UNIVERSAL LOGISTICS HOLDINGS INC

Previous wording

For financial reporting, 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 are associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services are provided to specific customers on a contractual basis, generally pursuant to contract terms of one year or longer. The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks ended March 30, 2024 and April 1, 2023, presented as a percentage of total operating revenues:

Current wording

For financial reporting, 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 are associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services are specific to customers on a contractual basis, generally pursuant to contract terms of one year or longer. The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks and twenty-six weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of total operating revenues:

Previous wording

Operating revenues. The overall increase in operating revenues was primarily due to an increase in our contract logistics segment revenues. This increase was partially offset by decreases in our transactional transportation-related services. The primary driver in our contract logistics segment was our progress towards the completion of deliverables on a significant new specialty development project in the first quarter 2024. This project is expected to be substantially complete by the end of 2024. Operating revenues included separately-identified fuel surcharges of $24.7 million in the first quarter 2024, compared to $33.9 million in the first quarter 2023. Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.5 million during the first quarter 2024 compared to $26.0 million one year earlier.

Current wording

Operating revenues. The overall increase in operating revenues was primarily due to an increase in our contract logistics segment revenues. This increase was partially offset by decreases in our transactional transportation-related services. The primary driver in our contract logistics segment was the recently awarded specialty development project. Operating revenues included separately-identified fuel surcharges of $24.5 million in the second quarter 2024, compared to $28.6 million in the second quarter 2023. Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.1 million during the second quarter 2024 compared to $13.4 million one year earlier.

Previous wording

Purchased transportation and equipment rent. Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers. These fluctuations are generally correlated with changes in demand for transactional transportation-related services. The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services. In the first quarter 2024, transactional transportation-related service revenues decreased 21.1% compared to the prior year.

Current wording

Purchased transportation and equipment rent. Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers. These fluctuations are generally correlated with changes in demand for transactional transportation-related services. The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services. In the second quarter 2024, transactional transportation-related service revenues decreased 2.5% compared to the prior year.

Previous wording

Operating supplies and expenses. Operating supplies and expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand. The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project that launched in the first quarter of 2024.

Current wording

Operating supplies and expenses. Operating supplies and expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand. The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project.

Previous wording

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

Current wording

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

Previous wording

Depreciation and amortization. The increase in depreciation and amortization expense resulted from a $0.6 million increase in depreciation expense and a $1.6 million increase in amortization expense.

Current wording

Depreciation and amortization. The increase in depreciation and amortization expense resulted from a $16.1 million increase in depreciation expense and a $1.6 million increase in amortization expense. During the second quarter 2024, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $11.3 million during the period.

Previous wording

Interest expense, net. The increase in net interest expense reflects an increase in our outstanding borrowings as well as an increase in interest rates on our outstanding borrowings. As of March 30, 2024, our outstanding borrowings were $418.4 million compared to $381.9 million at April 1, 2023.

Current wording

Interest expense, net. The increase in net interest expense reflects an increase in our outstanding borrowings. As of June 29, 2024, our outstanding borrowings were $487.8 million compared to $382.0 million at July 1, 2023.

Previous wording

Direct personnel and related benefits. Trends in direct personnel and benefit costs are generally correlated with changes in operating facilities and headcount requirements and, therefore, fluctuate correspondingly with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations. The increase in the first quarter 2024 was due to an increase in the number of employee drivers in our intermodal business. While generalizations about the impact of personnel and related benefits costs are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.

Current wording

Direct personnel and related benefits. Trends in direct personnel and benefit costs are generally correlated with changes in operating facilities and headcount requirements and, therefore, fluctuate correspondingly with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations. The decrease in the first half 2024 was due to a decrease in headcount in our value-added business. While generalizations about the impact of personnel and related benefits costs are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Income tax expense. Our effective income tax rate was 25.2% in both the first quarter 2024 and 2023. The increase in income taxes is primarily the result of an increase in taxable income.

Current wording

Income tax expense. Our effective income tax rate was 25.2% in both the first half 2024 and 2023. The increase in income taxes is primarily the result of an increase in taxable income.

Previous wording

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

Current wording

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

Previous wording

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 48.4%. The primary driver in our contract logistics segment was our progress towards the completion of deliverables on a significant new specialty development project in the first quarter 2024. This project is expected to be substantially complete by the end of 2024. During the full-year 2024, we expect to recognize $228.0 million of total operating revenues on this program, of which $95.3 million was recognized in the first quarter of 2024. At the end of the first quarter 2024, we managed 71 value-added programs compared to 65 at the end of the first quarter 2023. Included in contract logistics segment revenues for the thirteen weeks ended March 30, 2024, were $8.6 million in separately identified fuel surcharges from dedicated transportation services, compared to $9.7 million in the same period last year. Income from operations increased $53.7 million and operating margin, as a percentage of revenue was 26.0% for the first quarter 2024, compared to 13.1% in the first quarter 2023.

Current wording

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 26.2%.The increase in operating revenues was primarily due to our recently awarded specialty development project. At the end of the second quarter 2024, we managed 68 value-added programs, unchanged from the second quarter 2023. Included in contract logistics segment revenues for the thirteen weeks ended June 29, 2024, were $8.0 million in separately identified fuel surcharges from dedicated transportation services, compared to $8.6 million in the same period last year. Income from operations increased $20.1 million and operating margin, as a percentage of revenue was 20.1% for the second quarter 2024, compared to 15.7% in the second quarter 2023.

Previous wording

Operating revenues in the intermodal segment decreased 30.9% primarily due to a decrease in the number of loads hauled. Included in intermodal segment revenues for the first quarter 2024 were $10.7 million in separately identified fuel surcharges, compared to $17.1 million in the same period last year. Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.5 million during the first quarter 2024 compared to $26.0 million in the first quarter 2023. Load volumes decreased 14.1% on a year-over-year basis. As a percentage of revenue, operating margin in the intermodal segment for the first quarter 2024 was (10.5)%, compared to 6.1% one year earlier.

Current wording

Operating revenues in the intermodal segment decreased 14.8% primarily due to a decrease in the average operating revenue per load and the number of loads hauled. Included in intermodal segment revenues for the second quarter 2024 were $10.9 million in separately identified fuel surcharges, compared to $13.6 million in the same period last year. Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.1 million during the second quarter 2024 compared to $13.4 million in the second quarter 2023. Load volumes declined 4.1%, while the average operating revenue per load, excluding fuel surcharges, fell 5.9% on a year-over-year basis. As a percentage of revenue, operating margin in the intermodal segment for the second quarter 2024 was (10.6)%, compared to (0.3)% one year earlier.

Previous wording

In the trucking segment, operating revenues decreased 12.6% primarily due to decreases in the average revenue per load, excluding fuel surcharges, and in the number of loads hauled. First quarter 2024 trucking segment revenues included $28.6 million of brokerage services compared to $34.7 million during the same period last year. Also included in our trucking segment revenues were $5.4 million in separately identified fuel surcharges during the first quarter 2024 compared to $7.2 million in fuel surcharges in the first quarter 2023. On a year-over-year basis, the average operating revenue per load, excluding fuel surcharges, decreased 6.2% while load volumes declined 7.1%. As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended March 30, 2024, was 5.3% compared to 4.8% for the thirteen weeks ended April 1, 2023.

Current wording

In the trucking segment, operating revenues increased 12.6% primarily due to an increase in the average revenue per load, excluding fuel surcharges. Second quarter 2024 trucking segment revenues included $25.5 million of brokerage services compared to $30.7 million during the same period last year. Also included in our trucking segment revenues were $5.7 million in separately identified fuel surcharges during the second quarter 2024 compared to $6.4 million in fuel surcharges in the second quarter 2023. On a year-over-year basis, load volumes declined 11.1%; however, the average operating revenue per load, excluding fuel surcharges, increased 28.5%, supported by our specialty, heavy-haul wind business. As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended June 29, 2024, was 4.8% compared to 5.4% for the thirteen weeks ended July 1, 2023.

Previous wording

Operating revenues in the company-managed brokerage segment decreased 8.7% primarily due to a decrease in the average operating revenue per load. On a year-over-year basis, average operating revenue per load in the company-managed brokerage segment decreased 12.2%. As a percentage of revenue, operating margin for the first quarter 2024 was (8.0)% compared to (1.1)% during the same period last year.

Current wording

Operating revenues in the company-managed brokerage segment decreased 6.9% primarily due to a decrease in the average operating revenue per load. On a year-over-year basis, average operating revenue per load in the company-managed brokerage segment decreased 20.3%. This was partially offset by a 13.7% increase in load volumes. As a percentage of revenue, operating margin for the first half 2024 was (8.0)% compared to (1.8)% during the same period last year.

Previous wording

During the thirteen weeks ended March 30, 2024, our capital expenditures totaled $68.6 million. These expenditures primarily consisted of transportation equipment and investments in support of our value-added service operations. Our flexible 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. Through the remainder of 2024, we expect our capital expenditures to be in the range of $245 million to $260 million. We expect to make these capital expenditures for the acquisition of transportation equipment, to support new and existing value-added service operations, to expand our owned terminal network, and for improvements to our existing terminal yard and container facilities.

Current wording

During the twenty-six weeks ended June 29, 2024, our capital expenditures totaled $145.7 million. These expenditures primarily consisted of transportation equipment, investments in support of our value-added service operations and the expansion of our terminal network. Our flexible business model depends somewhat on the customized solutions we implement for specific customers. 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 2024, we expect our capital expenditures to be in the range of $170 million to $185 million. We expect to make these capital expenditures for the acquisition of transportation equipment, to support new and existing value-added service operations, to expand our owned terminal network, and for improvements to our existing terminal yard and container facilities.

Previous wording

Our Revolving Credit Facility provides for a $400 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027. The Revolving Credit Facility, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, 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. Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request. At March 30, 2024, we were in compliance with all its covenants, and $362.2 million was available for borrowing.

Current wording

Our Revolving Credit Facility provides for a $400 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027. The Revolving Credit Facility, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, 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. Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request. At June 29, 2024, we were in compliance with all its covenants, and $337.0 million was available for borrowing.

Previous wording

Our UACL Credit Agreement provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027. The UACL Credit Agreement, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, 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. Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request. At March 30, 2024, we were in compliance with all its covenants, and $10.0 million was available for borrowing.

Current wording

Our UACL Credit Agreement provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027. The UACL Credit Agreement, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, 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. Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request. At June 29, 2024, we were in compliance with all its covenants, and $5.0 million was available for borrowing.

Previous wording

A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment. The notes are secured by liens on specific titled vehicles, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 7.27%.

Current wording

A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment. The notes are secured by liens on specific titled vehicles, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 7.31%.

Previous wording

We also maintain a short-term line of credit secured by our portfolio of marketable securities. It bears interest at Term SOFR plus 1.10%. The amount available under the margin facility is based on a percentage of the market value of the underlying securities. We did not have any amounts advanced against the line as of March 30, 2024, and the maximum available borrowings were $5.7 million.

Current wording

We also maintain a short-term line of credit secured by our portfolio of marketable securities. It bears interest at Term SOFR plus 1.10%. 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 June 29, 2024, and the maximum available borrowings were $5.8 million.

Previous wording

At March 30, 2024, we had cash and cash equivalents of $11.1 million compared to $12.5 million at December 31, 2023. Operating activities provided $36.9 million in net cash, financing activities provided an additional $29.2 million, and we used $68.4 million in investing activities.

Current wording

At June 29, 2024, we had cash and cash equivalents of $7.5 million compared to $12.5 million at December 31, 2023. Operating activities provided $46.4 million in net cash, financing activities provided an additional $95.8 million, and we used $144.6 million in investing activities.

Previous wording

The $36.9 million in net cash provided by operations was primarily attributed to $52.5 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, gains on marketable equity securities, gains on equipment sales, amortization of debt issuance costs, stock-based compensation, provisions for credit losses totaling, and a change in deferred income taxes totaling $38.5 million, net. Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $54.1 million. The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, increases in contract assets and other receivables, and a decrease in other long-term liabilities. These were partially offset by a decrease in trade accounts receivable and increases in trade accounts payable, accrued expenses and other current liabilities, accruals for insurance and claims, and in income taxes payable. Affiliate transactions increased net cash provided by operating activities by $2.1 million. The increase in net cash resulted from an increase in accounts payable to affiliates of $2.5 million, offset by an increase in accounts receivable from affiliates of $0.4 million.

Current wording

The $46.4 million in net cash provided by operations was primarily attributed to $83.2 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, gains on marketable equity securities, gains on equipment sales, amortization of debt issuance costs, stock-based compensation, provisions for credit losses totaling, and a change in deferred income taxes totaling $93.2 million, net. Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $129.9 million. The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, increases in contract assets, trade and other receivables, and decreases in other long-term liabilities and income taxes payable. These were partially offset increases in trade accounts payable, accrued expenses and other current liabilities, and accruals for insurance and claims. Affiliate transactions decreased net cash provided by operating activities by $0.4 million. The decrease in net cash resulted from a decrease in accounts payable to affiliates of $0.3 million and an increase in accounts receivable from affiliates of $0.1 million.

Previous wording

The $68.4 million in net cash used in investing activities consisted of $68.6 million in capital expenditures, which was partially offset by $0.2 million in proceeds from the sale of equipment.

Current wording

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

Previous wording

Financing activities provided $29.2 million in net cash during the thirteen weeks ended March 30, 2024. We had outstanding borrowings totaling $418.4 million at March 30, 2024 compared to $386.4 million at December 31, 2023. During the period, we made payments on term loan and equipment and real estate notes totaling $31.0 million, borrowed $47.1 million for new equipment and had net borrowings on our revolving lines of credit totaling $15.8 million. During the period, we also paid cash dividends of $2.8 million.

Current wording

Financing activities provided $95.8 million in net cash during the twenty-six weeks ended June 29, 2024. We had outstanding borrowings totaling $487.8 million at June 29, 2024 compared to $386.4 million at December 31, 2023. During the period, we made payments on term loan and equipment and real estate notes totaling $59.6 million, borrowed $115.0 million for new equipment and had net borrowings on our revolving lines of credit totaling $46.1 million. During the period, we also paid cash dividends of $5.5 million and purchased $0.1 million of treasury stock.