Universal(ULH) - 2024 Q4 - Annual Report

PART I Business The company provides customized transportation and logistics solutions across North America and Colombia through its contract logistics, intermodal, and trucking segments - The company operates through three reportable segments: contract logistics, intermodal, and trucking[17] - As of December 31, 2024, the company operated 52 company-managed terminals and serviced 90 value-added programs[16] - On September 30, 2024, the company acquired Parsec, LLC, a provider of terminal management services to railroads, which is now part of the Contract Logistics segment[20] - The company's growth strategy includes making strategic acquisitions, capitalizing on outsourcing trends, penetrating the automotive industry, and expanding its agent and owner-operator network[22][23][24] Type of Equipment | Type of Equipment | Company owned or Leased | Owner Operator Provided | Total | | :--- | :--- | :--- | :--- | | Tractors | 2,603 | 1,598 | 4,201 | | Yard Tractors | 737 | — | 737 | | Trailers | 5,051 | 709 | 5,760 | | Chassis | 3,354 | — | 3,354 | | Containers | 107 | — | 107 | Customers The company's revenue is highly concentrated in the automotive industry, with General Motors and Ford as major customers and a growing reliance on its top 10 clients Customer/Industry Concentration | Customer/Industry Concentration | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Automotive Industry Revenue | 47% | 43% | 36% | | General Motors Revenue | 18% | 20% | 16% | | Ford Revenue | 17% | 6% | 6% | | Top 10 Customers Revenue | 56% | 48% | 42% | Human Capital Resources The company employs over 10,000 people, with a significant unionized portion, and faces intense competition for qualified workers and drivers - As of December 31, 2024, the company employed 10,821 people, with about 46% being members of unions[33] - The company faces significant competition in recruiting and retaining qualified workers and drivers, which has led to increased expenses and periodic under-utilization[36] Seasonality The company's operations are subject to seasonal demand fluctuations tied to the automotive production cycle and post-holiday transportation slowdowns - Demand for value-added services increases in Q2 (automotive spring selling season) and decreases in Q3 (OEM shutdowns) and Q4 (holiday shutdowns)[55][56] - Transportation services activity generally decreases during the post-holiday winter season[57] Risk Factors The company faces significant risks from its heavy reliance on the automotive sector, customer concentration, and a material weakness in its internal financial controls - The business is highly dependent on the North American automotive industry, which accounted for 47% of revenues in 2024[73] - The top 10 customers accounted for approximately 56% of operating revenues in 2024, posing a concentration risk[74] - As a 'controlled company' under NASDAQ rules, the company is exempt from certain corporate governance standards, such as having a majority of independent directors[101] - A material weakness was identified in internal control over financial reporting for the year ended December 31, 2024, stemming from errors in financial statement preparation and accounting for non-routine transactions[107] Unresolved Staff Comments None Cybersecurity The company manages cybersecurity risks through a program based on the NIST framework, overseen by the Audit Committee, with no material impacts identified to date - The cybersecurity program is designed and assessed based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)[110] - The Board's Audit Committee oversees the cybersecurity risk management program and receives quarterly updates from management[112] - The company has not identified any risks from known cybersecurity threats that have materially affected its operations, business strategy, or financial condition[111] Properties The company owns its Michigan headquarters and 24 other properties while leasing 78 facilities and using 54 customer-provided locations for its operations - The company owns its corporate headquarters in Warren, Michigan, and 24 other properties[115] - As of year-end 2024, the company leased 78 operating facilities and utilized 54 customer-provided facilities[116] Legal Proceedings The company is involved in ordinary course litigation and believes current proceedings will not materially affect its financial position - The company is involved in claims and litigation from the ordinary course of business and accrues for claims within its self-insured retention amounts[117] - Management does not expect current legal proceedings to have a material effect on the company's financial position[117] Mine Safety Disclosures Not applicable PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock (ULH) trades on NASDAQ, with a quarterly dividend policy and an active share repurchase program - The company's common stock is traded on The NASDAQ Global Market under the symbol ULH[121] - The company has a policy for a regular quarterly dividend of $0.105 per share, totaling $0.42 annually; the Board did not declare a special dividend in Q1 2025[123] - As of December 31, 2024, 513,251 shares remain available for repurchase under the company's stock purchase authorization[128] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue and net income grew in 2024, driven by the contract logistics segment, despite challenges from inflation, labor shortages, and a material weakness in internal controls Results of Operations In 2024, revenue and net income increased significantly due to a specialty project and an acquisition, reversing the declines experienced in 2023 Comparison of 2024 to 2023 | (In millions) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $1,846.0 | $1,662.1 | 11.1% | | Income from operations | $203.1 | $145.4 | 39.6% | | Net income | $129.9 | $92.9 | 39.8% | Comparison of 2023 to 2022 | (In millions) | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $1,662.1 | $2,015.5 | (17.5)% | | Income from operations | $145.4 | $240.4 | (39.5)% | | Net income | $92.9 | $168.6 | (44.9)% | Segment Financial Results In 2024, strong growth in Contract Logistics offset a significant operating loss in Intermodal and flat performance in Trucking Segment Operating Revenues | Segment Operating Revenues (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Contract logistics | $1,129,658 | $829,574 | $823,934 | | Intermodal | $308,744 | $382,610 | $622,615 | | Trucking | $331,982 | $333,211 | $392,639 | Segment Income from Operations | Segment Income from Operations (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Contract logistics | $219,084 | $127,752 | $118,437 | | Intermodal | $(27,741) | $1,604 | $85,037 | | Trucking | $20,963 | $17,258 | $27,564 | Liquidity and Capital Resources The company funded significant acquisitions and capital expenditures in 2024 by increasing its total debt to $762.6 million, relying on cash from operations and its credit facility - Net cash provided by operating activities was $112.4 million in 2024[187][188] - Net cash used in investing activities was $462.9 million, primarily for $251.6 million in capital expenditures and $215.8 million for acquisitions (Parsec and East Texas Heavy Haul)[189] - Net cash provided by financing activities was $365.0 million, reflecting a significant increase in borrowings[190] Financial Position | (In thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $19,351 | $12,511 | | Outstanding debt | $762,641 | $386,445 | Critical Accounting Policies Key accounting judgments include estimating insurance reserves and valuing long-lived assets, which led to a $3.5 million goodwill impairment charge in 2024 - Accruals for estimated insurance claims, net of receivables, were $13.3 million at year-end 2024, up from $11.2 million in 2023[197] - Goodwill is tested for impairment annually in the third quarter; in Q3 2024, the company recorded goodwill impairment charges of $3.5 million related to the closure of its company-managed brokerage operations[200][265] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from variable-rate debt, diesel fuel prices, equity investments, and foreign currency fluctuations - As of December 31, 2024, the company had $484.5 million in variable interest rate debt; a 100 basis point increase in rates would increase annual interest expense by approximately $4.8 million[204] - A 10% increase in the average annual price of diesel fuel would increase the company's annual fuel expense by approximately $5.2 million[208] - The company holds a portfolio of marketable equity securities valued at $11.6 million as of December 31, 2024[209] - Foreign operations in Mexico, Canada, and Colombia accounted for 3.0% of revenues in 2024, exposing the company to foreign currency exchange risk[210] Financial Statements and Supplementary Data This section includes audited financial statements, notes, and the auditor's report, which gave an unqualified opinion on financials but an adverse opinion on internal controls Report of Independent Registered Public Accounting Firm The auditor issued an unqualified opinion on the financial statements but an adverse opinion on internal controls due to a material weakness - The auditor, Grant Thornton LLP, issued an unqualified opinion on the consolidated financial statements[214] - An adverse opinion was issued on the effectiveness of the company's internal control over financial reporting as of December 31, 2024[215] - Critical Audit Matters included the goodwill impairment assessment for the Contract Logistics and Intermodal units and the fair value of customer relationships from the Parsec acquisition[219][221] Consolidated Financial Statements The company's total assets reached $1.79 billion in 2024, with revenues of $1.85 billion and net income of $129.9 million Consolidated Balance Sheet | Consolidated Balance Sheet (In thousands) | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $409,813 | $365,472 | | Total assets | $1,786,837 | $1,253,523 | | Total current liabilities | $304,568 | $260,416 | | Total liabilities | $1,139,814 | $721,325 | | Total shareholders' equity | $647,023 | $532,198 | Consolidated Statement of Income | Consolidated Statement of Income (In thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total operating revenues | $1,846,035 | $1,662,139 | $2,015,456 | | Income from operations | $203,112 | $145,444 | $240,435 | | Net income | $129,907 | $92,901 | $168,632 | | Diluted EPS | $4.93 | $3.53 | $6.37 | Notes to Consolidated Financial Statements Key notes detail the closure of brokerage operations, two major acquisitions, a significant increase in debt, and substantial related-party transactions - In August 2024, the company closed its company-managed brokerage operations, incurring pre-tax losses of approximately $8.6 million[245] - The company acquired Parsec for a cash purchase price of $208.4 million and ETHH for $7.5 million in 2024[302][303] - Total debt outstanding was $762.6 million at December 31, 2024, a significant increase from $386.4 million at year-end 2023[311] - Transactions with affiliated companies, controlled by the majority shareholder, totaled $126.8 million in expenses for services like insurance, rent, and administrative support in 2024[326] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Controls and Procedures Management and the independent auditor concluded that disclosure controls were ineffective due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to a material weakness in internal control over financial reporting[377] - The material weakness was caused by errors in financial statement preparation and accounting for non-routine transactions, stemming from a need for additional technical accounting resources[381] - The independent registered public accounting firm, Grant Thornton LLP, issued an adverse opinion on the effectiveness of the company's internal control over financial reporting[382][389] - Remediation plans include enhancing internal accounting staff with employees having requisite technical knowledge and expanding the use of external consulting firms[384] Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q4 2024 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None PART III Directors, Executive Officers and Corporate Governance Information is incorporated by reference from the 2025 Proxy Statement; the company has adopted a Code of Business Conduct - The required information is incorporated by reference from the definitive proxy statement for the 2025 Annual Meeting of Shareholders[403] Executive Compensation Information required by this item is incorporated by reference from the company's 2025 Proxy Statement - The required information will be included in the 2025 Proxy Statement and is incorporated by reference[405] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership details are incorporated by reference from the 2025 Proxy Statement, with over 748,000 securities available for future issuance under equity plans Equity Compensation Plan Information | Plan Category | Securities to be issued | Securities available for future issuance | | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 85,538 | 748,455 | | Total | 85,538 | 748,455 | Certain Relationships and Related Transactions, and Director Independence Information required by this item is incorporated by reference from the company's 2025 Proxy Statement - The required information will be included in the 2025 Proxy Statement and is incorporated by reference[408] Principal Accounting Fees and Services Information required by this item is incorporated by reference from the company's 2025 Proxy Statement - The required information will be included in the 2025 Proxy Statement and is incorporated by reference[409] PART IV Exhibits and Financial Statement Schedules This section lists the financial statements and exhibits filed with the Form 10-K, with schedules omitted as permitted Form 10-K Summary None