What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 137 added, 61 removed, 160 unchanged (55% of the section changed)

33 unchanged sentences

truckload services, brokerage services, intermodal services, dedicated services and value-added services.

Our truckload, brokerage and intermodal services are associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services are provided to specific customers on a contractual basis, generally pursuant to contract terms of one year or longer.

The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks ended March 30, 2024 and April 1, 2023, presented as a percentage of total operating revenues:

Our truckload, brokerage and intermodal services are associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services are specific to customers on a contractual basis, generally pursuant to contract terms of one year or longer.

The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks and twenty-six weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of total operating revenues:

Thirteen Weeks Ended

Twenty-six Weeks Ended

Operating revenues:

6 unchanged sentences

Results of Operations

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks ended March 30, 2024 and April 1, 2023, presented as a percentage of operating revenues:

Thirteen Weeks Ended June 29, 2024 Compared to Thirteen Weeks Ended July 1, 2023

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of operating revenues:

Thirteen Weeks Ended

Percent Change in Dollar Amount

(Dollars in millions)

Operating revenues

10 unchanged sentences

Income from operations

Interest and other non-operating expense, net

Interest expense, net

Other non-operating income

Income before income taxes

Income tax expense

Thirteen Weeks Ended March 30, 2024 Compared to Thirteen Weeks Ended April 1, 2023

Operating revenues .

1 unchanged sentence

This increase was partially offset by decreases in our transactional transportation-related services.

The primary driver in our contract logistics segment was our progress towards the completion of deliverables on a significant new specialty development project in the first quarter 2024.

This project is expected to be substantially complete by the end of 2024.

Operating revenues included separately-identified fuel surcharges of $24.7 million in the first quarter 2024, compared to $33.9 million in the first quarter 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.5 million during the first quarter 2024 compared to $26.0 million one year earlier.

The primary driver in our contract logistics segment was the recently awarded specialty development project.

Operating revenues included separately-identified fuel surcharges of $24.5 million in the second quarter 2024, compared to $28.6 million in the second quarter 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.1 million during the second quarter 2024 compared to $13.4 million one year earlier.

Purchased transportation and equipment rent .

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The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services.

In the first quarter 2024, transactional transportation-related service revenues decreased 21.1% compared to the prior year.

In the second quarter 2024, transactional transportation-related service revenues decreased 2.5% compared to the prior year.

Direct personnel and related benefits.

Trends in direct personnel and benefit costs are generally correlated with changes in operating facilities and headcount requirements and, therefore, fluctuate correspondingly with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations.

The increase in the first quarter 2024 was due to an increase in the number of employee drivers in our intermodal business.

The decrease in the second quarter 2024 was due to a decrease in headcount in our intermodal and value-added businesses.

While generalizations about the impact of personnel and related benefits costs are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.

1 unchanged sentence

Operating supplies and expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand.

The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project that launched in the first quarter of 2024.

The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project.

Commission expense .

Commission expense decreased due to decreased revenue in our agency-based truckload business.

Commission expense increased due to increased revenue in our agency-based truckload business.

Occupancy expense .

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Insurance and claims .

The decrease in insurance and claims expense was primarily due to a decrease in auto liability claims expense.

The increase in insurance and claims expense was primarily due to an increase in auto liability premiums as well as an increase in cargo claims expense.

Depreciation and amortization .

The increase in depreciation and amortization expense resulted from a $16.1 million increase in depreciation expense and a $1.6 million increase in amortization expense.

During the second quarter 2024, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $11.3 million during the period.

Interest expense, net .

The increase in net interest expense reflects an increase in our outstanding borrowings as well as an increase in interest rates on our outstanding borrowings.

As of March 30, 2024, our outstanding borrowings were $418.4 million compared to $381.9 million at April 1, 2023.

The increase in net interest expense reflects an increase in our outstanding borrowings.

As of June 29, 2024, our outstanding borrowings were $487.8 million compared to $382.0 million at July 1, 2023.

Other non-operating income .

Other non-operating income increased by $1.1 million in first quarter 2024 and includes a $1.0 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income.

Other non-operating income increased by $0.6 million in second quarter 2024 and includes a $0.8 million favorable legal settlement.

Income tax expense .

Our effective income tax rate was 25.2% in both the first quarter 2024 and 2023.

Our effective income tax rate was 25.3% in both the second quarter 2024 and 2023.

The increase in income taxes is primarily the result of an increase in taxable income.

Segment Financial Results

We 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.

The following tables summarize information about our reportable segments for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):

Thirteen Weeks Ended

Twenty-six Weeks Ended June 29, 2024 Compared to Thirteen Weeks Ended July 1, 2023

The following table sets forth items derived from our consolidated statements of income for the twenty-six weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of operating revenues:

Twenty-six Weeks Ended

Percent Change in Dollar Amount

12 unchanged sentences

Income from operations

Interest income (expense), net

Interest expense, net

Other non-operating income

1 unchanged sentence

Income tax expense

Thirteen Weeks Ended March 30, 2024 Compared to Thirteen Weeks Ended April 1, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 48.4%.

The primary driver in our contract logistics segment was our progress towards the completion of deliverables on a significant new specialty development project in the first quarter 2024.

This project is expected to be substantially complete by the end of 2024.

During the full-year 2024, we expect to recognize $228.0 million of total operating revenues on this program, of which $95.3 million was recognized in the first quarter of 2024.

At the end of the first quarter 2024, we managed 71 value-added programs compared to 65 at the end of the first quarter 2023.

Included in contract logistics segment revenues for the thirteen weeks ended March 30, 2024, were $8.6 million in separately identified fuel surcharges from dedicated transportation services, compared to $9.7 million in the same period last year.

Income from operations increased $53.7 million and operating margin, as a percentage of revenue was 26.0% for the first quarter 2024, compared to 13.1% in the first quarter 2023.

Operating revenues in the intermodal segment decreased 30.9% primarily due to a decrease in the number of loads hauled.

Included in intermodal segment revenues for the first quarter 2024 were $10.7 million in separately identified fuel surcharges, compared to $17.1 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.5 million during the first quarter 2024 compared to $26.0 million in the first quarter 2023.

Load volumes decreased 14.1% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the first quarter 2024 was (10.5)%, compared to 6.1% one year earlier.

In the trucking segment, operating revenues decreased 12.6% primarily due to decreases in the average revenue per load, excluding fuel surcharges, and in the number of loads hauled.

First quarter 2024 trucking segment revenues included $28.6 million of brokerage services compared to $34.7 million during the same period last year.

Also included in our trucking segment revenues were $5.4 million in separately identified fuel surcharges during the first quarter 2024 compared to $7.2 million in fuel surcharges in the first quarter 2023.

On a year-over-year basis, the average operating revenue per load, excluding fuel surcharges, decreased 6.2% while load volumes declined 7.1%.

As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended March 30, 2024, was 5.3% compared to 4.8% for the thirteen weeks ended April 1, 2023.

Operating revenues .

The overall increase in operating revenues was primarily due to an increase in our contract logistics segment revenues.

This increase was partially offset by decreases in our transactional transportation-related services.

The primary driver in our contract logistics segment was the recently awarded specialty development project.

Operating revenues included separately-identified fuel surcharges of $49.3 million in the first half 2024, compared to $62.6 million in the first half 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $16.6 million during the first half 2024 compared to $39.4 million one year earlier.

Purchased transportation and equipment rent .

Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers.

These fluctuations are generally correlated with changes in demand for transactional transportation-related services.

The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services.

In the first half 2024, transactional transportation-related service revenues decreased 12.3% compared to the prior year.

Direct personnel and related benefits .

The decrease in the first half 2024 was due to a decrease in headcount in our value-added business.

Operating supplies and expenses .

The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project.

Commission expense .

Commission expense decreased due to decreased brokerage revenue in our agency-based truckload business.

Occupancy expense .

The decrease in occupancy expense was attributable to a decrease in building rents.

This was partially offset by an increase in property taxes.

General and administrative .

The increase in general and administrative expense was primarily due to an increase in salaries, wages, and benefits as well as professional fees.

Insurance and claims .

The increase in insurance and claims expense was primarily due to an increase in auto liability premiums as well as an increase in cargo claims expense.

This was partially offset by a decrease in auto liability claims expense.

Depreciation and amortization .

The increase in depreciation and amortization expense resulted from a $16.6 million increase in depreciation expense and a $3.2 million increase in amortization expense.

During the first half 2024, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $11.3 million during the period.

Interest expense, net .

The increase in net interest expense reflects an increase in our outstanding borrowings.

As of June 29, 2024, our outstanding borrowings were $487.8 million compared to $382.0 million at July 1, 2023.

Other non-operating income .

Other non-operating income increased by $1.7 million in first half 2024 and includes a $0.8 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income and a $0.8 million favorable legal settlement.

Income tax expense .

Our effective income tax rate was 25.2% in both the first half 2024 and 2023.

The increase in income taxes is primarily the result of an increase in taxable income.

Segment Financial Results

We 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.

The following tables summarize information about our reportable segments for the thirteen week and twenty-six week periods ended June 29, 2024 and July 1, 2023 (in thousands):

Operating Revenues

Thirteen Weeks Ended

Twenty-six Weeks Ended

Contract logistics

Company-managed brokerage

Total operating revenues

Income from Operations

Thirteen Weeks Ended

Twenty-six Weeks Ended

Contract logistics

Company-managed brokerage

Total income from operations

Thirteen Weeks Ended June 29, 2024 Compared to Thirteen Weeks Ended July 1, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 26.2%.The increase in operating revenues was primarily due to our recently awarded specialty development project.

At the end of the second quarter 2024, we managed 68 value-added programs, unchanged from the second quarter 2023.

Included in contract logistics segment revenues for the thirteen weeks ended June 29, 2024, were $8.0 million in separately identified fuel surcharges from dedicated transportation services, compared to $8.6 million in the same period last year.

Income from operations increased $20.1 million and operating margin, as a percentage of revenue was 20.1% for the second quarter 2024, compared to 15.7% in the second quarter 2023.

Operating revenues in the intermodal segment decreased 14.8% primarily due to a decrease in the average operating revenue per load and the number of loads hauled.

Included in intermodal segment revenues for the second quarter 2024 were $10.9 million in separately identified fuel surcharges, compared to $13.6 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.1 million during the second quarter 2024 compared to $13.4 million in the second quarter 2023.

Load volumes declined 4.1%, while the average operating revenue per load, excluding fuel surcharges, fell 5.9% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the second quarter 2024 was (10.6)%, compared to (0.3)% one year earlier.

In the trucking segment, operating revenues increased 12.6% primarily due to an increase in the average revenue per load, excluding fuel surcharges.

Second quarter 2024 trucking segment revenues included $25.5 million of brokerage services compared to $30.7 million during the same period last year.

Also included in our trucking segment revenues were $5.7 million in separately identified fuel surcharges during the second quarter 2024 compared to $6.4 million in fuel surcharges in the second quarter 2023.

On a year-over-year basis, load volumes declined 11.1%;

however, the average operating revenue per load, excluding fuel surcharges, increased 28.5%, supported by our specialty, heavy-haul wind business.

As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended June 29, 2024, was 4.8% compared to 5.4% for the thirteen weeks ended July 1, 2023.

Operating revenues in the company-managed brokerage segment decreased 4.9% primarily due to a decrease in the average operating revenue per load.

On a year-over-year basis, average operating revenue per load in the company-managed brokerage segment decreased 21.9%.

As a percentage of revenue, operating margin for the first quarter 2024 was (8.0)% compared to (1.1)% during the same period last year.

This was partially offset by a 20.1% increase in load volumes.

As a percentage of revenue, operating margin for the second quarter 2024 was (7.9)% compared to (2.7)% during the same period last year.

Twenty-six Weeks Ended June 29, 2024 Compared to Twenty-six Weeks Ended July 1, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 37.4%.The increase in operating revenues was primarily due to our recently awarded specialty development project.

At the end of the first half 2024, we managed 68 value-added programs, unchanged from the first half 2023.

Included in contract logistics segment revenues for the twenty-six weeks ended June 29, 2024, were $16.6 million in separately identified fuel surcharges from dedicated transportation services, compared to $18.3 million in the same period last year.

Income from operations increased $73.8 million and operating margin, as a percentage of revenue was 23.3% for the first half 2024, compared to 14.4% in the first half 2023.

Operating revenues in the intermodal segment decreased 23.6% primarily due to a decrease in the average operating revenue per load and the number of loads hauled.

Included in intermodal segment revenues for the first half 2024 were $21.5 million in separately identified fuel surcharges, compared to $30.7 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $16.6 million during the first half 2024 compared to $39.4 million in the first half 2023.

Load volumes declined 9.3%, while the average operating revenue per load, excluding fuel surcharges, fell 3.1% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the first half 2024 was (10.6)%, compared to (3.2)% one year earlier.

In the trucking segment, operating revenues increased 0.1% primarily due to an increase in the average revenue per load, excluding fuel surcharges.

First half 2024 trucking segment revenues included $54.1 million of brokerage services compared to $65.4 million during the same period last year.

Also included in our trucking segment revenues were $11.1 million in separately identified fuel surcharges during the first half 2024 compared to $13.5 million in fuel surcharges in the first half 2023.

On a year-over-year basis, load volumes declined 9.1%;

however, the average operating revenue per load, excluding fuel surcharges, increased 11.1%, supported by our specialty, heavy-haul wind business.

As a percentage of revenue, operating margin in the trucking segment for the twenty-six weeks ended June 29, 2024, was 5.0% compared to 5.1% for the twenty-six weeks ended July 1, 2023.

Operating revenues in the company-managed brokerage segment decreased 6.9% primarily due to a decrease in the average operating revenue per load.

On a year-over-year basis, average operating revenue per load in the company-managed brokerage segment decreased 20.3%.

This was partially offset by a 13.7% increase in load volumes.

As a percentage of revenue, operating margin for the first half 2024 was (8.0)% compared to (1.8)% during the same period last year.

Liquidity and Capital Resources

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As a result, our capital expenditure requirements are limited in comparison to most large transportation and logistics service providers, which maintain significant properties and sizable fleets of owned tractors and trailers.

During the thirteen weeks ended March 30, 2024, our capital expenditures totaled $68.6 million.

These expenditures primarily consisted of transportation equipment and investments in support of our value-added service operations.

During the twenty-six weeks ended June 29, 2024, our capital expenditures totaled $145.7 million.

These expenditures primarily consisted of transportation equipment, investments in support of our value-added service operations and the expansion of our terminal network.

Our flexible business model depends somewhat on the customized solutions we implement for specific customers.

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The Board of Directors did not declare a special dividend in the first quarter of 2024.

On April 25, 2024, our Board of Directors did declare the regular quarterly cash dividend of $0.105 per share of common stock payable July 1, 2024 to shareholders of record at the close of business on June 3, 2024.

On July 25, 2024, our Board of Directors did declare the regular quarterly cash dividend of $0.105 per share of common stock payable October 1, 2024 to shareholders of record at the close of business on September 2, 2024.

During the year ended December 31, 2023, we paid a total of $0.42 per common share, or $11.0 million.

12 unchanged sentences

Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request.

At March 30, 2024, we were in compliance with all its covenants, and $362.2 million was available for borrowing.

At June 29, 2024, we were in compliance with all its covenants, and $337.0 million was available for borrowing.

Our UACL Credit Agreement provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027.

1 unchanged sentence

Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request.

At March 30, 2024, we were in compliance with all its covenants, and $10.0 million was available for borrowing.

At June 29, 2024, we were in compliance with all its covenants, and $5.0 million was available for borrowing.

A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment.

4 unchanged sentences

The facility bears interest at Term SOFR, plus an applicable margin equal to 2.12%.

At March 30, 2024, we were in compliance with all covenants under the facility.

At June 29, 2024, we were in compliance with all covenants under the facility.

We also maintain a short-term line of credit secured by our portfolio of marketable securities.

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The amount available under the margin facility is based on a percentage of the market value of the underlying securities.

We did not have any amounts advanced against the line as of March 30, 2024, and the maximum available borrowings were $5.7 million.

We did not have any amounts advanced against the line as of June 29, 2024, and the maximum available borrowings were $5.8 million.

Discussion of Cash Flows

At March 30, 2024, we had cash and cash equivalents of $11.1 million compared to $12.5 million at December 31, 2023.

At June 29, 2024, we had cash and cash equivalents of $7.5 million compared to $12.5 million at December 31, 2023.

Operating activities provided $46.4 million in net cash, financing activities provided an additional $95.8 million, and we used $144.6 million in investing activities.

1 unchanged sentence

Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $129.9 million.

The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, increases in contract assets and other receivables, and a decrease in other long-term liabilities.

These were partially offset by a decrease in trade accounts receivable and increases in trade accounts payable, accrued expenses and other current liabilities, accruals for insurance and claims, and in income taxes payable.

Affiliate transactions increased net cash provided by operating activities by $2.1 million.

The increase in net cash resulted from an increase in accounts payable to affiliates of $2.5 million, offset by an increase in accounts receivable from affiliates of $0.4 million.

The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, increases in contract assets, trade and other receivables, and decreases in other long-term liabilities and income taxes payable.

These were partially offset increases in trade accounts payable, accrued expenses and other current liabilities, and accruals for insurance and claims.

Affiliate transactions decreased net cash provided by operating activities by $0.4 million.

The decrease in net cash resulted from a decrease in accounts payable to affiliates of $0.3 million and an increase in accounts receivable from affiliates of $0.1 million.

The $144.6 million in net cash used in investing activities consisted of $145.7 million in capital expenditures, which was partially offset by $1.1 million in proceeds from the sale of equipment.

Financing activities provided $29.2 million in net cash during the thirteen weeks ended March 30, 2024.

We had outstanding borrowings totaling $418.4 million at March 30, 2024 compared to $386.4 million at December 31, 2023.

Financing activities provided $95.8 million in net cash during the twenty-six weeks ended June 29, 2024.

We had outstanding borrowings totaling $487.8 million at June 29, 2024 compared to $386.4 million at December 31, 2023.

During the period, we made payments on term loan and equipment and real estate notes totaling $59.6 million, borrowed $115.0 million for new equipment and had net borrowings on our revolving lines of credit totaling $46.1 million.

During the period, we also paid cash dividends of $2.8 million.

During the period, we also paid cash dividends of $5.5 million and purchased $0.1 million of treasury stock.

Off Balance Sheet Arrangements

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A summary of critical accounting policies is presented in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies,” of our Form 10-K for the year ended December 31, 2023.

There have been no changes in our accounting policies during the thirteen weeks ended March 30, 2024.

There have been no changes in our accounting policies during the thirteen weeks ended June 29, 2024.

Generally, demand for our value-added services delivered to existing customers increases during the second calendar quarter of each year as a result of the automotive industry’s spring selling season.

4 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have not been any material changes to the Company’s market risk during the thirteen weeks ended March 30, 2024.

There have not been any material changes to the Company’s market risk during the thirteen weeks ended June 29, 2024.

For additional information, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis