Benzinga  Sep 30  Comment 
Universal Truckload Services, Inc. (NASDAQ: UACL) shares fell 18.85 percent to touch a new 52-week low of $15.58 after the company issued a downbeat Q3 guidance. Lantheus Holdings Inc (NASDAQ: LNTH) shares dropped 19.48 percent to reach a new...
Benzinga  Sep 30  Comment 
Barracuda Networks Inc (NYSE: CUDA) shares dipped 32.53 percent to $15.89. Barracuda reported upbeat earnings for its fiscal second quarter, but the company's sales slightly missed analysts' estimates. The company also issued a weak forecast for...


Universal Truckload Services, Inc. (NASDAQ: UACL) is a trucking company that provides dry van and flatbed operations, which are on-the-road shipping services, as well as shipping by steamship and rail, to shippers in the U.S., Ontario and Quebec. The company operates a network of 3,400 tractors and 3,400 trailers.[1] The company earned $503 million in revenue and $4.9 million in net income in 2009.[2]

The firm has faced rising costs in some of its primary inputs, along with a decrease in demand for its services due to lower retail and industrial production. The largest development impacting the company is the economic downturn; for example, since exports to the US have declined, this directly translates to lower shipping volume. Company costs are highly dependent on volatile oil prices, which have increased since the mid 2000s. Competition has increased significantly due to lower demanded shipping volume. However, this has forced many companies to exit the industry, with 3000 companies exiting since 2008.

Company Overview

Business Analysis[3]

Universal Truckload Services uses a non-asset based business model, which means it's more oriented towards providing services and doesn't hold a lot of assets, such as tractors and tailors, on its books. Most of the tractors and two-thirds of the trailers are owned by others. This is an advantage, as the firm doesn't have to own a lot of facilities and spends a lot less on capital expenditures compared to its competitors. On the other hand, since they don't own a lot of their facilities, this limits their growth potential in good economic climates because they can't dictate how fast to expand. The firm does offer some assets, such as its intermodal depot facilities and management information systems, and so it greatly reduces the need for large cash outlays in order to expand. This also increases their average return on assets ratio compared with rivals who use an asset-based model. In the last fiscal year, the company had a 7.1% return on average assets.

Universal relies heavily on its contractor network of agents and owners-operators, who provide the link to customers and are responsible for delivering the services and equipment. The former is responsible for attracting and doing business with shippers, as well as locating freight. Agents focus on a particular market segment and are able to better serve that specific sector's needs compared to a company that targets a wider segment. These agent networks also provide services to owners-operators, including dispatch and terminal services, as well as aid in their recruitment. There are no formal long-term guarantees for future business, however, between agents and Universal. The latter, owners-operators, provide the transportation services to the clients and provide and finance the necessary equipment, such as the majority of the trailers and most of the tractors. They also pay for other costs they incur, like fuel. The firm is divided into several subsidiaries: NYP of Michigan, Inc., Universal Am-Can, Louisiana Transportation, Mason & Dixon Lines, Economy Transport, Great American Lines, CrossRoad Carriers and Mason Dixon Intermodal.

Segment Breakdown[4]

Revenues for the company come from three general segments. Universal Truckload concentrates its business on flatbed and dry van operations, truck brokerage services and rail-truck and steamship-truck intermodal support services.

  • Truckload (62.3% of sales) - Universal provides on-the-road shipping services to clients in a variety of segments, from food products to steel and building materials.
  • Brokerage (22.4% of sales) - If there is more shipping volume than owners-operators can handle, then shipping is arranged through agents to third party transportation operators, such as competing freight carriers.
  • Intermodal Support Services (15.3% of sales) - are shipments by steamship and rail.

Business Growth

FY 2009 (ended December 31, 2009)[2]

  • Net revenue decreased 34% to $503 million. The decrease in operating revenues is primarily attributable to a decrease in the number of loads in the truckload, brokerage and intermodal operations attributable to the current economic recession, a decrease in fuel surcharges, and a decrease in operating revenues per loaded mile.
  • Net income decreased 67% to $4.9 million.

Trends and Forces

Costs Are Affected by Oil Prices

Since Universal Truckload Services is a shipping company, gas prices are one of the greatest contributors to cost, especially when fuel prices are not as stable. Even the smallest increase in the price of diesel fuel has a large impact on the trucking industry; the American Trucking Association estimates that expenses on fuel increase by $391 million annually if fuel increases by just one cent. It's clear that unpredictable fluctuations in fuel prices can cause costs - and therefore earnings - to be volatile. A large portion of the fleet is owned by owners-operators and not by the company directly, which means United itself isn't taking on large debt; however, if fuel prices are too high, these high costs will significantly cut into the profits of owner-operators, and they will be forced into bankruptcy, as has already happened to some firms. This will hurt United because it will then be harder to find new owner-operators to replace them. Some owners-operators have already chosen to leave the sector, causing Universal and its rivals to compete for these scarcer resources. Universal is forced to constantly search for and hire new owners-operators.

Market Consolidation

Due to the financial crisis, the truckload sector is moving towards consolidation, meaning a few larger companies will dominate the sector, squeezing out smaller firms. It's likely that this will continue because some smaller firms are forced out by competition by larger firms or combine with others. Since 2008, over 3,000 firms in this sector filed for bankruptcy, which translated into about 7% of trucks carrying freight. The reasons include the instability of inputs like fuel prices, tougher government environmental regulation and the fact that it is harder to obtain financing during a down economic cycle. Also, large firms are able to provide customers with all necessary services, a one-stop solution, with which smaller firms are finding it hard to compete. If this continues to happen, this trend will be advantageous to Universal Truckload Services, as it is a large provider and has the opportunity to capture more market share and customers as smaller competitors continue exit.

Shortage of Truck Drivers

In the years leading up to the economic downturn there has been a significant shortage of truck drivers, which are an important input in the trucking industry. The shortage is caused by changes in demographics and labor market participation, lower wages and a significant number of current drivers retiring. The labor market for this segment is overwhelmingly male, about 60% white; the majority of truck tends to be less educated and is mostly between ages 35 and 54. The American Trucking Association predicts this age group will decrease by over 3 million people by the year 2014. Many current truck drivers will retire in the next 10 to 15 years, which will shrink this labor market. In addition, there are many regulatory hurdles candidates have to overcome to be certified as truck drivers, including the English language requirement, training, more thorough background checks, and immigration laws. As the economy recovers and begins to grow again, there will be an increased demand for more truck drivers. Wages have fallen and many firms, already under pressure from the recession, cannot afford to raise pay for truck drivers, exacerbating the problem.[5] As freight companies compete for a smaller pool of workers, the American Trucking Association predicts wages will begin to increase in order to close the supply and demand gap in the labor force.


In the trucking industry, prices charged for shipping services are influenced and determined by fuel rates, equipment availability - how many trucks are on hand for services, the overall economic climate, as well as competitors' prices. There are about a quarter of a million trucks that have excess capacity to deliver freight, which means increased competition and smaller profit margins. Universal's key competitors are:

  • J.B. Hunt Transport Services (JBHT) - J.B. Hunt is one of the ten largest freight shippers on the continent. It also services the automotive industry like Universal.
  • Landstar System (LSTR) - With over $2.5 billion dollars of annual revenues, Landstar has a similar non-asset backed business model in the trucking segment.
  • Arkansas Best (ABFS) - Arkansas Best is also a commodity shipping company with its largest freight subsidiary earning over 90% of its revenues. However, it has an asset-intensive business model.
  • Old Dominion Freight Line (ODFL) - Old Dominion has a wide network of delivery and shipping centers and has widespread coverage over 39 states.
  • Marten Transport (MRTN) - Marten Transport provides freight and truckload services to general commodity companies. Its tractors and trailers, like Universal's, are also supplied by independent contractors.
  • Hub Group (HUBG) - The Hub Group is a freight transportation company; it provides many services including shipping optimization, carrier management and long-haul services.
  • Covenant Transport (CVTI) - Covenant Transportation provides truckload transportation services in the same geographic region as Universal, mainly in United States and Canada. Their customers include various retailers and manufacturers, other transportation firms and truckload companies.


  1. UACL 2009 10-K "Overview" pg. 3-4
  2. 2.0 2.1 UACL 2009 10-K "Selected Financial Data" pg. 22
  3. UACL 2009 10-K "Asset Light Strategy" pg. 4-5
  4. UACL 2009 10-K "Our Operations" pg. 6-7
  5. [www.truckline.com/StateIndustry/Documents/ATADriverShortageStudy05.pdf American Trucking Association "U.S. Truck Driver Shortages: Analysis and Forecasts" 12 June 2009]
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