What changed in this filing

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Item 1. Business

2024-03-15 compared with 2023-03-16 · 84 added, 133 removed, 357 unchanged (38% of the section changed)

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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.

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.

Our operating subsidiaries provide a comprehensive suite of transportation and logistics solutions that allow our customers to reduce costs and manage their global supply chains more efficiently.

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• 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;

• Through company-managed facilities;

• Through a network of agents who solicit freight business directly from shippers.

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.

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.

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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.

We provide customers freight brokerage services by utilizing third-party transportation providers to transport goods.

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.

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Value-Added .

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.

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.

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contract logistics, intermodal, trucking, and company-managed brokerage.

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.

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.

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.

The 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.

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.

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.

Business and Growth Strategy

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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.

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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.

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.

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.

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.

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.

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.

Continue to expand penetration in other vertical markets .

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These vendors have the scope and capabilities to provide the breadth of services required by the large and complex supply chains of automotive original equipment manufacturers (OEMs).

We also encounter competition from regional and local third-party logistics providers, integrated transportation companies that operate their own aircraft, cargo sales agents and brokers, surface freight forwarders and carriers, airlines, associations of shippers organized to consolidate their members’

shipments to obtain lower freight rates, and internet-based freight exchanges.

The transportation industry is continuously impacted by new rules and regulations intended to improve the overall safety of the industry.

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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.

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.

A significant percentage of our revenues are derived from the domestic automotive industry.

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.

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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, 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.

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.

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Our tools and platforms provide real-time, web-based visibility into the supply chains of our customers.

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.

It also enables us to clearly identify and communicate to the customer any vendor-related problems that may cause delays in production.

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We are also subject to regulations relating to testing and specifications of transportation equipment and product handling requirements.

In addition, our drivers and owner-operators must have a commercial driver’s license and comply with safety and fitness regulations promulgated by the FMCSA, including those relating to drug and alcohol testing.

Our international operations, which include not only facilities in Mexico, Canada and Colombia but also transportation shipments managed by our specialized service operations, are impacted by a wide variety of U.S.

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This increased focus on sustainability may result in new legislation or regulations and customer requirements that could negatively affect us as we may incur additional costs or be required to make changes to our operations in order to comply with any new regulations or customer requirements.

Legislation or regulations that potentially impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels such as those used in the Company’s trucks, could adversely affect our operations and financial results.

More specifically, legislative or regulatory actions relating to climate change could adversely impact the Company by increasing our fuel costs and reducing fuel efficiency and could result in the creation of substantial additional capital expenditures and operating costs in the form of taxes, emissions allowances, or required equipment upgrades.

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However, future changes to laws or regulations may adversely affect our operations and could result in unforeseen costs to our business.

Conversely, such demand generally decreases during the third quarter of each year due to the impact of scheduled OEM customer plant shutdowns in July for vacations and changeovers in production lines for new model years.

Our value-added services business is also impacted in the fourth quarter by plant shutdowns during the December holiday period.

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.

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.

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.

Available Information

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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.

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.

Risks Related to Our Industry

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We operate in a highly competitive and fragmented industry, and our business may suffer if we are unable to adequately address any downward pricing pressures or other factors that may adversely affect our ability to compete with other carriers.

Further, we are affected by recessionary economic cycles and downturns in customers’

business cycles, particularly in market segments and industries, such as the automotive industry, where we have a significant concentration of customers.

Further, we are affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries, such as the automotive industry, where we have a significant concentration of customers.

Economic conditions may also adversely affect our customers and their ability to pay for our services.

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• 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;

• 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;

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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.

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.

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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.

If our independent contractors are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’

compensation, unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits.

If our independent contractors are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits.

In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods.

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More specifically, legislative, or regulatory actions related to climate change could adversely impact the Company by increasing our fuel costs and reducing fuel efficiency and could result in the creation of substantial additional capital expenditures and operating costs in the form of taxes, emissions allowances, or required equipment upgrades.

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A significant portion of our larger customers are concentrated in the North American automotive industry.

For customers generating annual revenues over $100,000, 36% of our revenues were derived from customers in the North American automotive industry during 2022.

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.

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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 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.

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.

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.

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.

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.

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.

The terms of our future collective bargaining agreements also may affect our competitive position and results of operations.

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.

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.

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.

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.

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.

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.

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.

The 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.

Ultimately, these factors could materially and adversely affect the results of our 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.

The Company is self-insured for health and workers’

compensation insurance coverage up to certain limits.

We are 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.

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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.

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.

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Harsh weather conditions generally also result in higher accident frequency, increased freight claims, and higher equipment repair expenditures.

Generally, demand for our value-added services delivered to existing customers increases during the second calendar quarter of each year as a result of the automotive industry’s spring selling season and decreases during the third quarter of each year due to the impact of scheduled OEM customer plant shutdowns in July for vacations and changeovers in production lines for new model years.

Our value-added services business is also impacted in the fourth quarter by plant shutdowns during the December holiday period.

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If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of applicable laws or regulations, it could have a materially adverse effect on our business and operating results.

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.

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.

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In addition, the insurance premiums charged for some or all of the coverage currently maintained by us could increase dramatically or such coverage could be unavailable in the future.

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.

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 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.

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.

We cannot be certain that our management and operational controls will be able to support us as we grow.

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Any failure to identify and address or to prevent a cyber- or malware-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to our customers or others, the diversion of corporate resources, injury to our reputation and increased service and maintenance costs.

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.

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.

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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.

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.

Although 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.

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.

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.

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.

Moroun holds greater than 50% of the voting power of the Company.

As a result, Mr.

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.

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.

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.

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.

Moroun could cause us to enter into transactions or agreements of which our other shareholders would not approve or make decisions with which they may disagree.

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.

In addition, he could elect to sell a controlling interest in us to a third-party and our other shareholders may not be able to participate in such transaction or, if they are able to participate in such a transaction, such shareholders may receive less than the then current fair market value of their shares.

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.

Moroun holds a majority of our outstanding common stock.

As a result, we are a controlled company under the rules of the NASDAQ Stock Market.

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:

Our public shareholders may have limited influence over our significant corporate actions.

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.

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.

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.

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.

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.

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.

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.

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.

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 be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

These requirements will not apply to us as long as we remain a controlled company.

• a nominating and corporate governance committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

• the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

We are a controlled company under these rules, and these requirements will not apply to us as long as we retain that status.

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.

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Given the daily average trading volume of our common stock, significant sales of the common stock in a brief period of time, or the expectation of these sales, could cause a decline in the price of our common stock.

Additionally, low trading volumes may limit a shareholder’s ability to sell shares of our common stock.

Our ability to pay regular dividends on our common stock is subject to the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, any covenants included in our credit facilities any legal or contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant.

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In addition, certain provisions of Michigan law that apply to us could discourage or prevent a change of control or acquisition of our Company.

UNRESOLVED SECURITIES & E XCHANGE COMMISSION STAFF COMMENTS

We are headquartered and maintain our corporate administrative offices in Warren, Michigan.

We 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.

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.

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.

For more information on our lease arrangements, see Part II, Item 8:

Notes 10, 12 and 15 to the Consolidated Financial Statements.

Ineffective internal control over financial reporting could result in errors in our financial statements, reduce investor confidence, and adversely impact our stock price.

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.

We are in the process of remediating the material weakness, but our efforts may not be successful.

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.

If we are unable to remediate the material weakness in an appropriate and timely manner, or if we identify additional control deficiencies that individually or together constitute significant deficiencies or material weaknesses, our ability to accurately record, process, and report financial information and consequently, our ability to prepare financial statements within required time periods, could be adversely affected.

Failure to maintain effective internal control over financial reporting could result in violations of applicable securities laws, stock exchange listing requirements, and the covenants under our debt agreements, subject us to litigation and investigations, negatively affect investor confidence in our financial statements, and adversely impact our stock price and ability to access capital markets.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business