0001564590-15-009719.txt : 20151109 0001564590-15-009719.hdr.sgml : 20151109 20151105165641 ACCESSION NUMBER: 0001564590-15-009719 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20150926 FILED AS OF DATE: 20151105 DATE AS OF CHANGE: 20151105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Universal Truckload Services, Inc. CENTRAL INDEX KEY: 0001308208 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 383640097 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51142 FILM NUMBER: 151201447 BUSINESS ADDRESS: STREET 1: 12755 EAST NINE MILE ROAD CITY: WARREN STATE: MI ZIP: 48089 BUSINESS PHONE: (586) 920-0100 MAIL ADDRESS: STREET 1: 12755 EAST NINE MILE ROAD CITY: WARREN STATE: MI ZIP: 48089 10-Q 1 uacl-10q_20150926.htm 10-Q uacl-10q_20150926.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

For the quarterly period ended September 26, 2015

or

o

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 TRUCKLOAD SERVICES, 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)

 

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  x   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x   No  o

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

 

Large accelerated filer

 

¨

  

Accelerated filer

 

x

 

 

 

 

Non-accelerated filer

 

¨

  

Smaller reporting company

 

¨

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

The number of shares of the registrant’s common stock, no par value, outstanding as of October 30, 2015, was 28,378,179.

 

 

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

 

UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

September 26,

2015

 

 

December 31,

2014

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,190

 

 

$

8,001

 

Marketable securities

 

 

13,408

 

 

 

14,309

 

Accounts receivable – net of allowance for doubtful accounts of $4,666

   and $5,207, respectively

 

 

159,003

 

 

 

151,107

 

Other receivables

 

 

20,067

 

 

 

13,856

 

Due from affiliates

 

 

1,855

 

 

 

1,562

 

Prepaid income taxes

 

 

2,080

 

 

 

2,719

 

Prepaid expenses and other

 

 

18,791

 

 

 

19,340

 

Deferred income taxes

 

 

4,947

 

 

 

5,386

 

Total current assets

 

 

230,341

 

 

 

216,280

 

Property and equipment – net of accumulated depreciation of $167,284 and

   $149,610, respectively

 

 

170,894

 

 

 

178,069

 

Goodwill

 

 

74,484

 

 

 

74,484

 

Intangible assets – net of accumulated amortization of $41,206 and $34,340, respectively

 

 

46,954

 

 

 

53,820

 

Other assets

 

 

5,189

 

 

 

6,361

 

Total assets

 

$

527,862

 

 

$

529,014

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

57,408

 

 

$

57,448

 

Due to affiliates

 

 

4,970

 

 

 

2,896

 

Accrued expenses and other current liabilities

 

 

23,047

 

 

 

22,341

 

Insurance and claims

 

 

23,478

 

 

 

20,704

 

Current maturities of capital lease obligations

 

 

953

 

 

 

1,051

 

Current portion of long-term debt

 

 

8,571

 

 

 

9,593

 

Total current liabilities

 

 

118,427

 

 

 

114,033

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

237,284

 

 

 

225,705

 

Capital lease obligations, net of current maturities

 

 

1,268

 

 

 

1,980

 

Deferred income taxes

 

 

43,175

 

 

 

45,883

 

Other long-term liabilities

 

 

3,964

 

 

 

4,252

 

Total long-term liabilities

 

 

285,691

 

 

 

277,820

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, no par value. Authorized 100,000,000 shares; 30,864,006 and

   30,856,506 shares issued; 28,378,179 and 29,997,784 shares outstanding, respectively

 

 

30,864

 

 

 

30,857

 

Paid-in capital

 

 

2,613

 

 

 

2,448

 

Treasury stock, at cost; 2,485,827 and 858,722 shares, respectively

 

 

(50,018

)

 

 

(14,953

)

Retained earnings

 

 

142,424

 

 

 

117,913

 

Accumulated other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized holding gain on available-for-sale securities, net of income

   taxes of $908 and $1,642, respectively

 

 

1,606

 

 

 

2,888

 

Foreign currency translation adjustments

 

 

(3,745

)

 

 

(1,992

)

Total shareholders’ equity

 

 

123,744

 

 

 

137,161

 

Total liabilities and shareholders’ equity

 

$

527,862

 

 

$

529,014

 

See accompanying notes to consolidated financial statements.

 

2


 

UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-nine Weeks Ended

 

 

 

September 26,

2015

 

 

September 27,

2014

 

 

September 26,

2015

 

 

September 27,

2014

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation services

 

$

178,114

 

 

$

196,777

 

 

$

518,668

 

 

$

574,098

 

Value-added services

 

 

68,400

 

 

 

69,170

 

 

 

213,723

 

 

 

214,659

 

Intermodal services

 

 

37,700

 

 

 

36,181

 

 

 

110,391

 

 

 

100,284

 

Total operating revenues

 

 

284,214

 

 

 

302,128

 

 

 

842,782

 

 

 

889,041

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation and equipment rent

 

 

146,687

 

 

 

160,269

 

 

 

427,852

 

 

 

456,212

 

Direct personnel and related benefits

 

 

54,116

 

 

 

47,917

 

 

 

159,374

 

 

 

157,271

 

Commission expense

 

 

9,651

 

 

 

11,687

 

 

 

28,012

 

 

 

32,440

 

Operating expenses (exclusive of items shown separately)

 

 

25,483

 

 

 

28,545

 

 

 

81,624

 

 

 

90,644

 

Occupancy expense

 

 

6,739

 

 

 

6,198

 

 

 

20,173

 

 

 

18,791

 

Selling, general, and administrative

 

 

9,452

 

 

 

9,784

 

 

 

27,724

 

 

 

29,656

 

Insurance and claims

 

 

6,598

 

 

 

6,259

 

 

 

16,643

 

 

 

17,853

 

Depreciation and amortization

 

 

8,544

 

 

 

8,469

 

 

 

26,449

 

 

 

24,132

 

Total operating expenses

 

 

267,270

 

 

 

279,128

 

 

 

787,851

 

 

 

826,999

 

Income from operations

 

 

16,944

 

 

 

23,000

 

 

 

54,931

 

 

 

62,042

 

Interest income

 

 

12

 

 

 

13

 

 

 

37

 

 

 

36

 

Interest expense

 

 

(2,090

)

 

 

(2,062

)

 

 

(5,858

)

 

 

(6,123

)

Other non-operating income

 

 

135

 

 

 

101

 

 

 

807

 

 

 

315

 

Income before provision for income taxes

 

 

15,001

 

 

 

21,052

 

 

 

49,917

 

 

 

56,270

 

Provision for income taxes

 

 

5,754

 

 

 

7,958

 

 

 

19,222

 

 

 

21,419

 

Net income

 

$

9,247

 

 

$

13,094

 

 

$

30,695

 

 

$

34,851

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.32

 

 

$

0.44

 

 

$

1.04

 

 

$

1.16

 

Diluted

 

$

0.32

 

 

$

0.44

 

 

$

1.04

 

 

$

1.16

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

28,661

 

 

 

29,947

 

 

 

29,537

 

 

 

30,037

 

Diluted

 

 

28,661

 

 

 

29,982

 

 

 

29,541

 

 

 

30,077

 

Dividends declared common share

 

$

0.07

 

 

$

0.07

 

 

$

0.21

 

 

$

0.21

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

3


 

UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-nine Weeks Ended

 

 

 

September 26,

2015

 

 

September 27,

2014

 

 

September 26,

2015

 

 

September 27,

2014

 

Net Income

 

$

9,247

 

 

$

13,094

 

 

$

30,695

 

 

$

34,851

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) on available-for-sale

   investments arising during the period, net

   of income taxes

 

 

(1,098

)

 

 

(53

)

 

 

(1,106

)

 

 

411

 

Realized gains on available-for-sale investments

   reclassified into income, net of income taxes

 

 

-

 

 

 

-

 

 

 

(176

)

 

 

-

 

Foreign currency translation adjustments

 

 

(987

)

 

 

(460

)

 

 

(1,753

)

 

 

(560

)

Total other comprehensive income (loss)

 

 

(2,085

)

 

 

(513

)

 

 

(3,035

)

 

 

(149

)

Total comprehensive income

 

$

7,162

 

 

$

12,581

 

 

$

27,660

 

 

$

34,702

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

4


 

UNIVERSAL TRUCKLOAD SERVICES, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Thirty-nine Weeks Ended

 

 

 

September 26,

2015

 

 

September 27,

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

30,695

 

 

$

34,851

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,449

 

 

 

24,132

 

Gain on sale of marketable equity securities

 

 

(276

)

 

 

 

Loss (gain) on disposal of property and equipment

 

 

295

 

 

 

(36

)

Amortization of debt issuance costs

 

 

530

 

 

 

519

 

Stock-based compensation

 

 

173

 

 

 

 

Provision for doubtful accounts

 

 

2,017

 

 

 

1,485

 

Deferred income taxes

 

 

(1,569

)

 

 

(3,090

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade and other accounts receivable

 

 

(16,878

)

 

 

(27,731

)

Prepaid income taxes, prepaid expenses and other assets

 

 

1,526

 

 

 

2,946

 

Accounts payable, accrued expenses and other current liabilities, and insurance

   and claims

 

 

4,067

 

 

 

16,562

 

Due to/from affiliates, net

 

 

1,781

 

 

 

118

 

Other long-term liabilities

 

 

(318

)

 

 

500

 

Net cash provided by operating activities

 

 

48,492

 

 

 

50,256

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(13,377

)

 

 

(40,169

)

Proceeds from the sale of property and equipment

 

 

505

 

 

 

1,220

 

Purchases of marketable securities

 

 

(1,150

)

 

 

(55

)

Proceeds from sale of marketable securities

 

 

322

 

 

 

 

Net cash used in investing activities

 

 

(13,700

)

 

 

(39,004

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowing - revolving debt

 

 

101,080

 

 

 

102,749

 

Repayments of debt - revolving debt

 

 

(80,450

)

 

 

(100,899

)

Proceeds from borrowing - equipment facility

 

 

 

 

 

2,500

 

Repayments of debt - equipment facility

 

 

(6,428

)

 

 

(3,429

)

Repayments of debt - term debt

 

 

(3,645

)

 

 

 

Payment of capital lease obligations

 

 

(810

)

 

 

(1,066

)

Dividends paid

 

 

(6,184

)

 

 

(6,313

)

Purchases of treasury stock

 

 

(35,065

)

 

 

(4,750

)

Capitalized financing costs

 

 

(76

)

 

 

 

Net cash used in financing activities

 

 

(31,578

)

 

 

(11,208

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,025

)

 

 

(263

)

Net increase (decrease) in cash

 

 

2,189

 

 

 

(219

)

Cash  and cash equivalents – beginning of period

 

 

8,001

 

 

 

10,223

 

Cash and cash equivalents – end of period

 

$

10,190

 

 

$

10,004

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

5,230

 

 

$

5,331

 

Cash paid for income taxes

 

$

20,534

 

 

$

17,205

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

5


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements

 

(1)

Basis of Presentation 

The accompanying unaudited consolidated financial statements of Universal Truckload Services, Inc. and its wholly-owned subsidiaries (“we”, “us”, “our”, “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, 2014 and 2013 and for each of the years in the three-year period ended December 31, 2014 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.

Certain immaterial reclassifications have been made to the prior financial statements in order for them to conform to the September 26, 2015 presentation.

 

 

(2)

Marketable Securities

At September 26, 2015 and December 31, 2014, marketable securities, all of which are available-for-sale, consist of common and preferred stocks.  Marketable securities are carried at fair value, with unrealized gains and losses, net of related income taxes, reported as accumulated other comprehensive income, except for losses from impairments which are determined to be other-than-temporary.  Realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in the determination of net income and are included in other non-operating income (expense), at which time the average cost basis of these securities are adjusted to fair value.  Fair values are based on quoted market prices at the reporting date.  Interest and dividends on available-for-sale securities are included in other non-operating income (expense).

The cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of available-for-sale securities by type were as follows (in thousands):

 

 

 

Cost

 

 

Gross

unrealized

holding

gains

 

 

Gross

unrealized

holding

(losses)

 

 

Fair

Value

 

At September 26, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

10,883

 

 

$

3,720

 

 

$

(1,195

)

 

$

13,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

9,779

 

 

$

4,825

 

 

$

(295

)

 

$

14,309

 

 

Included in equity securities at September 26, 2015 are securities with a fair value of $4.3 million with a cumulative loss position of $1.2 million, the impairment of which we consider to be temporary.  We consider several factors in our determination as to whether declines in value are judged to be temporary or other-than-temporary, including the severity and duration of the decline, the financial condition and near-term prospects of the specific issuers and the industries in which they operate, and our intent and ability to hold these securities.  We may incur future impairment charges if declines in market values continue and/or worsen and impairments are no longer considered temporary.

 

 

6


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(2)

Marketable Securities - continued 

The fair value and gross unrealized holding losses of our marketable securities that are not deemed to be other-than-temporarily impaired aggregated by type and length of time they have been in a continuous unrealized loss position were as follows (in thousands):

 

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair

Value

 

 

Unrealized

Losses

 

 

Fair

Value

 

 

Unrealized

Losses

 

 

Fair

Value

 

 

Unrealized

Losses

 

At September 26, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$

4,067

 

 

$

999

 

 

$

270

 

 

$

196

 

 

$

4,337

 

 

$

1,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$

1,380

 

 

$

197

 

 

$

146

 

 

$

98

 

 

$

1,526

 

 

$

295

 

 

Our portfolio of equity securities in a continuous loss position, the impairment of which we consider to be temporary, consists primarily of common stocks in the oil and gas, banking, steel, and transportation industries.  The fair value and unrealized losses are distributed in 40 publicly traded companies, with no single industry or company representing a material or concentrated unrealized loss.  We have evaluated the near-term prospects of the various industries, as well as the specific issuers within our portfolio, in relation to the severity and duration of the impairments, and based on that evaluation, as well as our ability and intent to hold these investments for a reasonable period of time to allow for a recovery of fair value, we do not consider these investments to be other-than-temporarily impaired at September 26, 2015.

We may, from time to time, invest cash in excess of our current needs in marketable securities, much of which is held in equity securities, which are actively traded on public exchanges.  It is our philosophy to minimize the risk of capital loss without foregoing the potential for capital appreciation through investing in value-and-income oriented investments.  However, holding equity securities subjects us to fluctuations in the market value of our investment portfolio based on current market prices, and a decline in market prices or other unstable market conditions could cause a loss in the value of our marketable securities classified as available-for-sale.

 

 

(3)

Accrued Expenses and Other Current Liabilities

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

 

 

 

September 26,

2015

 

 

December 31,

2014

 

 

 

 

 

 

 

 

 

 

Payroll related items

 

$

9,214

 

 

$

8,827

 

Driver escrow liabilities

 

 

4,269

 

 

 

4,519

 

Commissions, taxes and other

 

 

9,564

 

 

 

8,995

 

Total

 

$

23,047

 

 

$

22,341

 

 

 

 

7


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt 

Debt is comprised of the following (in thousands):

 

 

 

Interest Rates

at September 26, 2015

 

September 26,

2015

 

 

December 31,

2014

 

Outstanding Debt:

 

 

 

 

 

 

 

 

 

 

Syndicated credit facility

 

 

 

 

 

 

 

 

 

 

$120 million revolving credit

   facility

 

LIBOR + 1.85%

 

$

80,500

 

 

$

59,500

 

Swing Line sub-facility

 

Prime   + 0.85%

 

 

 

 

 

370

 

$60 million equipment financing

   facility

 

LIBOR + 2.35%

 

 

49,000

 

 

 

55,428

 

$50 million term loan

 

LIBOR + 3.00%

 

 

46,355

 

 

 

50,000

 

$70 million term loan B

 

LIBOR + 3.00%

 

 

70,000

 

 

 

70,000

 

UBS secured borrowing facility

 

LIBOR + 1.10%

 

 

 

 

 

 

 

 

 

 

 

245,855

 

 

 

235,298

 

Less current portion

 

 

 

 

8,571

 

 

 

9,593

 

Total long-term debt

 

 

 

$

237,284

 

 

$

225,705

 

Syndicated credit facility

On December 19, 2013, we entered into a Second Amendment (the “Second Amendment”) to our Revolving Credit and Term Loan Agreement dated August 28, 2012 (the “Credit Agreement”), with and among the lenders parties thereto and Comerica Bank, as administrative agent, to provide for aggregate borrowing facilities of up to $300 million.  The Second Amendment modifies the Credit Agreement to allow for additional borrowings of $70 million under a new term loan and a $10 million increase in the revolving credit facility.  The Credit Agreement, as amended, consists of a $120 million revolving credit facility (which amount may be increased by up to $20 million upon our request and approval of the lenders), a $60 million equipment credit facility, a $50 million term loan, and a $70 million term loan B.  Additionally, the Credit Agreement provides for up to $5 million in letters of credit, which letters of credit reduce availability under the revolving credit facility.

$120 million Revolving Credit Facility

The revolving credit facility is available to refinance existing indebtedness and to finance working capital through August 28, 2017.  Two interest rate options are applicable to advances borrowed pursuant to the facility:  Eurodollar-based advances and base rate advances.  Eurodollar-based advances bear interest at 30, 60 or 90-day LIBOR rates plus an applicable margin, which varies from 1.35% to 2.10% based on our ratio of total debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined.  As an alternative, base rate advances bear interest at a base rate, as defined, plus an applicable margin, which also varies based on our ratio of total debt to EBITDA in a range from 0.35% to 1.10%.  The base rate is the greater of the prime rate announced by Comerica Bank, the federal funds effective rate plus 1.0%, or the daily adjusting LIBOR rate plus 1.0%.  At September 26, 2015, interest accrued at 2.05% based on 30-day LIBOR.

To support daily borrowing and other operating requirements, the revolving credit facility contains a $10.0 million Swing Line sub-facility and a $5.0 million letter of credit sub-facility.  On June 3, 2013, we executed an amendment to our Revolving Credit and Term Loan Agreement (the “First Amendment”) which split the availability on the Swing Line between two existing lenders, Comerica Bank and KeyBank.  The Swing Line was split to provide for borrowings of up to $7.0 million from Comerica Bank and $3.0 million from KeyBank, so long as the Comerica Bank and KeyBank advances do not exceed $10.0 million in the aggregate.  Swing Line borrowings incur interest at either the base rate plus the applicable margin or, alternatively, at a quoted rate offered by the applicable Swing Line lender in its sole discretion.  At September 26, 2015, we did not have any amounts outstanding under the Swing Line, and there were no letters of credit issued against the revolving credit facility.

Interest on the unpaid balance of all revolving credit facility and swing line base rate advances is payable quarterly in arrears commencing on October 1, 2012, and on the first day of each October, January, April and July thereafter.  Interest on the unpaid balance of each Eurodollar-based advance of the revolving credit facility is payable on the last day of the applicable Eurodollar interest period.  Interest on the unpaid balance of each quoted rate based advance of the swing line is payable on the last day of the applicable quoted rate interest period.  

 

8


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued 

The revolving credit facility is subject to a facility fee, which is payable quarterly in arrears, of either 0.25% or 0.50%, depending on our ratio of total debt to EBITDA.  Other than in connection with Eurodollar-based advances or quoted rate advances that are paid off and terminated prior to an applicable interest period, there are no premiums or penalties resulting from prepayment.  Borrowings outstanding at any time under the revolving credit facility are limited to the value of eligible accounts receivable of our principal operating subsidiaries, pursuant to a monthly borrowing base certificate.  At September 26, 2015, our $80.5 million revolver advance was secured by, among other assets, net eligible accounts receivable totaling $138.4 million, of which, $114.6 million were available for borrowing against pursuant to the agreement.

$60 million Equipment Credit Facility

Through August 28, 2015, the equipment credit facility was used to refinance existing indebtedness and to finance capital expenditures including in connection with acquisitions.  At September 26, 2015, outstanding borrowings under the equipment credit facility were $49.0 million.  Such borrowings are being repaid in quarterly installments equal to 1/28th of the aggregate amount of borrowings under the equipment credit facility commencing on January 1, 2014.  

The two interest rate options that apply to revolving credit facility advances also apply to equipment credit facility advances.  Eurodollar-based advances bear interest at 30, 60 or 90-day LIBOR rates plus an applicable margin, which varies from 1.60% to 2.60% based on our ratio of total debt to EBITDA.   Base rate advances bear interest at a base rate, as defined, plus an applicable margin, which also varies based on our ratio of total debt to EBITDA in a range from 0.60% to 1.60%.  The equipment credit facility is subject to an unused fee, which is payable quarterly in arrears, of 0.50%. At September 26, 2015, interest accrued at 2.55% based on 30-day LIBOR.

Interest on the unpaid balance of all equipment credit facility base rate advances is payable quarterly in arrears commencing on October 1, 2012, and on the first day of each October, January, April and July thereafter.  Interest on the unpaid balance of each Eurodollar-based advance of the equipment credit facility is payable on the last day of the applicable Eurodollar interest period.  

$50 million Term Loan

Proceeds of the term loan were advanced on October 1, 2012 and used to refinance existing indebtedness of LINC.  The outstanding principal balance is due on August 28, 2017, to the extent not already reduced by mandatory or optional prepayments.  The applicable interest rate on the effective date of the term loan indebtedness was the base rate.  Base rate advances bear interest at a defined base rate plus an applicable margin which varies from 1.50% to 2.25%, based on our ratio of total debt to EBITDA.  Thereafter, we may convert base rate advances to Eurodollar-based advances, which bear interest at 30, 60 or 90-day LIBOR rates plus an applicable margin which varies from 2.50% to 3.25%, based on our ratio of total debt to EBITDA.  At September 26, 2015, interest accrued at 3.20% based on 30-day LIBOR.

Interest on the unpaid principal of all term loan base rate advances is payable quarterly in arrears commencing on October 1, 2012, and on the first day of each October, January, April and July thereafter.  Interest on the unpaid principal of each Eurodollar-based advance of the term loan is payable on the last day of the applicable Eurodollar interest period.  

$70 million Term Loan B

Proceeds of the term loan were advanced on December 19, 2013 and used to finance the acquisition of Westport.  The outstanding principal balance is due on August 28, 2017, to the extent not already reduced by mandatory or optional prepayments.  The applicable interest rate on the effective date of the term loan indebtedness was the base rate.  Base rate advances bear interest at a defined base rate plus an applicable margin which varies from 1.50% to 2.25%, based on our ratio of total debt to EBITDA.  Thereafter, we may convert base rate advances to Eurodollar-based advances, which bear interest at 30, 60 or 90-day LIBOR rates plus an applicable margin which varies from 2.50% to 3.25%, based on our ratio of total debt to EBITDA.  At September 26, 2015, interest accrued at 3.20% based on 30-day LIBOR.

Interest on the unpaid principal of all term loan base rate advances is payable quarterly in arrears commencing on January 1, 2014, and on the first day of each January, April, July and October thereafter.  Interest on the unpaid principal of each Eurodollar-based advance of the term loan is payable on the last day of the applicable Eurodollar interest period.  

 

9


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued 

The Credit Agreement requires us to repay the borrowings made under the term loan facilities and the equipment credit facility as follows: 50% (which percentage shall be reduced to 0% subject to the Company attaining a certain leverage ratio) of our annual excess cash flow, as defined; 100% of net cash proceeds of certain asset sales; and 100% of certain insurance and condemnation proceeds.  There were no mandatory prepayments of the term loans due as of September 26, 2015.  We may voluntarily repay outstanding loans under each of the facilities at any time, subject to certain customary “breakage” costs with respect to LIBOR-based borrowings.  In addition, we may elect to permanently terminate or reduce all or a portion of the revolving credit facility.  

All obligations under the Credit Agreement are unconditionally guaranteed by the Company’s material U.S. subsidiaries and the obligations of the Company and such subsidiaries under the Credit Agreement and such guarantees are secured by, subject to certain exceptions, substantially all of their assets.  The Credit Agreement also may, in certain circumstances, limit our ability to pay dividends or distributions.  The Credit Agreement includes annual, quarterly and ad hoc financial reporting requirements and financial covenants requiring us to maintain maximum leverage ratios and a minimum fixed charge coverage ratio, as well as customary affirmative and negative covenants and events of default.  Specifically, we may not exceed a maximum senior debt to EBITDA ratio, as defined, of 2.5:1 and a maximum total debt to EBITDA ratio, as defined, of 3.0:1.  We must also maintain a fixed charge coverage ratio, as defined, of not less than 1.25:1.  On June 9, 2015, we entered into a third amendment  to exclude purchases of up to $35 million of the Company’s common stock in a modified “Dutch auction” tender offer from the calculation of the Company’s fixed charge coverage ratio, as defined in the Credit Agreement.  As of September 26, 2015, we were in compliance with our debt covenants.

UBS Secured Borrowing Facility

We also maintain a secured borrowing facility at UBS Financial Services, Inc., or UBS, using our marketable securities as collateral for the short-term line of credit.  The line of credit bears an interest rate equal to LIBOR plus 1.10% (effective rate of 1.29% at September 26, 2015), and interest is adjusted and billed monthly.  No principal payments are due on the borrowing; however, the line of credit is callable at any time.  The amount available under the line of credit is based on a percentage of the market value of the underlying securities.  If the equity value in the account falls below the minimum requirement, we must restore the equity value, or UBS may call the line of credit.  As of September 26, 2015 and December 31, 2014, there were no amounts outstanding under the line of credit, and the maximum available borrowings were $7.5 million and $6.9 million, respectively.  

 

 

(5)

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.

 

10


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(5)

Fair Value Measurements and Disclosures – continued 

We have segregated all financial assets 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):

 

 

 

September 26,

2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

574

 

 

$

 

 

$

 

 

$

574

 

Marketable securities

 

 

13,408

 

 

 

 

 

 

 

 

 

13,408

 

Total Assets

 

$

13,982

 

 

$

 

 

$

 

 

$

13,982

 

 

 

 

December 31,

2014

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

21

 

 

$

 

 

$

 

 

$

21

 

Marketable securities

 

 

14,309

 

 

 

 

 

 

 

 

 

14,309

 

Total Assets

 

$

14,330

 

 

$

 

 

$

 

 

$

14,330

 

 

The valuation techniques used to measure fair value for the items in the tables above are as follows:

 

·

Cash equivalents – This category consists of money market funds which are listed as Level 1 assets and measured at fair value based on quoted prices for identical instruments in active markets.

 

·

Marketable securities – Marketable securities represent equity securities, which consist of common and preferred stocks, are actively traded on public exchanges and are listed as Level 1 assets.  Fair value was measured based on quoted prices for these securities in active markets.  

Our senior debt and line of credit consists of variable rate borrowings.  We categorize borrowings under the credit agreement and line of credit as Level 2 in the fair value hierarchy.  The carrying value of these borrowings approximate fair value because the applicable interest rates are adjusted frequently based on short-term market rates.

 

 

(6)

Transactions with Affiliates

Through December 31, 2004, we were a wholly-owned subsidiary of CenTra, Inc. On December 31, 2004, CenTra distributed all of our common stock to the shareholders of CenTra.  Subsequent to our initial public offering in 2005, our majority shareholders retained and continue to hold a controlling interest in us.  CenTra and affiliates of CenTra provide administrative support services to us, including legal, human resources, and tax services.  The cost of these services is based on the actual or estimated utilization of the specific service. Management believes these charges are reasonable.  However, the costs of these services charged to us are not necessarily indicative of the costs that would have been incurred if we had internally performed or acquired these services as a separate unaffiliated entity.

 

11


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(6)

Transactions with Affiliates – continued 

In addition to the administrative support services described above, we purchase other services from affiliates. Following is a schedule of cost incurred for services provided by affiliates for the thirteen weeks and thirty-nine weeks ended September 26, 2015 and September 27, 2014 (in thousands):

 

 

 

Thirteen weeks ended

 

 

Thirty-nine weeks ended

 

 

 

September 26,

2015

 

 

September 27,

2014

 

 

September 26,

2015

 

 

September 27,

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative support services

 

$

1,026

 

 

$

770

 

 

$

2,749

 

 

$

1,728

 

Truck fueling and maintenance

 

 

867

 

 

 

436

 

 

 

1,247

 

 

 

1,042

 

Real estate rent and related costs

 

 

3,149

 

 

 

2,578

 

 

 

9,578

 

 

 

7,852

 

Insurance and employee benefit plans

 

 

13,374

 

 

 

8,695

 

 

 

37,358

 

 

 

27,717

 

Contracted transportation services

 

 

218

 

 

 

494

 

 

 

686

 

 

 

705

 

Total

 

$

18,634

 

 

$

12,973

 

 

$

51,618

 

 

$

39,044

 

In connection with our transportation services, we also routinely cross the Ambassador Bridge between Detroit, Michigan and Windsor Ontario, and we pay tolls and other fees to certain related entities which are under common control with CenTra.  CenTra also charges us for the direct variable cost of various maintenance, fueling and other operational support costs for services delivered at their trucking terminals that are geographically remote from our own facilities.  Such activities are billed when incurred, paid on a routine basis, and reflect actual labor utilization, repair parts costs or quantities of fuel purchased.

A significant number of our transportation and logistics service operations are located at facilities leased from affiliates.  At 43 facilities, occupancy is based on either month-to-month or contractual, multi-year lease arrangements which are billed and paid monthly.  Leasing properties provided by an affiliate that owns a substantial commercial property portfolio affords us significant operating flexibility.  However, we are not limited to such arrangements.  

In July 2015, we entered into a lease agreement with Cedar Investments LLC, an affiliate, to provide us a logistics facility of up to 500,000 sq. ft. located on 33 acres in close proximity to a major customer in Detroit, Michigan.  The term of the lease is 124 months at a rate of approximately $256,500 per month once the new facility is made available for occupancy, which is expected to occur prior to the end of 2015.

We purchase workers’ compensation, property and casualty, cargo, warehousing and other general liability insurance from an insurance company controlled by our majority shareholders.  Our employee health care benefits and 401(k) programs are also provided by this affiliate.

Other services from affiliates, including leased real estate, insurance and employee benefit plans, and contracted transportation services, are delivered to us on a per-transaction-basis or pursuant to separate contractual arrangements provided in the ordinary course of business.  At September 26, 2015 and December 31, 2014, amounts due to affiliates were $5.0 million and $2.9 million, respectively.  In our Consolidated Balance Sheets, we record our insured claims liability and the related recovery from an affiliate insurance provider in insurance and claims, and other receivables.  At September 26, 2015 and December 31, 2014, there were $13.7 million and $10.7 million, respectively, included in each of these accounts for insured claims.  

We did not purchase any tractors or trailers from affiliates during the thirteen weeks or thirty-nine weeks ended September 26, 2015.  We did however purchase used snow removal equipment from an affiliate during the thirty-nine weeks ended September 26, 2015, for $18,000. For the thirty-nine weeks ended September 27, 2014, we purchased 10 used tractors and one used trailer from an affiliate totaling approximately $0.8 million.

We have retained the law firm of Sullivan Hincks & Conway to provide us legal services.  Daniel C. Sullivan, a member of our Board, is a partner at Sullivan Hincks & Conway.  Not included in the table above are amounts paid for legal services during the thirteen and thirty-nine weeks ended September 26, 2015 of $500 and $1,500, respectively.  Also not included in the table above are amounts paid for legal services during the thirteen and thirty-nine weeks ended September 27, 2014 of $46,000 and $71,000, respectively.

We also exercised our right of first refusal to acquire 25,000 shares of restricted stock from a director, H.E. “Scott” Wolfe, for $622,500 based on the closing market price on March 5, 2015, the effective date of the transaction. Effective August 19, 2015, we exercised our right of first refusal to acquire 2,500 shares of restricted stock from our CEO, Jeff Rogers, for $50,825 based on the closing market price on the effective date of the transaction.

 

12


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(6)

Transactions with Affiliates – continued 

Services provided by Universal to Affiliates

We may assist our affiliates with selected transportation and logistics services in connection with their specific customer contracts or purchase orders.  Following is a schedule of services provided to affiliates for the thirteen weeks and thirty-nine weeks ended September 26, 2015 and September 27, 2014 (in thousands):

 

 

 

Thirteen weeks ended

 

 

Thirty-nine weeks ended

 

 

 

September 26,

2015

 

 

September 27,

2014

 

 

September 26,

2015

 

 

September 27,

2014

 

Transportation and intermodal services

 

$

10

 

 

$

5

 

 

$

191

 

 

$

293

 

Truck fueling and maintenance

 

 

 

 

 

1

 

 

 

 

 

 

87

 

Administrative and customer support services

 

 

 

 

 

66

 

 

 

 

 

 

71

 

Total

 

$

10

 

 

$

72

 

 

$

191

 

 

$

451

 

At September 26, 2015 and December 31, 2014, amounts due from affiliates were $1.9 million and $1.6 million, respectively.

We did not sell any equipment to affiliates during the thirteen or thirty-nine weeks ended September 26, 2015.  During the thirteen weeks ended September 27, 2014, we sold two used trailers to an affiliate for $4,000.  The trailers were fully depreciated, and therefore, the sale resulted in a gain of approximately $4,000.  For the thirty-nine weeks ended September 27, 2014, we sold 41 used trailers to an affiliate for approximately $82,000.  The trailers were fully depreciated, and therefore, the sale resulted in a gain of approximately $82,000.  

 

In June 2015, our Board of Directors authorized the repurchase of up to 1,000,000 shares of our common stock through a “Dutch auction” tender offer. Subject to certain limitations and legal requirements, we could repurchase up to an additional 2% of our outstanding shares. The tender offer began on the date of the announcement, June 9, 2015, and expired on July 8, 2015. Through this tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares at a price within the range of $21.50 to $23.50 per share. Upon expiration, 1,599,605 shares were purchased through this offer at a final purchase price of $21.50 per share for a total purchase price of approximately $34.4 million, including fees and commission.  The tender offer was settled on July 14, 2015, and we used funds borrowed under our existing line of credit and from our available cash and cash equivalents to fund the offering.  Immediately following the consummation of the tender offer, we had 28,380,679 shares of common stock outstanding. The total amount of shares purchased in the tender offer included 1,486,060 shares tendered by Mr. Manuel J. Moroun, a member of Universal’s Board of Directors, and a trust controlled by him.  Mr. Moroun is the father of Mr. Matthew T. Moroun, the Chairman of the Board of Directors.  

During the thirty-nine weeks ended September 27, 2014, we incurred approximately $0.5 million of costs related to an underwritten public offering of our common stock. Under the Amended and Restated Registration Rights Agreement, dated as of July 25, 2012 with our majority shareholders, we were responsible to pay for the cost of the offering. After deducting the underwriting discount and offering expenses, we did not have any remaining proceeds from the sale of our common stock.

 

 

 

13


UNIVERSAL TRUCKLOAD SERVICES, INC.
Notes to Unaudited Consolidated Financial Statements - Continued

 

(7)

Comprehensive Income 

Comprehensive income includes the following (in thousands):

 

 

 

Thirteen weeks ended

 

 

Thirty-nine weeks ended

 

 

 

September 26,

2015

 

 

September 27,

2014

 

 

September 26,

2015

 

 

September 27,

2014

 

Unrealized holding gains (losses) on available-for-sale

   investments arising during the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross amount

 

$

(1,707

)

 

$

(86

)

 

$

(1,740

)

 

$

644

 

Income tax (expense) benefit

 

 

609

 

 

 

33

 

 

 

634

 

 

 

(233

)

Net of tax amount

 

$

(1,098

)

 

$

(53

)

 

$

(1,106

)

 

$

411