10-Q 1 ulh-10q_20180331.htm FORM 10-Q ulh-10q_20180331.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 March 31, 2018

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, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

 

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

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

The number of shares of the registrant’s common stock, no par value, outstanding as of May 7, 2018, was 28,394,892.

 

 


PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

 

UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)

 

 

 

March 31,

2018

 

 

December 31,

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,145

 

 

$

1,672

 

Marketable securities

 

 

11,932

 

 

 

15,144

 

Accounts receivable – net of allowance for doubtful accounts of $1,544

   and $1,330, respectively

 

 

197,489

 

 

 

171,036

 

Other receivables

 

 

18,507

 

 

 

17,511

 

Due from affiliates

 

 

4,497

 

 

 

2,685

 

Prepaid income taxes

 

 

793

 

 

 

4,515

 

Prepaid expenses and other

 

 

18,123

 

 

 

16,103

 

Total current assets

 

 

253,486

 

 

 

228,666

 

Property and equipment – net of accumulated depreciation of $209,940 and

   $205,771, respectively

 

 

272,665

 

 

 

267,195

 

Goodwill

 

 

84,827

 

 

 

74,484

 

Intangible assets – net of accumulated amortization of $57,823 and $56,901, respectively

 

 

41,995

 

 

 

31,259

 

Deferred income taxes

 

 

4,154

 

 

 

4,154

 

Other assets

 

 

5,341

 

 

 

4,834

 

Total assets

 

$

662,468

 

 

$

610,592

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

103,856

 

 

$

84,380

 

Due to affiliates

 

 

6,469

 

 

 

11,964

 

Accrued expenses and other current liabilities

 

 

27,407

 

 

 

24,129

 

Insurance and claims

 

 

38,322

 

 

 

37,727

 

Current portion of long-term debt

 

 

48,204

 

 

 

40,870

 

Total current liabilities

 

 

224,258

 

 

 

199,070

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

222,759

 

 

 

207,108

 

Deferred income taxes

 

 

33,388

 

 

 

32,361

 

Other long-term liabilities

 

 

2,658

 

 

 

3,288

 

Total long-term liabilities

 

 

258,805

 

 

 

242,757

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, no par value. Authorized 100,000,000 shares; 30,954,202 and

   30,941,702 shares issued; 28,394,892 and 28,382,392 shares outstanding,

   respectively

 

 

30,955

 

 

 

30,943

 

Paid-in capital

 

 

4,074

 

 

 

3,841

 

Treasury stock, at cost; 2,559,310 shares

 

 

(51,532

)

 

 

(51,532

)

Retained earnings

 

 

198,723

 

 

 

186,226

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

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

   taxes of $0 and $1,090, respectively

 

 

-

 

 

 

3,823

 

Interest rate swaps, net of income taxes of $125 and $63, respectively

 

 

397

 

 

 

197

 

Foreign currency translation adjustments

 

 

(3,212

)

 

 

(4,733

)

Total shareholders’ equity

 

 

179,405

 

 

 

168,765

 

Total liabilities and shareholders’ equity

 

$

662,468

 

 

$

610,592

 

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

 

 

 

March 31,

2018

 

 

April 1,

2017

 

Operating revenues:

 

 

 

 

 

 

 

 

Truckload services

 

$

77,192

 

 

$

71,490

 

Brokerage services

 

 

78,159

 

 

 

57,989

 

Intermodal services

 

 

46,609

 

 

 

35,927

 

Dedicated services

 

 

28,075

 

 

 

24,896

 

Value-added services

 

 

105,078

 

 

 

94,140

 

Total operating revenues

 

 

335,113

 

 

 

284,442

 

Operating expenses:

 

 

 

 

 

 

 

 

Purchased transportation and equipment rent

 

 

162,011

 

 

 

131,227

 

Direct personnel and related benefits

 

 

85,956

 

 

 

75,544

 

Operating supplies and expenses

 

 

28,091

 

 

 

28,984

 

Commission expense

 

 

8,913

 

 

 

7,544

 

Occupancy expense

 

 

7,373

 

 

 

7,831

 

General and administrative

 

 

7,987

 

 

 

7,958

 

Insurance and claims

 

 

5,460

 

 

 

5,858

 

Depreciation and amortization

 

 

12,218

 

 

 

10,327

 

Total operating expenses

 

 

318,009

 

 

 

275,273

 

Income from operations

 

 

17,104

 

 

 

9,169

 

Interest income

 

 

17

 

 

 

14

 

Interest expense

 

 

(2,570

)

 

 

(2,250

)

Other non-operating (expense) income

 

 

(395

)

 

 

68

 

Income before income taxes

 

 

14,156

 

 

 

7,001

 

Income tax expense

 

 

3,722

 

 

 

2,683

 

Net income

 

$

10,434

 

 

$

4,318

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.37

 

 

$

0.15

 

Diluted

 

$

0.37

 

 

$

0.15

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

28,386

 

 

 

28,435

 

Diluted

 

 

28,393

 

 

 

28,435

 

Dividends declared per common share

 

$

0.105

 

 

$

0.070

 

 

See accompanying notes to consolidated financial statements.

 

 

3


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Comprehensive Income

(In thousands)

 

 

 

Thirteen Weeks Ended

 

 

 

March 31,

2018

 

 

April 1,

2017

 

Net Income

 

$

10,434

 

 

$

4,318

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized changes in fair value of interest rate swaps,

   net of income taxes (1)

 

 

200

 

 

 

30

 

Foreign currency translation adjustments

 

 

1,521

 

 

 

999

 

Unrealized holding gains on available-for-sale

   investments arising during the period, net

   of income taxes (2)(4)

 

 

-

 

 

 

183

 

Realized loss on available-for-sale investments reclassified

   into income, net of taxes (3)(4)

 

 

-

 

 

 

9

 

Total other comprehensive income

 

 

1,721

 

 

 

1,221

 

Total comprehensive income

 

$

12,155

 

 

$

5,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Net of income taxes of $61 and $18, respectively.

 

 

 

 

 

 

 

 

(2) Net of income taxes of $0 and $77, respectively.

 

 

 

 

 

 

 

 

(3) Net of income taxes of $0 and $5, respectively.

 

 

 

 

 

 

 

 

(4) In accordance with the adoption of ASU 2016-01 on January 1, 2018 (see Note 4) unrealized holding gains and losses on equity securities have been reclassified to income for the current period and to retained earnings for historical amounts recorded in Accumulated Other Comprehensive Income at December 31, 2017.

 

 

See accompanying notes to consolidated financial statements.

 

 

4


UNIVERSAL LOGISTICS HOLDINGS, INC.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

Thirteen Weeks Ended

 

 

 

March 31,

2018

 

 

April 1,

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

10,434

 

 

$

4,318

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

12,218

 

 

 

10,327

 

Losses on marketable equity securities

 

 

520

 

 

 

14

 

(Gain) loss on disposal of property and equipment

 

 

(9

)

 

 

50

 

Amortization of debt issuance costs

 

 

85

 

 

 

80

 

Stock-based compensation

 

 

246

 

 

 

246

 

Provision (credit) for doubtful accounts

 

 

(298

)

 

 

698

 

Deferred income taxes

 

 

(1,564

)

 

 

(3,207

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Trade and other accounts receivable

 

 

(23,177

)

 

 

(7,130

)

Prepaid income taxes, prepaid expenses and other assets

 

 

4,067

 

 

 

5,272

 

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

   and claims

 

 

21,523

 

 

 

18,030

 

Due to/from affiliates, net

 

 

(7,307

)

 

 

(1,668

)

Other long-term liabilities

 

 

(630

)

 

 

(1,192

)

Net cash provided by operating activities

 

 

16,108

 

 

 

25,838

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(7,336

)

 

 

(17,669

)

Proceeds from the sale of property and equipment

 

 

1,255

 

 

 

194

 

Purchases of marketable securities

 

 

(119

)

 

 

 

Proceeds from sale of marketable securities

 

 

2,811

 

 

 

 

Acquisition of business

 

 

(34,850

)

 

 

 

Net cash used in investing activities

 

 

(38,239

)

 

 

(17,475

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowing - revolving debt

 

 

89,850

 

 

 

71,246

 

Repayments of debt - revolving debt

 

 

(72,349

)

 

 

(69,646

)

Proceeds from borrowing - term debt

 

 

12,406

 

 

 

2,729

 

Repayments of debt - term debt

 

 

(12,619

)

 

 

(9,386

)

Borrowings under margin account

 

 

9,100

 

 

 

 

Repayments under margin account

 

 

(3,364

)

 

 

 

Payment of capital lease obligations

 

 

(22

)

 

 

(27

)

Capitalized financing costs

 

 

(124

)

 

 

 

Dividends paid

 

 

(1,988

)

 

 

(1,991

)

Net cash provided by (used in) financing activities

 

 

20,890

 

 

 

(7,075

)

Effect of exchange rate changes on cash and cash equivalents

 

 

1,714

 

 

 

310

 

Net increase in cash

 

 

473

 

 

 

1,598

 

Cash  and cash equivalents – beginning of period

 

 

1,672

 

 

 

1,755

 

Cash and cash equivalents – end of period

 

$

2,145

 

 

$

3,353

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,408

 

 

$

2,144

 

Cash paid for income taxes

 

$

1,185

 

 

$

787

 

Acquisition of business:

 

 

 

 

 

 

 

 

Fair value of assets acquired

 

$

38,943

 

 

$

-

 

Liabilities assumed

 

 

(3,838

)

 

 

-

 

Acquisition obligation

 

 

(255

)

 

 

-

 

Net cash paid for acquisition of business

 

$

34,850

 

 

$

-

 

 

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. and its wholly-owned subsidiaries (collectively, “Universal” or the “Company”) have been prepared by the Company’s management. In the opinion of management, the unaudited consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. All intercompany transactions and balances have been eliminated in consolidation.  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements as of December 31, 2017 and 2016 and for each of the years in the three-year period ended December 31, 2017 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.

The Company made certain immaterial reclassifications to items in its prior financial statements so that their presentation is consistent with the format in the financial statements for the period ended March 31, 2018.  These reclassifications, however, had no effect on reported consolidated net income, comprehensive income, earnings per common share, cash flows, total assets or shareholders’ equity as previously reported.

 

(2)

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, using the modified retrospective transition method with a cumulative adjustment to retained earnings of approximately $0.2 million.  ASU 2014-09 is a comprehensive revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;  (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when or as the entity satisfies a performance obligation. For our transportation services businesses, which include truckload, brokerage, intermodal and dedicated services, the adoption of the standard changed the timing of revenue recognition from “at delivery” to “over-time” as the performance obligations on the in-transit services are completed.  For our value-added service businesses, the adoption of the standard did not change the timing of revenue recognition.  Due to the Company’s short in-transit period for transportation services, the impact did not have a material impact on its consolidated results of operations, financial position or cash flows. The adoption of ASU 2014-09 required an increase in the level of information disclosed in the Notes to Unaudited Consolidated Financial Statements.  See Note 3 for additional information.

On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, using the modified retrospective method.  Upon adoption, approximately $3.8 million in accumulated changes in the fair market value of the Company’s equity securities that were presented at December 31, 2017 in accumulated other comprehensive income were reclassified to retained earnings. ASU 2016-01 requires, among other things, equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities.

On January 1, 2018, the Company prospectively adopted ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, to clarify the definition of a business to assist entities when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The impact of the adoption did not have an impact on its results of operations, financial position or cash flows.

6


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(2)

Recent Accounting Pronouncements - continued

Recent accounting pronouncements not currently effective

In February 2016, the FASB issued ASU 2016-02, Leases. The objective of the new standard is to establish principles for lessees and lessors to report information about the amount, timing, and uncertainty of cash flows arising from a lease.  The ASU will require a lessee to recognize the assets and liabilities that arise from leases, including operating leases. Under the new requirements, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and the right-of-use asset representing the right to the underlying asset for the lease term. For leases with a term of 12 months or less, the lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. This update is effective for annual and interim periods beginning after December 15, 2018, which will require us to adopt these provisions in the first quarter of 2019 using a modified retrospective approach. Early adoption is permitted, although we do not plan to adopt early.  We are currently evaluating the effects ASU 2016-02 will have on our consolidated financial statements and related disclosures. As of December 31, 2017, we disclosed approximately $71.8 million in operating lease obligations in Note 9, “Leases” in the Company’s Form 10-K.  We will evaluate those contracts as well as other existing arrangements to determine if they qualify for lease accounting under the new standard. Upon adoption, we would expect the amount recognized for the right-of-use assets and lease liabilities to be material to the consolidated financial statements.

 

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amends existing guidance for reporting comprehensive income to reflect changes resulting from the Tax Cuts and Jobs Act of 2017. The amendment provides the option to reclassify stranded tax effects within accumulated other comprehensive income (AOCI) to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recorded. New disclosures will be required upon adoption, including the accounting policy for releasing income tax effects from AOCI, whether reclassification of stranded income tax effects is elected, and information about other income tax effect reclassifications. Although the amendment will become effective for us on January 1, 2019, early adoption is permitted, although we do not plan to early adopt. We are currently evaluating the impact of adopting this standard on our consolidated financial statements and disclosures.

 

In March 2018, the FASB issued ASU 2018-05, Income Taxes, to clarify the accounting implications of Staff Accounting Bulletin No. 118 ("SAB 118"). SAB 118 provides a measurement period that should not extend beyond one year from December 22, 2017, the date of the enactment of the Tax Cuts and Jobs Act, to complete the accounting under Accounting Standards Codification ("ASC") 740, Income Taxes. As of March 31, 2018, we have not adjusted the provisional estimate recorded at December 31, 2017. We expect to complete our analysis within the measurement period in accordance with SAB 118.

 

(3)

Revenue Recognition

The Company broadly groups its services into the following categories: truckload services, brokerage services, intermodal services, dedicated services and value-added services.

 

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

 

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

 

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

 

Dedicated services are primarily provided in support of automotive and retail customers using specialized van equipment.  Dedicated services also include our final mile and ground expedited services.  Our dedicated services are primarily short run or round-trip moves within a defined geographic area.

 

7


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(3)

Revenue Recognition - continued

 

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

Revenue is recognized as control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to receive in exchange for its services.

Our transportation services businesses include truckload, brokerage, intermodal and dedicated services.  The adoption of ASU 2014-09 changed the timing of revenue recognition for transportation services from at delivery to over-time as the performance obligations on the in-transit services are completed.  

Transportation services are short-term in nature; agreements governing their provision generally have a term of less than one year. They do not contain significant financing components.  In accordance with ASU 2014-09, the Company recognizes revenue over the period transportation services are provided to the customer, including service performed as of the end of the reporting period for loads currently in transit, in order to recognize the value that is transferred to a customer over the course of the transportation service.

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

 

 

For the Company’s value-added service businesses, the adoption of ASU 2014-09 did not change the timing of revenue recognition.  The contracts in our value-added services businesses are negotiated agreements, which contain both fixed and variable components. The variability of revenues is driven by volumes and transactions, which are known as of an invoice date. Value-added service contracts typically have terms that extend beyond one year, and they do not include financing components.  The timing of revenue recognition for value-added services will remain the same, as we have elected to use the “right to invoice” practical expedient, reflecting that a customer obtains the benefit associated with value-added services as they are provided.

 

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

 

 

March 31,

2018

 

 

January 1,

2018

 

Prepaid expenses and other - contract assets

 

$

2,098

 

 

$

1,361

 

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

 

Practical expedients

 

The Company elected to use the following practical expedients that are available under ASC 606: (i) to apply the new revenue standard to a portfolio of contracts (or performance obligations) with similar characteristics, as we reasonably expect that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts; (ii) to recognize commission expense when incurred, which we consider to be a cost to obtain a contract, because the amortization period is less than one year; and (iii) to recognize revenue in the value-added services portfolio in the amount of consideration to which we have a right to invoice, that corresponds directly with the value to the customer of the service completed to date.

 

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

8


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(3)     Revenue Recognition - continued

 

In accordance with the new revenue standard requirements, the impact of adoption on our consolidated statement of income and balance sheet was as follows (in thousands):

 

 

 

Thirteen Weeks Ended March 31, 2018

 

Financial Statement Line Item

 

Under ASC 605

 

 

Adjustment

 

 

As Reported

 

Consolidated Statement of Income

 

 

 

 

 

 

 

 

 

 

 

 

Truckload services

 

$

75,780

 

 

$

1,412

 

 

$

77,192

 

Brokerage services

 

 

77,749

 

 

 

410

 

 

 

78,159

 

Intermodal services

 

 

46,428

 

 

 

181

 

 

 

46,609

 

Dedicated services

 

 

27,980

 

 

 

95

 

 

 

28,075

 

Purchased transportation and equipment rent

 

 

160,240

 

 

 

1,771

 

 

 

162,011

 

Commission expense

 

 

8,876

 

 

 

37

 

 

 

8,913

 

Income tax expense

 

 

3,645

 

 

 

77

 

 

 

3,722

 

Net income

 

 

10,221

 

 

 

213

 

 

 

10,434

 

Consolidated Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid income taxes

 

 

870

 

 

 

(77

)

 

 

793

 

Prepaid expenses and other

 

 

16,025

 

 

 

2,098

 

 

 

18,123

 

Accounts payable

 

 

102,048

 

 

 

1,808

 

 

 

103,856

 

Retained earnings

 

 

198,510

 

 

 

213

 

 

 

198,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See also Note 13 for information on revenue reported by segment.  

 

(4)

Marketable Securities

 

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

 

Marketable equity securities are carried at fair value, with gains and losses in fair market value included in the determination of net income beginning January 1, 2018. The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note 8.

 

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

 

 

March 31,

2018

 

 

December 31,

2017

 

Fair value

 

$

11,932

 

 

$

15,144

 

Cost

 

 

8,784

 

 

 

10,231

 

Unrealized gain

 

$

3,148

 

 

$

4,913

 

 

 

 

 

 

 

 

 

 

Prior to the Company’s  adoption of ASU 2016-01 as of January 1, 2018 , unrealized losses in fair market value were presented as a component of Accumulated Other Comprehensive Income in shareholders’ equity; before adoption of this guidance, the Company included in net income only realized gains and losses and declines in value determined to be other-than-temporary on available-for-sale securities. The cost of securities determined to be in an other-than-temporary loss position was required to be presented net of the amount of the other-than-temporary impairment calculated. Subsequent to adoption of ASU 2016-01, cost is no longer presented net of other-than-temporary impairment. The December 31, 2017 cost reflected in the table above was presented net of approximately $424,000 of other-than-temporary impairment.

9


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(4)

Marketable Securities - continued

 

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

 

 

March 31,

2018

 

 

December 31,

2017

 

Gross unrealized gains

 

$

3,758

 

 

$

5,390

 

Gross unrealized losses

 

 

(610

)

 

 

(477

)

Net unrealized gains

 

$

3,148

 

 

$

4,913

 

 

 

 

 

 

 

 

 

 

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

 

 

Thirteen weeks ended

 

 

 

March 31,

2018

 

 

April 1,

2017

 

Realized gain (loss)

 

 

 

 

 

 

 

 

Sale proceeds

 

$

2,811

 

 

$

 

Cost of securities sold

 

 

2,684

 

 

 

14

 

Realized gain (loss)

 

$

127

 

 

$

(14

)

 

 

 

 

 

 

 

 

 

Realized gain (loss), net of taxes

 

$

94

 

 

$

(9

)

 

 

 

 

 

 

 

 

 

During the thirteen-week period ended March 31, 2018, our marketable equity securities portfolio experienced a net unrealized pre-tax loss in market value of approximately $647,000, which was reported in other non-operating (expense) income for the period.

10


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(5)

Acquisitions

On February 1, 2018, the Company acquired Fore Transportation, Inc. and certain of its affiliates (collectively, “Fore”).  Fore provides comprehensive intermodal solutions, including local and regional drayage services. One of the acquired Fore affiliates owns and leases real property and improvements, including a 28-acre terminal that serves as Fore’s corporate headquarters and its secured trailer and container storage facility for 1,100 units.  The acquisition of Fore strategically enhances our geographic footprint and further diversifies our customer base. The total cash purchase price was $35.1 million. To fund the acquisition, the Company used available cash and borrowed approximately $31.3 million using its margin credit facility, revolving credit facility and secured real estate financing.  

The Company accounted for the acquisition in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded at their estimated fair value as of February 1, 2018, with the remaining unallocated purchase price recorded as goodwill. The goodwill recorded is included in our transportation segment, and is non-deductible for income tax purposes. The pro forma effect of this acquisition has been omitted, as the effect is immaterial to the Company’s consolidated results of operations, financial position and cash flows. The preliminary allocation of the purchase price is as follows (in thousands):

 

Current assets

 

$

6,077

 

Property and equipment

 

 

10,864

 

Goodwill

 

 

10,343

 

Intangible assets

 

 

11,659

 

Current liabilities

 

 

(1,234

)

Deferred tax liabilities, net

 

 

(2,604

)

 

 

$

35,105

 

 

The intangible assets acquired represent Fore’s acquired customer relationships and a non-competition agreement, that are being amortized over a period of 10 years and five years, respectively.  The Company used the discount cash flow method to estimate the fair value of these acquired intangible assets.  

 

Fore’s operating results have been included in the Company’s Unaudited Consolidated Statements of Income since February 1, 2018. Included in the Company’s operating results are acquisition related costs of approximately $0.2 million, which are reflected in operating supplies and expenses in the Unaudited Consolidated Statement of Income.

 

(6)

Accrued Expenses and Other Current Liabilities

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

 

 

 

March 31,

2018

 

 

December 31,

2017

 

 

 

 

 

 

 

 

 

 

Payroll related items

 

$

9,092

 

 

$

9,854

 

Driver escrow liabilities

 

 

3,629

 

 

 

3,785

 

Commissions, taxes and other

 

 

14,686

 

 

 

10,490

 

Total

 

$

27,407

 

 

$

24,129

 

 

 

11


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(7)

Debt

Debt is comprised of the following (in thousands):

 

 

 

Interest Rates

at March 31, 2018

 

 

March 31,

2018

 

 

December 31,

2017

 

Outstanding Debt:

 

 

 

 

 

 

 

 

 

 

 

 

ABL Facility (1)

 

3.44% to 5.50%

 

 

$

83,795

 

 

$

70,225

 

Westport Facility (2)

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan

 

4.88%

 

 

 

19,500

 

 

 

22,500

 

Revolver

 

4.38%

 

 

 

3,930

 

 

 

 

Equipment Financing (3)

 

3.18% to 4.79%

 

 

 

109,176

 

 

 

112,205

 

Real Estate Financing (4)

 

4.13%

 

 

 

50,125

 

 

 

44,309

 

Margin Facility (5)

 

2.99%

 

 

 

5,737

 

 

 

 

Unamortized debt issuance costs

 

 

 

 

 

 

(1,300

)

 

 

(1,261

)

 

 

 

 

 

 

 

270,963

 

 

 

247,978

 

Less current portion of long-term debt

 

 

 

 

 

 

48,204

 

 

 

40,870

 

Total long-term debt, net of current portion

 

 

 

 

 

$

222,759

 

 

$

207,108

 

(1) The ABL Facility provides for maximum borrowings of $120 million at a variable rate of interest based on LIBOR, or a base rate, and matures on December 23, 2020. The facility, which is secured by cash, deposits and accounts receivable of the borrowing subsidiaries, 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. Interest on base rate advances is payable quarterly, and interest on each LIBOR-based advance is payable on the last day of the applicable interest period. At March 31, 2018, we were in compliance with all covenants under the facility, and $41.1 million was available for borrowing.

(2) The Westport Facility provides our subsidiary, Westport Axle Corporation, with maximum borrowings of $60 million in the form of a $40 million term loan and a $20 million revolver. Borrowings under the Westport Facility, which matures on December 23, 2020, accrue interest at a variable interest rate based on LIBOR, or a base rate, and are secured by all of Westport’s assets. The Company becomes a guarantor upon the occurrence of certain events specified in the Westport Facility. Borrowings are repaid in part quarterly with the balance due at maturity. Interest on base rate advances is payable quarterly, and interest on each LIBOR-based advance is payable on the last day of the applicable interest period. The Westport Facility includes customary affirmative and negative covenants and events of default. At March 31, 2018, we were in compliance with all covenants, and $14.3 million was available for borrowing.

(3) The Equipment Financing consists of a series of promissory notes issued by a wholly-owned subsidiary in order to finance transportation equipment. The equipment notes, which are secured by liens on selected titled vehicles, include certain affirmative and negative covenants, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 3.18% to 4.79%. At March 31, 2018, we were in compliance with all covenants.

(4) The Real Estate Financing consists of a series of promissory notes issued by a wholly-owned subsidiary in order to finance certain real property. The promissory notes, which are secured by first mortgages and assignment of leases on specific parcels of real estate and improvements, include certain affirmative and negative covenants and are generally payable in 120 monthly installments.  Each of the notes bears interest at LIBOR plus 2.25%. At March 31, 2018, we were in compliance with all covenants.

(5) The Margin Facility is a short-term line of credit secured by our portfolio of marketable securities. It bears interest at LIBOR plus 1.10%. The amount available under the line of credit is based on a percentage of the market value of the underlying securities. At March 31, 2018, the maximum available borrowing under the line of credit was $0.7 million.

12


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(7)

Debt - continued

The Company is also party to two 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 March 31, 2018. 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 swap (swap A) became effective October 2016, has a rate of 4.16% (amortizing notional amount of $10.0 million) and expires July 2026, and an additional March 2016 swap (swap B) became  effective October 2016, has a rate of 3.83% (amortizing notional amount of $5.7 million) and expires May 2022.  At March 31, 2018, the fair value of the swap agreements was an asset of $0.5 million. Since these swap agreements qualify for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. See Note 8 for additional information pertaining to interest rate swaps.

 

(8)

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

 

(8)

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):

 

 

 

March 31,

2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

11,932

 

 

$

 

 

$

 

 

$

11,932

 

Interest rate swaps

 

 

 

 

 

522

 

 

 

 

 

 

522

 

Total

 

$

11,932

 

 

$

522

 

 

$

 

 

$

12,454

 

 

 

 

December 31,

2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Fair Value Measurement

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

75

 

 

$

 

 

$

 

 

$

75

 

Marketable securities

 

 

15,144

 

 

 

 

 

 

 

 

 

15,144

 

Interest rate swaps

 

 

 

 

 

260

 

 

 

 

 

 

260

 

Total

 

$

15,219

 

 

$

260

 

 

$

 

 

$

15,479

 

 

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 our real estate promissory notes 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 promissory notes, 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 this credit agreement as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of these promissory notes at March 31, 2018 is summarized as follows:

 

 

Carrying Value

 

 

Estimated Fair

Value

 

Equipment promissory notes

 

$

109,176

 

 

$

107,566

 

 

We have not elected the fair value option for any of our financial instruments.

 

14


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(9)

Transactions with Affiliates

CenTra, Inc., an affiliate of the Company, provides administrative support services to Universal in the ordinary course of business, including legal, human resources, tax, and IT infrastructure and related services.  The cost of these services is based on the actual or estimated utilization of the specific service.

Universal also purchases other services from affiliates. Following is a schedule of costs incurred and included in operating expenses for services provided by affiliates for the thirteen weeks ended March 31, 2018 and April 1, 2017 (in thousands):

 

 

 

Thirteen weeks ended

 

 

 

March 31,

2018

 

 

April 1,

2017

 

 

 

 

 

 

 

 

 

 

Administrative support services

 

$

1,115

 

 

$

503

 

Truck fuel, tolls and maintenance

 

 

503

 

 

 

777

 

Real estate rent and related costs

 

 

4,007

 

 

 

4,706

 

Insurance and employee benefit plans

 

 

11,289

 

 

 

14,572

 

Purchased transportation and equipment rent

 

 

3

 

 

 

5

 

Total

 

$

16,917

 

 

$

20,563

 

 

We pay CenTra the direct variable cost of maintenance, fueling and other operational support costs for services delivered at our affiliate’s trucking terminals that are geographically remote from our own facilities. Such costs are billed when incurred, paid on a routine basis, and reflect actual labor utilization, repair parts costs or quantities of fuel purchased. In connection with our transportation services, we also pay tolls and other fees for international bridge crossings to certain related entities which are under common control with CenTra.

A significant number of our operating locations are located in facilities leased from affiliates.  At 36 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.  

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 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 March 31, 2018 and December 31, 2017, amounts due to affiliates were $6.5 million and $12.0 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 March 31, 2018 and December 31, 2017, there were $10.3 million and $10.1 million, respectively, included in each of these accounts for insured claims.  

During the thirteen weeks ended April 1, 2017, we made purchases of used equipment from an affiliate totaling $1.8 million, and also purchased wheels and tires from an affiliate for new trailering equipment totaling $1.1 million during the same period.  There were no such purchases made during the thirteen-week period ended March 31, 2018.

15


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(9)

Transactions with Affiliates – continued

Services provided by Universal to Affiliates

We periodically assist our affiliates by providing 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 ended March 31, 2018 and April 1, 2017 (in thousands):

 

 

 

Thirteen weeks ended

 

 

 

March 31,

2018

 

 

April 1,

2017

 

Purchased transportation and equipment rent

 

$

142

 

 

$

326

 

Total

 

$

142

 

 

$

326

 

At March 31, 2018 and December 31, 2017, amounts due from affiliates were $4.5 million and $2.7 million, respectively.

 

 

(10)

Stock Based Compensation

On April 23, 2014, our Board of Directors adopted the 2014 Amended and Restated Stock Incentive Plan, or the Plan.  The Plan was approved by our shareholders at the 2014 Annual Meeting and became effective as of the date it was adopted by the Board of Directors.  The Plan replaced our 2004 Stock Incentive Plan and carried forward the shares of common stock that remained available for issuance under the 2004 Stock Incentive Plan. The grants may be made in the form of stock options, restricted stock bonuses, restricted stock purchase rights, stock appreciation rights, phantom stock units, restricted stock units or unrestricted common stock.  Restricted stock awards currently outstanding under the 2004 Stock Incentive Plan will remain outstanding in accordance with the terms of that plan. 

On February 22, 2017, February 24, 2016, April 29, 2015 and March 5, 2015, the Company granted 10,000, 10,000, 20,000 and 10,000 shares, respectively, of restricted stock to our Chief Executive Officer.  The restricted stock grants have fair values of $13.45 per share, $15.55 per share, $22.03 per share, and $25.18 per share, respectively, based on the closing price of the Company’s stock on each grant date.  For each award, 25% of the shares vested immediately on the grant dates, and the remaining shares vest in three equal installments with the final vesting of the 2017 award to occur on March 5, 2020, in each case subject to continued employment with the company.  

On December 23, 2015, the Company granted 50,000 shares of restricted stock to certain of its employees, including 10,000 shares to our Chief Financial Officer. The restricted stock grants have a grant date fair value of $14.93 per share, based on the closing price of the Company’s stock, of which 25% vested immediately, and an additional 25% will vest in three equal increments on each December 20 in 2016, 2017 and 2018.

 A grantee’s vesting of restricted stock awards may be accelerated under certain conditions, including retirement.

The following table summarizes the status of the Company’s non-vested shares and related information for the period indicated:

 

 

 

 

Shares

 

 

Weighted

Average Grant

Date Fair Value

 

Non-vested at January 1, 2018

 

 

31,250

 

 

$

16.63

 

Granted

 

 

 

 

$

 

Vested

 

 

(12,500

)

 

$

19.65

 

Forfeited

 

 

 

 

$

 

Balance at March 31, 2018

 

 

18,750

 

 

$

14.62

 

 

In each of the thirteen-week periods ended March 31, 2018 and April 1, 2017, the total grant date fair value of vested shares recognized as compensation costs was $0.2 million.  As of March 31, 2018, there was approximately $0.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements.  That cost is expected to be recognized on a straight-line basis over the remaining vesting period.  As a result, the Company expects to recognize stock-based compensation expense of $0.1 million during the remainder of 2018, and $0.1 million in each of 2019 and 2020.

 

16


UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

 

(11)

Earnings Per Share

Basic earnings per common share amounts are based on the weighted average number of common shares outstanding, excluding outstanding non-vested restricted stock. Diluted earnings per common share include dilutive common stock equivalents determined by the treasury stock method.  For the thirteen weeks ended March 31, 2018 and April 1, 2017, there were 6,750 and 346 weighted average non-vested shares of restricted stock, respectively, included in the denominator for the calculation of diluted earnings per share.

For the thirteen weeks ended April 1, 2017, 35,000 shares of non-vested restricted stock were excluded from the calculation of diluted earnings per share because such shares were anti-dilutive. No shares were excluded from the calculation of diluted earnings per share for the thirteen weeks ended March 31, 2018.   

 

(12)

Dividends

On February 21, 2018, our Board of Directors approved an increase in the Company’s annual cash dividend policy from $0.28 per share to $0.42 per share beginning in 2018. The first quarterly installment of $0.105 per share is expected to be declared after the conclusion of the first quarter of 2018. After taking into account the regular quarterly dividends made during the year, the Board of Directors also intends to evaluate the potential declaration of an annual special dividend payable in the first quarter of each year in an effort to return up to 40% of Universal’s net income from the previous fiscal year, beginning in the first quarter of 2019.  

Pursuant to the cash dividend policy in effect until February 21, 2018, the Board of Directors declared a quarterly cash dividend of $0.07 per share of common stock, payable to shareholders of record at the close of business on March 5, 2018 and paid on March 15, 2018.  Declaration of future cash dividends is subject to final determination by the Board of Directors each quarter after its review of our financial condition, results of operations, capital requirements, any legal or contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant.

 

(13)

Segment Reporting

We report our financial results in two reportable segments, the transportation segment and the logistics segment, based on the nature of the underlying customer commitment and the types of investments required to support these commitments.  This presentation reflects the manner in which management evaluates our operating segments, including an evaluation of economic characteristics and applicable aggregation criteria.  

Operations aggregated in our transportation segment are associated with individual freight shipments coordinated by our agents, company-managed terminals and specialized services operations.  In contrast, operations aggregated in our logistics segment deliver value-added services or transportation services to specific customers on a dedicated basis, generally pursuant to contract terms of one year or longer.  Other non-reportable operating segments are comprised of the Company’s subsidiaries that provide support services to other subsidiaries and to owner-operators, including shop maintenance and equipment leasing.  

The following tables summarize information about our reportable segments as of and for the thirteen week period ended March 31, 2018 and April 1, 2017 (in thousands):

 

 

 

Thirteen weeks ended March 31, 2018

 

 

 

Transportation

 

 

Logistics

 

 

Other

 

 

Total

 

Operating revenues

 

$

206,108

 

 

$

128,648

 

 

$

357

 

 

$

335,113