0001564590-16-028958.txt : 20161110 0001564590-16-028958.hdr.sgml : 20161110 20161110163757 ACCESSION NUMBER: 0001564590-16-028958 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 73 CONFORMED PERIOD OF REPORT: 20161001 FILED AS OF DATE: 20161110 DATE AS OF CHANGE: 20161110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL LOGISTICS HOLDINGS, 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: 161988604 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 FORMER COMPANY: FORMER CONFORMED NAME: Universal Truckload Services, Inc. DATE OF NAME CHANGE: 20041109 10-Q 1 ulh-10q_20161001.htm UNIVERSAL-3RD QTR-16_FORM 10-Q_2016.10.01 ulh-10q_20161001.htm

 

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 October 1, 2016

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)

 

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 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     No  

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

 

 

 

 

 

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     No  

The number of shares of the registrant’s common stock, no par value, outstanding as of November 1, 2016, was 28,412,746.

 

 

 


PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

October 1,

2016

 

 

December 31,

2015

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,544

 

 

$

12,930

 

Marketable securities

 

 

13,786

 

 

 

13,431

 

Accounts receivable – net of allowance for doubtful accounts of $4,903

   and $5,173, respectively

 

 

149,096

 

 

 

141,275

 

Other receivables

 

 

13,180

 

 

 

15,422

 

Due from affiliates

 

 

2,818

 

 

 

1,924

 

Prepaid income taxes

 

 

3,379

 

 

 

-

 

Prepaid expenses and other

 

 

19,814

 

 

 

17,858

 

Total current assets

 

 

203,617

 

 

 

202,840

 

Property and equipment – net of accumulated depreciation of $176,852 and

   $171,815, respectively

 

 

236,499

 

 

 

177,189

 

Goodwill

 

 

74,484

 

 

 

74,484

 

Intangible assets – net of accumulated amortization of $49,114 and $43,495, respectively

 

 

39,046

 

 

 

44,665

 

Deferred income taxes

 

 

63

 

 

 

83

 

Other assets

 

 

4,522

 

 

 

3,894

 

Total assets

 

$

558,231

 

 

$

503,155

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

73,027

 

 

$

46,347

 

Due to affiliates

 

 

6,558

 

 

 

3,413

 

Accrued expenses and other current liabilities

 

 

21,105

 

 

 

18,989

 

Insurance and claims

 

 

19,061

 

 

 

21,906

 

Income taxes payable

 

 

 

 

 

1,045

 

Current portion of long-term debt, net of debt issuance costs of $321 and $264, respectively

 

 

32,333

 

 

 

61,224

 

Current portion of affiliate note

 

 

2,614

 

 

 

 

Current maturities of capital lease obligations

 

 

108

 

 

 

916

 

Total current liabilities

 

 

154,806

 

 

 

153,840

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt, net of debt issuance costs of $1,347 and $1,235, respectively

 

 

213,934

 

 

 

172,190

 

Long-term portion of affiliate note

 

 

43

 

 

 

 

Capital lease obligations, net of current maturities

 

 

115

 

 

 

1,065

 

Deferred income taxes

 

 

40,155

 

 

 

40,496

 

Other long-term liabilities

 

 

3,235

 

 

 

4,483

 

Total long-term liabilities

 

 

257,482

 

 

 

218,234

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, no par value. Authorized 100,000,000 shares; 30,900,304 and

   30,884,727 shares issued; 28,412,746 and 28,398,900 shares outstanding, respectively

 

 

30,900

 

 

 

30,885

 

Paid-in capital

 

 

3,196

 

 

 

2,914

 

Treasury stock, at cost; 2,487,558 and 2,485,827 shares, respectively

 

 

(50,044

)

 

 

(50,018

)

Retained earnings

 

 

165,299

 

 

 

149,743

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

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

   taxes of $(1,249) and $(1,015), respectively

 

 

2,215

 

 

 

1,801

 

Interest rate swaps, net of income taxes of $238 and $0, respectively

 

 

(389

)

 

 

 

Foreign currency translation adjustments

 

 

(5,234

)

 

 

(4,244

)

Total shareholders’ equity

 

 

145,943

 

 

 

131,081

 

Total liabilities and shareholders’ equity

 

$

558,231

 

 

$

503,155

 

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

 

 

Thirty-nine Weeks Ended

 

 

 

October 1,

2016

 

 

September 26,

2015

 

 

October 1,

2016

 

 

September 26,

2015

 

Operating revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation services

 

$

163,587

 

 

$

178,114

 

 

$

476,235

 

 

$

518,668

 

Value-added services

 

 

71,956

 

 

 

68,400

 

 

 

225,716

 

 

 

213,723

 

Intermodal services

 

 

35,950

 

 

 

37,700

 

 

 

106,749

 

 

 

110,391

 

Total operating revenues

 

 

271,493

 

 

 

284,214

 

 

 

808,700

 

 

 

842,782

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation and equipment rent

 

 

131,832

 

 

 

146,687

 

 

 

385,509

 

 

 

427,852

 

Direct personnel and related benefits

 

 

65,257

 

 

 

54,116

 

 

 

194,615

 

 

 

159,374

 

Commission expense

 

 

8,217

 

 

 

9,651

 

 

 

24,668

 

 

 

28,012

 

Operating expenses (exclusive of items shown separately)

 

 

24,973

 

 

 

25,483

 

 

 

72,465

 

 

 

81,624

 

Occupancy expense

 

 

8,075

 

 

 

6,739

 

 

 

23,772

 

 

 

20,173

 

Selling, general, and administrative

 

 

9,087

 

 

 

9,452

 

 

 

26,576

 

 

 

27,724

 

Insurance and claims

 

 

4,949

 

 

 

6,598

 

 

 

13,607

 

 

 

16,643

 

Depreciation and amortization

 

 

9,076

 

 

 

8,544

 

 

 

26,757

 

 

 

26,449

 

Total operating expenses

 

 

261,466

 

 

 

267,270

 

 

 

767,969

 

 

 

787,851

 

Income from operations

 

 

10,027

 

 

 

16,944

 

 

 

40,731

 

 

 

54,931

 

Interest income

 

 

15

 

 

 

12

 

 

 

141

 

 

 

37

 

Interest expense

 

 

(2,093

)

 

 

(2,090

)

 

 

(6,297

)

 

 

(5,858

)

Other non-operating income

 

 

170

 

 

 

135

 

 

 

420

 

 

 

807

 

Income before provision for income taxes

 

 

8,119

 

 

 

15,001

 

 

 

34,995

 

 

 

49,917

 

Provision for income taxes

 

 

3,122

 

 

 

5,754

 

 

 

13,474

 

 

 

19,222

 

Net income

 

$

4,997

 

 

$

9,247

 

 

$

21,521

 

 

$

30,695

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

0.32

 

 

$

0.76

 

 

$

1.04

 

Diluted

 

$

0.18

 

 

$

0.32

 

 

$

0.76

 

 

$

1.04

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

28,413

 

 

 

28,661

 

 

 

28,410

 

 

 

29,537

 

Diluted

 

 

28,413

 

 

 

28,661

 

 

 

28,410

 

 

 

29,541

 

Dividends declared per common share

 

$

0.07

 

 

$

0.07

 

 

$

0.21

 

 

$

0.21

 

 

See accompanying notes to consolidated financial statements.

 

 

3


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

Thirteen Weeks Ended

 

 

Thirty-nine Weeks Ended

 

 

 

October 1,

2016

 

 

September 26,

2015

 

 

October 1,

2016

 

 

September 26,

2015

 

Net Income

 

$

4,997

 

 

$

9,247

 

 

$

21,521

 

 

$

30,695

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

   securities arising during the period, net

   of income taxes

 

 

(147

)

 

 

(1,098

)

 

 

467

 

 

 

(1,106

)

Realized gains on available-for-sale securities

   reclassified into income, net of income taxes

 

 

(29

)

 

 

 

 

 

(53

)

 

 

(176

)

Unrealized changes in fair value of interest rate swaps,

   net of income taxes

 

 

45

 

 

 

 

 

 

(389

)

 

 

 

Foreign currency translation adjustments

 

 

(293

)

 

 

(987

)

 

 

(990

)

 

 

(1,753

)

Total other comprehensive loss

 

 

(424

)

 

 

(2,085

)

 

 

(965

)

 

 

(3,035

)

Total comprehensive income

 

$

4,573

 

 

$

7,162

 

 

$

20,556

 

 

$

27,660

 

 

See accompanying notes to consolidated financial statements.

 

 

4


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Thirty-nine Weeks Ended

 

 

 

October 1,

2016

 

 

September 26,

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

21,521

 

 

$

30,695

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,757

 

 

 

26,449

 

Gain on sale of marketable securities

 

 

(53

)

 

 

(276

)

(Gain) loss on disposal of property and equipment

 

 

(353

)

 

 

295

 

Amortization of debt issuance costs

 

 

227

 

 

 

530

 

Stock-based compensation

 

 

298

 

 

 

173

 

Provision for doubtful accounts

 

 

1,369

 

 

 

2,017

 

Deferred income taxes

 

 

(251

)

 

 

(1,569

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade and other accounts receivable

 

 

(6,558

)

 

 

(16,878

)

Prepaid income taxes, prepaid expenses and other assets

 

 

(5,962

)

 

 

1,526

 

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

   and claims

 

 

23,608

 

 

 

4,067

 

Due to/from affiliates, net

 

 

2,251

 

 

 

1,781

 

Other long-term liabilities

 

 

(1,912

)

 

 

(318

)

Net cash provided by operating activities

 

 

60,942

 

 

 

48,492

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(78,651

)

 

 

(13,377

)

Proceeds from the sale of property and equipment

 

 

2,225

 

 

 

505

 

Purchases of marketable securities

 

 

(13

)

 

 

(1,150

)

Proceeds from sale of marketable securities

 

 

358

 

 

 

322

 

Net cash used in investing activities

 

 

(76,081

)

 

 

(13,700

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowing - revolving

 

 

140,494

 

 

 

101,080

 

Repayments of borrowings - revolving

 

 

(150,129

)

 

 

(80,450

)

Proceeds from borrowing - term

 

 

85,313

 

 

 

 

Repayments of borrowings - term

 

 

(63,657

)

 

 

(10,073

)

Payment of capital lease obligations

 

 

(1,758

)

 

 

(810

)

Dividends paid

 

 

(5,965

)

 

 

(6,184

)

Capitalized financing costs

 

 

(396

)

 

 

(76

)

Purchases of treasury stock

 

 

(26

)

 

 

(35,065

)

Net cash provided by (used in) financing activities

 

 

3,876

 

 

 

(31,578

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(123

)

 

 

(1,025

)

Net increases (decrease) in cash

 

 

(11,386

)

 

 

2,189

 

Cash  and cash equivalents – beginning of period

 

 

12,930

 

 

 

8,001

 

Cash and cash equivalents – end of period

 

$

1,544

 

 

$

10,190

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

5,724

 

 

$

5,230

 

Cash paid for income taxes

 

$

18,398

 

 

$

20,534

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities (Note 4 and Note 6):

During the thirty-nine weeks ended October 1, 2016, the Company made $3.7 million of non-cash capital expenditures pursuant to a promissory note.

 

 

See accompanying notes to consolidated financial statements.

 

5


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., formerly known as 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. 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, 2015 and 2014 and for each of the years in the three-year period ended December 31, 2015 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 October 1, 2016 presentation.  Such reclassifications had no impact on previously reported net income.

 

 

(2)

Marketable Securities

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.

At October 1, 2016 and December 31, 2015, 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 October 1, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

10,322

 

 

$

4,250

 

 

$

(786

)

 

$

13,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Securities

 

$

10,614

 

 

$

3,958

 

 

$

(1,141

)

 

$

13,431

 

 

Included in equity securities at October 1, 2016 are securities with a fair value of $3.1 million with a cumulative loss position of $0.8 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 LOGISTICS HOLDINGS, 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 October 1, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$

908

 

 

$

163

 

 

$

2,220

 

 

$

623

 

 

$

3,128

 

 

$

786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$

3,099

 

 

$

987

 

 

$

345

 

 

$

154

 

 

$

3,444

 

 

$

1,141

 

 

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, communications, and transportation industries.  The fair value and unrealized losses are distributed in 29 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 October 1, 2016.

 

 

(3)

Accrued Expenses and Other Current Liabilities

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

 

 

 

October 1,

2016

 

 

December 31,

2015

 

 

 

 

 

 

 

 

 

 

Payroll related items

 

$

9,457

 

 

$

6,833

 

Driver escrow liabilities

 

 

4,129

 

 

 

4,486

 

Commissions, taxes and other

 

 

7,519

 

 

 

7,670

 

Total

 

$

21,105

 

 

$

18,989

 

 

 

7


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt

Debt is comprised of the following (in thousands):

 

 

 

Interest Rates

at October 1, 2016

 

 

October 1,

2016

 

 

December 31,

2015

 

Outstanding Debt:

 

 

 

 

 

 

 

 

 

 

 

 

PNC $120 million revolving credit facility

 

 

 

 

 

 

 

 

 

 

 

 

LIBOR rate advance

 

 

2.03%

 

 

$

58,000

 

 

$

55,000

 

Domestic rate advance

 

 

4.00%

 

 

 

2,700

 

 

 

4,569

 

Key Equipment credit agreement

 

 

3.75%

 

 

 

68,436

 

 

 

83,578

 

Comerica syndicated credit facility

 

 

 

 

 

 

 

 

 

 

 

$40 million term loan

 

 

3.02%

 

 

 

35,500

 

 

 

40,000

 

$20 million revolving credit facility

 

 

 

 

 

 

 

 

 

 

 

 

LIBOR rate advance

 

 

2.52%

 

 

 

1,000

 

 

 

6,000

 

PRIME rate advance

 

NA

 

 

 

 

 

 

5,766

 

Flagstar $40 million unsecured term loan

 

NA

 

 

 

 

 

 

40,000

 

Real estate notes

 

 

 

 

 

 

 

 

 

 

 

 

Flagstar real estate notes

 

2.71%

 

 

 

50,937

 

 

 

 

Crown real estate note

 

3.50%

 

 

 

2,657

 

 

 

 

Equipment notes

 

3.24% to 3.69%

 

 

 

31,362

 

 

 

 

UBS secured borrowing facility

 

 

1.63%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

250,592

 

 

 

234,913

 

Less current portion

 

 

 

 

 

 

35,268

 

 

 

61,488

 

Total long-term debt

 

 

 

 

 

$

215,324

 

 

$

173,425

 

December 2015 Debt Refinancing

On December 23, 2015, Universal and certain of its wholly-owned subsidiaries entered into a combination of secured and unsecured loans with certain lenders.   The Company undertook the action as part of its ongoing organizational streamlining efforts to better align sources of capital used in its asset-light businesses and to fix a portion of its variable interest rate bearing debt. Upon closing, the Company and subsidiaries involved borrowed approximately $234.9  million to pay off existing indebtedness, to terminate its previous syndicated Comerica Bank Revolving Credit and Term Loan Agreement, and to pay fees and expenses associated with the new credit agreements.

At October 1, 2016 and December 31, 2015, long-term debt and current maturities of long-term debt are presented net of debt issuance cost totaling $1.7 million and $1.5 million, respectively, in our Consolidated Balance Sheets.

PNC $120 million Revolving Credit Facility

Universal Truckload, Inc., Universal Dedicated, Inc., Mason Dixon Intermodal, Inc., Logistics Insight Corp., Universal Logistics Solutions International, Inc., Universal Specialized, Inc., Cavalry Logistics, LLC and Universal Management Services, Inc., (each a wholly-owned subsidiary of the Company, a “Borrowing Subsidiary” and, collectively, the “Borrowing Subsidiaries”) entered into a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”) to provide for a revolving credit facility of up to $120 million (which amount may be increased by up to $30 million upon request).  Borrowings under the revolving credit facility may be made until, and mature on, December 23, 2020.

To support daily borrowing and other operating requirements, the revolving credit facility contains a $10.2 million Swing Loan sub-facility and provides for $3.0 million in letters of credit.  There were no amounts outstanding under the Swing Loan sub-facility at October 1, 2016 and December 31, 2015, and no letters of credit were issued against the line.

8


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued

Borrowings under the Revolving Credit and Security Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each.  The applicable margin fluctuates based on the Borrowing Subsidiaries’ quarterly average excess availability, as defined in the Revolving Credit and Security Agreement.  Interest on the unpaid balance of all base rate advances is payable quarterly in arrears on the first day of each calendar quarter.  Interest on the unpaid balance of each LIBOR based advance of the revolving credit facility is payable on the last day of the applicable LIBOR interest period.  At October 1, 2016, interest on a $58.0 million LIBOR rate advance accrued at 2.03% based on 30-day LIBOR plus 1.50%, and interest on a $2.7 million domestic rate advance accrued at 4.0% based on PNC’s prime rate plus 0.50%.

The Revolving Credit and Security Agreement includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring a minimum fixed charge coverage ratio to be maintained after a triggering event, as defined in the Revolving Credit and Security Agreement.  The Revolving Credit and Security Agreement also includes customary mandatory prepayments provisions and is subject to an unused revolving credit line fee of 0.25%.  At October 1, 2016, we were in compliance with the debt covenants.

As security for all indebtedness pursuant to the Revolving Credit and Security Agreement, PNC was granted a first priority perfected security interest in cash, deposits and accounts receivable of the Borrowing Subsidiaries and selected other assets. At October 1, 2016, our $60.7 million revolver advance was secured by, among other assets, net eligible accounts receivable totaling $98.5 million.  At October 1, 2016, availability, as defined in the Revolving Credit and Security Agreement, was $28.0 million.

Key Equipment Credit Agreement

LGSI Equipment of Indiana, LLC, a wholly-owned subsidiary of the Company (the “Equipment Borrowing Subsidiary”), entered into a Master Security Agreement and five Promissory Notes (collectively the “Equipment Credit Agreement”) with Key Equipment Finance, a division of KeyBank National Association (“KeyBank”).  Under the Equipment Credit Agreement, the Equipment Borrowing Subsidiary borrowed approximately $83.6 million.  The promissory notes are being paid in 60 monthly installments, including interest, beginning on January 23, 2016 and bear interest at a fixed rate of 3.75%.

Additionally, all obligations under the Equipment Credit Agreement are guaranteed by Universal Dedicated, Inc., Logistics Insight Corp., Universal Truckload, Inc., Universal Specialized, Inc. and Mason Dixon Intermodal, Inc. (each a wholly-owned subsidiary of the Company) in connection with each subsidiary’s lease of equipment.  The Equipment Credit Agreement also includes financial covenants requiring the Equipment Borrowing Subsidiary to maintain a ratio of operating cash flow to fixed charges of not less than 1.1:1, as defined in the agreement.  At October 1, 2016, we were in compliance with the debt covenants.

As security for all indebtedness pursuant to the Equipment Credit Agreement, KeyBank was granted liens on selected titled vehicles of the Equipment Borrowing Subsidiary set forth on various collateral schedules.  The Equipment Borrowing Subsidiary may sell or dispose of equipment secured under the Equipment Credit Agreement provided the disposed equipment is replaced with acceptable equipment as collateral, if we pay down of a portion of the loan plus breakage charges and handling charges, as defined in the promissory notes, or if KeyBank, at its option, releases the equipment without pay down or pre-payment. At October 1, 2016, the aggregate principal outstanding pursuant to the five promissory notes totaled $68.4 million.

9


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued

Comerica Syndicated Credit Facility

Westport Axle Corp., a wholly-owned subsidiary of the Company (“Westport”), entered into a Revolving Credit and Term Loan Agreement (the “Credit Agreement”), with and among the lenders party thereto and Comerica Bank, as administrative agent, arranger and documentation agent, providing for aggregate borrowing facilities of up to $60 million.  The Credit Agreement consists of a $40 million term loan and a $20 million revolving credit facility.  Borrowings under the term loan were advanced on December 23, 2015 and mature on December 23, 2020.  The term loan shall be repaid in 20 equal quarterly installments of $1.5 million over five years beginning March 1, 2016, with the remaining balance due at maturity.   Borrowings under the revolving credit facility may be made until, and mature on, December 23, 2020.

Borrowings under the Credit Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each.  The applicable margin fluctuates based on Westport’s total debt to EBITDA ratio, as defined in the Credit Agreement.  At October 1, 2016, interest on the $35.5 million term loan accrued at 3.02% based on 30-day LIBOR plus 2.50%, and interest on the $1.0 million LIBOR rate revolving credit advance accrued at 2.52% based on 30-day LIBOR plus 2.00%.

To support daily borrowing and other operating requirements, the revolving credit facility contains a $4.0 million Swing Line sub-facility and provides for $2.0 million in letters of credit.  Swing Line borrowings incur interest at either the base rate plus the applicable margin or, alternatively, at a quoted rate offered by Comerica Bank in its sole discretion.  There were no amounts outstanding under the Swing Line at October 1, 2016 and December 31, 2015, and no letters of credit were issued against the line.

Interest on the unpaid balance of all revolving credit facility and swing line base rate advances is payable quarterly in arrears commencing on March 1, 2016, and on the first day of each June, September, December and March 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.

Interest on the unpaid principal of all term loan base rate advances is payable quarterly in arrears commencing on January 1, 2016, and on the first day of each April, July, October and January 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.

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 Westport’s 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 and inventory of Westport, pursuant to a monthly borrowing base certificate.  At October 1, 2016, our $1.0 million revolver advance was secured by, among other assets, net eligible accounts receivable and inventory of $10.5 million and $6.5 million, respectively.  At October 1, 2016, availability, as defined in the Credit Agreement, was $11.5 million.

The Credit Agreement requires Westport to repay the borrowings made under the term loan and the revolving credit facility as follows: 50% (which percentage shall be reduced to zero subject to Westport attaining a certain leverage ratio) of Westport’s annual excess cash flow, as defined; 100% of the net cash proceeds if we sell Westport’s machining division; 50% of net proceeds from certain equity issuances; 100% of proceeds from the issuance of certain indebtedness; and 100% of net proceeds from the sale of certain assets, insurance and condemnation proceeds.

10


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued

As security for all indebtedness pursuant to the syndicated Credit Agreement, Comerica Bank, as lead arranger, was granted first perfected security interest on all of Westport’s tangible and intangible property and in assets acquired in the future.  The Company also pledged 100% of its equity interest in Westport.  The Credit Agreement also contains a “springing” guaranty requiring the Company to guarantee the indebtedness under certain events, as defined in the Credit Agreement and guarantee.

The Credit Agreement includes financial covenants requiring Westport to maintain a minimum fixed charge coverage ratio, minimum quarterly EBITDA amounts, as defined in the Credit Agreement, and a maximum debt to EBITDA ratio, as well as customary affirmative and negative covenants and events of default.  At October 1, 2016, Westport was in compliance with the debt covenants.

Flagstar $40 million Unsecured Term Loan

The Company entered into a Loan and Financing Agreement (the “Loan Agreement”) with Flagstar Bank, F.S.B. (“Flagstar”) to provide for a $40.0 million unsecured term loan. Proceeds of the unsecured term loan were advanced on December 23, 2015, and the outstanding principal balance was due on or before July 15, 2016.   Borrowings under the unsecured term loan bore interest at LIBOR, plus 3.5%, and interest on the unpaid balance was payable monthly commencing on February 1, 2016.  On June 21, 2016, UTSI Finance, Inc. (“UTSI Finance”), a wholly-owned subsidiary of the Company, borrowed approximately $32.8 million to refinance a portion of the Company’s existing indebtedness with Flagstar pursuant to the $40 million unsecured term loan. At October 1, 2016, the outstanding principal balance was $0.

Real Estate Notes  

On June 21, 2016, UTSI Finance, entered into a Loan and Financing Agreement with Flagstar, along with ten accompanying promissory notes and commercial mortgages (collectively, the “Real Estate Credit Agreement”).  Under the Real Estate Credit Agreement, UTSI Finance borrowed approximately $32.8 million to refinance a portion of the Company’s existing indebtedness with Flagstar pursuant to its $40 million unsecured term loan.  The promissory notes bear interest at a rate of LIBOR plus 2.25%, and will be repaid in consecutive monthly installment payments of principal and accrued interest beginning July 1, 2016. The promissory notes are due on or before June 30, 2026.  

11


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued

As security for all indebtedness pursuant to the Real Estate Credit Agreement, Flagstar was granted first mortgages and assignment of leases on specific parcels of real estate and improvements included in the collateral pool, as defined in the agreement.  Except for obligations subject to interest rate swap agreements with Flagstar, as defined in the Real Estate Credit Agreement, UTSI Finance may prepay all or a portion of the loans, plus applicable breakage charges and fees.  

On September 6, 2016, UTSI Finance entered into an additional loan and financing agreement with Flagstar, along with a promissory note and commercial mortgage (collectively, the “Secured Note”). Under the Secured Note, Flagstar loaned UTSI Finance $19.0 million in order to repay a portion of an unsecured promissory note in the principal amount of $22.5 million dated August 8, 2016 (the “Unsecured Note”) issued to an affiliate, Crown Enterprises, Inc. (“Crown”), in connection with the purchase of a terminal. The Unsecured Note is payable in 120 monthly payments of principal and accrued interest starting September 15, 2016, and bears interest at a fixed rate of 3.5% per annum.  UTSI Finance may prepay the Unsecured Note at any time, in whole or in part, without premium or penalty.  As of October 1, 2016, the remaining principal balance on the Unsecured Note with Crown was approximately $2.7 million, and such amount is due on or before August 15, 2026.  See Note 6 for additional information pertaining to the terminal purchase.  

The Secured Note bears interest at a rate of LIBOR plus 2.25%, and will be repaid in consecutive monthly installment payments of principal and accrued interest beginning October 1, 2016. The Secured Note matures on September 5, 2026. UTSI Finance granted to Flagstar a first priority mortgage on the terminal pursuant to the mortgage as security under the Secured Note. Except for obligations subject to any interest rate swap agreement, UTSI Finance may prepay all or a portion of the Secured Note, plus applicable breakage charges and fees.

The Flagstar real estate notes contain customary affirmative and negative covenants and events of default, and requires UTSI Finance to maintain a debt service coverage ratio of not less than 1.02:1.   The first test for compliance is due after the fourth quarter of 2016.  As of October 1, 2016, the aggregate principal outstanding pursuant to all Flagstar real estate notes was $50.9 million and interest accrued at 2.71%.

Equipment Notes

During the thirty-nine weeks ended October 1, 2016, a wholly-owned subsidiary of the Company entered into installment obligations totaling approximately $33.6 million for the purpose of purchasing revenue equipment. The promissory notes will be repaid in 60 monthly installments at interest rates ranging from 3.24% to 3.69%. At October 1, 2016, the aggregate principal outstanding pursuant to the promissory notes totaled $31.4 million.

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 1.63% at October 1, 2016), 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.  At both October 1, 2016 and December 31, 2015, there were no amounts outstanding under the line of credit, and the maximum available borrowings were $7.3 million and $7.4 million, respectively.  

12


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Debt - continued

Swap Agreements

The Company is party to two forward interest rate swap agreements that qualify for hedge accounting. The swap agreements were executed to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $15.7 million at October 1, 2016. Under the swap agreements, the Company receives interest at the one-month LIBOR rate plus 2.25%, and pays a fixed rate. The March 2016 forward swap (swap A) is effective October 2016, has a rate of 4.16% (amortizing notional amount of $10.0 million) and expires July 2026, and the March 2016 forward swap (swap B) is effective October 2016, has a rate of 3.83% (amortizing notional amount of $5.7 million) and expires May 2022.  The Company is also party to a third interest rate swap agreement that qualifies for hedge accounting.  The swap agreement was executed to fix a portion of its variable rate debt with a notional amount of $12.0 million and expires February 2018 (swap C).  Under swap C, the Company receives interest at the one-month LIBOR rate, and pays a fixed rate of 0.78%.  The fair value of the three swap agreements was a liability of $0.6 million at October 1, 2016. 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 5 for additional information pertaining to interest rate swaps.    

 

 

(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.

13


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(5)

Fair Value Measurements and Disclosures – continued

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):

 

 

 

October 1,

2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Asset/(Liability) Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

8

 

 

$

 

 

$

 

 

$

8

 

Marketable securities

 

 

13,786

 

 

 

 

 

 

 

 

 

13,786

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

 

 

 

(627

)

 

 

 

 

 

(627

)

Total

 

$

13,794

 

 

$

(627

)

 

$

 

 

$

13,167

 

 

 

 

December 31,

2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Asset/(Liability) Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

96

 

 

$

 

 

$

 

 

$

96

 

Marketable securities

 

 

13,431

 

 

 

 

 

 

 

 

 

13,431

 

Total

 

$

13,527

 

 

$

 

 

$

 

 

$

13,527

 

 

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.  

 

Interest rate swaps - The fair value of our interest rate swaps, as provided by a third party service provider, is determined using a methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments).  The variable cash receipts (or payments) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. The fair value measurement also incorporates credit valuation adjustments to appropriately reflect both the Company’s nonperformance risk and the respective counterparty’s nonperformance risk.

Our revolving credit and term loan agreements, and real estate promissory notes with PNC, Comerica Bank and Flagstar consist of variable rate borrowings.  We categorize borrowings under these credit agreements 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.

For our equipment and real estate promissory notes with fixed rates, the fair values are estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements. We categorize borrowings under these credit agreements as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of these promissory notes at October 1, 2016 is summarized as follows:

 

 

Carrying Value

 

 

Estimated Fair

Value

 

Equipment and real estate promissory notes

 

$

102,455

 

 

$

103,695

 

 

 

14


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(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 Universal.  In the normal course of business, CenTra and affiliates of CenTra provide administrative support services to us, including legal, human resources, tax, and IT infrastructure services.  The cost of these services is based on the actual or estimated utilization of the specific service.

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 ended October 1, 2016 and September 26, 2015 (in thousands):

 

 

 

Thirteen weeks ended

 

 

Thirty-nine Weeks Ended

 

 

 

October 1,

2016

 

 

September 26,

2015

 

 

October 1,

2016

 

 

September 26,

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative support services

 

$

548

 

 

$

881

 

 

$

1,906

 

 

$

2,374

 

Truck fuel, tolls and maintenance

 

 

619

 

 

 

1,012

 

 

 

1,864

 

 

 

1,622

 

Real estate rent and related costs

 

 

4,218

 

 

 

3,149

 

 

 

12,458

 

 

 

9,578

 

Insurance and employee benefit plans

 

 

12,496

 

 

 

13,374