Item 1. Business
ITEM 1: BUSINESS
Company Overview
Universal Logistics Holdings, Inc. is a holding company whose subsidiaries provide customized transportation and logistics solutions across North America and select international markets. Through our operating subsidiaries, we deliver an integrated portfolio of transportation and logistics services designed to support customers throughout their supply chains, including value-added, dedicated, intermodal and trucking services. Our operations primarily serve customers in the automotive, industrial, retail, consumer goods, energy, and metals sectors.
We conduct operations throughout the United States and in Mexico and Canada, providing both domestic and cross-border logistics solutions.
On May 1, 2025, we completed a reincorporation from Michigan to Nevada pursuant to a statutory conversion approved by our stockholders. The reincorporation did not result in any change to our business, management, board of directors, executive officers, assets, liabilities, or operations. The rights of our stockholders are now governed by Nevada law and our Nevada articles of incorporation and bylaws, which differ in certain respects from Michigan law. See Item 1A—Risk Factors
We have been a publicly held company since February 11, 2005, the date of our initial public offering. Our principal executive offices are located at 12755 E. Nine Mile Road, Warren, Michigan 48089.
Operating Model and Service Delivery
Our comprehensive suite of transportation and logistics solutions is designed to help customers reduce costs, improve reliability, and manage increasingly complex supply chains. We market and deliver our services through multiple channels:
• A direct sales and marketing organization focused on large, complex customers in targeted industry verticals;
• A network of company-managed facilities and terminals; and
• A nationwide network of independent agents who solicit freight directly from shippers.
As of December 31, 2025, we operated approximately 48 company-managed terminal locations, supported 78 active value-added logistics programs, and maintained an agent network of approximately 131 agents across our service footprint.
4
Reportable Segments
We manage and report our operations across three reportable segments, differentiated primarily by service offering and operational characteristics.
Contract Logistics
We provide value-added and dedicated transportation services to support inbound and internal logistics requirements of industrial manufacturers and major retailers, generally under contractual arrangements of one year or longer. Services are customized to individual customer requirements and include material handling, consolidation, sequencing, sub-assembly, cross-dock operations, kitting, repacking, warehousing, returnable container management, and rail lift services.
Dedicated transportation services within this segment typically involve short-haul or round-trip moves within defined geographic areas and are provided using a mix of union and non-union employee drivers, owner-operators, and contract drivers. Our facilities and personnel are often directly integrated into customer production environments, making these services a critical component of customer operations.
Intermodal
Our intermodal segment provides local and regional drayage services coordinated through company-managed terminals. These services utilize a combination of owner-operators, company-owned equipment, and third-party capacity providers. Intermodal services include steamship-truck, rail-truck, and related support services, primarily moving international and domestic containers between ports or railheads and customer facilities.
Trucking
Our trucking segment includes dry van, flatbed, heavy-haul, and refrigerated operations, transporting a broad range of commodities including automotive parts, machinery, building materials, food products, steel, and other industrial and consumer goods. These operations are coordinated through a mix of agents and company-managed terminals, utilizing owner-operators, company equipment, and brokered capacity.
Other non-reportable operations consist primarily of legacy brokerage activities and subsidiaries that provide support services to other operating units.
For additional segment information, see Item 8, Note 18 to the Consolidated Financial Statements.
Business Developments
Parsec Integration Update
In September 2024, we completed the acquisition of Parsec, LLC, a provider of terminal management and related services to Class I, regional, and short-line railroads across North America. During the year ended December 31, 2025, Parsec operated as part of our Contract Logistics segment and continued to provide time-sensitive intermodal terminal services across its network of rail yard locations. Integration activities during 2025 focused primarily on aligning operational, safety, and administrative processes while preserving Parsec’s specialized operating expertise and customer relationships.
Business and Growth Strategy
Our strategy is focused on disciplined growth, operational excellence, and long-term value creation. Key elements include:
Strategic Acquisitions . We operate in a highly fragmented industry and selectively pursue acquisitions that enhance service capabilities, expand geographic reach, diversify end markets, or provide specialized logistics expertise.
Capitalizing on Outsourcing Trends . We believe long-term industry growth will be supported by continued outsourcing of logistics functions as supply chains become more complex. We intend to leverage our integrated service offering, facility network, and long-standing customer relationships to capitalize on these trends.
Automotive Market Penetration . The automotive sector remains a core market. During the year ended December 31, 2025, automotive-related operations represented approximately 45% of total operating revenues.
Expansion into Other Verticals . We continue to expand in aerospace, energy, government services, healthcare, industrial retail, consumer goods, and metals, leveraging modular process design and rapid implementation expertise.
Growth of Agent and Owner-Operator Networks . We plan to continue expanding our agent and owner-operator base to drive growth in transactional transportation services.
5
Competition and Industry
The transportation and logistics industry is highly competitive and fragmented. Competition is based on service quality, reliability, pricing, breadth of offerings, technology capabilities, and access to capacity. We compete with asset-based and non-asset-based carriers, integrated logistics providers, railroads, and digital freight platforms.
Customers
We serve customers throughout the United States and in Mexico and Canada. Revenues are concentrated in automotive, retail and consumer goods, metals, energy, and manufacturing industries.
For the year ended December 31, 2025:
• Automotive customers represented approximately 45% of total revenues;
• Our top customer, General Motors, represented approximately 25% of revenues; and
• Our top ten customers represented approximately 59% of revenues.
Human Capital Resources
As of December 31, 2025, Universal employed approximately 10,525 employees, supported by the full-time equivalency of approximately 46 individuals on a contract basis. Approximately 37% of our employees were represented by labor unions and covered by collective bargaining agreements. Our workforce consists of a broad mix of professional, technical, operational, and driver personnel supporting both customer-integrated logistics operations and transactional transportation services. We believe our employee and labor relations remain constructive.
Our business depends on the ability to attract, develop, and retain a qualified workforce capable of meeting the operational, safety, and service requirements of our customers. Accordingly, our human capital management approach focuses on several core areas, including workforce safety, talent acquisition and retention, training and development, labor availability, and regulatory compliance. We regularly assess workforce trends, operating requirements, and labor market conditions and adjust our practices as appropriate.
Workforce Availability, Retention, and Development
Competition for qualified drivers, logistics professionals, and skilled operations personnel remains intense across the transportation and logistics industry. We seek to mitigate turnover through competitive compensation and benefits, incentive programs, training opportunities, and operational stability, particularly in customer-integrated environments.
Training and workforce development are critical components of our operations, given the safety-sensitive and customer-specific nature of many of our services. We maintain structured onboarding, skills enhancement, and supervisory training programs designed to support workforce readiness, operational continuity, and succession planning.
Health, Safety, and Wellbeing
The safety and wellbeing of our employees, contractors, and the communities in which we operate are fundamental to our business. We maintain safety programs and policies designed to promote compliance with applicable regulations, reduce workplace incidents, and support safe operating practices across our facilities and transportation network.
We continue to invest in safety training, monitoring, and operational controls; however, the nature of our operations exposes us to inherent safety risks, and there can be no assurance that incidents will not occur.
Labor Relations
A significant portion of our workforce is represented by labor unions under collective bargaining agreements that establish wage rates, benefits, work rules, and other terms and conditions of employment. These agreements typically have defined terms and may result in periodic wage and benefit increases. While we believe our labor relationships are constructive, labor negotiations, workforce availability, or work stoppages could adversely affect our operations or financial performance.
Human Capital Challenges and Outlook
We believe our human capital practices support our operational objectives and customer service commitments. Nevertheless, we continue to face challenges common to the transportation and logistics industry, including labor availability constraints, wage and benefit cost inflation, regulatory requirements, and workforce retention pressures. These factors may increase operating costs, constrain capacity, or impact service levels. See Item 1A—Risk Factors for additional discussion of risks related to labor, workforce availability, and operating costs.
6
Independent Contractor Network
Independent agents and owner-operators are a critical component of our operating model. During 2025, agents generated approximately 17% of freight volume.
Owner-operators provide equipment and are responsible for associated operating costs and regulatory compliance.
Revenue Equipment
As of December 31, 2025, our revenue equipment consisted of approximately:
Type of Equipment
Company-
owned or
Leased
Owner-
Operator
Provided
Total
Tractors
2,461
1,128
3,589
Yard Tractors
738
—
738
Trailers
4,793
471
5,264
Chassis
3,570
—
3,570
Containers
94
—
94
Risk Management and Insurance
We maintain insurance coverage and self-insurance programs consistent with industry practice. We establish reserves for auto liability, cargo, and material handling claims based on actuarial estimates and historical experience.
Technology, Cybersecurity, and System Resiliency
Our operations rely on a combination of proprietary and third-party information technology systems to support transportation management, warehouse operations, customer integration, billing, and operational visibility. We face an increasingly complex cybersecurity risk environment, including risks associated with system intrusions, ransomware, data integrity failures, and service disruptions. We maintain cybersecurity risk management and governance processes designed to identify, assess, and manage these risks, and we continue to invest in system monitoring, employee awareness, and incident response capabilities.
While we have implemented measures intended to enhance system reliability and security, our systems have experienced operational and technology-related challenges from time to time, and there can be no assurance that future disruptions, cyber incidents, or system failures will not occur. Any such events could adversely affect our operations, customer relationships, or financial results. See “Risk Factors—Information Technology and Cybersecurity Risks” for a discussion of risks related to system disruptions, cybersecurity incidents, and data protection.
Government Regulation and Environmental Matters
Our operations are subject to extensive federal, state, and international regulation, including safety, labor, customs, and environmental requirements. We believe we are in material compliance with applicable laws.
Environmental and climate-related regulations may increase operating or capital costs over time.
Seasonality
Our value-added logistics services experience seasonal demand patterns driven by automotive production cycles and scheduled OEM shutdowns. Transportation services are also impacted by weather and holiday-related shipping patterns.
Available Information
We make available, free of charge, our SEC filings on our website at www.universallogistics.com as soon as reasonably practicable after filing. The contents of our website are not incorporated into this Form 10-K.
ITEM 1A: RI SK FACTORS
The following risks and uncertainties could materially and adversely affect our business, financial condition, results of operations, cash flows, or the market price of our common stock. The risks described below are not the only risks we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business. You should carefully consider these risk factors together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
7
Risks Related to Our Industry and Operating Environment
Our business is sensitive to general economic conditions, customer demand cycles, and macroeconomic volatility.
Demand for our transportation and logistics services is highly dependent on general economic conditions and the business cycles of our customers. Adverse economic conditions—including inflation, rising interest rates, reduced industrial production, supply chain disruptions, or recessionary pressures—may reduce shipping volumes, increase pricing pressure, delay customer payments, or increase customer credit risk. These effects may be more pronounced in industries where we have meaningful customer concentration, including automotive, metals, and industrial manufacturing.
Deterioration in U.S. or global economic conditions may also constrain our customers’ access to capital, adversely affect their production levels, or cause them to reduce or delay logistics spending, any of which could materially and adversely affect our results of operations and cash flows.
We operate in a highly competitive and fragmented industry, which could limit our ability to maintain pricing, margins, or market share.
The transportation and logistics industry is intensely competitive and fragmented. We compete with asset-based and non-asset-based carriers, integrated logistics providers, railroads, and increasingly with technology-enabled brokers and digital freight platforms. Some competitors have greater financial resources, larger equipment fleets, broader service offerings, more advanced technology platforms, or greater economies of scale.
Competitive pressures may result in downward pricing, reduced margins, loss of customers, increased capital or technology investment requirements, or higher labor and capacity costs. In addition, customers may reduce the number of carriers they use, rely on lead logistics providers that allocate freight on a non-neutral basis, or rebid freight frequently, which could further pressure pricing and volumes.
Volatility in diesel fuel prices or disruptions in fuel supply could adversely affect our operating results.
Diesel fuel represents a significant operating expense in our transportation operations. The price and availability of diesel fuel are subject to wide fluctuations due to factors beyond our control, including global supply and demand dynamics, refinery capacity, geopolitical conflicts, sanctions, trade restrictions, military activity affecting energy-producing regions, and disruptions to major maritime shipping routes used for the transportation of crude oil and refined products.
We do not currently hedge against fuel price fluctuations. Although we have historically recovered a portion of fuel cost increases through fuel surcharge mechanisms, rate adjustments, or other contractual pricing arrangements, there can be no assurance that these measures will fully offset increases in fuel prices, fuel taxes or other energy-related costs. In particular, fuel surcharge programs may lag market price movements, may not apply to all of our services or contracts, and may be difficult to implement or adjust during periods of rapid or sustained price volatility or competitive pricing pressure.
Recent geopolitical developments, including military conflicts and instability in regions critical to global energy production and shipping, have increased volatility in global oil markets and could further disrupt energy supply chains. If disruptions to oil production, refining capacity, or maritime transportation routes occur or intensify, diesel fuel prices could increase significantly and fuel availability in certain markets could be constrained.
Sustained increases in fuel prices, reduced fuel availability, or disruptions in fuel distribution networks could increase operating costs for our company-owned equipment and may also adversely affect the economics of owner-operator arrangements and third-party transportation providers on whom we rely. Any such developments could materially adversely affect our operating margins, operating results, cash flows, and overall financial condition.
Driver and labor availability constraints could limit growth and increase costs.
The transportation industry continues to experience challenges in attracting and retaining qualified drivers and skilled logistics personnel. Competition for labor may require increased wages, benefits, incentives, or recruiting costs and could result in equipment under-utilization, service disruptions, or missed growth opportunities. If we are unable to attract or retain sufficient personnel, our profitability and ability to meet customer service requirements could be adversely affected.
Capital intensity and equipment cost trends may adversely affect cash flows and returns.
Our business requires significant ongoing capital investment in tractors, trailers, chassis, and other equipment. Purchase prices for new equipment may increase due to regulatory requirements, supply constraints, or manufacturer pricing actions, while the resale value of used equipment may decline due to market oversupply or technological obsolescence. These factors could increase depreciation expense, reduce proceeds from asset sales, and adversely affect our cash flows and financial condition.
8
Trade policy changes, tariffs, and geopolitical developments could adversely affect our business.
Our business depends heavily on cross-border trade between the United States, Canada, and Mexico. Changes in trade policy, tariffs, customs regulations, or geopolitical tensions could disrupt supply chains.
Risks Related to Regulation, Legal Matters, and Compliance
We operate in a highly regulated industry, and changes in laws or regulations could increase costs or limit operations.
Our operations are subject to extensive federal, state, and international regulation, including safety, labor, environmental, customs, and transportation requirements. Compliance with existing or future regulations may increase operating costs, restrict capacity, disrupt operations, or require additional capital expenditures. Violations could result in fines, penalties, operational restrictions, or reputational harm.
Independent contractor classification risks could result in significant liabilities.
Federal and state authorities continue to scrutinize the classification of independent contractors in the transportation industry. Changes in laws, regulations, or enforcement interpretations could result in reclassification of owner-operators or agents as employees, which could materially increase labor costs, tax obligations, benefit liabilities, and potential retroactive exposure.
Environmental and climate-related regulations may increase costs or constrain operation s.
We are subject to environmental laws governing emissions, fuel storage, hazardous materials, and stormwater discharge. Increased focus on climate change may result in new regulations, customer requirements, or emissions-related taxes that increase operating or capital costs, reduce fuel efficiency, or require equipment upgrades. Compliance costs or failure to meet customer sustainability expectations could adversely affect our results.
Risks Related to Our Business and Strategy
We have restated previously issued financial statements, which may adversely affect investor confidence and expose us to additional risks.
In March 2026, the Company determined that its previously issued condensed consolidated financial statements as of and for the quarter ended September 27, 2025 should no longer be relied upon due to an error identified in the goodwill impairment analysis for the Company’s intermodal reporting unit. Specifically, certain deferred tax liabilities attributable to intercompany allocations were included in the carrying value used in the impairment analysis when they should not have been included. As a result, the Company restated those financial statements and recorded an additional goodwill impairment charge of approximately $43.2 million.
Restatements of previously issued financial statements may negatively affect investor confidence in the reliability of our financial reporting and could cause our stock price to decline. Restatements may also increase the risk of regulatory scrutiny, including inquiries or investigations by the Securities and Exchange Commission, and may expose us to litigation or other claims. In addition, responding to matters arising from a restatement can require significant management time and attention and may increase professional fees and other costs.
Although the restatement described above relates to a non-cash accounting adjustment and does not affect the Company’s previously reported revenues, operating cash flows, liquidity, or compliance with debt covenants, we cannot assure you that additional issues will not be identified in the future or that similar matters will not occur again.
We have identified a material weakness in our internal control over financial reporting. If we fail to remediate this material weakness or otherwise maintain effective internal control over financial reporting, our ability to accurately report our financial results could be adversely affected.
As discussed elsewhere in this Annual Report on Form 10-K, the Company restated its condensed consolidated financial statements for the quarter ended September 27, 2025 as a result of an error identified in the goodwill impairment analysis for the Company’s intermodal reporting unit. Management concluded that the error that resulted in the restatement is consistent with a previously identified material weakness in the Company’s internal control over financial reporting related to the accounting for complex and non-routine transactions and the preparation and review of financial statements and related disclosures.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because of this material weakness, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2025.
9
Management has begun implementing remediation measures designed to address this material weakness, including enhancing the Company’s internal technical accounting expertise and strengthening review procedures relating to complex and non-routine accounting matters, including goodwill impairment analyses. However, these remediation efforts are ongoing, and management cannot provide assurance that these measures will fully remediate the material weakness or prevent future deficiencies in internal control over financial reporting.
Management continues to evaluate the effectiveness of these remediation measures and may determine that additional steps are necessary to address the material weakness. In addition, management may identify additional deficiencies or material weaknesses in internal control over financial reporting in the future as remediation efforts continue and controls are tested.
Maintaining effective internal control over financial reporting requires ongoing diligence, particularly as our business continues to evolve through acquisitions, operational changes, increased transaction complexity, and personnel changes. As our operations grow and change, there can be no assurance that additional deficiencies or material weaknesses will not be identified in the future.
If the Company is unable to successfully remediate the material weakness, or if additional material weaknesses or significant deficiencies are identified in the future, the Company’s ability to accurately record, process, summarize and report financial information could be adversely affected. In addition, the Company could become subject to increased regulatory scrutiny, incur additional costs related to remediation and external audit procedures, or experience reduced investor confidence in the reliability of its financial statements.
We may be required to record additional impairment charges related to goodwill and other long-lived assets, which could materially adversely affect our results of operations.
We carry goodwill and other intangible assets on our consolidated balance sheet as a result of prior acquisitions. We evaluate goodwill for impairment at least annually and more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit may not be recoverable. We also evaluate long-lived tangible and intangible assets for impairment when triggering events occur.
During the year ended December 31, 2025, we recorded material non-cash impairment charges totaling approximately $124.4 million related to goodwill and customer-relationship intangible assets associated with our intermodal reporting unit. As a result of these impairment charges, no goodwill remains attributable to the intermodal reporting unit.
The determination of whether an impairment exists requires significant judgment and involves estimates and assumptions regarding future cash flows, revenue growth rates, operating margins, terminal values, and discount rates. These estimates and assumptions reflect management’s judgments based on information available at the time the analyses are performed, and future events or changes in circumstances may differ from those assumptions.
Our remaining reporting units continue to include goodwill and other intangible assets that are subject to impairment testing. If actual operating results or future cash flow projections differ from our assumptions, or if market conditions, interest rates, or business risks change, we may be required to record additional impairment charges in future periods. Any such charges could adversely affect our results of operations and stockholders’ equity and could negatively impact investor perceptions of our financial condition or operating performance, even though such charges would not directly affect our cash flows.
Cybersecurity incidents or technology failures could disrupt operations and harm our business.
Our operations depend on the availability, reliability, and security of information technology systems, including transportation management, warehouse management, dispatch, billing, and customer-facing platforms. We operate in a heightened cybersecurity risk environment and have experienced operational and technology-related challenges from time to time.
Cyber incidents, ransomware attacks, data breaches, system failures, or disruptions at third-party service providers could result in service interruptions, data loss, reputational harm, regulatory scrutiny, or financial loss. While we maintain cybersecurity risk management and governance processes, there can be no assurance that our controls will prevent all incidents or that future incidents will not have a material adverse effect.
Our disclosure controls and procedures and internal control over financial reporting may not continue to be effective as our business evolves.
Disclosure controls and procedures and internal control over financial reporting are subject to inherent limitations and require ongoing monitoring and refinement. As our business continues to evolve—including through acquisitions, operational changes, increased transaction complexity, and integration of acquired businesses—there is a risk that controls may become inadequate or fail to operate as intended. If our disclosure controls or internal control over financial reporting are not designed, implemented, or maintained effectively, we may be unable to timely and accurately disclose information required under the Securities Exchange Act of 1934.
10
Insurance, claims exposure, and “nuclear verdict” trends could materially increase costs.
The transportation industry has experienced increased claim severity and large jury verdicts. Rising insurance premiums, higher self-insurance retention levels, or uninsured losses could materially and adversely affect our earnings, liquidity, and cash flows.
Customer concentration, particularly in the automotive industry, exposes us to demand volatility.
A significant portion of our revenues is derived from a limited number of customers and industries. During the year ended December 31, 2025, customers in the automotive industry accounted for approximately 45% of our revenues, and our top ten customers accounted for approximately 59% of revenues. The loss of, or reduced demand from, any significant customer could materially adversely affect our business.
Labor disputes involving our employees or our customers could disrupt operations.
Many of our customers and a significant portion of our workforce are subject to collective bargaining agreements. Labor disputes, strikes, or work stoppages involving our employees, customers, or suppliers could disrupt operations, reduce volumes, or increase costs.
We may not successfully integrate acquired businesses or realize expected benefits.
Acquisitions are an element of our growth strategy. Integration efforts may involve operational, technological, or cultural challenges and may divert management attention. We may not realize anticipated benefits, synergies, or performance improvements, and integration issues could adversely affect results.
Natural disasters, severe weather, public health events, terrorism, war, or geopolitical instability could disrupt supply chains, commercial trade routes, or customer demand, adversely affecting our operations and financial results.
Our business depends on the efficient movement of freight through domestic and international supply chains. Extreme weather events, natural disasters, pandemics or other public health crises, acts of terrorism, armed conflicts, geopolitical instability, trade restrictions, sanctions, tariffs, or other governmental actions could disrupt global or regional transportation networks, restrict access to ports or border crossings, interrupt the flow of goods, or reduce customer production levels and shipping demand.
In particular, geopolitical tensions or military conflicts affecting major maritime trade routes or energy transit corridors could disrupt global commerce and energy markets. For example, instability in regions surrounding key shipping passages, including the Persian Gulf, the Strait of Hormuz, the Red Sea, or other strategic maritime channels, could interfere with commercial shipping activity, increase shipping costs, disrupt global supply chains, and contribute to volatility in energy and commodity markets. Disruptions affecting these routes could reduce the availability of shipping capacity, increase transit times, or cause rerouting of vessels, which could have cascading effects on global trade flows and the availability and cost of goods transported by our customers.
In addition, geopolitical instability may contribute to broader economic uncertainty, reduced industrial production, lower consumer demand, and decreased freight volumes across transportation markets. Any significant disruption to global trade flows, fuel supply chains, manufacturing activity, or customer operations could reduce demand for our services, increase operating costs, or otherwise adversely affect our revenues, operating results, and financial condition.
Risks Related to Our Indebtedness and Liquidity
Our substantial indebtedness and the financial covenants in our credit facilities require ongoing monitoring and may limit our financial and operational flexibility.
We have a significant amount of indebtedness, and our credit facilities contain financial and operational covenants, including covenants related to liquidity, fixed charge coverage ratios, and total leverage. While we complied with all such covenants as of December 31, 2025, compliance requires ongoing monitoring and disciplined financial management, particularly in light of recent trends in operating performance.
Our ability to comply with these covenants is dependent on our financial and operating performance, including the level and stability of EBITDA, cash flows, and working capital. EBITDA has been negatively impacted in recent periods by macroeconomic conditions, including reduced demand in certain end markets, pricing pressure, and cost inflation, and these factors may continue to affect our operating results in 2026. A sustained decline in EBITDA, unexpected operating disruptions, higher interest expense, or adverse changes in working capital could reduce covenant headroom and constrain liquidity.
If we were to fail to maintain compliance with the covenants in our debt agreements, we could be required to seek waivers or amendments, which may not be available on acceptable terms, or at all. In such circumstances, lenders could restrict our access to borrowing capacity, increase pricing, impose additional conditions, or accelerate repayment obligations. Any of these outcomes could require us to curtail capital expenditures, reduce operating flexibility, delay strategic initiatives, sell assets, raise additional capital, or take other actions that could materially and adversely affect our business, financial condition, results of operations, and cash flows.
11
In addition, rising interest rates and variable-rate borrowings increase our exposure to higher interest expense, which could further pressure earnings, cash flows, and covenant compliance. Our substantial indebtedness may also place us at a competitive disadvantage relative to competitors with lower leverage and may limit our ability to respond effectively to changes in market conditions or pursue strategic opportunities.
Risks Related to Our Common Stock and Corporate Governance
Our controlling stockholders have substantial influence over corporate actions.
Family trusts that collectively own a majority of our outstanding common stock hold a majority of our voting power. Under the governance arrangements of those trusts, a special trustee exercises voting authority with respect to the shares held by the trusts. Matthew T. Moroun, as trustee of the family trusts, holds the power to appoint and remove the special trustee. Through the trusts’ ownership position, the trusts are able to control the outcome of matters submitted to our stockholders, including the election of directors and the approval of certain mergers, acquisitions, or sales of substantially all of our assets, and other significant corporate actions. As a result, our public stockholders may have limited ability to influence corporate actions, and the interests of the trusts and their beneficiaries may differ from, or conflict with, the interests of our other stockholders.
Because we are a “controlled company” under Nasdaq rules, stockholders may have reduced governance protections.
We are a “controlled company” under Nasdaq rules and are not required to comply with certain corporate governance requirements applicable to other listed companies, including requirements related to board and committee independence. As a result, stockholders may not have the same protections as stockholders of companies subject to all Nasdaq governance standards.
Nevada law and our governing documents provide stockholders with fewer protections than Michigan law .
Nevada law provides greater protection to directors and officers and may provide fewer rights to stockholders compared to the laws of other states, including Michigan. These differences may discourage certain lawsuits and may limit stockholders’ ability to obtain relief against directors and officers.
Nevada law and our governing documents may deter change-of-control transactions.
As a Nevada corporation, our articles of incorporation, bylaws, and Nevada law contain provisions that may discourage, delay, or prevent a change of control, proxy contest, or acquisition, even if such a transaction might otherwise be beneficial to stockholders.
Limited trading liquidity and dividend discretion may affect stockholder returns.
Our common stock has relatively limited trading volume, which may increase price volatility and limit liquidity. In addition, dividends are declared at the discretion of our Board of Directors and may be reduced or eliminated at any time.