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What changed in UNIVERSAL LOGISTICS HOLDINGS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UNIVERSAL LOGISTICS HOLDINGS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+227 added−253 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-16)

Top changes in UNIVERSAL LOGISTICS HOLDINGS, INC.'s 2023 10-K

227 paragraphs added · 253 removed · 177 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

28 edited+4 added−3 removed46 unchanged
Biggest changeOur company-managed brokerage segment provides for the pick-up and delivery of individual freight shipments using broker carriers, coordinated by our company-managed operations. For additional information on segments, see Item 8, Note 17 to the Consolidated Financial Statements. Impact of COVID-19 Our operations have been impacted by the COVID-19 global pandemic.
Biggest changeThe operations that we group in our trucking segment are associated with individual freight shipments coordinated primarily by our agents using a mix of owner-operators, company equipment and broker carriers. Our company-managed brokerage segment provides for the pick-up and delivery of individual freight shipments using broker carriers, coordinated by our company-managed operations.
Customers Revenue is generated from customers throughout the United States, and in Mexico, Canada and Colombia. Our customers are largely concentrated in the automotive, retail and consumer goods, steel and other metals, energy and manufacturing industries. A significant percentage of our revenues are derived from the domestic auto industry.
Customers Revenue is generated from customers throughout the United States, and in Mexico, Canada and Colombia. Our customers are largely concentrated in the automotive, retail and consumer goods, steel and other metals, energy and manufacturing industries. A significant percentage of our revenues are derived from the domestic automotive industry.
Any such adjustments could have a materially adverse effect on our operations and financial results. 6 To reduce our exposure to claims incurred while a vehicle is being operated without a trailer attached or is being operated with an attached trailer which does not contain or carry any cargo, we require our owner-operators to maintain non-trucking use liability coverage (which the industry refers to as deadhead bobtail coverage) of $2.0 million per occurrence.
Any such adjustments could have a materially adverse effect on our operations and financial results. 7 To reduce our exposure to claims incurred while a vehicle is being operated without a trailer attached or is being operated with an attached trailer which does not contain or carry any cargo, we require our owner-operators to maintain non-trucking use liability coverage (which the industry refers to as deadhead bobtail coverage) of $2.0 million per occurrence.
Under specific environmental laws, we could also be held responsible for any costs relating to contamination at our past or present facilities and at third-party waste disposal sites, as well as costs associated with cleanup of accidents involving our vehicles. 7 As climate change issues become more prevalent, federal, state and local governments, as well as some of our customers, have made efforts to respond to these issues.
Under specific environmental laws, we could also be held responsible for any costs relating to contamination at our past or present facilities and at third-party waste disposal sites, as well as costs associated with cleanup of accidents involving our vehicles. 8 As climate change issues become more prevalent, federal, state and local governments, as well as some of our customers, have made efforts to respond to these issues.
Our commitment to diversity and inclusion means that we will continue to strive to establish and improve an inclusive workplace environment where employees from all backgrounds can succeed and be heard. 5 Employee Health and Safety . We are committed to being an industry leader in health and safety standards.
Our commitment to diversity and inclusion means that we will continue to strive to establish and improve an inclusive workplace environment where employees from all backgrounds can succeed and be heard. 6 Employee Health and Safety . We are committed to being an industry leader in health and safety standards.
The contents of our website are not incorporated into this filing. 8
The contents of our website are not incorporated into this filing.
We believe our union and employee relationships are good. Diversity and Inclusion . We believe diversity and inclusion are critical to our ability to win in the marketplace and enable our workforce and communities to succeed. Specifically, having a diverse and inclusive workplace allows us to attract and retain the best employees to deliver results for our shareholders.
We believe diversity and inclusion are critical to our ability to win in the marketplace and enable our workforce and communities to succeed. Specifically, having a diverse and inclusive workplace allows us to attract and retain the best employees to deliver results for our shareholders.
In our contract logistics segment, we customize our proprietary Warehouse Management System (WMS) to meet the needs of individual customers. Our WMS allows us to send our customers an advance shipping notice through a simple, web-based interface that can be used by a variety of vendors.
In our contract logistics segment, we customize our proprietary warehouse management and sequencing systems to meet the needs of individual customers. Our systems allows us to send our customers an advance shipping notice through a simple, web-based interface that can be used by a variety of vendors.
Operations aggregated in our contract logistics segment deliver value-added and/or dedicated transportation services to support in-bound logistics to original equipment manufacturers (OEMs) and major retailers on a contractual basis, generally pursuant to terms of one year or longer.
The operations that we aggregate in our contract logistics segment deliver value-added and dedicated transportation services to support in-bound logistics to original equipment manufacturers (OEMs) and major retailers on a contractual basis, generally pursuant to terms of one year or longer.
Our agents solicited and controlled approximately 30% of the freight we hauled in 2022, with the balance of the freight being generated by company-managed terminals. Our top 100 agents in 2022 generated approximately 19% of our annual operating revenues.
Our agents solicited and controlled approximately 30% of the freight we hauled in 2023, with the balance of the freight being generated by company-managed terminals. Our top 100 agents in 2023 generated approximately 20% of our annual operating revenues.
ITEM 1: BUSINESS Company Background Universal Logistics Holdings, Inc. is a holding company that owns subsidiaries engaged in providing a variety of customized transportation and logistics solutions throughout the United States, and in Mexico, Canada and Colombia. Our operating subsidiaries provide customers a broad array of services across their entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.
ITEM 1: BUSINESS Company Background Universal Logistics Holdings, Inc. is a holding company whose subsidiaries provide a variety of customized transportation and logistics solutions throughout the United States and in Mexico, Canada and Colombia. Our operating subsidiaries provide customers with a broad scope of services across their entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.
We market and deliver our services in several ways: • Through a direct sales and marketing network focused on selling our portfolio of services to large customers in specific industry sectors; • Through company-managed facilities and full-service freight forwarding and customs house brokerage offices; and • Through a network of agents who solicit freight business directly from shippers.
We market and deliver our services in several ways: • Through a direct sales and marketing network focused on selling our portfolio of services to large customers in specific industry sectors; • Through company-managed facilities; and • Through a network of agents who solicit freight business directly from shippers.
Our truckload services include dry van, flatbed, heavy-haul and refrigerated operations. Truckload services represented approximately $230.7 million, or 11.4%, of our operating revenues in 2022. 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. Brokerage .
Our truckload services include dry van, flatbed, heavy-haul and refrigerated operations. Truckload services represented approximately $213.9 million, or 12.9%, of our operating revenues in 2023. 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. Brokerage .
At December 31, 2022, we operated 51 company-managed terminal locations and serviced 63 value-added programs at locations throughout the United States and in Mexico, Canada and Colombia, and we had an agent network totaling approximately 240 agents. We were incorporated in Michigan on December 11, 2001.
At December 31, 2023, we operated 50 company-managed terminal locations, serviced 71 value-added programs at locations throughout the United States and in Mexico, Canada and Colombia, and had an agent network totaling approximately 230 agents. We were incorporated in Michigan on December 11, 2001.
We believe long-term industry growth will be supported by manufacturers seeking to outsource non-core logistics functions to cost-effective third-party providers that can efficiently manage increasingly complex global supply chains.
Continue to capitalize on strong industry fundamentals and outsourcing trends . We believe long-term industry growth will be supported by manufacturers seeking to outsource non-core logistics functions to cost-effective third-party providers that can efficiently manage increasingly complex global supply chains.
In 2022, dedicated services represented approximately $324.6 million, or 16.1%, of our operating revenues. Our dedicated services are primarily short run or round-trip moves within a defined geographic area provided through a network of union and non-union employee drivers, owner-operators, and contract drivers. Value-Added .
In 2023, dedicated services represented approximately $343.5 million, or 20.7%, of our operating revenues. Our dedicated services are primarily short run or round-trip moves within a defined geographic area provided through a network of union and non-union employee drivers, owner-operators, and contract drivers. Value-Added .
Intermodal support services represented $591.9 million, or 29.4%, of our operating revenues in 2022. Our intermodal support services are primarily short-to-medium distance delivery of both international and domestic containers between the railhead or port and the customer. Dedicated . Our dedicated services are primarily provided in support of automotive customers using van equipment.
Intermodal support services represented $374.7 million, or 22.5%, of our operating revenues in 2023. Our intermodal support services are primarily short- to medium-distance delivery of both international and domestic containers between the railhead or port and the customer. Dedicated . Our dedicated services are primarily provided in support of automotive customers using van equipment.
We intend to capitalize on anticipated continued growth in outsourcing of higher value logistics services in the automotive sector such as sub-assembly and sequencing, which link directly into production lines and require specialized capabilities, technological expertise and strict quality controls. 4 Continue to expand penetration in other vertical markets .
We intend to capitalize on continued growth opportunities in those outsourced, higher-value logistics services, such as sub-assembly and sequencing, which link directly into production lines and require specialized capabilities, technological expertise, and strict quality controls. 5 Continue to expand penetration in other vertical markets .
We provide customers freight brokerage services by utilizing third-party transportation providers to transport goods. Brokerage services also include full service domestic and international freight forwarding, and customs brokerage. In 2022, brokerage services represented approximately $368.9 million, or 18.3%, of our operating revenues. 3 Intermodal . Intermodal operations include steamship-truck, rail-truck, and support services.
We provide customers with freight brokerage services by utilizing third-party transportation providers to transport goods. Brokerage services also include full service domestic and international freight forwarding, and customs brokerage. In 2023, brokerage services represented approximately $244.0 million, or 14.7%, of our operating revenues. 4 Intermodal . Intermodal operations include steamship-truck, rail-truck, and support services.
Our 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 services represented approximately $499.3 million, or 24.8%, of our operating revenues in 2022.
Our value-added services, which are typically tailored to individual customer requirements, include material handling, consolidation, sequencing, sub-assembly, cross-dock services, kitting, repacking, warehousing and returnable container management. Value-added services represented approximately $486.0 million, or 29.2%, of our operating revenues in 2023.
Revenue Equipment The following table represents our equipment used to provide transportation services as of December 31, 2022: Type of Equipment Company- owned or Leased Owner- Operator Provided Total Tractors 1,847 2,207 4,054 Yard Tractors 244 — 244 Trailers 4,139 1,043 5,182 Chassis 3,372 1 3,373 Containers 129 — 129 Risk Management and Insurance Our customers and federal regulations generally require that we provide insurance for auto liability and general liability claims up to $1.0 million per occurrence.
Revenue Equipment The following table represents our equipment used to provide transportation services as of December 31, 2023: Type of Equipment Company- owned or Leased Owner- Operator Provided Total Tractors 1,945 1,766 3,711 Yard Tractors 339 — 339 Trailers 4,434 950 5,384 Chassis 3,494 — 3,494 Containers 108 — 108 Risk Management and Insurance Our customers and federal regulations generally require that we provide insurance for auto liability and general liability claims up to $1.0 million per occurrence.
Sales to our top 10 customers, including General Motors, totaled 42% in 2022. A significant percentage of our revenue also results from our providing capacity to other transportation companies that aggregate loads from a variety of shippers in these and other industries. Human Capital Resources Overview . As of December 31, 2022, we had 8,646 employees.
A significant percentage of our revenue also results from our providing capacity to other transportation companies that aggregate loads from a variety of shippers in these and other industries. Human Capital Resources Overview . As of December 31, 2023, we had 9,311 employees.
Our intermodal segment is associated with local and regional drayage moves predominately coordinated by company-managed terminals using a mix of owner-operators, company equipment and third-party capacity providers (broker carriers). Operations aggregated in our trucking segment are associated with individual freight shipments coordinated primarily by our agents using a mix of owner-operators, company equipment and broker carriers.
Our intermodal segment is associated with local and regional drayage moves predominately coordinated by company-managed terminals using a mix of owner-operators, company equipment and third-party capacity providers that are commonly referred to as broker carriers.
Of our customers generating revenues greater than $100,000 per year, aggregate sales in the automotive industry totaled 36%, 31% and 29% of revenues during the fiscal years ended December 31, 2022, 2021 and 2020, respectively. During 2022, 2021 and 2020, General Motors accounted for approximately 16%, 13% and 14% of our total operating revenues, respectively.
Our aggregate sales in the automotive industry totaled 43%, 36% and 31% of our revenues during the fiscal years ended December 31, 2023, 2022 and 2021, respectively. During 2023, 2022 and 2021, General Motors accounted for approximately 20%, 16% and 13% of our total operating revenues, respectively. Sales to our top 10 customers, including General Motors, totaled 48% in 2023.
At these times, some shippers reduce their shipments, and inclement weather impedes trucking operations or underlying customer demand. Prolonged adverse weather conditions, particularly in winter months, can also adversely impact margins due to productivity declines and related challenges meeting customer service requirements.
Prolonged adverse weather conditions, particularly in winter months, can also adversely impact margins due to productivity declines and related challenges meeting customer service requirements.
During the year ended December 31, 2022, we also engaged, on average, the full-time equivalency of 1,326 individuals on a contract basis. As of December 31, 2022, approximately 39% of our employees in the United States, Canada, and Colombia and 80% of our employees in Mexico were members of unions and subject to collective bargaining agreements.
During the year ended December 31, 2023, we also engaged, on average, the full-time equivalency of 450 individuals on a contract basis. As of December 31, 2023, approximately 33% of our employees were members of unions and subject to collective bargaining agreements. We believe our union and employee relationships are good. Diversity and Inclusion .
Business and Growth Strategy The key elements of our strategy are as follows: Make strategic acquisitions. The transportation and logistics industry is highly fragmented, with hundreds of small and mid-sized competitors that are either specialized in specific vertical markets, specific service offerings, or limited to local and regional coverage.
The transportation and logistics industry is highly fragmented, with thousands of small and mid-sized competitors that are either specialized in specific vertical markets, specific service offerings, or limited to local and regional coverage. We expect to selectively evaluate and pursue acquisitions that will enhance our service capabilities, expand our geographic network and/or diversify our customer base.
The automotive industry is one of the largest users of global outsourced logistics services, providing us growth opportunities with both existing and new customers. Of our customers generating revenues greater than $100,000 per year, this sector comprised approximately 36% of operating revenues in 2022.
The automotive industry is one of the largest users of global outsourced logistics services, providing us growth opportunities with both existing and new customers. In 2023, this sector comprised approximately 43% of our total operating revenues. The vast majority of hourly employees in our automotive customers’ manufacturing operations are represented by unions and covered by collective bargaining agreements.
Removed
We began our COVID-19 response activities in the first quarter of 2020, which required expanded health and safety policies, facility modifications, increased security coverage, and purchase and distribution of personal protective equipment and supplies. Any future waves or outbreaks of alternative strains of the virus could adversely impact our future operations and financial results.
Added
For additional information on segments, see Item 8, Note 17 to the Consolidated Financial Statements. Business and Growth Strategy The key elements of our strategy are as follows: Make strategic acquisitions.
Removed
We expect to selectively evaluate and pursue acquisitions that will enhance our service capabilities, expand our geographic network and/or diversify our customer base. Continue to capitalize on strong industry fundamentals and outsourcing trends .
Added
These agreements provide guaranteed wage and benefit levels throughout the contract term. With the ratification of new contracts in 2023, we expect our customers to experience significant increases in their labor costs through the life of the contracts.
Removed
However, due to the COVID-19 pandemic and its impact on North American automotive manufacturing, we may not experience normal seasonal demand for our services supporting the automotive production and selling cycles during the current year. Our transportation services business is generally impacted by decreased activity during the post-holiday winter season and, in certain states, during hurricane season.
Added
These cost increases may cause certain of our customers to evaluate the outsourcing of certain value-added operations where we possess demonstrated experience and expertise.
Added
Additionally, our transportation services business, excluding dedicated transportation tied to specific customer supply chains, is generally impacted by decreased activity during the post-holiday winter season and, in certain states during hurricane season, because some shippers reduce their shipments and inclement weather impedes trucking operations or underlying customer demand.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+16 added−18 removed60 unchanged
Biggest changeAlthough we do not have any direct operations in Russia, Belarus, or Ukraine, we may be affected by the broader consequences of the Russia and Ukraine conflict or expansion of such conflict to other areas or countries or similar conflicts elsewhere, such as, increased inflation, supply chain issues, including access to parts for our revenue equipment, embargoes, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory action by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.
Biggest changeThe potential implications include increased inflation, supply chain disruption, reduced access to parts for our revenue equipment, embargoes, geopolitical shifts, reduced access to diesel fuel, higher energy prices, and other effects on the global economy. The magnitude of these risks cannot be predicted, including the extent to which the conflicts may heighten other risk factors.
We may be unable to successfully integrate businesses we acquire into our operations. Integrating businesses we acquire may involve unanticipated delays, costs or other operational or financial problems. Successful integration of the businesses we acquire depends on a number of factors, including our ability to transition acquired companies to our management information systems.
We may be unable to successfully integrate the businesses we acquire into our operations. Integrating acquired companies may involve unanticipated delays, costs or other operational or financial problems. Successful integration of the businesses we acquire depends on a number of factors, including our ability to transition acquired companies to our management information systems.
In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods. Any of the above increased costs would adversely affect our business and operating results. 10 We may incur additional operating expenses or liabilities as a result of potential future requirements to address climate change issues.
In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods. Any of the above increased costs would adversely affect our business and operating results. We may incur additional operating expenses or liabilities as a result of potential future requirements to address climate change issues.
In integrating acquired businesses, we may not achieve expected economies of scale or profitability or realize sufficient revenues to justify our investment. We also face the risk that an unexpected problem at one of the companies we acquire will require substantial time and attention from senior management, diverting management’s attention from other aspects of our business.
In integrating acquired businesses, we may not achieve expected economies of scale or profitability or realize sufficient revenues to justify our investment. We also face the risk that an unexpected problem at one of the acquired companies will require substantial time and attention from senior management, diverting management’s attention from other aspects of our business.
Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged, which could adversely affect our growth and profitability. 13 Our results of operations may be affected by seasonal factors.
Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged, which could adversely affect our growth and profitability. Our results of operations may be affected by seasonal factors.
If we should fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability. Our business may be disrupted by natural disasters and severe weather conditions causing supply chain disruptions.
If we fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability. Our business may be disrupted by natural disasters and severe weather conditions causing supply chain disruptions.
These factors include the following: • we compete with many other truckload carriers and logistics companies of varying sizes, some of which have more equipment, a broader coverage network, a wider range of services and greater capital resources than we do; • some of our competitors periodically reduce their rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase rates, maintain our operating margins, or maintain significant growth in our business; • many customers reduce the number of carriers they use by selecting so-called “core carriers” as approved service providers and, in some instances, we may not be selected; • some companies hire lead logistics providers to manage their logistics operations, and these lead logistics providers may hire logistics providers on a non-neutral basis which may reduce the number of business opportunities available to us; • many customers periodically accept bids from multiple carriers and providers for their shipping and logistic service needs, and this process may result in the loss of some of our business to competitors and/or price reductions; • the trend toward consolidation in the trucking and third-party logistics industries may create other large providers with greater financial resources and other competitive advantages relating to their size and with whom we may have difficulty competing; • advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher rates to cover the cost of these investments; • competition from Internet-based and other brokerage companies may adversely affect our relationships with our customers and freight rates; • economies of scale that may be passed on to smaller providers by procurement aggregation providers may improve the ability of smaller providers to compete with us; • some areas of our service coverage require trucks with engines no older than 2011 in order to comply with environmental rules; and • an inability to continue to access capital markets to finance equipment acquisition could put us at a competitive disadvantage. 9 We may be adversely impacted by fluctuations in the price and availability of diesel fuel.
These factors include the following: • we compete with many other truckload carriers and logistics companies of varying sizes, some of which have more equipment, a broader coverage network, a wider range of services and greater capital resources than we do; • some of our competitors periodically reduce their rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase rates, maintain our operating margins, or maintain significant growth in our business; • many customers reduce the number of carriers they use by selecting so-called “core carriers” as approved service providers and, in some instances, we may not be selected; • some companies hire lead logistics providers to manage their logistics operations, and these lead logistics providers may hire logistics providers on a non-neutral basis which may reduce the number of business opportunities available to us; • many customers periodically accept bids from multiple carriers and providers for their shipping and logistic service needs, and this process may result in the loss of some of our business to competitors and/or price reductions; • the trend toward consolidation in the trucking and third-party logistics industries may create other large providers with greater financial resources and other competitive advantages relating to their size and with whom we may have difficulty competing; • advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher rates to cover the cost of these investments; • competition from Internet-based and other brokerage companies may adversely affect our relationships with our customers and freight rates; • economies of scale that may be passed on to smaller providers by procurement aggregation providers may improve the ability of smaller providers to compete with us; • some areas of our service coverage require trucks with engines no older than 2011 in order to comply with environmental rules; and • an inability to continue to access capital markets to finance equipment acquisition could put us at a competitive disadvantage.
We cannot be certain that our management and operational controls will be able to support us as we grow. 14 Our information technology systems are subject to certain cyber risks and disasters that are beyond our control.
We cannot be certain that our management and operational controls will be able to support us as we grow. Our information technology systems are subject to certain cyber risks and disasters that are beyond our control.
A labor dispute involving another supplier to our customers that results in a slowdown or closure of our customers’ plants to which we provide services could also have a material adverse effect on our business. Significant increases in labor costs as a result of the renegotiation of collective bargaining agreements could also be harmful to our business and our profitability.
A labor dispute involving another supplier to our customers that results in a slowdown or closure of our customers’ plants where we provide services could also have a material adverse effect on our business. Significant increases in labor costs as a result of the renegotiation of our collective bargaining agreements could be harmful to our business and our profitability.
We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business. The U.S.
We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business.
A large portion of our revenue is generated from a limited number of major customers concentrated in the automotive, retail and consumer goods, steel and other metals, energy and manufacturing industries. Our top 10 customers accounted for approximately 42% of our operating revenues during 2022.
A large portion of our revenue is generated from a limited number of major customers concentrated in the automotive, retail and consumer goods, steel and other metals, energy and manufacturing industries. Our top 10 customers accounted for approximately 48% of our operating revenues during 2023.
We are subject to certain risks arising from doing business in Mexico. As we continue to grow our business in Mexico, we are subject to greater risks of doing business internationally.
As we continue to grow our business in Mexico, we are subject to greater risks of doing business internationally.
In addition, strikes, work stoppages and slowdowns by our employees may affect our ability to meet our customers’ needs, and customers may do more business with competitors if they believe that such actions may adversely affect our ability to provide service. We may face permanent loss of customers if we are unable to provide uninterrupted service.
Any work stoppages or slowdowns by our employees could affect our ability to meet our customers’ needs, and customers may do more business with our competitors if they believe that such actions may adversely affect our ability to provide our services. We may face the permanent loss of customers if we are unable to provide uninterrupted services.
ITEM 1A: RI SK FACTORS Set forth below, and elsewhere in this Report and in other documents we file with the SEC, are risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this Report.
ITEM 1A: RI SK FACTORS Set forth below, and elsewhere in this Report and in other documents we file with the SEC, are risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this Report or our other filings with the SEC or in oral presentations such as telephone conferences open to the public.
Any future successful cyber-attack or catastrophic natural disaster could significantly affect our operating and financial systems and could temporarily disrupt our ability to provide required services to our customers, impact our ability to manage our operations and perform vital financial processes, any of which could have a materially adverse effect on our business.
Any future successful cyber-attack or catastrophic natural disaster could significantly affect our operating and financial systems and could temporarily disrupt our ability to provide required services to our customers, impact our ability to manage our operations and perform vital financial processes, any of which could have a materially adverse effect on our business. 15 We are subject to certain risks arising from doing business in Mexico.
As a result, these events could make it difficult or impossible for us to provide logistics and transportation services; disrupt or prevent our ability to perform functions at the corporate level; and/or otherwise impede our ability to continue business operations in a continuous manner consistent with the level and extent of business activities prior to the occurrence of the unexpected event, which could adversely affect our business and results of operations or make our results more volatile.
As a result, these events could make it difficult or impossible for us to provide logistics and transportation services; disrupt or prevent our ability to perform functions at the corporate level; and/or otherwise impede our ability to continue business operations in a continuous manner consistent with the level and extent of business activities prior to the occurrence of the unexpected event, which could adversely affect our business and results of operations or make our results more volatile. 14 Our business may be harmed by public health crises, terrorist attacks, future war, or anti-terrorism measures.
Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity, and cash flows. 12 We have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales.
Costs we incur to defend or to satisfy a judgment or settlement of these claims may not be covered by insurance or could exceed the amount of that coverage or increase our insurance costs and could have a material adverse effect on our financial condition, results of operations, liquidity, and cash flows.
An example of such legislation enacted in California is now enforceable against trucking companies. There can be no assurance that interpretations that support the independent contractor status will not change, that other federal or state legislation will not be enacted or that various authorities will not successfully assert a position that re-classifies independent contractors to be employees.
There can be no assurance that interpretations that support the independent contractor status will not change, that other federal or state legislation will not be enacted or that various authorities will not successfully assert a position that re-classifies independent contractors to be employees.
Diesel fuel represents a significant operating expense for the Company, and we do not currently hedge against the risk of diesel fuel price increases.
We may be adversely impacted by fluctuations in the price and availability of diesel fuel. Diesel fuel represents a significant operating expense for the Company, and we do not currently hedge against the risk of diesel fuel price increases.
These requirements will not apply to us as long as we remain a controlled company. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of NASDAQ. 16 Our stock trading volume may not provide adequate liquidity for investors.
Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of NASDAQ. Our stock trading volume may not provide adequate liquidity for investors.
We have outstanding indebtedness, and our debt may fluctuate from time to time in the future for various reasons, including changes in the results of our operations, capital expenditures, and potential acquisitions.
Our existing and future indebtedness could limit our flexibility in operating our business or adversely affect our business and our liquidity position. We have outstanding indebtedness, and our debt may fluctuate from time to time in the future for various reasons, including changes in the results of our operations, capital expenditures, and potential acquisitions.
This concentration of ownership could limit the price that some investors might be willing to pay for shares of our common stock. The interests of Mr. Moroun could conflict with or differ from our interests or the interests of our other shareholders.
This concentration of ownership could also limit the price that some investors might be willing to pay for shares of our common stock. The interests of our controlling shareholders may conflict with those of the Company and our other shareholders. The interests of the Moroun family trusts could conflict with the interests of Universal or our other shareholders.
Any of these factors could impair our operating efficiency and productivity and result in higher operating costs. In addition, revenues could decrease if we are unable to meet regulatory or customer sustainability requirements. These additional costs, changes in operations, or loss of revenues could have a material adverse effect on our business, financial condition, and results of operations.
Any of these factors could impair our operating efficiency and productivity and result in higher operating costs. In addition, revenues could decrease if we are unable to meet regulatory or customer sustainability requirements.
Moroun controls any action requiring the general approval of our shareholders, including the election of our board of directors, the adoption of amendments to our articles of incorporation and bylaws, and the approval of any merger or sale of substantially all of our assets. So long as Mr.
Votes cast on behalf of the family trusts control any action requiring the general approval of our shareholders, including the election of our board of directors, the adoption of amendments to our articles of incorporation and bylaws, and the approval of any merger or sale of substantially all of our assets.
For customers generating annual revenues over $100,000, 36% of our revenues were derived from customers in the North American automotive industry during 2022. Our business and growth largely depend on continued demand for its services from customers in this industry.
A significant portion of our larger customers are concentrated in the North American automotive industry. During 2023, 43% of our revenues were derived from customers in the North American automotive industry. Our business and growth largely depend on continued demand for its services from customers in this industry.
We are highly dependent upon the services of our key employees and executive officers. The loss of any of their services could have a material adverse effect on our operations and future profitability. We must continue to develop and retain a core group of managers if we are to realize our goal of expanding our operations and continuing our growth.
If we are unable to retain our key employees, our business, financial condition, and results of operations could be harmed. We are highly dependent upon the services of our key employees and executive officers. The loss of any of their services could have a material adverse effect on our operations and future profitability.
If we are unable to attract drivers when needed or contract with independent contractors when needed, we could be required to further adjust our driver compensation packages, increase driver recruiting efforts, or let trucks sit idle, any of which could adversely affect our growth and profitability.
If we are unable to attract drivers when needed or contract with independent contractors when needed, we could be required to further adjust our driver compensation packages, increase driver recruiting efforts, or let trucks sit idle, any of which could adversely affect our growth and profitability. 10 Purchase price increases for new revenue equipment and/or decreases in the value of used revenue equipment could have an adverse effect on our results of operations, cash flows and financial condition.
Federal Motor Carrier Safety Administration, or FMCSA, and various state and local agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carrier operations, drug and alcohol testing, safety and insurance requirements.
The FMCSA and various state and local agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carrier operations, drug and alcohol testing, safety and insurance requirements. Our owner-operators must comply with the safety and fitness regulations promulgated by the FMCSA, including those relating to drug and alcohol testing and hours-of-service.
We face litigation risks that could have a material adverse effect on the operation of our business. We face litigation risks regarding a variety of issues, including without limitation, accidents involving our trucks and employees, alleged violations of federal and state labor and employment laws, securities laws, environmental liability, and other matters.
We face litigation risks regarding a variety of issues, including without limitation, accidents involving our trucks and employees, alleged violations of federal and state labor and employment laws, securities laws, environmental liability, and other matters. These proceedings may be time-consuming, expensive, and disruptive to normal business operations.
Deterioration in the United States and world economies could exacerbate any difficulties experienced by our customers and suppliers in obtaining financing, which, in turn, could materially and adversely impact our business, financial condition, results of operations and cash flows.
Deterioration in the United States and world economies could exacerbate any difficulties experienced by our customers and suppliers in obtaining financing, which, in turn, could materially and adversely impact our business, financial condition, results of operations and cash flows. 9 We operate in the highly competitive and fragmented transportation and logistics industry, and our business may suffer if we are unable to adequately address factors that may adversely affect our revenue and costs relative to our competitors.
A significant portion of our expenses are fixed costs that neither increase nor decrease proportionately with our sales. There can be no assurance that we would be able to reduce our fixed costs proportionately in response to a decline in our sales; therefore, our competitiveness could be significantly impacted.
There can be no assurance that we would be able to reduce our fixed costs proportionately in response to a decline in our sales; therefore, our competitiveness could be significantly impacted. As a result, a decline in our sales would result in a higher percentage decline in our income from operations and net income.
The Company is self-insured for health and workers’ compensation insurance coverage up to certain limits. If medical costs continue to increase, or if the severity or number of claims increase, and if we are unable to offset the resulting increases in expenses with higher freight rates, our earnings could be materially and adversely affected.
If medical costs continue to increase, or if the severity or number of claims increase, and if we are unable to offset the resulting increases in expenses with higher freight rates, our earnings could be materially and adversely affected. We face litigation risks that could have a material adverse effect on the operation of our business.
We also cannot provide assurance that we would be able to dispose of material assets or operations or restructure our debt or other obligations if necessary or, even if we were able to take such actions, that we could do so on terms that are acceptable to us.
We also cannot provide assurance that we would be able to dispose of material assets or operations or restructure our debt or other obligations if necessary or, even if we were able to take such actions, that we could do so on terms that are acceptable to us. 13 Disruptions in the credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our results of operations, cash flows and financial condition.
The NASDAQ rules state that a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that: • a majority of the board of directors consist of independent directors; • a nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
A controlled company may elect not to comply with certain corporate governance requirements, including: • a majority of the board of directors consist of independent directors; • a nominating and corporate governance committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. 16 We are a controlled company under these rules, and these requirements will not apply to us as long as we retain that status.
A determination that independent contractors are employees could expose us to various liabilities and additional costs. Federal and state legislators and other regulatory authorities, as well as independent contractors themselves, often seek to assert that independent contractors in the transportation services industry are employees rather than independent contractors.
Federal and state legislators and other regulatory authorities, as well as independent contractors themselves, often seek to assert that independent contractors in the transportation services industry are employees rather than independent contractors. An example of such legislation enacted in California is now enforceable against trucking companies.
Risks Related to Our Business Our revenue is largely dependent on North American automotive industry production volume and may be negatively affected by future downturns in North American automobile production. A significant portion of our larger customers are concentrated in the North American automotive industry.
These additional costs, changes in operations, or loss of revenues could have a material adverse effect on our business, financial condition, and results of operations. 11 Risks Related to Our Business Our revenue is largely dependent on North American automotive industry production volume and may be negatively affected by future downturns in North American automobile production.
The development and maintenance of these measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly more sophisticated. Despite our efforts, we are not fully insulated from data breaches, technology disruptions or data loss, which could adversely impact our competitiveness and results of operations.
Despite our efforts, we are not fully insulated from data breaches, technology disruptions or data loss, which could adversely impact our competitiveness and results of operations.
Any decision regarding their ownership of us that Mr. Moroun may make at some future time will be in his absolute discretion, subject to applicable laws and fiduciary duties. Because Matthew T. Moroun owns a controlling interest in us, we are not subject to certain corporate governance standards that apply to other publicly traded companies. Mr.
Any such decisions that may be made in the future by our controlling shareholders will be in their absolute discretion, subject to applicable laws and fiduciary duties. Because we are a “controlled company” under NASDAQ rules, we are not subject to certain corporate governance standards that apply to other publicly traded companies.
A substantial number of our employees and of the employees of our largest customers are members of industrial trade unions and are employed under the terms of collective bargaining agreements. Each of our unionized facilities has a separate agreement with the union that represents the workers at only that facility.
As of December 31, 2023, approximately 33% of our employees were members of unions and subject to collective bargaining agreements. Subject to a few exceptions, each of our unionized facilities has a separate agreement with the union that generally represents the workers at only that facility.
In recent years, several insurance companies have stopped offering coverage to trucking companies as a result of increases in the severity of automobile liability claims and higher costs of settlements and verdicts. Recent jury awards in the trucking industry have reached into the tens and even hundreds of millions of dollars.
The defense of such lawsuits could result in significant expense and the diversion of our management’s time and attention from the operation of our business. In recent years, several insurance companies have stopped offering coverage to trucking companies as a result of increases in the severity of automobile liability claims and higher costs of settlements and verdicts.
These measures could disrupt or impede the timing of our deliveries and we may fail to meet the needs of our customers. The cost of complying with these regulatory measures, or any future measures, could have a materially adverse effect on our business or results of operations.
The cost of complying with these regulatory measures, or any future measures, could have a materially adverse effect on our business or results of operations. A determination that independent contractors are employees could expose us to various liabilities and additional costs.
A reduction in or termination of services by one or more of our major customers could have a material adverse effect on our business and results of operations. 11 If we are unable to retain our key employees, our business, financial condition, and results of operations could be harmed.
If our major customers lose U.S. market share, they may have less need for services. A reduction in or termination of services by one or more of our major customers could have a material adverse effect on our business and results of operations.
Some of our software systems are utilized by third parties who provide outsourced processing services which may increase the risk of a cyber-security incident. We have invested and continue to invest in technology security initiatives, employee training, information technology risk management and disaster recovery plans.
Although our information systems are protected through physical and software security as well as redundant backup systems, they remain susceptible to cyber security risks. Some of our software systems are utilized by third parties who provide outsourced processing services which may increase the risk of a cyber-security incident.
If we are unable to address business concerns related to our Mexican operations in a timely and cost-efficient manner, our financial position, results of operations, or cash flows could be adversely affected. 15 The conflict between Russia and Ukraine, expansion of such conflict to other areas or countries or similar conflicts could adversely impact our business and financial results.
If we are unable to address business concerns related to our Mexican operations in a timely and cost-efficient manner, our financial position, results of operations, or cash flows could be adversely affected. Risks Related to Our Common Stock Our public shareholders may have limited influence over our significant corporate actions. Matthew T.
The terms of our future collective bargaining agreements also may affect our competitive position and results of operations. Ongoing insurance and claims expenses could significantly reduce our earnings and cash flows. Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings and cash flows.
Ultimately, these factors could materially and adversely affect the results of our operations. 12 Ongoing insurance and claims expenses could significantly reduce our earnings and cash flows. Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings and cash flows. We are self-insured for health and workers’ compensation insurance coverage up to certain limits.
In addition, certain provisions of Michigan law that apply to us could discourage or prevent a change of control or acquisition of our Company. 17 ITEM 1B: UNRESOLVED SECURITIES & E XCHANGE COMMISSION STAFF COMMENTS None.
In addition, certain provisions of Michigan law that apply to us could discourage or prevent a change of control or acquisition of our Company. 17 Ineffective internal control over financial reporting could result in errors in our financial statements, reduce investor confidence, and adversely impact our stock price.
For example, the concentration of ownership he holds could delay, defer, or prevent a change of control of our Company or impede a merger, takeover or other business combination that may otherwise be favorable for us. Accordingly, Mr.
For example, the concentration of ownership in the trusts could delay, defer, or prevent a change of control of the Company that may otherwise be favorable to the Company and our other shareholders. The votes cast on behalf of the family trusts could also result in our entry into transactions or agreements that our other shareholders do not approve.
Moroun may continue to retain control of us for the foreseeable future and may decide not to enter into a transaction in which shareholders would receive consideration for our common stock that is much higher than the then-current market price of our common stock.
Our controlling shareholders might also refrain from voting in favor of a transaction that would result in our other shareholders receiving consideration for our common stock that is much higher than its then-current market price.
Our owner-operators must comply with the safety and fitness regulations promulgated by the FMCSA, including those relating to drug and alcohol testing and hours-of-service. There also are regulations specifically relating to the trucking industry, including testing and specifications of equipment and product handling requirements.
There also are regulations specifically relating to the trucking industry, including testing and specifications of equipment and product handling requirements. These measures could disrupt or impede the timing of our deliveries and we may fail to meet the needs of our customers.
We cannot assure that we will be able to do so. A significant labor dispute involving us or one or more of our customers, or that could otherwise affect our operations, could reduce our revenues, and harm our profitability.
A significant labor dispute that involves one of our customers or that could otherwise affect our operations could reduce our revenues and harm our profitability. Our largest customers employ a substantial number of workers who are members of industrial trade unions, and their employment is subject to the terms of collective bargaining agreements.
Risks Related to Our Common Stock Under applicable NASDAQ rules, a “Controlled Company” is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. We are controlled by Matthew T. Moroun, Since the Chairman of our Board of Directors, Matthew T.
The NASDAQ rules state that a controlled company is one in which more than 50% of the voting power is held by another person or group of persons acting together.
Removed
We operate in the highly competitive and fragmented transportation and logistics industry, and our business may suffer if we are unable to adequately address factors that may adversely affect our revenue and costs relative to our competitors. Numerous competitive factors could impair our ability to maintain our current profitability.
Added
You should carefully consider the following factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our Consolidated Financial Statements and related Notes in Item 8.
Removed
Purchase price increases for new revenue equipment and/or decreases in the value of used revenue equipment could have an adverse effect on our results of operations, cash flows and financial condition.
Added
Numerous competitive factors could impair our ability to maintain our current profitability.
Removed
If our major customers lose U.S. market share, they may have less need for services.
Added
We must continue to develop and retain a core group of managers if we are to realize our goal of expanding our operations and continuing our growth. We cannot assure that we will be able to do so.
Removed
During 2019, a labor strike by the United Auto Workers of its employees at the facilities of our largest customer, General Motors, caused an extended shutdown of General Motors’ manufacturing operations and, in turn, materially and adversely impacted our operating results during the third and fourth quarters of 2019.
Added
In 2023, the United Auto Workers conducted a trilateral strike against Ford, General Motors, and Stellantis. Although the UAW reached agreements with Ford, General Motors, and Stellantis, similar such actions in the future could negatively impact our revenue and profitability.
Removed
Any future labor disputes involving either us or our customers could similarly materially affect our operations. If the UAW and our automotive customers and their suppliers are unable to negotiate new contracts in the future and our customers’ plants experience slowdowns or closures as a result, our revenue and profitability could be negatively impacted.
Added
The terms of our future collective bargaining agreements may also affect our competitive position and results of operations. The conflict in the Middle East, or expansion of the conflict to other areas or countries, or similar conflicts in the region could adversely impact our business and financial results.
Removed
As of December 31, 2022, approximately 39% of our employees in the United States, Canada, and Colombia, and 80% of our employees in Mexico were members of unions and subject to collective bargaining agreements.
Added
We do not have any direct operations in Israel, Egypt, Jordan, Lebanon, Syria, the West Bank or Gaza, but we may be affected by the broader consequences of the conflict in the Middle East.
Removed
These proceedings may be time-consuming, expensive, and disruptive to normal business operations. The defense of such lawsuits could result in significant expense and the diversion of our management’s time and attention from the operation of our business.
Added
Recent jury awards in the trucking industry have reached into the tens and even hundreds of millions of dollars.
Removed
As a result, a decline in our sales would result in a higher percentage decline in our income from operations and net income. Our existing and future indebtedness could limit our flexibility in operating our business or adversely affect our business and our liquidity position.
Added
We have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales. A significant portion of our expenses are fixed costs that neither increase nor decrease proportionately with our sales.
Removed
Disruptions in the credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our results of operations, cash flows and financial condition.
Added
We have invested and continue to invest in technology security initiatives, employee training, information technology risk management and disaster recovery plans. The development and maintenance of these measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly more sophisticated.
Removed
Our business may be harmed by public health crises, terrorist attacks, future war, or anti-terrorism measures.
Added
Moroun, the Chairman of our Board of Directors, is the trustee of certain family trusts that collectively own greater than 50% of our outstanding shares. In this capacity, Mr. Moroun holds investment power over the shares in the family trusts. Frederick P.
Removed
For example, in June 2020, we experienced a previously disclosed ransomware cyber-attack affecting certain of our network systems. During the attack, we experienced limited disruption and rapidly deployed back-up systems or implemented temporary procedures to maintain operations.
Added
Calderone, a member of our Board of Directors, is the special trustee of the family trusts and, in that capacity, he exercises voting authority over the shares in the family trusts. The special trustee serves at the discretion of the trustee of the trusts, and members of the Moroun family are the beneficiaries of the trusts.
Removed
Based on our assessment and on information currently known, we do not believe the attack had or will have a material adverse impact on our business or results of operations. Although our information systems are protected through physical and software security as well as redundant backup systems, they remain susceptible to cyber security risks.
Added
As discussed in Part II, Item 9A “Management’s Report on Internal Control Over Financial Reporting” later in this report, in the fourth quarter of 2023, we identified a material weakness in controls in place to identify potential data-entry errors related to our contracted rates and quantities and their associated invoices and amounts recorded as unbilled revenue.
Removed
The magnitude of these risks cannot be predicted, including the extent to which the conflict may heighten other risks disclosed herein. Ultimately, these or other factors could materially and adversely affect our results of operations.
Added
We are in the process of remediating the material weakness, but our efforts may not be successful.
Removed
Moroun, satisfies this standard, Mr. Moroun controls the Company. The influence of our public shareholders over significant corporate actions is limited, and Mr. Moroun’s interests may conflict with our interests and the interests of other shareholders. Matthew T. Moroun holds greater than 50% of the voting power of the Company. As a result, Mr.
Added
To remediate the material weakness, we plan to modify our policies and procedures for the timely review and approval of those contracted rates that are entered into the system, add a monitoring control that requires a secondary review of all contracted rates entered into the system to ensure they are being reviewed timely and entered accurately, and enhance the controls associated with invoices to ensure they reflect contracted rates.
Removed
Moroun continues to own a significant amount of our equity, even if such amount is less than a majority of the outstanding shares of our common stock, he will be capable of substantially influencing the outcome of votes on all matters requiring approval by the shareholders, including our ability to enter into certain corporate transactions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own our corporate administrative offices, as well as 21 terminal yards and other properties in the following locations: Dearborn, Michigan; Romulus, Michigan; Riverside, California; Jacksonville, Florida; Garden City, Georgia; Harvey, Illinois; Gary, Indiana; Louisville, Kentucky; Albany, Missouri; South Kearny, New Jersey; Cleveland, Ohio; Columbus, Ohio; Reading, Ohio; York County, Pennsylvania; Wall, Pennsylvania; Mount Pleasant, South Carolina; Memphis, Tennessee; Dallas, Texas; Houston, Texas and Clearfield, Utah.
Biggest changeWe own our corporate administrative offices, as well as 23 terminal yards and other properties in the following locations: Dearborn, Michigan; Romulus, Michigan; Compton, California; Riverside, California; Jacksonville, Florida; Garden City, Georgia; Savannah, Georgia; Harvey, Illinois; Gary, Indiana; Louisville, Kentucky; Albany, Missouri; South Kearny, New Jersey; Cleveland, Ohio; Columbus, Ohio; Reading, Ohio; York County, Pennsylvania; Wall, Pennsylvania; Mount Pleasant, South Carolina; Memphis, Tennessee; Dallas, Texas; Houston, Texas; Cloverdale, Virginia; and Clearfield, Utah.
We also deliver value-added services under our contract logistics segment inside or linked to 36 facilities provided by customers. Certain of our leased facilities are leased from entities controlled by our majority shareholders. These facilities are leased on either a month-to-month basis or extended terms.
We also deliver value-added services under our contract logistics segment inside or linked to 38 facilities provided by customers. Certain of our leased facilities are leased from entities controlled by our majority shareholders. These facilities are leased on either a month-to-month basis or extended terms.
As of December 31, 2022, we also leased 87 operating, terminal and yard, and administrative facilities in various U.S. cities located in 23 states, in Windsor, Ontario; and in San Luis Potosí, Mexico. Generally, our facilities are utilized by our operating segments for various administrative, transportation-related or value-added services.
As of December 31, 2023, we also leased 87 operating, terminal and yard, and administrative facilities in various U.S. cities located in 22 states, in Windsor, Ontario; and in Monterrey, Mexico; Saltillo, Mexico; and San Luis Potosí, Mexico. Generally, our facilities are utilized by our operating segments for various administrative, transportation-related or value-added services.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, if we experience claims that are not covered by our insurance or that exceed our estimated claim reserve, it could increase the volatility of our earnings and have a materially adverse effect on our financial condition, results of operations or cash flows. ITEM 4: MINE SAF ETY DISCLOSURES Not applicable. 18 PART II
Biggest changeHowever, if we experience claims that are not covered by our insurance or that exceed our estimated claim reserve, it could increase the volatility of our earnings and have a materially adverse effect on our financial condition, results of operations or cash flows. ITEM 4: MINE SAF ETY DISCLOSURES Not applicable. 19 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed6 unchanged
Biggest changeNo specific expiration date has been assigned to the authorization. 19 Performance Graph The graph below matches Universal Logistics Holdings, Inc.'s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index and the NASDAQ Transportation index.
Biggest changeThere were no purchases of our equity securities by or on behalf of us or any affiliated purchaser within the fourth quarter of 2023. 20 Performance Graph The graph below matches Universal Logistics Holdings, Inc.'s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index and the NASDAQ Transportation index.
In addition, under our current dividend policy, after considering the regular quarterly dividends made during the year, the Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year. The Board of Directors did not declare a special dividend in the first quarter of 2023.
In addition, under our current dividend policy, after considering the regular quarterly dividends made during the year, the Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year. The Board of Directors did not declare a special dividend in the first quarter of 2024.
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED S TOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The NASDAQ Global Market under the symbol ULH. As of March 6, 2023, there were approximately 40 record holders of our common stock, based upon data available to us from our transfer agent.
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED S TOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The NASDAQ Global Market under the symbol ULH. As of March 4, 2024, there were approximately 50 record holders of our common stock, based upon data available to us from our transfer agent.
On July 29, 2021, the Company announced that it had been authorized to purchase up to 1,000,000 shares of its common stock from time to time in the open market. As of December 31, 2022, 513,251 shares remain available under this authorization.
Purchases of Equity Securities by the Issuer On July 29, 2021, the Company announced that it had been authorized to purchase up to 1,000,000 shares of its common stock from time to time in the open market. As of December 31, 2023, 513,251 shares remain available under this authorization. No specific expiration date has been assigned to the authorization.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2017 to December 31, 2022. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Universal Logistics Holdings, Inc. 100.00 77.30 83.45 91.68 85.60 154.05 NASDAQ Composite 100.00 97.16 132.81 192.47 235.15 158.65 NASDAQ Transportation 100.00 84.30 103.87 110.40 125.06 101.32 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 20 ITEM 6: R ESERVED
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Universal Logistics Holdings, Inc. 100.00 107.96 118.61 110.74 199.29 169.50 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 NASDAQ Transportation 100.00 123.21 130.96 148.36 120.19 161.24 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 21 ITEM 6: R ESERVED
Removed
Purchases of Equity Securities by the Issuer The following table provides information regarding the Company’s purchases of its common stock during the period from October 2, 2022 to December 31, 2022, the Company’s fourth fiscal quarter: Fiscal Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares that May Yet be Purchased Under the Plans or Program Oct. 2, 2022 - Oct. 29, 2022 — $ — — 513,251 Oct. 30, 2022 - Nov. 26, 2022 471 (1) 33.65 — 513,251 Nov. 27, 2022 - Dec. 31, 2022 — — — 513,251 Total 471 $ 33.65 — 513,251 (1) Consists of 471 shares of common stock acquired on November 4, 2022 by the Company from an employee for $15,850 upon exercising its right of first refusal pursuant to a restricted stock bonus award agreement.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

79 edited+29 added−54 removed61 unchanged
Biggest changeThe following table sets forth operating revenues resulting from each of these service categories for the years ended December 31, 2022, 2021 and 2020, presented as a percentage of total operating revenues: Years ended December 31, 2022 2021 2020 Operating revenues: Truckload services 11.4 % 14.2 % 14.5 % Brokerage services 18.3 22.9 24.2 Intermodal services 29.4 27.0 28.3 Dedicated services 16.1 11.7 9.2 Value-added services 24.8 24.2 23.8 Total operating revenues 100.0 % 100.0 % 100.0 % Results of Operations The following table sets forth items derived from our Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020, presented as a percentage of operating revenues: Years ended December 31, 2022 2021 2020 Operating revenues 100.0 % 100.0 % 100.0 % Operating expenses: Purchased transportation and equipment rent 42.0 47.1 48.5 Direct personnel and related benefits 25.9 26.1 24.3 Operating supplies and expenses 8.8 8.5 8.0 Commission expense 2.0 1.9 1.9 Occupancy expense 2.0 2.1 2.5 General and administrative 2.3 2.3 2.4 Insurance and claims 1.1 2.2 1.4 Depreciation and amortization 3.8 3.9 5.3 Total operating expenses 88.1 94.1 94.2 Income from operations 11.9 5.9 5.8 Interest and other non-operating income (expense), net (0.7 ) (0.3 ) (1.2 ) Income before for income taxes 11.2 5.6 4.6 Income tax (benefit) expense 2.8 1.4 1.1 Net income 8.4 % 4.2 % 3.5 % 24 2022 Compared to 2021 Operating revenues .
Biggest changeThe following table sets forth operating revenues resulting from each of these service categories for the years ended December 31, 2023, 2022 and 2021, presented as a percentage of total operating revenues: Years ended December 31, 2023 2022 2021 Operating revenues: Truckload services 12.9 % 11.4 % 14.2 % Brokerage services 14.7 18.3 22.9 Intermodal services 22.5 29.4 27.0 Dedicated services 20.7 16.1 11.7 Value-added services 29.2 24.8 24.2 Total operating revenues 100.0 % 100.0 % 100.0 % Results of Operations 2023 Compared to 2022 The following table sets forth items derived from our Consolidated Statements of Income for the years ended December 31, 2023 and 2022: 2023 2022 Percent Change in Dollar Amount (Dollars in millions) $ % $ % % Operating revenues $ 1,662,139 100.0 % $ 2,015,456 100.0 % (17.5 )% Operating expenses: Purchased transportation and equipment rent 571,213 34.4 847,414 42.0 (32.6 ) Direct personnel and related benefits 542,779 32.7 520,263 25.8 4.3 Operating supplies and expenses 170,994 10.3 177,440 8.8 (3.6 ) Commission expense 31,370 1.9 40,288 2.0 (22.1 ) Occupancy expense 44,301 2.7 41,286 2.0 7.3 General and administrative 51,839 3.1 48,924 2.4 6.0 Insurance and claims 27,163 1.6 22,749 1.1 19.4 Depreciation and amortization 77,036 4.6 76,657 3.8 0.5 Total operating expenses 1,516,695 91.2 1,775,021 88.1 (14.6 ) Income from operations 145,444 8.8 240,435 11.9 (39.5 ) Interest (expense), net (22,753 ) (1.4 ) (16,156 ) (0.8 ) 40.8 Other non-operating income 1,608 0.1 1,143 0.1 40.7 Income before income taxes 124,299 7.5 225,422 11.2 (44.9 ) Income tax expense 31,398 1.9 56,790 2.8 (44.7 ) Net income $ 92,901 5.6 % $ 168,632 8.4 % (44.9 )% Operating revenues .
The amount of the purchased transportation we pay to our owner-operators is primarily based on a contractually agreed-upon rates for each load hauled, net of any rental income we receive by leasing our trailers to owner-operators. The expense also includes the amount of fuel surcharges, where separately identifiable, that we receive from our customers and pass through to our owner-operators.
The amount of the purchased transportation we pay to our owner-operators is primarily based on contractually agreed-upon rates for each load hauled, net of any rental income we receive by leasing our trailers to owner-operators. The expense also includes the amount of fuel surcharges, where separately identifiable, that we receive from our customers and pass through to our owner-operators.
These expenses are generally not directly related to levels of operating activity and may contain other expenses related to general business operations. We recognize general and administrative expense when it is incurred. 23 Insurance and claims. Insurance and claims expense represents our insurance premiums and the accruals we make for claims within our self-insured retention amounts.
These expenses are generally not directly related to levels of operating activity and may contain other expenses related to general business operations. We recognize general and administrative expense when it is incurred. Insurance and claims. Insurance and claims expense represents our insurance premiums and the accruals we make for claims within our self-insured retention amounts.
Additionally, a prolonged period of inflationary pressures could cause interest rates, equipment, maintenance, labor and other operating costs to continue to increase. If the Company is unable to offset rising costs through corresponding customer rate increases, such increases could adversely affect our results of operations.
A prolonged period of inflationary pressures could cause interest rates, equipment, maintenance, labor and other operating costs to continue to increase. If the Company is unable to offset rising costs through corresponding customer rate increases, such increases could adversely affect our results of operations.
Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request. At December 31, 2022, we were in compliance with all its covenants, and $10.0 million was available for borrowing. A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment (the “Equipment Financing”).
Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request. At December 31, 2023, we were in compliance with all its covenants, and $10.0 million was available for borrowing. A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment (the “Equipment Financing”).
For additional information on revenue recognition, see Item 8, Note 3 to the Consolidated Financial Statements. 22 Factors Affecting Our Expenses Purchased transportation and equipment rent .
For additional information on revenue recognition, see Item 8, Note 3 to the Consolidated Financial Statements. Factors Affecting Our Expenses Purchased transportation and equipment rent .
The Real Estate Facility includes customary affirmative and negative covenants, and principal and interest is payable on the facility on a monthly basis, based on an annual amortization of 10%. The facility bears interest at Term SOFR, plus an applicable margin equal to 2.12%. At December 31, 2022, we were in compliance with all covenants under the facility.
The Real Estate Facility includes customary affirmative and negative covenants, and principal and interest is payable on the facility on a monthly basis, based on an annual amortization of 10%. The facility bears interest at Term SOFR, plus an applicable margin equal to 2.12%. At December 31, 2023, we were in compliance with all covenants under the facility.
Recently Issued Accounting Pronouncements Not Currently Effective See Item 8: Note 2 to the Consolidated Financial Statements for discussion of new accounting pronouncements. 32
Recently Issued Accounting Pronouncements Not Currently Effective See Item 8: Note 2 to the Consolidated Financial Statements for discussion of new accounting pronouncements.
During each of the third quarters of 2022 and 2021, we completed our goodwill impairment testing by performing a quantitative assessment using the income approach for each of our reporting units with goodwill. The determination of the fair value of the reporting units requires us to make estimates and assumptions related to future revenue, operating income and discount rates.
During each of the third quarters of 2023 and 2022, we completed our goodwill impairment testing by performing a quantitative assessment using the income approach for each of our reporting units with goodwill. The determination of the fair value of the reporting units requires us to make estimates and assumptions related to future revenue, operating income and discount rates.
Based on our 2022 reserve for claims incurred but not reported, a 10% increase in claims incurred but not reported, would increase our insurance and claims expense by approximately $0.5 million. 31 Valuation of Long-Lived Assets, including Goodwill and Intangible Assets At both December 31, 2022 and 2021, our goodwill balance was $170.7 million.
Based on our 2023 reserve for claims incurred but not reported, a 10% increase in claims incurred but not reported would increase our insurance and claims expense by approximately $0.5 million. Valuation of Long-Lived Assets, including Goodwill and Intangible Assets At both December 31, 2023 and 2022, our goodwill balance was $170.7 million.
Our truckload, brokerage and intermodal services associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services to specific customers on a contractual basis, generally pursuant to contract terms of one year or longer.
Our truckload, brokerage and intermodal services are associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services are provided to specific customers on a contractual basis, generally pursuant to contract terms of one year or longer.
During the year ended December 31, 2022, we paid a total of $0.42 per common share, or $11.1 million. Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.
During the year ended December 31, 2023, we paid a total of $0.42 per common share, or $11.0 million. Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.
Thirty-six of our value-added service operations are located inside customer plants or distribution operations; the other facilities are generally located close to our customers’ plants to optimize the efficiency of their component supply chains and production processes.
Thirty-eight of our value-added service operations are located inside customer plants or distribution operations; the other facilities are generally located close to our customers’ plants to optimize the efficiency of their component supply chains and production processes.
After considering the regular quarterly dividends made during the year, the Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year. The Board of Directors did not declare a special dividend in the first quarter of 2023.
After considering the regular quarterly dividends made during the year, the Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year. The Board of Directors did not declare a special dividend in the first quarter of 2024.
We operate, manage or provide services at 114 logistics locations in the United States, Mexico, Canada and Colombia and through our network of agents and owner-operators located throughout the United States and in Ontario, Canada.
We operate, manage or provide services at 121 logistics locations in the United States, Mexico, Canada and Colombia and through our network of agents and owner-operators located throughout the United States and in Ontario, Canada.
We estimate the salvage value and useful lives of depreciable assets based on current market conditions and experience with past dispositions. Operating Revenues We broadly group our services into the following categories: truckload services, brokerage services, intermodal services, dedicated services and value-added services.
We estimate the salvage value and useful lives of depreciable assets based on current market conditions and experience with past dispositions. 24 Operating Revenues For financial reporting, we broadly group our services into the following categories: truckload services, brokerage services, intermodal services, dedicated services and value-added services.
As a result, purchased transportation and equipment rent is the largest component of our costs and increases or decreases proportionately with changes in the amount of revenue generated by our owner-operators and other third party providers and with the production volumes of our customers. We recognize purchased transportation and equipment rent as the services are provided.
As a result, purchased transportation and equipment rent is the largest component of our costs and increases or decreases proportionately with changes in the amount of revenue generated by our owner-operators and other third party providers and with the production volumes of our customers.
Off-Balance Sheet Arrangements None. 30 Legal Matters We are subject to various legal proceedings and other contingencies, the outcomes of which are subject to significant uncertainty. We accrue for estimated losses if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.
Legal Matters We are subject to various legal proceedings and other contingencies, the outcomes of which are subject to significant uncertainty. We accrue estimated losses if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Universal Logistics Holdings, Inc. is a holding company that owns subsidiaries engaged in providing a variety of customized transportation and logistics solutions throughout the United States, and in Mexico, Canada and Colombia.
ITEM 7:MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Universal Logistics Holdings, Inc. is a holding company whose subsidiaries provide a variety of customized transportation and logistics solutions throughout the United States and in Mexico, Canada and Colombia.
Critical Accounting Policies Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, operating revenues and operating expenses.
See Item 8, Note 15 to the Consolidated Financial Statements. 31 Critical Accounting Policies Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, operating revenues and operating expenses.
Accordingly, if the outcome of legal proceedings is different than is anticipated by us, we would have to record the matter at the actual amount at which it was resolved, in the period resolved, impacting our results of operations and financial position for the period. See Item 8, Note 15 to the Consolidated Financial Statements.
Accordingly, if the outcome of legal proceedings is different than is anticipated by us, we would have to record the matter at the actual amount at which it was resolved, in the period resolved, impacting our results of operations and financial position for the period.
We did not have any amounts advanced against the line as of December 31, 2022, and the maximum available borrowings were $5.1 million. Discussion of Cash Flows At December 31, 2022, we had cash and cash equivalents of $47.2 million compared to $13.9 million at December 31, 2021.
We did not have any amounts advanced against the line as of December 31, 2023, and the maximum available borrowings were $5.3 million. Discussion of Cash Flows At December 31, 2023, we had cash and cash equivalents of $12.5 million compared to $47.2 million at December 31, 2022.
Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $74.1 million.
Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $2.4 million.
Other non-operating income for 2022 includes a $1.0 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income. Other non-operating income for 2021 includes a $5.7 million pre-tax gain from a favorable legal settlement and a $1.5 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income.
Other non-operating income for 2021 includes a $5.7 million pre-tax gain from a favorable legal settlement and a $1.5 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income. Income tax expense . Our effective tax rate was 25.2% in both 2022 and 2021.
As of December 31, 2022, we employed 8,646 people in the United States, Mexico, Canada, and Colombia, including 3,588 employees subject to collective bargaining agreements. We also engaged contract staffing vendors to supply an average of 1,326 additional personnel on a full-time-equivalent basis.
As of December 31, 2023, we employed 9,311 people in the United States, Mexico, Canada, and Colombia, including 3,038 employees subject to collective bargaining agreements. We also engaged contract staffing vendors to supply an average of 450 additional personnel on a full-time-equivalent basis.
As of December 31, 2022 and 2021, we had accruals of $14.3 million and $23.0 million, respectively, for estimated claims net of insurance receivables.
As of December 31, 2023 and 2022, we had accruals of $11.2 million and $14.3 million, respectively, for estimated claims net of insurance receivables.
There can be no assurance that we will identify any opportunities that fit our strategic plans or will be able to execute any such opportunities on terms acceptable to us.
We also continually evaluate business development opportunities, including potential acquisitions that fit our strategic plans. There can be no assurance that we will identify any opportunities that fit our strategic plans or will be able to execute any such opportunities on terms acceptable to us.
We offer our customers a wide range of transportation services by utilizing a diverse fleet of tractors and trailing equipment provided by us, our owner-operators and third-party transportation companies. Our owner-operators provided us with 2,207 tractors and 1,043 trailers. We own 2,091 tractors, 4,139 trailers, 3,372 chassis and 129 containers.
We offer our customers a wide range of transportation services by utilizing a diverse fleet of tractors and trailing equipment provided by us, our owner-operators and third-party transportation companies. Our owner-operators provided us with 1,766 tractors and 950 trailers. We own 2,284 tractors, 4,434 trailers, 3,494 chassis and 108 containers.
The $213.4 million in net cash provided by operations was primarily attributed to $168.6 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, amortization and write-off of debt issuance costs, gains on marketable equity securities and equipment sales, stock-based compensation, provisions for doubtful accounts and a change in deferred income taxes totaling $118.9 million, net.
The $210.2 million in net cash provided by operations was primarily attributed to $92.9 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, amortization of debt issuance costs, gains on marketable equity securities and equipment sales, stock-based compensation, provisions for credit losses and a change in deferred income taxes totaling $119.7 million, net.
We expect to make these capital expenditures for the acquisition of transportation equipment, to support our new and existing value-added service operations, and for improvements to our existing terminal yard and container facilities.
In 2024, we expect our capital expenditures to be in the range of $480 million to $500 million. We expect to make these capital expenditures for the acquisition of transportation equipment, to support new and existing value-added service operations, to expand our owned terminal network, and for improvements to our existing terminal yard and container facilities.
At December 31, 2022, we were in compliance with all its covenants, and $400.0 million was available for borrowing. 29 Our UACL Credit and Security Agreement (the “UACL Credit Agreement”) provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027.
Our UACL Credit and Security Agreement (the “UACL Credit Agreement”) provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027.
A significant portion of the tractors and trailers used in our business are provided by our owner-operators. In addition, our use of agents reduces our overall need for large terminals.
We also utilize owner-operators and third-party carriers to provide a significant portion of our transportation and specialized services. A significant portion of the tractors and trailers used in our business are provided by our owner-operators. In addition, our use of agents reduces our overall need for large terminals.
See Item 8, Note 8 to the Consolidated Financial Statements for additional information regarding our debt obligations. We also have contractual obligations for operating leases commitments and purchase commitments related to agreements to purchase equipment. See Item 8, Note 12 and Note 15, respectively, to the Consolidated Financial Statements for additional information regarding lease obligations and purchase commitments.
We also have contractual obligations for operating leases commitments and purchase commitments related to agreements to purchase equipment, construct terminal and warehouse projects, and purchase strategic real estate. See Item 8, Note 12 and Note 15, respectively, to the Consolidated Financial Statements for additional information regarding lease obligations and purchase commitments. Off-Balance Sheet Arrangements None.
As a result, our capital expenditure requirements are limited in comparison to most large transportation and logistics service providers, which maintain significant properties and sizable fleets of owned tractors and trailers. In 2022, our capital expenditures totaled $117.1 million. These expenditures primarily consisted of transportation equipment and investments in support of our value-added service operations.
As a result, our capital expenditure requirements are limited in comparison to most large transportation and logistics service providers, which maintain significant properties and sizable fleets of owned tractors and trailers. 29 In 2023, our capital expenditures totaled $240.6 million.
The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, an increase in trade accounts receivable, and decreases in trade accounts payable, accruals for insurance and claims, and in accrued expenses and other current liabilities.
The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, increases in prepaid expenses and other assets, and decreases in trade accounts payable, accruals for insurance and claims, income taxes payable and other long-term liabilities. These were partially offset by decreases in trade and other accounts receivable, and other assets.
The increase in net interest expense reflects an increase in interest rates on our outstanding borrowings. As of December 31, 2022, our outstanding borrowings totaled $382.9 million compared to $428.4 million at the same time last year. Other non-operating income (expense) . Other non-operating income was $1.1 million for 2022 compared to $7.2 million in the prior year.
The increase in net interest expense reflects an increase in our outstanding borrowings as well as an increase in interest rates on our outstanding borrowings. As of December 31, 2023, our outstanding borrowings were $386.4 million compared to $382.9 million at December 31, 2022. Other non-operating income (expense) .
We evaluate the carrying value of long-lived assets, other than goodwill, for impairment by analyzing the operating performance and anticipated future cash flows for those assets, whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.
There were no triggering events identified from the date of our assessment through December 31, 2023 that would require an update to our annual impairment test. 32 We evaluate the carrying value of long-lived assets, other than goodwill, for impairment by analyzing the operating performance and anticipated future cash flows for those assets, whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.
Our flexible business model depends largely on the customized solutions we implement for specific customers. As a result, our capital expenditures will also depend on specific new contracts and the overall age and condition of our owned transportation equipment.
As a result, our capital expenditures will depend on specific new contracts and the overall age and condition of our owned transportation equipment.
Trends in these expenses are generally correlated with changes in operating facilities and headcount requirements and, therefore, increase and decrease with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation.
Trends in direct personnel and benefit costs are generally correlated with changes in operating facilities and headcount requirements and, therefore, fluctuate correspondingly with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations.
During 2022, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $9.7 million during the period. Interest expense, net . Net interest expense was $16.2 million for 2022 compared to $11.6 million for 2021.
The increase in depreciation and amortization expense resulted from a $2.1 million increase in depreciation expense and was partially offset by a $1.7 million decrease in amortization expense. During 2022, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $9.7 million in 2022. Interest expense, net .
We intend to continue our organic growth by recruiting new agents and owner-operators, expanding into new industry verticals and targeting further penetration of our key customers.
We believe that our flexible business model also offers us substantial opportunities to grow through a mixture of organic growth and acquisitions. We intend to continue our organic growth by recruiting new agents and owner-operators, expanding into new industry verticals and targeting further penetration of our key customers.
In the trucking segment, operating revenues decreased $10.7 million to $392.6 million in 2022 compared to $403.3 million in the prior year period. Included in trucking segment revenues for 2022 were $34.7 million in separately identified fuel surcharges compared to $24.4 million during 2021.
Trucking segment revenues included $168.3 million of brokerage services compared to $159.0 million during the same period in the prior year. Also included in our trucking segment revenues were $34.7 million in separately identified fuel surcharges during 2022 compared to $24.4 million in fuel surcharges in 2021.
While generalizations about the impact of personnel and related benefits costs as a percentage of total revenue are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services. Operating supplies and expenses .
The increase was due to the launch of new business wins and robust volumes experienced at our contract logistics operations during 2023. While generalizations about the impact of personnel and related benefits costs are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.
While generalizations about the impact of personnel and related benefits costs as a percentage of total revenue are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services. Operating supplies and expenses .
The increase was due to the launch of new business wins and robust volumes experienced at our contract logistics operations during 2022. While generalizations about the impact of personnel and related benefits costs are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.
Operating activities provided $213.4 million in net cash, and we used $103.7 million in investing activities and $78.2 million in financing activities.
Operating activities provided $210.2 million in net cash, and we used $236.8 million in investing activities and $8.6 million in financing activities.
Due to shortages, production backlogs, and limited availability of transportation equipment, our expenditures are projected to be somewhat higher than the customary range of 4% to 5% of our operating revenues. In 2023, exclusive of acquisitions of businesses or strategic real estate, we expect our capital expenditures to be in the range of 7% to 8% of operating revenues.
Due to shortages, production backlogs, and limited availability of transportation equipment in recent years, as well as the acquisition of strategic real estate and customer specific programs, our expenditures are somewhat higher than the customary range of 4% to 5% of our operating revenues.
The notes issued in connection with the Equipment Financing, which are secured by liens on specific titled vehicles, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 7.27%.
The notes issued in connection with the Equipment Financing, which are secured by liens on specific titled vehicles, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 7.27%. 30 Certain wholly owned subsidiaries entered into a $165.4 million term loan facility to repay outstanding balances under a then-existing term loan and certain other real estate notes (the “Real Estate Facility”).
In general, our facilities used in our value-added services are leased on terms that are either substantially matched to our customer’s contracts, are month-to-month or are provided to us by our customers. We also utilize owner-operators and third-party carriers to provide a significant portion of our transportation and specialized services.
We employ a flexible operating strategy which we believe lowers our capital expenditure requirements. In general, our facilities used in our value-added services are leased on terms that are either substantially matched to our customer’s contracts, are month-to-month or are provided to us by our customers.
Direct personnel and related benefits. Direct personnel and related benefits include the salaries, wages and fringe benefits of our employees, as well as costs related to contract labor utilized in selling and operating activities. These costs are a significant component of our cost structure and increase or decrease proportionately with the expansion, addition or closing of operating facilities.
These costs are a significant component of our cost structure and increase or decrease proportionately with the expansion, addition or closing of operating facilities. As of December 31, 2023, approximately 33% of our employees were subject to collective bargaining agreements. Any changes in union agreements will affect our personnel and related benefits cost.
Our 2022 insurance and claims also included a $3.0 million credit resulting from the favorable settlement of certain auto liability claims during the period. Depreciation and amortization . Depreciation and amortization expense for 2022 increased by $9.1 million, or 13.5%, to $76.7 million from $67.5 million for 2021. Depreciation expense increased $8.6 million and amortization expense increased $0.5 million.
This was partially offset by a decrease in cargo claims. 2022 also included a $3.0 million credit to insurance and claims expense resulting from the favorable settlement of certain auto liability claims. Depreciation and amortization .
These benefits are passed on to our customers in the form of cost savings and increased operating efficiency, while enhancing our cash generation and the returns on our invested capital and assets. We believe that our flexible business model also offers us substantial opportunities to grow through a mixture of organic growth and acquisitions.
Our use of agents and owner-operators allows us to maintain both a highly flexible cost structure and a scalable business operation, while reducing investment requirements. These benefits are passed on to our customers in the form of cost savings and increased operating efficiency, while enhancing our cash generation and the returns on our invested capital and assets.
Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request.
Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request. At December 31, 2023, we were in compliance with all its covenants, and $378.1 million was available for borrowing.
Trends in these expenses are generally correlated with changes in operating facilities and headcount requirements and, therefore, increase and decrease with the level of demand for our value-added services and staffing needs of our operations.
Trends in direct personnel and benefit costs are generally correlated with changes in operating facilities and headcount requirements and, therefore, fluctuate correspondingly with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations.
Other non-operating income in 2021 also includes a $1.5 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income compared to a pre-tax holding loss of $1.6 million in 2020. Income tax expense .
As of December 31, 2022, our outstanding borrowings totaled $382.9 million compared to $428.4 million at the same time in 2021. Other non-operating income . Other non-operating income for 2022 includes a $1.0 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income.
During 2022, the average operating revenue per load increased 2.6% to $1,893 from $1,845 in 2021; however, load volumes fell 25.8% to 90,432 from 121,944. As a percentage of revenue, operating margin for the company-managed brokerage segment was 5.0% for 2022 compared to 2.9% last year. Purchased transportation and equipment rent .
Operating revenues in the company-managed brokerage segment decreased 17.4% primarily due to a decrease in the number of loads moved. On a year-over-year basis, load volumes in the company-managed brokerage segment decreased 25.8% while average operating revenue per load increased 2.6%. As a percentage of revenue, operating margin for 2022 was 5.0% compared to 2.9% for 2021.
The increase in income taxes in 2021 is the result of an increase in taxable income and our effective tax rate for 2021 compared to 2020. 28 Liquidity and Capital Resources Our primary sources of liquidity are funds generated by operations, loans and extensions of credit under our credit facilities, on margin against our marketable securities and from installment notes, and proceeds from the sales of marketable securities.
Liquidity and Capital Resources Our primary sources of liquidity are funds generated by operations, loans and extensions of credit under our credit facilities, on margin against our marketable securities and from installment notes, and proceeds from the sales of marketable securities. We use secured asset lending to fund a substantial portion of purchases of tractors, trailers and material handling equipment.
As a percentage of revenue, operating margin in the trucking segment for 2022 was 7.0%, compared to 4.9% during the same period last year. In the company-managed brokerage segment, operating revenues decreased $42.3 million, or 17.4%, to $200.5 million in 2022 compared to $242.8 million in 2021.
As a percentage of revenue, operating margin in the trucking segment for 2023 was 5.2% compared to 7.0% last year. Operating revenues in the company-managed brokerage segment decreased 40.3% primarily due to decreases in the average operating revenue per load and in the number of loads moved.
As equipment manufacturers identify and implement solutions enabling them to overcome supply-side constraints, we would expect to return to a normalized level of capital expenditures in future periods. We have a cash dividend policy that anticipates a regular dividend of $0.42 per share of common stock, payable in quarterly increments of $0.105 per share of common stock.
We have a cash dividend policy that anticipates a regular dividend of $0.42 per share of common stock, payable in quarterly increments of $0.105 per share of common stock.
The increase in net cash resulted from an increase in accounts payable to affiliates of $2.8 million, partially offset by an increase in accounts receivable from affiliates of $0.2 million. The $103.7 million in net cash used in investing activities consisted of $117.1 million in capital expenditures and $0.9 million in marketable securities purchases.
Affiliate transactions increased net cash provided by operating activities by $0.4 million. The increase in net cash resulted from an increase in accounts payable to affiliates of $0.1 million and a decrease in accounts receivable from affiliates of $0.2 million.
During 2022, Universal moved 552,398 intermodal loads compared to 665,088 in 2021, a decrease of 16.9%, while its average operating revenue per load, excluding fuel surcharges increased 34.5% to $702 from $522. Intermodal segment revenues also include accessorial charges such as detention, demurrage and storage which totaled $123.6 million in 2022, compared to $84.9 million one year earlier.
Included in intermodal segment revenues for 2022 were $92.3 million in separately identified fuel surcharges, compared to $51.2 million in 2021. Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $123.6 million during 2022 compared to $84.9 million one year earlier.
As a percentage of operating revenues, insurance and claims decreased to 1.1% for 2022 compared to 2.2% for 2021. The decrease was attributable to decreases in auto liability insurance premiums and claims expense and in cargo and service failure claims.
The decrease in insurance and claims was attributable to decreases in auto liability insurance premiums and claims expense and in cargo and service failure claims. Our 2022 insurance and claims included a $3.0 million credit resulting from the favorable settlement of certain auto liability claims during the period.
The increases or decreases are generally correlated with changes in demand for transportation-related services, which includes truckload, brokerage, intermodal and to a lesser extent, dedicated services, which uses a higher mix of company-drivers compared to owner-operators. The absolute increase in purchased transportation and equipment rental costs was primarily the result of an overall increase in transportation-related services.
These fluctuations are generally correlated with changes in demand for transactional transportation-related services. The absolute increase in purchased transportation and equipment rental costs was primarily the result of an overall increase in transactional transportation-related services. In 2022, transactional transportation-related service revenues increased 14.2% compared to 2021. Direct personnel and related benefits .
We had outstanding borrowings totaling $382.9 million at December 31, 2022 compared to $428.4 million at December 31, 2021. During the year also we made net repayments on our revolving lines of credit totaling $163.3 million and term loan, and equipment and real estate note payments totaling $221.9 million.
During the period, we made payments on term loan and equipment and real estate notes totaling $74.6 million, borrowed $56.2 million for new equipment and had net borrowings on our revolving lines of credit totaling $21.9 million.
Purchased transportation and equipment rental costs for 2022 increased $22.6 million, or 2.7%, to $847.4 million from $824.8 million last year. Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers.
Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $123.6 million during 2022 compared to $84.9 million one year earlier. Purchased transportation and equipment rent . Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers.
Operating supplies and expenses increased by $28.0 million, or 18.8%, to $177.4 million for 2022 compared to $149.4 million for 2021. These expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand.
Operating supplies and expenses . Operating supplies and expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand. The main element driving the change was a decrease in other operating expenses including professional fees and bad debt expense.
The increase was attributable to a $4.1 million increase in salaries, wages, and benefits and a $2.5 million increase in professional fees. As a percentage of operating revenues, general and administrative expense was 2.3% in 2021 compared to 2.4% for 2020. Insurance and claims .
The increase in general and administrative expense was primarily due to an increase in salaries and wages as well as professional fees. Insurance and claims .
In 2022, Universal managed 63 value-added programs, unchanged from the prior year period. During 2022, dedicated transportation load count increased 4.2% to 619,673 from 594,798 in 2021. Also included in dedicated transportation revenue for 2022 were $41.7 million in separately identified fuel surcharges, compared to $21.2 million in the same period last year.
At the end of 2023, we managed 71 value-added programs compared to 63 at the end of 2022. Included in our contract logistics segment revenues for 2023 were $36.3 million in separately identified fuel surcharges from dedicated transportation services, compared to $41.7 million last year.
Operating supplies and expenses increased by $38.3 million, or 34.5%, to $149.4 million for 2021 compared to $111.1 million for 2020. These expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand.
Operating supplies and expenses . Operating supplies and expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand. The main elements driving the change were increases in fuel expense on company tractors, vehicle and other maintenance, and bad debt expense.
We also borrowed $339.6 million during the period to repay outstanding balances under a then-existing term loan and certain other real estate notes, and for new equipment. Contractual Obligations As of December 31, 2022, we had contractual obligations related to our long-term debt of $316.8 million and $59.4 million for principal borrowings and interest, respectively, which become due through 2032.
Contractual Obligations As of December 31, 2023, we had contractual obligations related to our long-term debt of $314.8 million and $58.2 million for principal borrowings and interest, respectively, which become due through 2032. See Item 8, Note 8 to the Consolidated Financial Statements for additional information regarding our debt obligations.
Income from operations in the intermodal segment increased $53.3 million to $83.6 million for the 2022 compared to $30.4 million in 2021. Intermodal segment results included litigation related charges totaling $5.8 million in 2021. As a percentage of revenue, operating margin in the intermodal segment for 2022 was 14.1%, compared to 6.4% during the same period last year.
Included in our contract logistics segment revenues for 2022 were $41.7 million in separately identified fuel surcharges from dedicated transportation services, compared to $21.2 million in 2021. Income from operations increased $73.6 million and operating margin, as a percentage of revenue was 14.4% for 2022, compared to 7.1% in 2021.
Average operating revenue per load, excluding fuel surcharges, also increased 11.3% to $1,356 from $1,218 in the prior year period. 2021 trucking segment results also included a $6.0 million charge for auto liability claims expected to settle in excess of policy limits.
Trucking segment results also included $6.0 million in previously disclosed pre-tax charges in 2021. On a year-over-year basis, the average operating revenue per load, excluding fuel surcharges, increased 33.3% while load volumes declined 30.7%. As a percentage of revenue, operating margin in the trucking segment for 2022 was 7.0% compared to 4.9% for 2021.
Contract logistics segment results for 2021 included $18.9 million of losses incurred in connection with a previously announced program launch. As a percentage of revenue, operating margin in the contract logistics segment for 2022 was 14.4% compared to 7.1% during the same period last year.
As a percentage of revenue, operating margin for 2023 was (1.9)% compared to 5.0% during the same period last year. 2022 Compared to 2021 In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 31.4% due to robust volumes. At the end of 2022, Universal managed 63 value-added programs, unchanged from the prior year period.
In the company-managed brokerage segment, operating revenues increased $24.7 million, or 11.3%, to $242.8 million in 2021 compared to $218.1 million in 2020. Company-managed brokerage load volumes decreased 16.3% to 121,944 in 2021 from 145,655 during the same period last year. However, average operating revenue per load, excluding fuel surcharges, increased 31.5% to $1,845 in 2021 from $1,403 in 2020.
In the trucking segment, operating revenues decreased 15.1% primarily due to decreases in the average revenue per load, excluding fuel surcharges and in the number of loads hauled. Trucking segment revenues included $124.3 million of brokerage services compared to $168.3 million during the same period last year.
Occupancy expenses increased by $2.7 million, or 7.8%, to $37.3 million for 2021. This compares to $34.6 million in 2020. The increase was primarily attributable to an increase in building rents and property taxes. General and administrative . General and administrative expense for 2021 increased by $6.4 million to $39.6 million from $33.3 million in 2020.
The increase in occupancy expense was attributable to an increase in building rents and property taxes. General and administrative . The increase in general and administrative expense was primarily attributable to an increase in salaries, wages, and benefits. 27 Insurance and claims .
The absolute increase in purchased transportation and equipment rental costs was primarily the result of an increase in transportation-related service revenues. In 2021, transportation-related service revenues increased 25.4% over the same period last year. As a percentage of operating revenues, purchased transportation and equipment rent expense decreased to 47.1% compared to 48.5% during the same period last year.
These fluctuations are generally correlated with changes in demand for transactional transportation-related services. The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services. In 2023, transactional transportation-related service revenues decreased 30.1% compared to the prior year. 25 Direct personnel and related benefits .
These uses were partially offset by $14.3 million in proceeds from the sale of equipment. We used $78.2 million in financing activities. During the year we paid cash dividends of $13.9 million, $14.3 million for purchases of common stock and $4.4 million in capitalized financing costs.
During the year, we paid cash dividends of $11.0 million, $0.9 million in capitalized financing costs and $0.1 million for purchases of common stock. We had outstanding borrowings totaling $386.4 million at December 31, 2023 compared to $382.9 million at December 31, 2022.
Based on the results of this test, no impairment loss was recognized. There were no triggering events identified from the date of our assessment through December 31, 2022 that would require an update to our annual impairment test.
Based on the results of this test, no impairment loss was recognized.
Our company-managed brokerage segment provides for the pick-up and delivery of individual freight shipments using broker carriers, coordinated by our company-managed operations. 21 Impact of COVID-19 and Current Economic Conditions The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its severity, government regulations imposed in response to the pandemic, and to its general effect on the economy and transportation demand.
Our company-managed brokerage segment provides for the pick-up and delivery of individual freight shipments using broker carriers, coordinated by our company-managed operations. 22 Current Economic Conditions As a leading provider of customized freight transportation and logistics solutions, our business can be impacted to varying degrees by factors beyond our control.
Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers and is generally correlated with changes in demand for transportation-related services, which includes truckload, brokerage, intermodal and to a lesser extent, dedicated services, which uses a higher mix of company-drivers compared to owner-operators.
Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $58.1 million during 2023 compared to $123.6 million one year earlier. Purchased transportation and equipment rent . Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers.
Removed
Our use of agents, owner-operators, third-party providers and contract staffing vendors allows us to maintain both a highly flexible cost structure and a scalable business operation, while reducing investment requirements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+1 added−0 removed13 unchanged
Biggest changeThe recorded value of marketable equity securities increased to $10.0 million at December 31, 2022 from $8.0 million at December 31, 2021. The increase resulted from an increase in the market value of the portfolio of approximately $1.1 million and purchases of marketable securities totaling approximately $0.9 million. There were no sales of marketable equity securities during the year.
Biggest changeThe increase resulted from an increase in the market value of the portfolio of approximately $0.8 million. During 2023, we also sold $0.3 million of marketable equity, with realized gains on sales totaling approximately $0.2 million.
Since the swap agreements qualifies for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. Included in cash and cash equivalents is approximately $13,000 in short-term investment grade instruments. The interest rates on these instruments are adjusted to market rates at least monthly.
Since the swap agreements qualifies for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. Included in cash and cash equivalents is approximately $0.2 million in short-term investment grade instruments. The interest rates on these instruments are adjusted to market rates at least monthly.
Borrowings under the credit agreements with each of the banks bear interest at Term SOFR or a base rate, plus an applicable margin. Our margin facility bears interest at Term SOFR plus 1.10%. As of December 31, 2022, we had total variable interest rate borrowings of $234.7 million.
Borrowings under the credit agreements with each of the banks bear interest at Term SOFR or a base rate, plus an applicable margin. Our margin facility bears interest at Term SOFR plus 1.10%. As of December 31, 2023, we had total variable interest rate borrowings of $230.1 million.
Assuming variable rate debt levels remain at $234.7 million for a full year, a 100 basis point increase in interest rates on our variable rate debt would increase interest expense approximately $2.3 million annually.
Assuming variable rate debt levels remain at $230.1 million for a full year, a 100 basis point increase in interest rates on our variable rate debt would increase interest expense approximately $2.3 million annually.
Based on 2022 expenditures denominated in foreign currencies, a 10% decrease in the exchange rates would increase our annual operating expenses by approximately $2.7 million. Historically, we have not entered into financial instruments for trading or speculative purposes. Short-term exposures to fluctuating foreign currency exchange rates are related primarily to intercompany transactions.
Based on 2023 expenditures denominated in foreign currencies, a 10% decrease in the exchange rates would increase our annual operating expenses by approximately $3.0 million. Historically, we have not entered into financial instruments for trading or speculative purposes. Short-term exposure to fluctuating foreign currency exchange rates are related primarily to intercompany transactions.
The swap agreement has an effective date of April 29, 2022, a maturity date of April 30, 2027, and an amortizing notional amount of $93.3 million. At December 31, 2022, the fair value of the swap agreement was an asset of $2.9 million.
The swap agreement has an effective date of April 29, 2022, a maturity date of April 30, 2027, and an amortizing notional amount of $83.3 million. At December 31, 2023, the fair value of the swap agreement was an asset of $1.8 million.
Adjustments from the translation of the net investment in these operations decreased equity by approximately $1.0 million for the year ended December 31, 2022. 34
Adjustments from the translation of the net investment in these operations increased equity by approximately $4.1 million for the year ended December 31, 2023. 34
A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately $1.0 million. For additional information with respect to the marketable equity securities, see Item 8, Note 4 to the Consolidated Financial Statements.
A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately $1.1 million.
Foreign Exchange Risk In the years ended December 31, 2022 and 2021, 1.9% and 1.7%, respectively, of our revenues were derived from services provided outside the United States, principally in Mexico, Canada and Colombia.
For additional information with respect to the marketable equity securities, see Item 8, Note 4 to the Consolidated Financial Statements. 33 Foreign Exchange Risk In the years ended December 31, 2023 and 2022, 2.4% and 1.9%, respectively, of our revenues were derived from services provided outside the United States, principally in Mexico, Canada and Colombia.
Based upon our 2022 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expense on company owned tractors by approximately $5.5 million. 33 Equity Securities Risk We hold certain actively traded marketable equity securities, which subjects the Company to fluctuations in the fair market value of its investment portfolio based on current market price.
Based upon our 2023 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expense on company owned tractors by approximately $5.5 million.
Added
Equity Securities Risk We hold certain actively traded marketable equity securities, which subjects the Company to fluctuations in the fair market value of its investment portfolio based on current market price. The recorded value of marketable equity securities increased to $10.8 million at December 31, 2023 from $10.0 million at December 31, 2022.

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