Universal Logistics Holdings, Inc. — Q1 2022 Form 10-Q
Business context and period: Universal provides customized transportation and logistics services in the U.S., Mexico, Canada and Colombia. This unaudited report covers the 13 weeks ended April 2, 2022; comparisons are with the 13 weeks ended April 3, 2021. Dollar amounts below are in millions unless noted.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $523.9 | $415.2 | +26.2% |
| Operating income | $57.8 | $31.2 | +85.7% |
| Operating margin | 11.0% | 7.5% | +3.5 percentage points |
| Net income | $42.0 | $21.7 | +94.0% |
| Diluted EPS | $1.56 | $0.80 | +$0.76 |
| Net cash from operations | $41.1 | $43.1 | -$2.0 |
| Capital expenditures | $6.0 | $4.9 | +$1.1 |
Net margin rose to 8.0% from 5.2%. The effective tax rate was 25.5%, versus 25.3%. Separately identified fuel surcharges were $34.6 million, compared with $20.2 million. Other non-operating income included a $0.9 million pre-tax unrealized gain on marketable securities.
Revenue and segment trends
- Contract logistics: Revenue increased 30.1% to $201.6 million and operating income rose 39.6% to $23.5 million. Margin improved to 11.6% from 10.9%. Universal managed 63 value-added programs versus 60; dedicated loads increased 1.2%.
- Intermodal: Revenue increased to $157.6 million from $103.7 million and operating income to $23.0 million from $8.5 million. Loads fell 14.3%, while revenue per load excluding fuel surcharges rose 51.2%; accessorial charges increased to $36.2 million from $11.0 million.
- Trucking: Revenue increased 2.7% to $97.5 million and operating income to $7.4 million. Loads declined 30.1%, partly offset by a 41.4% increase in revenue per load excluding fuel surcharges.
- Company-managed brokerage: Revenue increased 6.7% to $65.2 million. Loads fell 25.2%, while average revenue per load rose 25.3%; operating margin improved to 5.9% from 0.7%.
Liquidity, debt and capital allocation
- At April 2, 2022, cash and cash equivalents were $14.9 million and marketable securities were $9.0 million. Current assets were $477.8 million and current liabilities $355.8 million; working capital was approximately $121.9 million.
- Debt outstanding was approximately $402.7 million, versus $428.4 million at December 31, 2021. The balance sheet reports $401.7 million of debt net of issuance costs, including $60.5 million current and $341.2 million long-term. The company reported $51.0 million available on its revolver, compliance with facility covenants, and no margin-facility borrowings.
- Operating cash flow was $41.1 million. Receivables and other working-capital movements were a significant use of cash; trade and other receivables increased $56.0 million in the cash-flow reconciliation. Financing used $36.7 million, including $5.6 million of dividends, $5.3 million of share repurchases and net debt repayments. Cash increased $1.0 million during the quarter.
- Quarterly dividends were $0.105 per share. The company repurchased 257,261 shares for $5.3 million at an average $20.42 per share; 742,739 shares remained under the 1-million-share authorization.
Outlook, risks and notable items
- Management expected remaining-2022 capital expenditures, excluding acquisitions and strategic real estate purchases, to be 5%–6% of revenue. Equipment shortages, production backlogs and limited availability constrained Q1 spending. No earnings or revenue guidance was provided.
- Management said available cash, operating cash flow and borrowing capacity should fund near-term working capital and planned capital expenditures over the next 12 months, while warning that prolonged COVID-19 effects or weaker cash flows could require additional financing. Demand, customer production, equipment availability and weather remain relevant risks; normal seasonality may be affected by pandemic-related disruption.
- On April 29, 2022, after quarter-end, the company obtained a $165.4 million, 10-year term loan at SOFR plus 2.12%, using proceeds primarily to repay about $116.4 million under its existing credit facility and $39.5 million of real estate debt. It also entered a swap fixing a $100 million amortizing notional at 2.88% through April 2027. These transactions are subsequent events, not quarter-end balances.
- An adverse NLRB ruling related to a 2019 California terminal closure was under appeal. The company estimated exposure of $4.3 million–$7.2 million and accrued $5.8 million. A separate NLRB matter alleges certain California independent contractors should be employees; the company denied the allegations and planned to defend its position. Management did not expect these matters to have a material adverse effect, but outcomes are uncertain.
- Related-party purchases and services totaled $23.2 million, versus $14.7 million a year earlier, including insurance, rent and administrative support from entities associated with the controlling shareholder. Management reported effective disclosure controls and no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether higher revenue per load and accessorial charges can persist, particularly as load volumes declined in intermodal, trucking and brokerage.
- Receivables growth and cash conversion, given operating cash flow was below net income and lower year over year.
- The impact of the post-quarter refinancing on interest expense, collateral, covenant headroom and future debt maturities.
- Resolution and final financial exposure of both NLRB matters, including the existing $5.8 million accrual.
- Related-party transaction terms, insurance and claims trends, and the ability to meet the stated capital-spending outlook amid equipment constraints.