What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-12 compared with 2020-08-13 · 141 added, 143 removed, 166 unchanged (63% of the section changed)

24 unchanged sentences

COVID-19 Pandemic

The Company remains committed to doing its part to protect its employees, customers, vendors and the general public from the spread of the coronavirus outbreak (COVID-19), which was declared a pandemic by the World Health Organization in March of 2020.

The Company remains committed to doing its part to protect its employees, customers, vendors and the general public from the spread of the coronavirus outbreak (COVID-19).

We have distributed cleaning and protective supplies to our workforce, increased cleaning frequency and coverage, and provided employees direction on precautionary measures, such as sanitizing truck interiors, personal hygiene, and social distancing.

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 continued spread of COVID-19 has resulted in governmental authorities enforcing measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home orders, increased border security and shutdowns.

These on-going measures severely disrupted economic and commercial activity, and caused slowdowns and reduced demand for transportation and manufacturing support services for logistics companies such as ours.

As the escalation of the COVID-19 pandemic extended into the second quarter, the Company experienced the increasing effects of weakening economic conditions, most notably related to the shutdown of automotive and heavy-truck production for several weeks during the quarter.

The Company’s revenues, particularly in its dedicated transportation and value-added service operations, are highly dependent on these manufacturing sectors.

On a consolidated basis, activities supporting automotive and heavy-truck production represents approximately 30% of total revenue.

Although most automotive and heavy-truck operations have resumed production, additional closures and other consumer activity affecting our customers and any future wave of the virus or other similar outbreaks could further adversely affect our business.

A significant portion of our revenue is also provided by a network of agents and owner-operators located throughout the United States and in Ontario, Canada.

As the COVID-19 virus continues to spread in areas we service, a significant impact to our network due to illness or government restrictions could have a material adverse effect on our ability to service our customers and on our business and results of operations.

The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its continued severity, government regulations imposed in response to the pandemic, and to its general effect on the economy and transportation demand.

To mitigate the impact on our business, we implemented numerous cost reduction efforts including furloughing a large portion of our direct labor force, requiring salaried personnel to take unpaid time-off, restricting travel, reducing discretionary spending, and various other measures.

The spread of COVID-19 resulted in governmental authorities enforcing measures to try to contain the virus , which severely disrupted e conomic and commercial activity during the latter part of the first and most of the second quarter of 2020 .

To mitigate the impact on our business, we implemented numerous cost reduction efforts including furloughing a large portion of our direct labor force, requiring personnel to take unpaid time-off, restricting travel, reducing discretionary spending, and various other measures .

During the third quarter 2020, we experienced a rebound in demand for transportation and manufacturing support services and experienced a more normalized level of business activity.

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 .

While operating cash flows may continue to be negatively impacted by the pandemic, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities.

The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its severity, government regulations imposed in response to the pandemic, and to its general effect on the economy and transportation demand.

While operating cash flows be negatively impacted by the pandemic, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities.

Should the impact of the COVID-19 pandemic last longer than anticipated, and/or our cash flow from operations decline more than expected, we may need to obtain additional financing.

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Our truckload, brokerage and intermodal services associated with individual freight shipments coordinated by our agents and Company-managed terminals are generally aggregated into our reportable transportation segment, while our dedicated and value-added services to specific customers on a contractual basis make up our logistics segment.

The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks and twenty-six weeks ended July 4, 2020 and June 29, 2019, presented as a percentage of total operating revenues:

The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks and thirty-nine weeks ended October 3, 2020 and September 28, 2019, presented as a percentage of total operating revenues:

Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

Operating revenues:

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Results of Operations

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks and twenty-six weeks ended July 4, 2020 and June 29, 2019, presented as a percentage of operating revenues:

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks and thirty-nine weeks ended October 3, 2020 and September 28, 2019, presented as a percentage of operating revenues:

Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

Operating revenues:

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Total operating expenses

Income from operations

Income (loss) from operations

Interest and other non-operating income

(expense), net

Income before income taxes

Income tax expense

Thirteen Weeks Ended July 4, 2020 Compared to Thirteen Weeks Ended June 29, 2019

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Thirteen Weeks Ended October 3, 2020 Compared to Thirteen Weeks Ended September 28, 2019

Operating revenues .

Operating revenues for the thirteen weeks ended July 4, 2020 decreased $125.2 million, or 32.7%, to $258.0 million from $383.2 million for the thirteen weeks ended June 29, 2019.

Included in operating revenues are separately-identified fuel surcharges of $12.4 million for the thirteen weeks ended July 4, 2020 compared to $22.9 million for the thirteen weeks ended June 29, 2019.

Consolidated income from operations decreased $19.9 million, or 64.7%, to $10.8 million during the thirteen week period ended July 4, 2020 compared to $30.7 million during the same period last year.

Revenues from our transportation segment decreased $65.9 million, or 26.2%, while income from operations decreased $3.3 million, or 24.5%, compared to the same period last year.

The transportation segment was negatively impacted by a significant decline in volumes during the second quarter of 2020 due to the economic slowdown resulting from the COVID-19 pandemic.

In our logistics segment, revenues decreased $59.4 million, or 45.3%, over the same period last year and income from operations decreased $16.6 million, or 95.7%.

In North America, the resulting effects of the COVID-19 pandemic led to the shutdown of automotive and heavy-truck manufacturing for much of the second quarter of 2020, which adversely impacted our logistics segment results.

Operating revenues from truckload services decreased $24.3 million to $40.5 million during the thirteen weeks ended July 4, 2020, compared to $64.8 million for the same period last year.

Operating revenues for the thirteen weeks ended October 3, 2020 decreased $10.5 million, or 2.8%, to $365.0 million from $375.5 million for the thirteen weeks ended September 28, 2019.

Included in operating revenues are separately-identified fuel surcharges of $16.4 million for the thirteen weeks ended October 3, 2020 compared to $21.5 million for the thirteen weeks ended September 28, 2019.

Consolidated income from operations increased $29.4 million to $22.1 million during the thirteen week period ended October 3, 2020 compared to an operating loss of $7.4 million during the same period last year.

Revenues from our transportation segment decreased $17.1 million, or 6.7%, due to decreased truckload and brokerage volumes, while income from operations increased $27.6 million compared to the same period last year.

Included in the transportation segment’s third quarter 2019 operating loss were $27.0 million in non-recurring litigation charges for a previously disclosed legal matters.

In our logistics segment, revenues increased $6.7 million, or 5.5%, over the same period last year and income from operations increased $1.8 million, or 18.1%.

The increases in revenue and operating income were primarily attributable to strong third quarter 2020 automotive production compared to the third quarter of 2019 during which the United Auto Workers (UAW) was on strike against General Motors.

Operating revenues from truckload services decreased $10.4 million to $52.2 million during the thirteen weeks ended October 3, 2020, compared to $62.6 million for the same period last year.

Included in truckload revenues for the recently completed quarter were $3.6 million in separately identified fuel surcharges compared to $6.4 million during the same period last year.

The decrease in truckload services reflects a 17.3% decrease in the number of loads hauled which was partially offset by a 6.2% increase in average operating revenue per load, excluding fuel surcharges.

During the quarter ended July 4, 2020, Universal moved 36,445 loads compared to 61,423 during the same period last year.

Revenues during the thirteen weeks ended July 4, 2020 from brokerage services decreased $26.6 million, or 29.8%, to $62.8 million compared to $89.4 million one year earlier.

The decrease is primarily due to a 17.2% decrease in the number of brokerage loads moved and a 16.7% decrease average operating revenue per load.

During the second quarter of 2020, Universal brokered 47,797 loads, compared to 57,710 loads during the same period last year.

Intermodal services revenues decreased $11.0 million, or 11.7%, to $82.9 million during the thirteen weeks ended July 4, 2020, down from $93.9 million during the same period last year.

Intermodal revenues during the thirteen weeks ended July 4, 2020 also included $8.2 million in separately identified fuel surcharges, compared to $11.6 million during the same period last year.

The decrease is due to decreases in the average operating revenue per load, excluding fuel surcharges, and in the number of loads hauled.

During the thirteen weeks ended July 4, 2020, Universal moved 156,779 intermodal loads, compared to 164,761 loads during the same period last year, a decrease of 4.8%, while its average operating revenue per load, excluding fuel surcharges, decreased by 3.0%.

Operating revenues from dedicated services during the thirteen weeks ended July 4, 2020 decreased to $18.0 million compared to $35.9 million one year earlier.

Dedicated services revenues included $1.3 million in separately identified fuel surcharges in the thirteen weeks ended July 4, 2020 compared to $4.3 million during the same period last year.

The decrease in operating revenues was primarily attributable to the shutdown of North American automotive manufacturing for several weeks during the quarter.

Value-added services revenues decreased $45.5 million to $53.8 million in the thirteen weeks ended July 4, 2020.

During the quarter ended October 3, 2020, Universal moved 46,712 loads compared to 56,510 during the same period last year.

Revenues during the thirteen weeks ended October 3, 2020 from brokerage services decreased $3.9 million, or 4.1%, to $90.6 million compared to $94.4 million one year earlier.

The decrease is primarily due to a 10.1% decrease in the number of brokerage loads moved, which was partially offset by a 6.4% increase in average operating revenue per load.

During the third quarter of 2020, Universal brokered 54,919 loads, compared to 61,072 loads during the same period last year.

Intermodal services revenues increased $1.

5 million, or 1.6%, to $94.5 million during the thirteen weeks ended October 3, 2020, up from $93.0 million during the same period last year.

Intermodal revenues during the thirteen weeks ended October 3, 2020 also included $9.4 million in separately identified fuel surcharges, compared to $11.4 million during the same period last year.

The increase in intermodal services reflects an increase in the number of loads hauled, which was partially offset by a decrease in the average operating revenue per load, excluding fuel surcharges.

During the quarter ended October 3, 2020, Universal moved 182,803 intermodal loads, compared to 154,600 loads during the same period last year, while its average operating revenue per load, excluding fuel surcharges, fell by 11.0%.

Operating revenues from dedicated services during the thirteen weeks ended October 3, 2020 increased 20.3% to $39.4 million compared to $32.7 million one year earlier.

Dedicated services revenues included $3.4 million in separately identified fuel surcharges in the thirteen weeks ended October 3, 2020 compared to $3.6 million during the same period last year.

During the third quarter of 2020, Universal moved 160,694 dedicated loads, compared to 138,934 loads during the same period last year.

The increase in the third quarter 2020 was attributable to strong volumes in North American automotive production compared to the third quarter of last year which included a UAW labor strike against General Motors.

Value-added services revenues decreased $4.4 million to $88.3 million in the thirteen weeks ended October 3, 2020.

This compares to $92.7 million from value-added services one year earlier.

Operations supporting passenger vehicle programs declined during the period due to plant shutdowns and reduced production during ramp up near the end of the second quarter.

Value-added operations supporting heavy-truck production also decreased this quarter falling $20.6 million in the thirteen weeks ended July 4, 2020 compared to the same period last year.

Both platforms were adversely impacted by the shutdown of North American automotive and heavy-truck manufacturing for several weeks during the quarter.

Value-added operations supporting heavy-truck production fell $6.8 million in the thirteen weeks ended October 3, 2020 compared to the same period last year.

The decrease was partially offset by operations supporting passenger vehicle programs which saw increases due to robust activity throughout the third quarter 2020.

Additionally, the prior year was adversely impacted by the UAW labor strike halting vehicle production at several of our value-added operations.

Purchased transportation and equipment rent .

Purchased transportation and equipment rental costs for the thirteen weeks ended July 4, 2020 decreased by $49.7 million, or 27.9%, to $128.6 million from $178.4 million for the thirteen weeks ended June 29, 2019.

Purchased transportation and equipment rental costs for the thirteen weeks ended October 3, 2020 decreased by $6.7 million, or 3.6%, to $177.2 million from $183.9 million for the thirteen weeks ended September 28, 2019.

Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers, and is correlated with changes in demand for transportation-related services, which includes truckload, brokerage, intermodal and dedicated services.

As a percentage of operating revenues, purchased transportation and equipment rent expense increased to 49.9% for the thirteen weeks ended July 4, 2020 from 46.5% during the same period last year.

The increase was due to an increase in the mix of transportation-related service revenue.

As a percentage of total revenues, transportation-related service revenue increased to 79.2% for the thirteen weeks ended April 4, 2020 compared to 74.1% in the same period last year.

The absolute decrease in purchased transportation and equipment rental costs was primarily the result of a decrease in transportation-related service revenues.

For the thirteen weeks ended October 3, 2020, transportation-related services revenues decreased 2.2% compared to the same period last year.

As a percentage of operating revenues, purchased transportation and equipment rent expense decreased to 48.6% for the thirteen weeks ended October 3, 2020 from 49.0% during the same period last year.

The decrease was due to an increase in the mix of intermodal revenues, where the cost of transportation is typically lower than our other transportation businesses.

As a percentage of total revenues, intermodal services revenue increased to 25.9% for the thirteen weeks ended April 4, 2020 compared to 24.8% in the same period last year.

Direct personnel and related benefits .

Direct personnel and related benefits expenses for the thirteen weeks ended July 4, 2020 decreased by $36.1 million, or 38.5%, to $57.6 million compared to $93.7 million for the thirteen weeks ended June 29, 2019.

Direct personnel and related benefits expenses for the thirteen weeks ended October 3, 2020 decreased by $3.1 million, or 3.3%, to $88.9 million compared to $91.9 million for the thirteen weeks ended September 28, 2019.

Trends in these expenses are generally correlated with changes in operating facilities and headcount requirements and, therefore, increase and decrease with the level of demand for our value-added services and staffing needs of our operations.

The decrease was due to layoffs and temporary furloughs to right-size staffing as a cost cutting measure in response to the economic slowdown as a result of the COVID-19 pandemic.

As a percentage of operating revenues, personnel and related benefits expenses decreased to 22.3% for the thirteen weeks ended July 4, 2020, compared to 24.4% during the same period last year.

As a percentage of operating revenues, personnel and related benefits expenses decreased slightly to 24.4% for the thirteen weeks ended October 3, 2020, compared to 24.5% during the same period last year.

The percentage of direct personnel and related benefit expenses is derived on an aggregate basis from both existing and new programs, and from customer operations at various stages in their lifecycles.

2 unchanged sentences

Operating supplies and expenses .

Operating supplies and expenses decreased by $13.8 million, or 44.8%, to $17.0 million for the thirteen weeks ended July 4, 2020 compared to $30.7 million for the thirteen weeks ended June 29, 2019.

Operating supplies and expenses increased by $0.5 million, or 1.8%, to $31.0 million for the thirteen weeks ended October 3, 2020 compared to $30.5 million for the thirteen weeks ended September 28, 2019.

These 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 decrease was primarily due to operational cost cutting measures in response to the economic slowdown caused by the COVID-19 pandemic.

The primary elements of the decrease included decreases of $6.0 million in operating supplies and material costs in operations supporting heavy-truck programs, $3.7 million in fuel expense on company tractors, $2.7 million in vehicle maintenance, and $1.1 million in travel and entertainment.

The primary elements of the increase included increases of $0.7 million in operating supplies and material costs in operations supporting heavy-truck programs, $0.6 million in communications expense, and $0.5 million in professional fees.

These increases were partially offset by decreases of $0.7 million in fuel expense on company tractors, $0.3 million in travel and entertainment, and $0.2 million in bad debt expense.

Commission expense .

Commission expense for the thirteen weeks ended July 4, 2020 decreased by $2.8 million, or 36.1%, to $5.0 million from $7.9 million for the thirteen weeks ended June 29, 2019.

Commission expense for the thirteen weeks ended October 3, 2020 decreased by $1.2 million, or 15.5%, to $6.8 million from $8.0 million for the thirteen weeks ended September 28, 2019.

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

As a percentage of operating revenues, commission expense decreased to 1.9% compared to 2.1% for the thirteen weeks ended June 29, 2019.

As a percentage of operating revenues, commission expense decreased to 1.9% compared to 2.1% for the thirteen weeks ended September 28, 2019.

Occupancy expense .

Occupancy expenses decreased by $0.9 million, or 8.9%, to $9.0 million for the thirteen weeks ended July 4, 2020 compared to $9.9 million for the thirteen weeks ended June 29, 2019.

The decrease was primarily attributable to a decrease in building rents as we consolidated facilities for certain value-added programs.

Occupancy expenses increased by $0.3 million, or 3.5%, to $8.7 million for the thirteen weeks ended October 3, 2020 compared to $8.4 millio n for the thirteen weeks ended September 28, 2019.

The increase was primarily attributable to an increase in building rents .

General and administrative .

General and administrative expense decreased by $3.1 million, or 31.7%, to $6.6 million from $9.6 million in the thirteen weeks ended June 29, 2019.

The decrease was primarily attributable to a decrease in salaries, wages, and benefit costs.

Also included in general and administrative expense for the thirteen weeks ended July 4, 2020 was $0.5 million in professional service fees associated with the June 2020 cyber-attack.

As a percentage of operating revenues, general and administrative expense increased to 2.6% for the thirteen weeks ended July 4, 2020 compared to 2.5% in the prior year.

General and administrative expense decreased by $2.8 million, or 24.9%, to $8.6 million from $11.4 million in the thirteen weeks ended September 28, 2019.

The decrease was primarily attributable to $2.2 million in litigation charges included in the third quarter of 2019 as well as a decrease in salaries, wages, and benefit costs.

As a percentage of operating revenues, general and administrative expense decreased to 2.4% for the thirteen weeks ended October 3, 2020 compared to 3.0% in the prior year.

Insurance and claims .

Insurance and claims expense for the thirteen weeks ended July 4, 2020 decreased by $0.1 million, or 1.9%, to $4.9 million from $5.0 million for the thirteen weeks ended June 29, 2019.

The decrease was attributable to a decrease in our auto liability premiums and contractor insurance.

This was largely offset by an increase in cargo and service failure claims , including $0.5 million in service claims related to the June 2020 cyber-attack .

As a percentage of operating revenues, insurance and claims increased to 1.9 % for the thirteen weeks ended July 4, 2020 compared to 1.

3 % for the thirteen weeks ended June 29, 2019.

Insurance and claims expense for the thirteen weeks ended October 3, 2020 decreased by $25.0 million, or 83.5%, to $4.9 million from $29.9 million for the thirteen weeks ended September 28, 2019.

The decrease was attributable to a $24.8 million charge for a legal settlement in the third quarter of 2019.

As a percentage of operating revenues, insurance and claims decreased to 1.3% for the thirteen weeks ended October 3, 2020 compared to 8.0% for the thirteen weeks ended September 28, 2019.

Depreciation and amortization .

Depreciation and amortization expense for the thirteen weeks ended July 4, 2020 increased by $1.1 million, or 6.4%, to $18.5 million from $17.4 million for the thirteen weeks ended June 29, 2019.

During the thirteen weeks ended July 4, 2020, depreciation expense increased $1.2 million and amortization expense decreased $0.1 million.

The increase in depreciation expense is attributable to additional cost from the continued recapitalization of our fleet.

Depreciation and amortization expense for the thirteen weeks ended October 3, 2020 decreased by $1.9 million, or 10.2%, to $16.9 million from $18.8 million for the thirteen weeks ended September 28, 2019.

During the thirteen weeks ended October 3, 2020, depreciation expense decreased $0.9 million and amortization expense decreased $1.0 million.

Interest expense, net .

Net interest expense was $3.4 million for the thirteen weeks ended July 4, 2020 compared to $4.1 million for the thirteen weeks ended June 29, 2019.

Net interest expense was $3.5 million for the thirteen weeks ended October 3, 2020 compared to $4.1 million for the thirteen weeks ended September 28, 2019.

The decrease in net interest expense reflects a decrease in the average interest rate on our outstanding borrowings.

As of July 4, 2020, our outstanding borrowings were $405.6 million compared to $372.2 million at June 29, 2019.

As of October 3, 2020, our outstanding borrowings were $468.3 million compared to $388.8 million at September 28, 2019.

Other non-operating income (expense) .

Other non-operating income for the thirteen weeks ended July 4, 2020 was $0.8 million compared to $0.1 million for the thirteen weeks ended June 29, 2019.

During the thirteen weeks ended July 4, 2020 there were $0.9 million of holding gains from changes in the fair market value of marketable securities compared to $0.1 million of realized gain on sales of marketable securities in the thirteen weeks ended June 29, 2019.

Other non-operating expense for the thirteen weeks ended October 3, 2020 was $0.5 million compared to other non-operating income of $0.2 million for the thirteen weeks ended September 28, 2019.

During the thirteen weeks ended October 3, 2020 there were $0.5 million of holding losses from changes in the fair market value of marketable securities compared to $0.1 million of realized gain on sales of marketable securities in the thirteen weeks ended September 28, 2019.

Income tax expense .

Income tax expense for the thirteen weeks ended July 4, 2020 was $2.0 million compared to $6.7 million for the thirteen weeks ended June 29, 2019, based on an effective tax rate 24.9% and 25.2% respectively.

The decrease in income tax expense is attributable to a decrease in taxable earnings and our effective tax rate.

Twenty-six Weeks Ended July 4, 2020 Compared to Twenty-six Weeks Ended June 29, 2019

Income tax expense for the thirteen weeks ended October 3, 2020 was $4.5 million compared to an income tax benefit of $2.8 million for the thirteen weeks ended September 28, 2019, based on an effective tax rate 24.8% and 25.3% respectively.

The increase in income tax expense is attributable to an increase in taxable earnings.

Thirty-nine Weeks Ended October 3, 2020 Compared to Thirty-nine Weeks Ended September 28, 2019

Operating revenues .

Operating revenues for the twenty-six weeks ended July 4, 2020 decreased $120.4 million, or 15.8%, to $640.1 million from $760.6 million for the twenty-six weeks ended June 29, 2019.

Included in operating revenues are separately-identified fuel surcharges of $32.4 million for the twenty-six weeks ended July 4, 2020 compared to $45.1 million for the twenty-six weeks ended June 29, 2019.

Consolidated income from operations decreased $22.5 million, or 39.3%, to $34.7 million during the twenty-six week period ended July 4, 2020 compared to $57.2 million during the same period last year.

Revenues from our transportation segment decreased $58.0 million, or 11.6%, while income from operations decreased $3.7 million, or 14.3%, compared to the same period last year.

The transportation segment was negatively impacted by a significant decline in volumes during the first half of 2020 due to the economic slowdown resulting from the COVID-19 pandemic.

Operating revenues for the thirty-nine weeks ended October 3, 2020 decreased $130.9 million, or 11.5%, to $1,005.1 million from $1,136.1 million for the thirty-nine weeks ended September 28, 2019.

Included in operating revenues are separately-identified fuel surcharges of $51.9 million for the thirty-nine weeks ended October 3, 2020 compared to $66.6 million for the thirty-nine weeks ended September 28, 2019.

Consolidated income from operations increased $6.9 million, or 13.9%, to $56.8 million during the thirty-nine week period ended October 3, 2020 compared to $49.9 million during the same period last year.

Revenues from our transportation segment decreased $75.0 million, or 10.0%, while income from operations increased $23.9 million compared to the same period last year.

Revenues from the transportation segment decreased due to decreased volumes at our truckload services and decreased volumes and rates at our brokerage services.

The increase in operating income was primarily attributable to $27.0 million in charges related to legal matters in the third quarter of 2019.

In our logistics segment, revenues decreased $56.0 million, or 14.6%, over the same period last year and income from operations decreased $16.9 million, or 41.4%.

In North America, the resulting effects of the COVID-19 pandemic led to the shutdown of automotive and heavy-truck manufacturing in the first half of 2020 which adversely impacted our logistics segment results.

Operating revenues from truckload services decreased $31.1 million to $99.4 million during the twenty-six weeks ended July 4, 2020, compared to $130.5 million for the same period last year.

Included in truckload revenues for the recently completed twenty-six week period were $5.8 million in separately identified fuel surcharges compared to $13.8 million during the same period last year.

The decrease in truckload services reflects a 24.0% decrease in the number of loads hauled.

During the twenty-six weeks ended July 4, 2020, Universal moved 93,132 loads compared to 122,515 during the same period last year.

Revenues during the twenty-six weeks ended July 4, 2020 from brokerage services decreased $26.6 million, or 15.2%, to $148.7 million compared to $175.2 million one year earlier.

Our logistics segment results included the impact of the United Auto Workers (UAW) labor strike against General Motors in the third quarter of 2019.

Operating revenues from truckload services decreased $41.5 million to $151.6 million during the thirty-nine weeks ended October 3, 2020, compared to $193.1 million for the same period last year.

Included in truckload revenues for the recently completed thirty-nine week period were $12.4 million in separately identified fuel surcharges compared to $20.3 million during the same period last year.

The decrease in truckload services reflects a 21.9% decrease in the number of loads hauled, which was partially offset by a 6.7% increase in average operating revenue per load.

During the thirty-nine weeks ended October 3, 2020, Universal moved 139,844 loads compared to 179,025 during the same period last year.

Revenues during the thirty-nine weeks ended October 3, 2020 from brokerage services decreased $30.4 million, or 11.3%, to $239.2 million compared to $269.7 million one year earlier.

The decrease is due to a 5.0% decrease in the number of brokerage loads moved as well as a 4.8% decrease in the average operating revenue per load.

During the twenty-six weeks ended July 4, 2020, Universal moved 108,849 loads, compared to 111,319 loads during the same period last year.

Intermodal services revenues increased $8.2 million, or 4.4%, to $193.2 million during the twenty-six weeks ended July 4, 2020, up from $185.0 million during the same period last year.

Intermodal revenues during the twenty-six weeks ended July 4, 2020 also included $21.8 million in separately identified fuel surcharges, compared to $22.2 million during the same period last year.

During the thirty-nine weeks ended October 3, 2020, Universal moved 163,768 loads, compared to 172,391 loads during the same period last year.

Intermodal services revenues increased $9.7 million, or 3.5%, to $287.7 million during the thirty-nine weeks ended October 3, 2020, up from $278.0 million during the same period last year.

Intermodal revenues during the thirty-nine weeks ended October 3, 2020 also included $31.2 million in separately identified fuel surcharges, compared to $33.6 million during the same period last year.

The increase is attributable to an increase in the number of intermodal loads hauled, which was partially offset by a decrease in the average operating revenue per load, excluding fuel surcharges.

During the twenty-six weeks ended July 4, 2020, Universal moved 354,562 intermodal loads, compared to 329,938 loads during the same period last year, an increase of 7.5%, while the average operating revenue per load, excluding fuel surcharges, declined 1.2%.

Operating revenues from dedicated services during the twenty-six weeks ended July 4, 2020 decreased to $49.6 million compared to $72.9 million one year earlier.

Dedicated services revenues included $4.8 million in separately identified fuel surcharges in the twenty-six weeks ended July 4, 2020 compared to $8.9 million during the same period last year.

The decrease in operating revenues was primarily attributable to the shutdown of North American automotive manufacturing for several weeks during the first half of 2020.

Value-added services revenues decreased $47.7 million to $149.2 million in the twenty-six weeks ended July 4, 2020.

During the thirty-nine weeks ended October 3, 2020, Universal moved 537,365 intermodal loads, compared to 484,539 loads during the same period last year, an increase of 10.9%, while the average operating revenue per load, excluding fuel surcharges, declined 5.2%.

Operating revenues from dedicated services during the thirty-nine weeks ended October 3, 2020 decreased to $89.0 million compared to $105.6 million one year earlier.

Dedicated services revenues included $8.2 million in separately identified fuel surcharges in the thirty-nine weeks ended October 3, 2020 compared to $12.5 million during the same period last year.

The decrease in operating revenues was primarily attributable to the shutdown of North American automotive manufacturing for several weeks during the first half of 2020 caused by the COVID-19 pandemic.

Value-added services revenues decreased $52.1 million to $237.5 million in the thirty-nine weeks ended October 3, 2020.

This compares to $289.6 million from value-added services one year earlier.

Value-added operations supporting heavy-truck production saw revenues decrease by $26.9 million in the first half of 2020, while operations supporting passenger vehicle programs also saw decreased revenues compared to the same period last year.

Value-added operations supporting heavy-truck production saw revenues decrease by $33.7 million in the thirty-nine weeks ended October 3, 2020, while operations supporting passenger vehicle programs also saw decreased revenues compared to the same period last year.

Both platforms were adversely impacted by the shutdown of North American automotive and heavy-truck manufacturing during the first half of 2020.

Purchased transportation and equipment rent .

Purchased transportation and equipment rental costs for the twenty-six weeks ended July 4, 2020 decreased by $46.2 million, or 13.0%, to $309.5 million from $355.7 million for the twenty-six weeks ended June 29, 2019.

Purchased transportation and equipment rental costs for the thirty-nine weeks ended October 3, 2020 decreased by $52.9 million, or 9.8%, to $486.7 million from $539.6 million for the thirty-nine weeks ended September 28, 2019.

The absolute decrease in purchased transportation and equipment rental costs was primarily the result of a decrease in transportation-related service revenues.

For the twenty-six weeks ended July 4, 2020, transportation-related services revenues decreased 12.9% compared to the same period last year.

As a percentage of operating revenues, purchased transportation and equipment rent expense increased to 48.3% for the twenty-six weeks ended July 4, 2020 from 46.8% during the same period last year.

For the thirty-nine weeks ended October 3, 2020, transportation-related services revenues decreased 9.3% compared to the same period last year.

As a percentage of operating revenues, purchased transportation and equipment rent expense increased to 48.4% for the thirty-nine weeks ended October 3, 2020 from 47.5% during the same period last year.

The increase was due to an increase in the mix of transportation-related service revenue.

As a percentage of total revenues, transportation-related service revenue increased to 76.7% for the twenty-six weeks ended July 4, 2020 compared to 74.1% in the same period last year.

As a percentage of total revenues, transportation-related service revenue increased to 76.4% for the thirty-nine weeks ended October 3, 2020 compared to 74.5% in the same period last year.

Direct personnel and related benefits .

Direct personnel and related benefits expenses for the twenty-six weeks ended July 4, 2020 decreased by $31.8 million, or 17.0%, to $155.0 million compared to $186.8 million for the twenty-six weeks ended June 29, 2019.

Direct personnel and related benefits expenses for the thirty-nine weeks ended October 3, 2020 decreased by $34.9 million, or 12.5%, to $243.9 million compared to $278.8 million for the thirty-nine weeks ended September 28, 2019.

The decrease was due to layoffs and temporary furloughs to right-size staffing as a cost cutting measure in response to the economic slowdown as a result of the COVID-19 pandemic.

As a percentage of operating revenues, personnel and related benefits expenses decreased to 24.2% for the twenty-six weeks ended July 4, 2020, compared to 24.6% during the same period last year.

As a percentage of operating revenues, personnel and related benefits expenses decreased to 24.3% for the thirty-nine weeks ended October 3, 2020, compared to 24.5% during the same period last year.

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Operating supplies and expenses .

Operating supplies and expenses decreased by $13.9 million, or 22.5%, to $47.7 million for the twenty-six weeks ended July 4, 2020 compared to $61.5 million for the twenty-six weeks ended June 29, 2019.

Operating supplies and expenses decreased by $13.3 million, or 14.5%, to $78.7 million for the thirty-nine weeks ended October 3, 2020 compared to $92.0 million for the thirty-nine weeks ended September 28, 2019.

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

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The primary elements of the decrease included decreases of $6.1 million in operating supplies and material costs in operations supporting heavy-truck programs, $4.7 million in fuel expense on company tractors, $2.8 million in vehicle maintenance, and $1.6 million in travel and entertainment.

These decreases were partially offset by an increases of $1.4 million in professional service fees.

These decreases were partially offset by an increase of $1.9 million in professional service fees.

Commission expense .

Commission expense for the twenty-six weeks ended July 4, 2020 decreased by $3.5 million, or 22.3%, to $12.2 million from $15.7 million for the twenty-six weeks ended June 29, 2019.

Commission expense for the thirty-nine weeks ended October 3, 2020 decreased by $4.7 million, or 20.0%, to $19.0 million from $23.7 million for the thirty-nine weeks ended September 28, 2019.

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

As a percentage of operating revenues, commission expense decreased to 1.9% compared to 2.1% for the twenty-six weeks ended June 29, 2019.

As a percentage of operating revenues, commission expense decreased to 1.9% compared to 2.1% for the thirty-nine weeks ended September 28, 2019.

Occupancy expense .

Occupancy expenses decreased by $1.3 million, or 6.9%, to $17.8 million for the twenty-six weeks ended July 4, 2020 compared to $19.1 million for the twenty-six weeks ended June 29, 2019.

Occupancy expenses decreased by $1.0 million, or 3.8%, to $26.5 million for the thirty-nine weeks ended October 3, 2020 compared to $27.5 million for the thirty-nine weeks ended September 28, 2019.

The decrease was primarily attributable to a decrease in building rents as we consolidated facilities for certain value-added programs.

General and administrative .

General and administrative expense decreased by $3.4 million, or 17.9%, to $15.5 million from $18.9 million in the twenty-six weeks ended June 29, 2019.

The decrease was primarily attributable to a decrease in salaries, wages, and benefits.

Also included in general and administrative expense for the twenty-six weeks ended July 4, 2020 was $0.5 million in professional service fees associated with the June 2020 cyber-attack.

As a percentage of operating revenues, general and

administrative expense decreased to 2.

4 % for the thirteen weeks ended July 4, 2020 compared to 2.

5 % for the thirteen weeks ended June 29, 2019.

General and administrative expense decreased by $6.2 million, or 20.5%, to $24.1 million from $30.3 million in the thirty-nine weeks ended September 28, 2019.

The decrease was primarily attributable to a decrease in salaries, wages, and benefits and a $2.2 million litigation charge included in the third quarter of 2019.

As a percentage of operating revenues, general and administrative expense decreased to 2.4% for the thirty-nine weeks ended October 3, 2020 compared to 2.7% for the thirty-nine weeks ended September 28, 2019.

Insurance and claims .

Insurance and claims expense for the twenty-six weeks ended July 4, 2020 decreased by $1.6 million, or 13.9%, to $9.7 million from $11.3 million for the twenty-six weeks ended June 29, 2019.

The decrease was primarily attributable to a decrease in our auto liability premiums and contractor insurance.

Insurance and claims expense for the thirty-nine weeks ended October 3, 2020 decreased by $26.6 million, or 64.4%, to $14.7 million from $41.2 million for the thirty-nine weeks ended September 28, 2019.

The decrease was primarily attributable to a $24.8 million charge for a legal settlement in the third quarter of 2019 as well as a decrease in our auto liability premiums and contractor insurance .

This was partially offset by an increase in cargo and service failure claims , including $0.5 million in service claims related to the June 2020 cyber-attack .

As a percentage of operating revenues, insurance and claims remained consistent at 1.5% for the twenty-six weeks ended July 4, 2020.

As a percentage of operating revenues, insurance and claims decreased to 1.5% for the thirty-nine weeks ended October 3, 2020 compared to 3.6% for the thirty-nine weeks ended September 28, 2019.

Depreciation and amortization .

Depreciation and amortization expense for the twenty-six weeks ended July 4, 2020 increased by $3.7 million, or 10.8%, to $38.0 million from $34.3 million for the twenty-six weeks ended June 29, 2019.

During the twenty-six weeks ended July 4, 2020, depreciation expense increased $3.8 million and amortization expense was unchanged.

Depreciation and amortization expense for the thirty-nine weeks ended October 3, 2020 increased by $1.8 million, or 3.4%, to $54.9 million from $53.1 million for the thirty-nine weeks ended September 28, 2019.

During the thirty-nine weeks ended October 3, 2020, depreciation expense increased $2.8 million and amortization expense decreased $1.0 million.

The increase in depreciation expense is attributable to additional cost from the continued recapitalization of our fleet.

Interest expense, net .

Net interest expense was $7.6 million for the twenty-six weeks ended July 4, 2020 compared to $8.5 million for the twenty-six weeks ended June 29, 2019.

Net interest expense was $11.2 million for the thirty-nine weeks ended October 3, 2020 compared to $12.5 million for the thirty-nine weeks ended September 28, 2019.

The decrease in net interest expense reflects a decrease in the average interest rate on our outstanding borrowings.

As of July 4, 2020, our outstanding borrowings were $405.6 million compared to $372.2 million at June 29, 2019.

As of October 3, 2020, our outstanding borrowings were $468.3 million compared to $388.8 million at September 28, 2019.

Other non-operating income (expense) .

Other non-operating expense for the twenty-six weeks ended July 4, 2020 was $2.8 million compared to other non-operating income of $1.0 million for the twenty-six weeks ended June 29, 2019.

Included in other non-operating expense in the twenty-six weeks ended July 4, 2020 were $2.5 million of holding losses on changes in the fair value of marketable securities compared to $0.8 million in gains included in other non-operating income during the twenty-six weeks ended June 29, 2019.

Other non-operating expense for the thirty-nine weeks ended October 3, 2020 was $3.3 million compared to other non-operating income of $1.2 million for the thirty-nine weeks ended September 28, 2019.

Included in other non-operating expense in the thirty-nine weeks ended October 3, 2020 were $3.0 million of holding losses on changes in the fair value of marketable securities compared to $1.0 million of realized gain on sales of marketable securities in the thirty-nine weeks ended June 29, 2019.

Income tax expense .

Income tax expense for the twenty-six weeks ended July 4, 2020 was $6.0 million compared to $12.5 million for the twenty-six weeks ended June 29, 2019, based on an effective tax rate of 24.6% and 25.2%, respectively.

The decrease in income tax expense is attributable to a decrease in taxable earnings as well as a decrease in the effective tax rate.

Income tax expense for the thirty-nine weeks ended October 3, 2020 was $10.5 million compared to $9.7 million for the thirty-nine weeks ended September 28, 2019, based on an effective tax rate of 24.7% and 25.2%, respectively.

The increase in income tax expense is attributable to an increase in taxable earnings.

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 twenty-six weeks ended July 4, 2020, our capital expenditures totaled $42.4 million.

During the thirty-nine weeks ended October 3, 2020, our capital expenditures totaled $72.8 million.

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

Our asset-light business model depends somewhat on the customized solutions we implement for specific customers.

As a result, our capital expenditures will depend on specific new contracts and the overall age and condition of our owned transportation equipment.

To improve our liquidity during the COVID-19 pandemic, we deferred a portion of our capital expenditures to the second half of the year.

As a result, our capital

expenditures will depend on specific new contracts and the overall age and condition of our owned transportation equipment.

To improve our liquidity during the COVID-19 pandemic, a portion of our capital expenditures were deferred to the fourth quarter of the year.

Through the remainder of 2020, exclusive of any acquisitions of businesses, we expect our capital expenditures to be in the range of 5 % to 7 % of operating revenues.

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During the year ended December 31, 2019, we paid a total of $0.53 per common share, or $15.0 million.

Given the current operating environment and the uncertainty caused by the COVID-19 pandemic, on April 30, 2020, our Board of Directors temporarily suspended our regular quarterly dividend.

Future dividend policy and the payment of dividends, if any, will be determined by the

Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.

While operating cash flows may be negatively impacted by the pandemic, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities.

Due to the uncertainty caused by the Covid-19 pandemic, Universal’s cash dividend policy had been temporarily suspended during the first half of 2020.

The policy has since been reinstated and on October 29, 2020, our Board of Directors declared a cash dividend of $0.105 per share of common stock.

The dividend is payable to shareholders of record at the close of business on December 7, 2020 and is expected to be paid on January 4, 2021.

Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.

While operating cash flows may be negatively impacted by a prolonged pandemic, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities.

Should the impact of the COVID-19 pandemic last longer than anticipated, and/or our cash flow from operations decline more than expected, we may need to obtain additional financing.

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Our Credit Facility includes an accordion feature which allows us to increase availability by up to $100 million upon our request.

At July 4, 2020, we were in compliance with all covenants under the Credit Facility, and $110.0 million was available for borrowing.

At October 3, 2020, we were in compliance with all covenants under the Credit Facility, and $50.2 million was available for borrowing.

A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment (the “Equipment Financing”).

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Each of the notes bears interest at variable rates ranging from LIBOR plus 1.85% to LIBOR plus 2.25%.

At July 4, 2020, we were in compliance with all covenants.

At October 3, 2020, we were in compliance with all covenants.

We also maintain a short-term line of credit secured by our portfolio of marketable securities (the “Margin Facility”).

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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 July 4, 2020, and the maximum available borrowings were $4.9 million.

We did not have any amounts advanced against the line as of October 3, 2020, and the maximum available borrowings were $4.7 million.

Discussion of Cash Flows

At July 4, 2020, we had cash and cash equivalents of $7.7 million compared to $8.0 million at December 31, 2019.

At October 3, 2020, we had cash and cash equivalents of $8.7 million compared to $7.7 million at December 31, 2019.

Operating activities provided $77.7 million in net cash, and we used $71.5 million in investing activities and $2.2 million in financing activities.

The $77.7 million in net cash provided by operations was primarily attributed to $31.9 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, gains on marketable equity securities and equipment sales, amortization of debt issuance costs, stock-based compensation, provisions for doubtful accounts and a change in deferred income taxes totaling $87.0 million, net.

Net cash provided by operating activities also reflects an aggregate decrease in net working capital totaling $35.7 million.

The decrease in accounts receivable due to lower revenues and increases in accounts payable, accrued expenses and other current liabilities, and affiliated transactions were the primary drivers behind the decrease in working capital.

These decreases were partially offset by principal reductions in operating lease liabilities, decreases in prepaid expenses and other assets, and increases in other long-term liabilities.

Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $41.2 million.

The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, and increases in trade and other accounts receivable and in prepaid expenses and other assets.

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

Affiliate transactions increased net cash provided by operating activities by $1.5 million.

The increase in net cash resulted from a decrease in accounts receivable from affiliates of $0.2 million and an increase in accounts payable to affiliates of $1.3 million.

The $ 40.2 million in net cash used in investing activities consisted of $ 42.4 million in capital expenditures and purchases of marketable securities totaling $0.4 million .

The $71.5 million in net cash used in investing activities consisted of $72.8 million in capital expenditures, $1.3 million for a working capital adjustment from a 2019 acquisition, and $0.4 million for purchases of marketable securities.

These uses were partially offset by $3.0 million in proceeds from the sale of equipment.

We used $64.9 million in financing activities during the twenty-six weeks ended July 4, 2020.

We also used $2.2 million in financing activities during the thirty-nine weeks ended October 3, 2020.

During the period, we paid cash dividends of $5.7 million and repurchased $5.0 million of treasury stock.

At July 4, 2020, we had outstanding borrowings totaling $405.6 million compared to $459.7 million at December 31, 2019.

At October 3, 2020, we had outstanding borrowings totaling $468.3 million compared to $459.7 million at December 31, 2019.

We made net repayments on our revolving lines of credit and margin facility totaling $1.4 million and borrowed an additional $54.6 million for new equipment and real estate.

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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, 2019.

There have been no changes in our accounting policies during the thirteen weeks ended July 4, 2020.

There have been no changes in our accounting policies during the thirteen weeks ended October 3, 2020.

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 and decreases during the third quarter of each year due to the impact of scheduled OEM customer plant shutdowns in July and August for vacations and changeovers in production lines for new model years.

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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 July 4, 2020.

There have not been any material changes to the Company’s market risk during the thirteen weeks ended October 3, 2020.

For additional information, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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