What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-13 compared with 2020-11-12 · 106 added, 201 removed, 106 unchanged (74% of the section changed)

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Important factors could cause actual results to differ, possibly materially, from those in the forward-looking statements.

In some cases you can identify forward-looking statements by words such as “anticipate,” “expect,” “believe,” “could,” “estimate,” “plan,” “intend,” “may,” “should,” “will” and “would” or other similar words.

In some cases you can identify forward-looking statements by words such as “anticipate,” “expect,” “believe,” “targets,” “could,” “estimate,” “plan,” “intend,” “may,” “should,” “will” and “would” or other similar words.

You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other “forward-looking” information.

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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 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 .

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.

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.

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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Operating Revenues

We broadly group our services into the following service categories:

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

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 thirty-nine weeks ended October 3, 2020 and September 28, 2019, presented as a percentage of total operating revenues:

We broadly group our services into the following categories:

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

Our truckload, brokerage and intermodal services associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services 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 April 3, 2021 and April 4, 2020, presented as a percentage of total operating revenues:

Thirteen 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 thirty-nine weeks ended October 3, 2020 and September 28, 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 ended April 3, 2021 and April 4, 2020, presented as a percentage of operating revenues:

Thirteen Weeks Ended

Thirty-nine Weeks Ended

September 28,

Operating revenues:

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Total operating expenses

Income (loss) from operations

Interest and other non-operating income

(expense), net

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 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 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.

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 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.

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 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.

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.

Individual operations may be impacted by additional production shifts or by overtime at selected operations.

While generalizations about the impact of personnel and related benefits costs as a percentage of total revenue 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.

Operating supplies and expenses .

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 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 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 September 28, 2019.

Occupancy expense .

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 $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 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 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 $3.5 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 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 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 from operations

Interest and other non-operating expense, net

Income before income taxes

Income tax expense

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

Thirteen Weeks Ended April 3 , 202 1 Compared to Thirteen Weeks Ended April 4 , 20 20

Operating revenues .

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.

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 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 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 $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.

Operating revenues for the thirteen weeks ended April 3, 2021 increased $33.1 million, or 8.7%, to $415.2 million from $382.2 million for the thirteen weeks ended April 4, 2020.

Included in operating revenues are separately-identified fuel surcharges of $20.2 million for the thirteen weeks ended April 3, 2021 compared to $23.1 million for the thirteen weeks ended April 4, 2020.

Consolidated income from operations increased $7.2 million, or 30.3%, to $31.2 million for the first quarter 2021 compared to $23.9 million during the same period last year.

In the contract logistics segment, which includes value-added and dedicated services, operating revenues increased $27.9 million, or 21.9%, to $154.9 million in the first quarter 2021 compared to $127.0 million in the previous year.

Income from operations in the contract logistics segment increased $5.1 million, or 43.9%, to $16.8 million for the thirteen weeks ended April 3, 2021 compared to $11.7 million in the same period last year.

The improved performance was due to the successful launch of new business wins and robust volumes at current operations.

In the first quarter of 2021, Universal managed 60 value-added programs compared to 56 in the prior year period.

During the recently completed quarter, dedicated transportation load count increased 12.1% to 156,375 from 139,515 in the first quarter 2020.

In the intermodal segment, operating revenues decreased $6.6 million to $103.7 million in the first quarter 2021 compared to $110.3 million in the previous year.

Intermodal revenues for the thirteen weeks ended April 3, 2021 included $10.2 million in separately identified fuel surcharges, compared to $13.6 million in the same period last year.

During the first quarter 2021, Universal moved 179,905 intermodal loads compared to 197,783 in the first quarter 2020, a decrease of 9.0%, while its average operating revenue per load, excluding fuel surcharges decreased 6.5% to $461 from $493.

These decreases were partially offset by increases in accessorial and other non-line haul charges during the recently ended quarter.

Income from operations in the intermodal segment decreased $0.5 million to $8.5 million for the thirteen weeks ended April 3, 2021 compared to $9.0 million in the first quarter 2020.

As a percentage of revenue, operating margin in the intermodal segment was unchanged at 8.2% during both the first quarters of 2021 and 2020.

In the trucking segment, which includes agent-based and company-managed trucking operations, operating revenues increased $3.3 million to $94.9 million in the first quarter 2021 compared to $91.6 million in the prior year period.

Included in trucking segment revenues for the first quarter 2021 were $5.1 million in separately identified fuel surcharges compared to $6.0 million during the first quarter 2020.

Income from operations in the trucking segment increased $0.7 million to $5.2 million for the first quarter 2021 compared to $4.5 million in the same period last year.

During the recently completed quarter, Universal’s average operating revenue per load, excluding fuel surcharges, increased 7.1% to $1,246 from $1,163 in the prior year period;

however, this increase was partially offset by a 4.6% decrease in load volumes.

During the first quarter 2021, Universal moved 72,744 loads compared to 76,216 during the same period last year.

In the company-managed brokerage segment, operating revenues increased $8.3 million, or 15.8%, to $61.1 million in the thirteen weeks ending April 3, 2021 compared to $52.8 million in the thirteen weeks ending April 4, 2020.

During the recently completed quarter, the average operating revenue per load, excluding fuel surcharges, increased 42.4% to $1,737 from $1,220 in the first quarter 2020;

however, load volumes fell 20.8% to 32,885 from 41,523.

As a percentage of revenue, operating margin for the company-managed brokerage segment was 0.7% for the first quarter 2021 compared to (2.6%) in the same period last year.

Purchased transportation and equipment rent .

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 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 76.4% for the thirty-nine weeks ended October 3, 2020 compared to 74.5% in the same period last year.

Purchased transportation and equipment rental costs for the first quarter 2021 increased $8.5 million, or 4.7%, to $189.3 million from $180.9 million during the same period last year.

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

The increases or decreases are generally correlated with changes in demand for transportation-related services, which includes truckload, brokerage, intermodal and to a lesser extent, dedicated services, which uses a higher mix of company-drivers compared to owner-operators.

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

First quarter 2021 transportation-related service revenues increased 7.5% compared to the first quarter of 2020.

As a percentage of operating revenues, purchased transportation and equipment rent expense decreased to 45.6% compared to 47.3% during the same period last year due to a decrease in the mix of transportation-related service revenue.

As a percentage of total revenues, transportation-related service revenue decreased to 74.2% for 2021 compared to 75.0% in the same period last year.

Direct personnel and related benefits .

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 24.3% for the thirty-nine weeks ended October 3, 2020, compared to 24.5% during the same period last year.

Direct personnel and related benefits for the thirteen weeks ended April 3, 2021 increased by $10.2 million, or 10.4%, to $107.6 million compared to $97.4 million during the same period last year.

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 staffing needs in our contract logistics segment , which includes value-added services and dedicated transportation .

The increase was due to the launch of new business wins and robust volumes experienced during the current quarter .

As a percentage of operating revenues, personnel and related benefits increased to 25.9% for the thirteen weeks ended April 3, 2021, compared to 25.5% for the thirteen weeks ended April 4, 2020.

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

Individual operations may be impacted by additional production shifts or by overtime at selected operations.

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Operating supplies and expenses .

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.

Operating supplies and expenses increased by $6.4 million, or 20.8%, to $37.1 million for the thirteen weeks ended April 3, 2021 compared to $30.7 million for the thirteen weeks ended April 4, 2020.

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 $6.1 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 increase of $1.9 million in professional service fees.

The main elements driving the change included increases of $3.7 million in operating supplies and material costs in operations supporting heavy-truck programs, $1.3 million in professional fees, and $1.2 million in vehicle and other maintenance.

Commission expense .

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 thirty-nine weeks ended September 28, 2019.

Commission expense for the first quarter 2021 increased by $0.2 million, or 2.1%, to $7.3 million from $7.2 million for the first quarter 2020.

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

As a percentage of operating revenues, commission expense decreased to 1.8% for the thirteen weeks ending April 3, 2021, compared to 1.9% one year earlier.

Occupancy expense .

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.

Occupancy expenses decreased by $0.7 million, or 7.4%, to $8.2 million for the thirteen weeks ended April 3, 2021.

This compares to $8.8 million for the thirteen weeks ended April 4, 2020.

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 $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.

General and administrative expense for the thirteen weeks ended April 3, 2021 increased by $0.3 million to $9.2 million from $8.9 million in the thirteen weeks ended April 4, 2020.

The increase was attributable to a $0.4 million increase in salaries, wages, and benefits and a $0.4 million increase in professional fees.

These increases were partially offset by a $0.5 million decrease in other general and administrative expenses.

As a percentage of operating revenues, general and administrative expense was 2.2% for the first quarter 2021 compared to 2.3% for the first quarter 2020.

Insurance and claims .

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 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.

Insurance and claims expense for the first quarter 2021 increased by $1.5 million to $6.3 million from $4.9 million in the first quarter 2020.

As a percentage of operating revenues, insurance and claims increased to 1.5% for the thirteen weeks ending April 3, 2021 compared to 1.3% for the first quarter 2020.

The increase was attributable to a $1.5 million increase in cargo and service failure claims.

Depreciation and amortization .

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.

Depreciation and amortization expense for the thirteen weeks ended April 3, 2021 decreased by $0.4 million, or 2.2%, to $19.1 million from $19.5 million for 2020.

Depreciation expense increased $0.2 million and amortization expense decreased $0.6 million.

Interest expense, net .

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

Net interest expense was $3.2 million for the thirteen weeks ended April 3, 2021 compared to $4.2 million for the thirteen weeks ended April 4, 2020.

The decrease in net interest expense reflects a decrease in our outstanding borrowings as well as a decrease in interest rates on our outstanding borrowings.

As of April 4, 2021, our outstanding borrowings totaled $430.5 million compared to $480.8 million at the same time last year.

Other non-operating income (expense) .

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.

Other non-operating income was $1.0 million for the first quarter 2021 compared to $3.6 million of other non-operating expense for the first quarter 2020.

Other non-operating income for the first quarter 2021 includes a $0.9 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income compared to a pre-tax holding loss of $3.4 million in the first quarter 2020.

Income tax expense .

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.

Income tax expense for the first quarter 2021 was $7.3 million, compared to $3.9 million for the first quarter 2020, based on an effective tax rate of 25.3% and 24.4% respectively.

The increase in income taxes in 2021 is the result of an increase in taxable income and our effective tax rate for the thirteen weeks ended April 3, 2021 compared to the thirteen weeks ended April 4, 2020.

Liquidity and Capital Resources

Our primary sources of liquidity are funds generated by operations, loans and extensions of credit under our credit facilities, on margin against our marketable securities and from installment notes, and proceeds from the sales of marketable securities.

We use secured, asset lending to fund a substantial portion of purchases of real estate, tractors, trailers and material handling equipment.

We use secured, asset lending to fund a substantial portion of purchases of tractors, trailers and material handling equipment.

We employ an asset-light operating strategy which we believe lowers our capital expenditure requirements.

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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 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.

During the thirteen weeks ended April 3, 2021, our capital expenditures totaled $4.9 million.

These expenditures primarily consisted of 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, 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.

We expect to make these capital expenditures for the acquisition of transportation equipment, to support our new and existing value-added service operations, and for the acquisition of real property and improvements to our existing terminal yard and facilities .

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

Through the remainder of 2021, exclusive of any acquisitions of businesses and strategic real estate purchases, we expect our capital expenditures to be in the range of 5% to 6% of operating revenues.

We expect to make these capital expenditures for the acquisition of transportation equipment, to support our new and existing value-added service operations, and for improvements to our existing terminal yard and container facilities.

We have a cash dividend policy that anticipates a regular dividend of $0.42 per share of common stock, payable in quarterly increments of $0.105 per share of common stock.

After taking into account the regular quarterly dividends made during the year, our Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year.

The Board of Directors did not declare a special dividend in the first quarter of 2021.

On April 29, 2021, our Board of Directors did declare the regular quarterly cash dividend of $0.105 per share of common stock payable July 6, 2021 to shareholders of record at the close of business June 7, 2021.

During the first half of 2020, our Board of Directors temporarily suspended the Company’s cash dividend policy due to the uncertainty caused by the Covid-19 pandemic.

The policy has since been reinstated.

During the year ended December 31, 2020, we paid a total of $0.21 per common share, or $5.7 million.

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.

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There can be no assurance that we will identify any opportunities that fit our strategic plans or will be able to execute any such opportunities on terms acceptable to us.

Depending on the prospective consideration to be paid for an acquisition, any such opportunities would be financed first from available cash and cash equivalents and availability of borrowings under our credit facilities.

Depending on prospective consideration to be paid for an acquisition, any such opportunities would be financed first from available cash and cash equivalents and availability of borrowings under our credit facilities.

Revolving Credit, Promissory Notes and Term Loan Agreements

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

At April 3, 2021, we were in compliance with all covenants under the Credit Facility, and $67.5 million was available for borrowing.

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

The notes issued in connection with the Equipment Financing, which are secured by liens on specific titled vehicles, include certain affirmative and negative covenants, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.78% to 5.13%.

25 % to 5.13%.

A wholly-owned subsidiary issued a series of promissory notes in order to finance certain purchases of real property (the “Real Estate 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 October 3, 2020, we were in compliance with all covenants.

At April 3, 2021, 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 October 3, 2020, and the maximum available borrowings were $4.7 million.

We did not have any amounts advanced against the line as of April 3, 2021, and the maximum available borrowings were $4.2 million.

Discussion of Cash Flows

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.

At April 3, 2021, we had cash and cash equivalents of $10.8 million compared to $8.8 million at December 31, 2020.

Operating activities provided $43.1 million in net cash, and we used $36.9 million in financing activities and $4.2 million in investing activities.

The $43.1 million in net cash provided by operations was primarily attributed to $21.7 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, gain on marketable equity securities, gains on equipment sales, amortization of debt issuance costs, stock-based compensation, and provisions for doubtful accounts totaling $26.1 million, net.

Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $4.7 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 $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 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 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.

We also made term loan, and equipment and real estate note payments totaling $44.6 million during the period.

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

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

Affiliate transactions increased net cash provided by operating activities by $0.2 million due to an increase in accounts payable to affiliates.

The $4.2 million in net cash used in investing activities consisted of $4.9 million in capital expenditures and $0.1 million in marketable securities purchases.

These uses were partially offset by $0.8 million in proceeds from the sale of equipment and $0.1 million in proceeds from the sale of marketable securities.

We used $36.9 million in financing activities during the thirteen weeks ended April 3, 2021.

During the period we paid cash dividends of $5.7 million.

We had outstanding borrowings totaling $430.5 million at April 3, 2021 compared to $461.7 million at December 31, 2020.

During the period we made net repayments on our revolving lines of credit totaling $18.8 million and term loan, and equipment and real estate note payments totaling $15.4 million.

We also borrowed $3.0 million for new equipment during the period.

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, 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.

There have been no changes in our accounting policies during the thirteen weeks ended April 3, 2021.

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

Our value-added services business is also impacted in the fourth quarter by plant shutdowns during the December holiday period.

However, due to the COVID-19 pandemic and its impact on North American automotive manufacturing, we may not experience normal seasonal demand for our services supporting the automotive production and selling cycles during the current year.

However, d ue to the COVID-19 pandemic and its impact on North American automotive manufacturing, we may not experience normal seasonal demand for our services supporting the automotive production and selling cycles during the current year .

Our transportation services business is generally impacted by decreased activity during the post-holiday winter season and, in certain states, during hurricane season.

At these times, some shippers reduce their shipments, and inclement weather impedes trucking operations or underlying customer demand.

Prolonged adverse weather conditions, particularly in winter months, can also adversely impact margins due to productivity declines and related challenges meeting customer service requirements.

Additionally, our transportation services business, excluding dedicated transportation tied to specific customer supply chains, is generally impacted by decreased activity during the post-holiday winter season and, in certain states during hurricane season, because some shippers reduce their shipments and inclement weather impedes trucking operations or underlying customer demand.

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 October 3, 2020.

There have not been any material changes to the Company’s market risk during the thirteen weeks ended April 3, 2021.

For additional information, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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