UNIVERSAL LOGISTICS HOLDINGS, INC. 10-Q

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events, future financial performance, anticipated demand for our services, expected operating results, future capital expenditures, liquidity, financing arrangements, market conditions, business strategies and other matters that are not historical facts. In some cases, forward-looking statements can be identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions. These forward-looking statements are based on management’s current beliefs, expectations and assumptions regarding future events and are subject to risks, uncertainties and other factors, many of which are beyond our control. Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include, among others, changes in freight demand, customer activity levels, automotive and industrial production, labor availability and costs, fuel prices, insurance costs, interest rates, capital expenditures, the availability of qualified owner-operators and drivers, the impact of inflationary pressures, the strength of the U.S. economy, the timing and success of cost reduction initiatives, changes in laws and regulations, cybersecurity risks, supply chain disruptions, and the other risks described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Overview Universal Logistics Holdings, Inc. is a holding company whose subsidiaries provide customized transportation and logistics solutions throughout the United States and in Mexico and Canada. On May 1, 2025, we completed a reincorporation from Michigan to Nevada pursuant to a statutory conversion approved by our stockholders. Through our operating subsidiaries, we provide an integrated portfolio of transportation and logistics services designed to support customers throughout their supply chains, including value-added, dedicated, intermodal and trucking services. Our operating subsidiaries provide a comprehensive suite of transportation and logistics solutions that allow our customers to reduce costs and manage their supply chains more efficiently. We market our services through a direct sales and marketing network focused on large customers in specific industry sectors, through company-managed facilities, and through a contract network of agents who solicit freight business directly from shippers. Our business model is designed to provide flexibility in managing purchased transportation, labor and equipment costs and to allow us to respond quickly to changes in customer demand and shipping volumes. We generate substantially all of our revenues from fees charged to customers for transportation services and customized logistics solutions. We also derive revenue from fuel surcharges, where separately identifiable, loading and unloading activities, equipment detention, container management, storage and other related services. Operations in our intermodal and trucking segments are generally associated with individual freight shipments coordinated by our agents and company-managed terminals. In contrast, our contract logistics segment provides value-added services and dedicated transportation solutions to specific customers, generally pursuant to contracts with terms of one year or longer. As a result, our contract logistics segment generally provides greater visibility into volumes and pricing, while our intermodal and trucking segments are more directly affected by spot market conditions, customer shipping patterns and general freight demand. Our segments are also distinguished by the extent to which we dedicate personnel, equipment and other resources to support customer-specific requirements. During the first quarter of 2026, we continued to operate in a challenging environment in certain parts of our business, particularly in intermodal and certain industrial and automotive end markets. Freight demand remained uneven, customer activity levels remained below historical levels in certain markets, and elevated labor, insurance, equipment, maintenance and borrowing costs continued to pressure margins. The following discussion of our financial condition and results of operations should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 and the unaudited Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q. 19 Current Economic Conditions We continue to operate in an uncertain macroeconomic environment. Freight demand remains uneven across many end markets, particularly in certain industrial, automotive and consumer-related sectors. Production levels and shipping volumes in certain automotive and heavy industrial markets have remained below historical levels, which has negatively affected demand for portions of our contract logistics, intermodal and trucking services. In addition, we continue to experience elevated costs for labor, employee benefits, insurance, equipment, maintenance, fuel and interest expense. While we seek to mitigate these pressures through pricing initiatives, productivity improvements, cost controls and customer contract renewals, there can be no assurance that such actions will fully offset increased costs or reductions in shipping volumes. New or increased tariffs on imported goods, trade restrictions, geopolitical instability, supply chain disruptions or other macroeconomic developments could adversely affect shipping volumes, customer demand and overall freight activity. These factors could negatively affect our revenues, profitability, cash flows and financial condition. Despite these challenges, we believe that cash generated from operations, available cash balances and borrowing capacity under our revolving credit facility and other financing arrangements will be sufficient to fund working capital needs, planned capital expenditures and debt service requirements over the next twelve months. However, our future liquidity, financial condition and results of operations will depend on a number of factors beyond our control, including freight demand, customer shipping patterns, pricing, labor availability, interest rates and broader economic conditions. Operating Revenues For financial reporting purposes, we group our services into five primary categories: truckload, brokerage, intermodal, dedicated, and value-added logistics services. Truckload, brokerage and intermodal services are generally associated with individual freight shipments coordinated by our agents and company-managed terminals, while dedicated and value-added services are typically provided pursuant to customer-specific arrangements, generally under contracts with terms of one year or longer. Truckload includes dry van, flatbed, heavy-haul and refrigerated transportation. Brokerage is provided through third-party transportation providers. Intermodal includes rail-truck, steamship-truck and related drayage support services. Dedicated consists generally of short-run or round-trip transportation services provided to specific customers within defined geographic areas. Value-added services include material handling, sequencing, warehousing, returnable container management, specialty project development and other customer-specific logistics solutions. The following table sets forth operating revenues from each of these service categories for the thirteen weeks ended April 4, 2026 and March 29, 2025, expressed as a percentage of total operating revenues. Thirteen Weeks Ended April 4, 2026 March 29, 2025 Operating revenues: Truckload services 9.2 % 9.9 % Brokerage services 4.6 5.3 Intermodal services 12.9 17.9 Dedicated services 22.9 22.2 Value-added services 50.4 44.7 Total operating revenues 100.0 % 100.0 % 20 Results of Operations The following table sets forth selected items derived from our consolidated statements of income for the thirteen weeks ended April 4, 2026 and March 29, 2025, expressed as a percentage of total operating revenues. The period-to-period discussion that follows should be read together with the table and focuses on the primary drivers of changes in revenues, operating expenses and profitability. During the first quarter of 2026, lower freight demand, softer automotive production and continued cost pressures in labor adversely affected our operating margins. Thirteen Weeks Ended April 4, 2026 March 29, 2025 Percent Change in Dollar Amount (Dollars in millions) $ % $ % % Operating revenues $ 367,575 100.0 % $ 382,390 100.0 % (3.9 )% Operating expenses: Purchased transportation and equipment rent 60,678 16.5 79,743 20.9 (23.9 ) Direct personnel and related benefits 176,203 47.9 164,501 43.0 7.1 Operating supplies and expenses 48,327 13.1 51,312 13.4 (5.8 ) Commission expense 4,186 1.1 4,255 1.1 (1.6 ) Occupancy expense 15,559 4.2 11,253 2.9 38.3 General and administrative 14,604 4.0 13,193 3.5 10.7 Insurance and claims 7,598 2.1 6,965 1.8 9.1 Depreciation and amortization 35,643 9.7 35,488 9.3 0.4 Total operating expenses 362,798 98.7 366,710 95.9 (1.1 ) Income from operations 4,777 1.3 15,680 4.1 (69.5 ) Interest expense, net (9,706 ) (2.7 ) (8,224 ) (2.2 ) 18.0 Other non-operating income 295 0.1 578 0.2 (49.0 ) Income (loss) before income taxes (4,634 ) (1.3 ) 8,034 2.1 (157.7 ) Income tax expense (benefit) (1,123 ) (0.3 ) 2,020 0.5 (155.6 ) Net income (loss) $ (3,511 ) -1.0 % $ 6,014 1.6 % (158.4 )% Operating Revenues Operating revenues decreased by $14.8 million, or 3.9%, to $367.6 million for the thirteen weeks ended April 4, 2026, from $382.4 million for the thirteen weeks ended March 29, 2025. The decrease was primarily attributable to lower freight demand in our intermodal and trucking segments, continued softness in certain industrial and automotive end markets, and lower fuel surcharge revenue. The decrease was partially offset by an increase in our contract logistics segment, primarily driven by an increase in our revenue from value-added programs. Included in operating revenues for the thirteen weeks ended April 4, 2026, were separately identified fuel surcharges of $18.4 million, compared to $20.9 million in the prior year period. Purchased Transportation and Equipment Rent Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and third-party capacity providers. Purchased transportation and equipment rent was $60.7 million for the thirteen weeks ended April 4, 2026, compared to $79.7 million in the prior year period. The decrease was primarily attributable to lower transactional transportation volumes and a decrease in the mix of owner-operators versus employee drivers in certain intermodal operations. Direct Personnel and Related Benefits Direct personnel and related benefits expense was $176.2 million for the thirteen weeks ended April 4, 2026, compared to $164.5 million in the prior year period. Trends in direct personnel and related benefits are generally correlated with operating facility requirements, headcount levels and labor utilization in our contract logistics segment, including value-added services and dedicated transportation, as well as the use of employee drivers in certain intermodal operations. The increase in the current year period was primarily attributable to certain new contract logistics programs. 21 Operating Supplies and Expenses Operating supplies and expenses include items such as fuel, maintenance, utilities, communications, equipment repairs, cost of materials and other operating costs. Operating supplies and expenses were $48.3 million for the thirteen weeks ended April 4, 2026, compared to $51.3 million in the prior year period. The decrease was primarily attributable to a decrease in maintenance and professional fees. Commission Expense Commission expense was $4.2 million for the thirteen weeks ended April 4, 2026, compared to $4.3 million in the prior year period. The change was primarily attributable to decreases in revenue generated through our agent-based trucking operations. Occupancy Expense Occupancy expense was $15.6 million for the thirteen weeks ended April 4, 2026, compared to $11.3 million in the prior year period. The change was primarily attributable to additional properties being leased. General and Administrative Expense General and administrative expense was $14.6 million for the thirteen weeks ended April 4, 2026, compared to $13.2 million in the prior year period. The change was primarily attributable to increases in salaries, wages and benefits. Insurance and Claims Expense Insurance and claims expense was $7.6 million for the thirteen weeks ended April 4, 2026, compared to $7.0 million in the prior year period. The change was primarily attributable to an increase in auto liability insurance premiums and claims expense. Depreciation and Amortization Depreciation and amortization expense was $35.6 million for the thirteen weeks ended April 4, 2026, compared to $35.5 million in the prior year period. Depreciation expense increased $2.8 million and amortization expense decreased $2.7 million. The increase in depreciation expense is primarily attributable to incremental fixed asset additions. The decrease in amortization is due to the previous impairment of certain customer-relationship intangible assets in our intermodal segment in the third quarter of 2025. Interest Expense, Net Net interest expense was $9.7 million for the thirteen weeks ended April 4, 2026, compared to $8.2 million in the prior year period. The change reflects increases in average borrowings outstanding as well as an increase in average interest rates on our outstanding borrowings. As of April 4, 2026, total outstanding borrowings were approximately $754.7 million, compared to $740.0 million as of March 29, 2025. Other Non-Operating Income Other non-operating income was $0.3 million for the thirteen weeks ended April 4, 2026, compared to $0.6 million in the prior year period. The decrease can be attributed to a decrease in dividends and gains on marketable equity securities. Income Tax (Benefit) Expense During the thirteen weeks ended April 4, 2026, we had an income tax benefit of $(1.1) million, compared to income tax expense of $2.0 million in the prior year period. The change is primarily attributed to a decrease in pre-tax income. Our effective income tax rate was 24.2% for the thirteen weeks ended April 4, 2026, compared to 25.1% in the prior year period. 22 Segment Financial Results We report our financial results in three reportable segments: contract logistics, intermodal and trucking. This presentation reflects the manner in which management evaluates the business, including the economic characteristics and operating performance of each segment. The following tables summarize information about our reportable segments for the thirteen weeks ended April 4, 2026 and March 29, 2025 (in thousands): Operating Revenues Thirteen Weeks Ended April 4, 2026 March 29, 2025 Contract logistics $ 269,533 $ 255,892 Intermodal 47,854 70,697 Trucking 50,188 55,582 Other — 219 Total operating revenues $ 367,575 $ 382,390 Income from Operations Thirteen Weeks Ended April 4, 2026 March 29, 2025 Contract logistics $ 17,472 $ 23,859 Intermodal (13,115 ) (10,709 ) Trucking 566 2,190 Other (146 ) 340 Total income from operations $ 4,777 $ 15,680 Contract Logistics Operating revenues in our contract logistics segment were $269.5 million for the thirteen weeks ended April 4, 2026, compared to $255.9 million in the prior year period. The change was primarily attributable to certain new value-added programs and increases in certain existing value-added program volumes. Included in contract logistics segment revenues for the thirteen weeks ended April 4, 2026, were separately identified fuel surcharges from dedicated transportation services of $7.9 million, compared to $8.6 million in the prior year period. Income from operations in the contract logistics segment was $17.5 million for the thirteen weeks ended April 4, 2026, compared to $23.9 million in the prior year period. Operating margin in the contract logistics segment was 6.5% for the current year period, compared to 9.3% in the prior year period. The change in operating margin was primarily attributable to an increase in labor costs. Intermodal Operating revenues in our intermodal segment were $47.9 million for the thirteen weeks ended April 4, 2026, compared to $70.7 million in the prior year period. The change was primarily attributable to decreases in load volumes and average operating revenue per load. Included in intermodal segment revenues for the thirteen weeks ended April 4, 2026, were separately identified fuel surcharges of $5.4 million, compared to $8.2 million in the prior year period. Intermodal segment revenues also included detention, demurrage and storage charges of $7.2 million, compared to $8.1 million in the prior year period. The loss from operations in the intermodal segment was $(13.1) million for the thirteen weeks ended April 4, 2026, compared to $(10.7) million in the prior year period. Operating margin in the intermodal segment was (27.4)% for the current year period, compared to (15.1)% in the prior year period. Trucking Operating revenues in our trucking segment were $50.2 million for the thirteen weeks ended April 4, 2026, compared to $55.6 million in the prior year period. The change was primarily attributable to decreases in load volumes and average operating revenue per load. Included in trucking segment revenues for the thirteen weeks ended April 4, 2026, were brokerage revenues of $16.2 million, compared to $18.0 million in the prior year period, and separately identified fuel surcharges of $3.6 million, compared to $3.5 million in the prior year period. Income from operations in the trucking segment was $0.6 million for the thirteen weeks ended April 4, 2026, compared to $2.2 million in the prior year period. Operating margin in the trucking segment was 1.1% for the current year period, compared to 3.9% in the prior year period. 23 Liquidity and Capital Resources Our primary uses of cash are working capital requirements, capital expenditures, debt service, dividend payments, share repurchases and acquisitions. Working capital requirements are generally driven by customer payment terms, payroll, fuel costs, insurance costs, purchased transportation costs and other operating expenses. As of April 4, 2026, we had cash and cash equivalents of approximately $17.9 million and approximately $286.1 million of availability under our revolving credit facility. Total outstanding borrowings were approximately $754.7 million, including borrowings under our revolving credit facility, equipment financing arrangements, a term loan facility secured by real estate and approximately $189.4 million of CTL financing. Although we were in compliance with all financial covenants as of April 4, 2026, our credit agreements require ongoing monitoring of leverage ratios, fixed charge coverage ratios, minimum liquidity levels and other financial covenants. Given the continued pressure on earnings from uneven freight demand, elevated interest rates and higher labor, insurance and maintenance costs, we continue to actively monitor covenant compliance, liquidity and borrowing capacity. We believe that cash generated from operations, together with available borrowings under our revolving credit facility and other financing arrangements, will be sufficient to fund our working capital needs, planned capital expenditures, debt service obligations and dividend payments for at least the next twelve months. Capital Expenditures Capital expenditures were $9.6 million for the thirteen weeks ended April 4, 2026. Capital expenditures primarily consisted of investments in transportation equipment, terminal facilities and expenditures in support of value-added programs. For the remainder of 2026, we currently expect capital expenditures to be approximately $75.0 million. Actual spending may vary based on customer demand, equipment availability, pricing, timing of value-added opportunities, market conditions and liquidity considerations. Discussion of Cash Flows Net cash provided by operating activities was $33.4 million for the thirteen weeks ended April 4, 2026. Net cash provided by investing activities was $2.0 million and primarily reflected the proceeds from the sales of marketable securities and equipment, which was partially offset by capital expenditures. Net cash used in financing activities was $50.4 million and primarily reflected net borrowings, equipment financing activity, dividend payments and other financing transactions. Off-Balance Sheet Arrangements As of April 4, 2026, we had no off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies A summary of our critical accounting policies is presented in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies,” included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our critical accounting policies during the thirteen weeks ended April 4, 2026. Seasonality Our value-added logistics services experience seasonal demand patterns driven by automotive production schedules, customer shutdown periods and model changeovers. Transportation services are also affected by weather patterns, holiday shipping schedules and changes in customer production levels.