Universal Truckload Services, Inc. — Form 10-Q Summary
Reporting period: Second fiscal quarter and first 26 weeks ended July 2, 2011; comparative periods ended July 3, 2010. The filing is by Universal Truckload Services, Inc., notwithstanding the request metadata naming Universal Logistics Holdings, Inc. Amounts below are in millions unless stated otherwise.
Financial performance
| Metric | 13 weeks 2011 | 13 weeks 2010 | 26 weeks 2011 | 26 weeks 2010 |
|---|---|---|---|---|
| Operating revenue | $180.0 | $154.3 | $337.6 | $293.3 |
| Operating income | $6.1 | $4.1 | $9.9 | $5.5 |
| Operating margin | 3.4% | 2.6% | 2.9% | 1.9% |
| Net income | $3.9 | $4.6 | $6.8 | $6.6 |
| Diluted EPS | $0.25 | $0.29 | $0.44 | $0.42 |
- Revenue mix, first half: Truckload $208.1 million, brokerage $79.0 million, and intermodal $50.5 million. Revenue rose 15.1%, reflecting more loads, higher fuel surcharges and higher revenue per loaded mile. Combined loads increased to 392,700 from 369,200.
- Margins and costs: First-half purchased transportation rose to 77.0% of revenue from 75.8%, driven partly by fuel surcharge pass-throughs and higher brokerage transportation costs. SG&A fell to 7.7% of revenue from 8.8%; insurance and claims declined to 2.5% from 2.8% as a share of revenue.
- Profit comparison: Second-quarter operating income grew about 50%, but net income fell about 14%, primarily because other non-operating income was $0.2 million versus $3.7 million a year earlier. First-half net income increased about 3% despite lower gains on securities sales.
Cash flow, balance sheet and liquidity
- For the first half, operating cash flow was $2.5 million, compared with cash used of $2.6 million in 2010. Capital expenditures were $6.0 million; investing activities used $5.9 million and financing activities used $1.3 million.
- Cash and cash equivalents were $1.7 million at July 2, down from $6.3 million at year-end. Marketable securities were $15.4 million, bringing cash and securities to about $17.1 million.
- Total assets were $224.1 million; current assets $112.6 million and current liabilities $47.3 million. Accounts receivable increased to $81.3 million from $68.8 million at year-end; management attributed the increase to higher revenue. The filing identifies receivables as a significant operating cash-flow use.
- No borrowings were outstanding under the unsecured $20 million KeyBank credit line; $0.65 million of letters of credit used the facility. The company reported covenant compliance. The agreement ran through October 24, 2011 and carried an effective rate of 1.19% at quarter-end. The separate Cuyahoga County loan had been fully repaid by July 2, 2011.
- Shareholders’ equity was $170.0 million. The company spent $1.1 million on treasury-stock purchases in the first half. No cash dividends were anticipated in the foreseeable future.
Outlook, commentary and risks
- Management expected working capital and available borrowing capacity to fund operations and commitments for at least 12 months, assuming continued profitability; it did not provide revenue or earnings guidance.
- Expected remaining 2011 capital expenditures, excluding acquisitions, were $2.6–$3.6 million for real estate and facilities and $12.2–$12.7 million for tractors, trailers, containers, chassis and other equipment. Management also planned to add about 300 intermodal containers through year-end.
- The company described its business as primarily asset-light, with about 86% of operating expenses variable in the reported periods, and noted typical trucking seasonality: first-quarter results are generally lower than later quarters.
- Marketable securities were available-for-sale equities valued at $15.4 million. Unrealized losses of $0.22 million on securities with $1.33 million fair value were considered temporary; further market declines could result in impairment charges.
- Ordinary-course personal-injury and property-damage claims were believed adequately insured or provided for, though materially different outcomes could affect results or cash flows. The filing reported no material risk-factor changes and no material subsequent events.
- Related-party transactions included services, insurance and rent from CenTra and affiliates totaling $9.8 million in the first half, and purchases and legal services involving affiliates and a director’s law firm. Management stated service-cost allocations were reasonable, while noting they may not reflect the costs of operating independently.
Most important facts for investors to verify
- Whether revenue growth and improved operating margins persist as purchased-transportation costs and fuel surcharges change.
- Receivable collection trends and operating cash generation, given receivables growth and relatively low cash balances.
- Renewal or replacement terms for the KeyBank facility, whose stated term ended October 24, 2011.
- Execution and returns on planned container and other capital spending, and the integration and earnout costs of the Hart Transportation acquisition.
- Performance and impairment risk of the equity-securities portfolio, plus the adequacy of insurance and reserves for claims.
- Ongoing related-party dealings and the company’s capital allocation, including share repurchases and its stated intention not to pay dividends.