services to Universal in the ordinary course of business, including legal, human resources, IT infrastructure and other requested services. The cost of these services is based on the actual or estimated utilization of the specific service.
Universal also purchases other services from affiliates controlled by CenTra. Following is a schedule of costs incurred and included in operating expenses for services provided by affiliates for the thirteen weeks ended April 3, 2021 and April 4, 2020 (in thousands):
|
|
Thirteen weeks ended
|
|
|
|
April 3,
2021
|
|
|
April 4,
2020
|
|
Administrative support services
|
|
$
|
115
|
|
|
$
|
188
|
|
Truck fuel, tolls and maintenance
|
|
|
178
|
|
|
|
306
|
|
Real estate rent and related costs
|
|
|
2,913
|
|
|
|
3,307
|
|
Insurance and employee benefit plans
|
|
|
11,496
|
|
|
|
13,153
|
|
Purchased transportation and equipment rent
|
|
|
9
|
|
|
|
5
|
|
Total
|
|
$
|
14,711
|
|
|
$
|
16,959
|
|
We pay CenTra 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. In connection with our transportation services, we also pay tolls and other fees for international bridge crossings to certain related entities which are under common control with CenTra.
We lease 28 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 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 contracted transportation services, are delivered to us on a per-transaction basis or pursuant to separate contractual arrangements provided in the ordinary course of business. At April 3, 2021 and December 31, 2020, amounts due to affiliates were $17.3 million and $17.1 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 April 3, 2021 and December 31, 2020, there were $15.1 million and $13.3 million, respectively, included in each of these accounts for insured claims.
Services provided by Universal to Affiliates
We periodically assist our affiliates by providing 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 ended April 3, 2021 and April 4, 2020 (in thousands):
|
|
Thirteen weeks ended
|
|
|
|
April 3,
2021
|
|
|
April 4,
2020
|
|
Purchased transportation and equipment rent
|
|
$
|
49
|
|
|
$
|
135
|
|
Total
|
|
$
|
49
|
|
|
$
|
135
|
|
At April 3, 2021 and December 31, 2020, amounts due from affiliates were $1.3 million and $1.2 million, respectively.
15
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(10)
|
Stock Based Compensation
|
On April 23, 2014, our Board of Directors adopted our 2014 Amended and Restated Stock Incentive Plan. The Plan was approved at the 2014 annual meeting of shareholders and became effective as of the date our Board adopted it. The 2014 Plan replaced our 2004 Stock Incentive Plan and carried forward the shares of common stock that remained available for issuance under the 2004 Plan. The grants under the Plan may be made in the form of options, restricted stock awards, restricted stock purchase rights, stock appreciation rights, phantom stock units, restricted stock units or shares of unrestricted common stock.
On February 5, 2020, the Company granted 5,000 shares of restricted stock to our Chief Financial Officer. The restricted stock award has a fair value of $17.74 per share, based on the closing price of the Company’s stock on the grant date. The shares will vest on February 20, 2024, subject to his continued employment with the Company.
On January 10, 2020, the Company granted 60,000 shares of restricted stock to our Chief Executive Officer. The restricted stock award has a fair value of $18.82 per share, based on the closing price of the Company’s stock on the grant date. The shares will vest in installments of 20,000 shares on January 10, 2024 and January 10, 2026, and installments of 10,000 shares on January 10, 2027 and January 10, 2028, subject to his continued employment with the Company.
On February 20, 2019, the Company granted 44,500 shares of restricted stock to certain of its employees, including 10,000 shares to our Chief Financial Officer. The restricted stock awards have a grant date fair value of $23.56 per share, based on the closing price of the Company’s stock, and any non-vested shares under the awards will vest in four equal increments on each February 20 in 2020, 2021, 2022 and 2023.
A grantee’s vesting of restricted stock awards may be accelerated under certain conditions, including retirement.
The following table summarizes the status of the Company’s non-vested shares and related information for the period indicated:
|
|
Shares
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
Non-vested at January 1, 2021
|
|
|
85,625
|
|
|
$
|
19.90
|
|
Granted
|
|
|
—
|
|
|
$
|
-
|
|
Vested
|
|
|
(6,875
|
)
|
|
$
|
23.56
|
|
Forfeited
|
|
|
—
|
|
|
$
|
-
|
|
Balance at April 3, 2021
|
|
|
78,750
|
|
|
$
|
19.58
|
|
In each of the thirteen-week periods ended April 3, 2021 and April 4, 2020, the total grant date fair value of vested shares recognized as compensation costs was $0.2 million. As of April 3, 2021, there was approximately $1.5 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 in each year of 2022 and 2023, and $0.4 million in 2024, $0.3 million in 2026, and $0.2 million in each 2027 and 2028.
Basic earnings per common share amounts are based on the weighted average number of common shares outstanding, excluding outstanding non-vested restricted stock. Diluted earnings per common share include dilutive common stock equivalents determined by the treasury stock method. For the thirteen weeks ended April 3, 2021 and April 4, 2020, we included 14,613 and 0 weighted average non-vested shares of restricted stock, respectively, in the denominator for the calculation of diluted earnings per share.
For the thirteen weeks ended April 3, 2021 and April 4, 2020, we excluded 0 and 85,625 shares of non-vested restricted stock, respectively, from the calculation of diluted earnings per share because such shares were anti-dilutive.
On February 4, 2021, our Board of Directors declared a cash dividend of $0.105 per share of common stock, payable on April 5, 2021 to shareholders of record at the close of business on March 1, 2021. 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.
16
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
In December 2020, we changed the way we aggregate our business units and adopted a new segment reporting structure. As part of the new structure, we separated our previous transportation segment into three reportable segments: trucking, intermodal, and company-managed brokerage. In addition, we changed the name of our previous logistics segment to contract logistics. As a result, we now report our financial results in four distinct reportable segments: contract logistics, intermodal, trucking, and company-managed brokerage, which are based primarily on the services each segment provides. 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 contract logistics segment deliver value-added and/or dedicated transportation services to support in-bound logistics to original equipment manufacturers (OEMs) and major retailers on a contractual basis, generally pursuant to terms of one year or longer. Our intermodal segment is associated with local and regional drayage moves coordinated by company-managed terminals using a mix of owner-operators, company equipment and third-party capacity providers (broker carriers). Operations aggregated in our trucking segment are associated with individual freight shipments coordinated by our agents and company-managed terminals using a mix of owner-operators, company equipment and broker carriers. Our company-managed brokerage segment provides for the pick-up and delivery of individual freight shipments using broker carriers, coordinated by our company-managed operations. Other non-reportable segments are comprised of the Company’s subsidiaries that provide support services to other subsidiaries.
Separate balance sheets are not prepared by segment, and we do not provide asset information by segment to the chief operating decision maker.
The following tables summarize information about our reportable segments for the thirteen week period ended April 3, 2021 and April 4, 2020 (in thousands):
|
|
Operating Revenues
|
|
|
|
Thirteen weeks ended
|
|
|
|
April 3,
2021
|
|
|
April 4,
2020
|
|
Contract logistics
|
|
$
|
154,894
|
|
|
$
|
127,042
|
|
Intermodal
|
|
|
103,716
|
|
|
|
110,322
|
|
Trucking
|
|
|
94,899
|
|
|
|
91,570
|
|
Company-managed brokerage
|
|
|
61,106
|
|
|
|
52,782
|
|
Other
|
|
|
616
|
|
|
|
446
|
|
Total operating revenues
|
|
$
|
415,231
|
|
|
$
|
382,162
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliminated Inter-segment Revenues
|
|
|
|
Thirteen weeks ended
|
|
|
|
April 3,
2021
|
|
|
April 4,
2020
|
|
Contract logistics
|
|
$
|
287
|
|
|
$
|
235
|
|
Intermodal
|
|
|
1,077
|
|
|
|
336
|
|
Trucking
|
|
|
5,457
|
|
|
|
681
|
|
Company-managed brokerage
|
|
|
537
|
|
|
|
592
|
|
Total eliminated inter-segment revenues
|
|
$
|
7,358
|
|
|
$
|
1,844
|
|
|
|
|
|
|
|
|
|
|
17
UNIVERSAL LOGISTICS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements - Continued
(13)
|
Segment Reporting - continued
|
|
|
Income from Operations
|
|
|
|
Thirteen weeks ended
|
|
|
|
April 3,
2021
|
|
|
April 4,
2020
|
|
Contract logistics
|
|
$
|
16,820
|
|
|
$
|
11,690
|
|
Intermodal
|
|
|
8,494
|
|
|
|
9,000
|
|
Trucking
|
|
|
5,191
|
|
|
|
4,500
|
|
Company-managed brokerage
|
|
|
440
|
|
|
|
(1,397
|
)
|
Other
|
|
|
211
|
|
|
|
115
|
|
Total income from operations
|
|
$
|
31,156
|
|
|
$
|
23,908
|
|
|
|
|
|
|
|
|
|
|
(14)
|
Commitments and Contingencies
|
Our principal commitments relate to long-term real estate leases and payment obligations to equipment vendors.
The Company is involved in certain other claims and pending litigation arising from the ordinary conduct of business. We also provide accruals for claims within our self-insured retention amounts. Based on the knowledge of the facts, and in certain cases, opinions of outside counsel, in the Company’s opinion the resolution of these claims and pending litigation will not have a material effect on our financial position, results of operations or cash flows. However, if we experience claims that are not covered by our insurance or that exceed our estimated claim reserve, it could increase the volatility of our earnings and have a materially adverse effect on our financial condition, results of operations or cash flows.
At April 3, 2021, approximately 35% of our employees in the United States, Canada and Colombia, and approximately 86% of our employees in Mexico were subject to collective bargaining agreements that are renegotiated periodically, 40% of which are subject to contracts that expire in 2021.
On April 29, 2021, our Board of Directors declared the regular quarterly cash dividend of $0.105 per share of common stock, payable to shareholders of record at the close of business on June 7, 2021 and is expected to be paid on July 6, 2021. 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.
18