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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 0-51142

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Michigan

 

38-3640097

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

12755 E. Nine Mile Road

Warren, Michigan 48089

(Address, including Zip Code of Principal Executive Offices)

(586) 920-0100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, no par value

 

ULH

 

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No  

The number of shares of the registrant’s common stock, no par value, outstanding as of May 10, 2021, was 26,919,455.

 

 

 


PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

April 3,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,799

 

 

$

8,763

 

Marketable securities

 

 

7,530

 

 

 

6,534

 

Accounts receivable – net of allowance for doubtful accounts of $5,585

   and $5,140, respectively

 

 

264,385

 

 

 

259,154

 

Other receivables

 

 

23,798

 

 

 

22,422

 

Prepaid expenses and other

 

 

22,109

 

 

 

23,427

 

Due from affiliates

 

 

1,262

 

 

 

1,224

 

Total current assets

 

 

329,883

 

 

 

321,524

 

Property and equipment – net of accumulated depreciation of $309,475 and

   $298,789, respectively

 

 

353,361

 

 

 

364,795

 

Operating lease right-of-use asset

 

 

94,853

 

 

 

97,820

 

Goodwill

 

 

170,730

 

 

 

170,730

 

Intangible assets – net of accumulated amortization of $97,054 and $93,574, respectively

 

 

98,756

 

 

 

102,236

 

Deferred income taxes

 

 

2,159

 

 

 

2,159

 

Other assets

 

 

4,930

 

 

 

3,785

 

Total assets

 

$

1,054,672

 

 

$

1,063,049

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

98,577

 

 

$

97,916

 

Current portion of long-term debt

 

 

60,022

 

 

 

59,713

 

Current portion of operating lease liabilities

 

 

21,691

 

 

 

21,920

 

Accrued expenses and other current liabilities

 

 

43,316

 

 

 

39,588

 

Insurance and claims

 

 

28,735

 

 

 

25,022

 

Due to affiliates

 

 

17,316

 

 

 

17,093

 

Income taxes payable

 

 

9,261

 

 

 

11,555

 

Total current liabilities

 

 

278,918

 

 

 

272,807

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

369,015

 

 

 

400,407

 

Operating lease liabilities, net of current portion

 

 

75,395

 

 

 

78,093

 

Deferred income taxes

 

 

64,427

 

 

 

64,426

 

Other long-term liabilities

 

 

7,151

 

 

 

7,743

 

Total long-term liabilities

 

 

515,988

 

 

 

550,669

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, no par value. Authorized 100,000,000 shares; 30,986,702 and

   30,979,827 shares issued; 26,919,455 and 26,912,580 shares outstanding,

   respectively

 

 

30,988

 

 

 

30,981

 

Paid-in capital

 

 

4,639

 

 

 

4,484

 

Treasury stock, at cost; 4,067,247 shares

 

 

(82,385

)

 

 

(82,385

)

Retained earnings

 

 

312,474

 

 

 

293,643

 

Accumulated other comprehensive (loss):

 

 

 

 

 

 

 

 

Interest rate swaps, net of income taxes of $(109) and $(142), respectively

 

 

(343

)

 

 

(476

)

Foreign currency translation adjustments

 

 

(5,607

)

 

 

(6,674

)

Total shareholders’ equity

 

 

259,766

 

 

 

239,573

 

Total liabilities and shareholders’ equity

 

$

1,054,672

 

 

$

1,063,049

 

 

See accompanying notes to consolidated financial statements.

2


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

Thirteen Weeks Ended

 

 

 

April 3,

2021

 

 

April 4,

2020

 

Operating revenues:

 

 

 

 

 

 

 

 

Truckload services

 

$

59,702

 

 

$

58,898

 

Brokerage services

 

 

96,919

 

 

 

85,900

 

Intermodal services

 

 

103,716

 

 

 

110,322

 

Dedicated services

 

 

47,961

 

 

 

31,579

 

Value-added services

 

 

106,933

 

 

 

95,463

 

Total operating revenues

 

 

415,231

 

 

 

382,162

 

Operating expenses:

 

 

 

 

 

 

 

 

Purchased transportation and equipment rent

 

 

189,331

 

 

 

180,856

 

Direct personnel and related benefits

 

 

107,552

 

 

 

97,388

 

Operating supplies and expenses

 

 

37,092

 

 

 

30,695

 

Commission expense

 

 

7,324

 

 

 

7,170

 

Occupancy expense

 

 

8,180

 

 

 

8,831

 

General and administrative

 

 

9,176

 

 

 

8,924

 

Insurance and claims

 

 

6,335

 

 

 

4,872

 

Depreciation and amortization

 

 

19,085

 

 

 

19,518

 

Total operating expenses

 

 

384,075

 

 

 

358,254

 

Income from operations

 

 

31,156

 

 

 

23,908

 

Interest income

 

 

18

 

 

 

8

 

Interest expense

 

 

(3,181

)

 

 

(4,217

)

Other non-operating income (expense)

 

 

1,006

 

 

 

(3,605

)

Income before income taxes

 

 

28,999

 

 

 

16,094

 

Income tax expense

 

 

7,344

 

 

 

3,931

 

Net income

 

$

21,655

 

 

$

12,163

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.80

 

 

$

0.45

 

Diluted

 

$

0.80

 

 

$

0.45

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

26,916

 

 

 

27,223

 

Diluted

 

 

26,930

 

 

 

27,223

 

Dividends declared per common share

 

$

0.105

 

 

$

0.105

 

 

See accompanying notes to consolidated financial statements.

 

3


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

Thirteen Weeks Ended

 

 

 

April 3,

2021

 

 

April 4,

2020

 

Net Income

 

$

21,655

 

 

$

12,163

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized changes in fair value of interest rate swaps, net of income taxes of

   $33 and $(135), respectively

 

 

133

 

 

 

(448

)

Foreign currency translation adjustments

 

 

1,067

 

 

 

(680

)

Total other comprehensive income (loss)

 

 

1,200

 

 

 

(1,128

)

Total comprehensive income

 

$

22,855

 

 

$

11,035

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

4


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

Thirteen Weeks Ended

 

 

 

April 3,

2021

 

 

April 4,

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

21,655

 

 

$

12,163

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

19,085

 

 

 

19,518

 

Noncash lease expense

 

 

6,392

 

 

 

7,555

 

Loss (gain) on marketable equity securities

 

 

(999

)

 

 

3,409

 

Gain on disposal of property and equipment

 

 

(219

)

 

 

(506

)

Amortization of debt issuance costs

 

 

120

 

 

 

146

 

Stock-based compensation

 

 

162

 

 

 

195

 

Provision for doubtful accounts

 

 

1,621

 

 

 

1,048

 

Deferred income taxes

 

 

(21

)

 

 

(1,202

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade and other accounts receivable

 

 

(8,936

)

 

 

(11,947

)

Prepaid income taxes, prepaid expenses and other assets

 

 

293

 

 

 

2,404

 

Principal reduction in operating lease liabilities

 

 

(6,158

)

 

 

(7,258

)

Accounts payable, accrued expenses and other current liabilities, insurance

   and claims, and income taxes payable

 

 

10,382

 

 

 

(5,147

)

Due to/from affiliates, net

 

 

185

 

 

 

5,507

 

Other long-term liabilities

 

 

(425

)

 

 

(719

)

Net cash provided by operating activities

 

 

43,137

 

 

 

25,166

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(4,940

)

 

 

(32,775

)

Proceeds from the sale of property and equipment

 

 

760

 

 

 

2,282

 

Purchases of marketable securities

 

 

(114

)

 

 

(360

)

Proceeds from sale of marketable securities

 

 

117

 

 

 

 

Net cash used in investing activities

 

 

(4,177

)

 

 

(30,853

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowing - revolving debt

 

 

83,784

 

 

 

91,200

 

Repayments of debt - revolving debt

 

 

(102,579

)

 

 

(84,084

)

Proceeds from borrowing - term debt

 

 

3,035

 

 

 

29,760

 

Repayments of debt - term debt

 

 

(15,443

)

 

 

(15,853

)

Borrowings under margin account

 

 

 

 

 

256

 

Repayments under margin account

 

 

 

 

 

(256

)

Dividends paid

 

 

(5,692

)

 

 

(5,731

)

Purchases of treasury stock

 

 

 

 

 

(4,919

)

Net cash provided by (used in) financing activities

 

 

(36,895

)

 

 

10,373

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(29

)

 

 

(4,417

)

Net increase in cash

 

 

2,036

 

 

 

269

 

Cash  and cash equivalents – beginning of period

 

 

8,763

 

 

 

7,726

 

Cash and cash equivalents – end of period

 

$

10,799

 

 

$

7,995

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

3,086

 

 

$

4,157

 

Cash paid for income taxes

 

$

9,786

 

 

$

55

 

 

See accompanying notes to consolidated financial statements.

5


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Shareholders’ Equity

(In thousands, except per share data)

 

 

 

Common

stock

 

 

Paid-in

capital

 

 

Treasury

stock

 

 

Retained

earnings

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Total

 

Balances – December 31, 2019

 

$

30,972

 

 

$

4,298

 

 

$

(77,247

)

 

$

251,204

 

 

$

(4,010

)

 

$

205,217

 

Net income

 

 

 

 

 

 

 

 

 

 

 

12,163

 

 

 

 

 

 

12,163

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,128

)

 

 

(1,128

)

Dividends paid ($0.105 per share)

 

 

 

 

 

 

 

 

 

 

 

(2,865

)

 

 

 

 

 

(2,865

)

Stock based compensation

 

 

9

 

 

 

186

 

 

 

 

 

 

 

 

 

 

 

 

195

 

Purchases of treasury stock

 

 

 

 

 

 

 

 

(4,919

)

 

 

 

 

 

 

 

 

(4,919

)

Balances – April 4, 2020

 

$

30,981

 

 

$

4,484

 

 

$

(82,166

)

 

$

260,502

 

 

$

(5,138

)

 

$

208,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances – December 31, 2020

 

$

30,981

 

 

$

4,484

 

 

$

(82,385

)

 

$

293,643

 

 

$

(7,150

)

 

$

239,573

 

Net income

 

 

 

 

 

 

 

 

 

 

 

21,655

 

 

 

 

 

 

21,655

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,200

 

 

 

1,200

 

Dividends paid ($0.105 per share)

 

 

 

 

 

 

 

 

 

 

 

(2,824

)

 

 

 

 

 

(2,824

)

Stock based compensation

 

 

7

 

 

 

155

 

 

 

 

 

 

 

 

 

 

 

 

162

 

Balances – April 3, 2021

 

$

30,988

 

 

$

4,639

 

 

$

(82,385

)

 

$

312,474

 

 

$

(5,950

)

 

$

259,766

 

 

See accompanying notes to consolidated financial statements.

 

 

 

6


 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

 

(1)

Basis of Presentation

The accompanying unaudited consolidated financial statements of Universal Logistics Holdings, Inc. and its wholly-owned subsidiaries (collectively, “Universal” or the “Company”) have been prepared by the Company’s management. In the opinion of management, the unaudited consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. All intercompany transactions and balances have been eliminated in consolidation.  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements as of December 31, 2020 and 2019 and for each of the years in the three-year period ended December 31, 2020 included in the Company’s Form 10-K filed with the Securities and Exchange Commission. The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates.

Our fiscal year ends on December 31 and consists of four quarters, each with thirteen weeks.

COVID-19

In March of 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a pandemic.  The Company remains committed to doing its part to protect its employees, customers, vendors and the general public from the spread of COVID-19. We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.

The Company makes estimates and assumptions that affect reported amounts and disclosures included in its financial statements and accompanying notes and assesses certain accounting matters that require consideration of forecasted financial information. The Company's assumptions about future conditions important to these estimates and assumptions are subject to uncertainty, including the impacts of the COVID-19 pandemic.  

Although we estimate COVID-19 had the largest impact on our business during the second quarter 2020, we are unable to predict with any certainty the future impact COVID-19 may have on our operational and financial performance.  The Company will continue to monitor these conditions in future periods as new information becomes available and will update its analyses accordingly.  

 

(2)

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”  The ASU was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The Company has evaluated the provisions of this standard and determined that it is applicable to our primary term loan and revolving credit facility, real estate promissory notes and investment margin credit facility. The London Interbank Offered Rate (“LIBOR”) is the basis for interest charges on outstanding borrowings for both our line of credit and investment margin account. The scheduled discontinuation of LIBOR is not expected to materially alter any provisions of either of these debt instruments, except for the identification of a replacement reference rate. The Company has evaluated the new guidance and does not expect it to have a material impact on its financial condition, results of operations, or cash flows.

In June 2016, the FASB issued ASU 2016-13 (“ASU 2016-13”), Accounting for Credit Losses (Topic 326). ASU 2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The new standard will become effective for us beginning with the first quarter 2023.  The Company is evaluating the new guidance, but does not expect it to have a material impact on our consolidated financial statements.

 

7


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(3)

Revenue Recognition

The Company broadly groups its services into the following categories: truckload, brokerage, intermodal, dedicated and value-added. We disaggregate these categories and report our service lines separately on the Consolidated Statements of Income.

Truckload services include dry van, flatbed, heavy-haul and refrigerated operations. We transport a wide variety of general commodities, including automotive parts, machinery, building materials, paper, food, consumer goods, furniture, steel and other metals on behalf of customers in various industries. Truckload services also include our final mile and ground expedited services.  

To complement our available capacity, we provide customers freight brokerage services by utilizing third-party transportation providers to move freight. Brokerage services also include full-service domestic and international freight forwarding and customs brokerage.  

Intermodal services include rail-truck, steamship-truck and support services. Our intermodal support services are primarily short- to medium-distance delivery of rail and steamship containers between the railhead or port and the customer and drayage services.

Dedicated services are primarily provided in support of automotive and retail customers using van equipment.  Our dedicated services are primarily short-run or round-trip moves within a defined geographic area.

Transportation services are short term in nature; agreements governing their provision generally have a term of less than one year. They do not contain significant financing components.  The Company recognizes revenue over the period transportation services are provided to the customer, including service performed as of the end of the reporting period for loads currently in-transit, in order to recognize the value that is transferred to a customer over the course of the transportation service.

We determine revenue in-transit using the input method, under which revenue is recognized based on the duration of time that has lapsed from the departure date (start of transportation services) to the arrival date (completion of transportation services). Measurement of revenue in-transit requires the application of significant judgment. We calculate the estimated percentage of an order’s transit time that is complete at period end, and we apply that percentage of completion to the order’s estimated revenue.

Value-added services, which are typically dedicated to individual customer requirements, include material handling, consolidation, sequencing, sub-assembly, cross-dock services, kitting, repacking, warehousing and returnable container management.  Value-added revenues are substantially driven by the level of demand for outsourced logistics services. Major factors that affect value-added service revenue include changes in manufacturing supply chain requirements and production levels in specific industries, particularly the North American automotive and Class 8 heavy-truck industries.

Revenue is recognized as control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to receive in exchange for its services. We have elected to use the “right to invoice” practical expedient to recognize revenue, reflecting that a customer obtains the benefit associated with value-added services as they are provided. The contracts in our value-added services businesses are negotiated agreements, which contain both fixed and variable components. The variability of revenues is driven by volumes and transactions, which are known as of an invoice date. Value-added service contracts typically have terms that extend beyond one year, and they do not include financing components.  

The following table provides information related to contract balances associated with our contracts with customers (in thousands):

 

 

 

April 3,

2021

 

 

December 31,

2020

 

Prepaid expenses and other - contract assets

 

$

1,989

 

 

$

2,520

 

 

We generally receive payment for performance obligations within 45 days of completion of transportation services and 65 days for completion of value-added services. Contract assets in the table above generally relate to revenue in-transit at the end of the reporting period. 

 

 

8


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Marketable Securities

 

The Company accounts for its marketable equity securities in accordance with ASC Topic 321 “Investments Equity Securities.” ASC Topic 321 requires companies to measure equity investments at fair value, with changes in fair value recognized in net income. The Company’s investments in marketable securities consist of equity securities with readily determinable fair values. The cost basis of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).

Marketable equity securities are carried at fair value, with gains and losses in fair market value included in the determination of net income. The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note 7.

The following table sets forth market value, cost basis, and unrealized gains on equity securities (in thousands):

 

 

 

April 3,

2021

 

 

December 31,

2020

 

Fair value

 

$

7,530

 

 

$

6,534

 

Cost basis

 

 

6,426

 

 

 

6,579

 

Unrealized gain (loss)

 

$

1,104

 

 

$

(45

)

 

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities (in thousands):

 

 

 

April 3,

2021

 

 

December 31,

2020

 

Gross unrealized gains

 

$

2,171

 

 

$

1,627

 

Gross unrealized losses

 

 

(1,067

)

 

 

(1,672

)

Net unrealized gains (losses)

 

$

1,104

 

 

$

(45

)

 

The following table shows the Company’s net realized gains on marketable equity securities (in thousands):

 

 

 

Thirteen weeks ended

 

 

 

April 3,

2021

 

 

April 4,

2020

 

Realized gain:

 

 

 

 

 

 

 

 

Sale proceeds

 

$

117

 

 

$

 

Cost basis of securities sold

 

 

92

 

 

 

 

Realized gain

 

$

25

 

 

$

 

 

 

 

 

 

 

 

 

 

Realized gain, net of taxes

 

$

19

 

 

$

 

 

 

 

 

 

 

 

 

 

The Company did not sell marketable equity securities during the thirteen-week period April 4, 2020.

During the thirteen-week periods ended April 3, 2021 and April 4, 2020, our marketable equity securities portfolio experienced a net unrealized pre-tax gain (loss) in market value of approximately $974,000 and $(3,400,000), respectively, which was reported in other non-operating income (expense) for the period.

 

9


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(5)

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following (in thousands):

 

 

 

April 3,

2021

 

 

December 31,

2020

 

Accrued payroll

 

$

13,042

 

 

$

11,536

 

Accrued payroll taxes

 

 

14,112

 

 

 

11,601

 

Driver escrow liabilities

 

 

3,937

 

 

 

4,045

 

Legal settlements and claims

 

 

3,700

 

 

 

3,700

 

Commissions, taxes and other

 

 

8,525

 

 

 

8,706

 

Total

 

$

43,316

 

 

$

39,588

 

 

(6)

Debt

Debt is comprised of the following (in thousands):

 

 

 

Interest Rates

at April 3, 2021

 

 

April 3,

2021

 

 

December 31,

2020

 

Outstanding Debt:

 

 

 

 

 

 

 

 

 

 

 

 

Credit and Security Agreement (1)

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan

 

1.86%

 

 

$

128,438

 

 

$

131,250

 

Revolver

 

1.86%

 

 

 

132,531

 

 

 

151,326

 

Equipment Financing (2)

 

2.25% to 5.13%

 

 

 

122,272

 

 

 

129,870

 

Real Estate Financing (3)

 

1.96% to 2.36%

 

 

 

47,250

 

 

 

49,248

 

Margin Facility (4)

 

1.21%

 

 

 

 

 

 

 

Unamortized debt issuance costs

 

 

 

 

 

 

(1,454

)

 

 

(1,574

)

 

 

 

 

 

 

 

429,037

 

 

 

460,120

 

Less current portion of long-term debt

 

 

 

 

 

 

60,022

 

 

 

59,713

 

Total long-term debt, net of current portion

 

 

 

 

 

$

369,015

 

 

$

400,407

 

 

(1) Our Credit and Security Agreement (the “Credit Agreement”) provides for maximum borrowings of $350 million in the form of a $150 million term loan and a $200 million revolver.  Term loan proceeds were advanced on November 27, 2018 and mature on November 26, 2023.  The term loan will be repaid in consecutive quarterly installments, as defined in the Credit Agreement, commencing March 31, 2019, with the remaining balance due at maturity.  Borrowings under the revolving credit facility may be made until and mature on November 26, 2023. Borrowings under the Credit Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each based on the Company’s leverage ratio.  The Credit Agreement is secured by a first priority pledge of the capital stock of applicable subsidiaries, as well as first priority perfected security interest in cash, deposits, accounts receivable, and selected other assets of the applicable borrowers.  The Credit Agreement includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring minimum fixed charge coverage and leverage ratios, and customary mandatory prepayments provisions. At April 3, 2021, we were in compliance with all covenants under the facility, and $67.5 million was available for borrowing on the revolver.

(2) Our Equipment Financing consists of a series of promissory notes issued by a wholly owned subsidiary. The equipment notes, which are secured by liens on specific titled vehicles, include certain affirmative and negative covenants, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 5.13%.

(3) Our Real Estate Financing consists of a series of promissory notes issued by a wholly owned subsidiary. The promissory notes, which are secured by first mortgages and assignment of leases on specific parcels of real estate and improvements, include certain affirmative and negative covenants and are generally payable in 120 monthly installments. Each of the notes bears interest at a variable rate ranging from LIBOR plus 1.85% to LIBOR plus 2.25%. At April 3, 2021, we were in compliance with all covenants.

 

10


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(6)

Debt – continued

(4) Our Margin Facility is a short-term line of credit secured by our portfolio of marketable securities. It bears interest at LIBOR plus 1.10%. The amount available under the line of credit is based on a percentage of the market value of the underlying securities. At April 3, 2021, the maximum available borrowings under the line of credit were $4.2 million.

The Company is also party to two interest rate swap agreements that qualify for hedge accounting. The Company executed the swap agreements to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $12.6 million at April 3, 2021. Under the swap agreements, the Company receives interest at the one-month LIBOR rate plus 2.25% and pays a fixed rate. The first swap became effective in October 2016, has a rate of 4.16% (amortizing notional amount of $10.0 million) and expires in July 2026. The second swap became effective in October 2016, has a rate of 3.83% (amortizing notional amount of $2.6 million) and expires in May 2022. At April 3, 2021, the fair value of the swap agreements was a liability of $0.5 million. Since these swap agreements qualify for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. See Note 7 for additional information pertaining to interest rate swaps.

(7)

Fair Value Measurements and Disclosures

FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date and expanded disclosures with respect to fair value measurements.

FASB ASC Topic 820 also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

Level 1 — Quoted prices in active markets for identical assets or liabilities.

 

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

We have segregated all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below (in thousands):

 

 

 

April 3,

2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value

Measurement

 

Assets