2021 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
2021
2020
2019
2018
2017
Operating revenues
$2,734,372
$2,372,178
$2,463,701
$2,457,914
$2,116,737
Net income attributable to Werner*
$259,052
$169,078
$166,944
$168,148
$202,889
Diluted earnings per share*
$3.82
$2.44
$2.38
$2.33
$2.80
Cash dividends declared per share**
$0.46
$0.36
$4.11
$0.34
$0.27
Return on average stockholders’ equity*
Operating ratio
Operating ratio - Truckload Segment
20.4%
88.7%
86.2%
14.7%
14.6%
13.7%
19.5%
90.4%
90.8%
90.9%
93.2%
88.0%
89.4%
89.2%
91.6%
Total assets
Total debt
$2,603,713
$2,156,676
$2,143,864
$2,083,504
$1,807,991
$427,500
$200,000
$300,000
$125,000
$75,000
Stockholders’ equity*
$1,327,550
$1,195,040
$1,111,008
$1,264,753
$1,184,782
Dollars in thousands, except per share amounts
* 2017 includes the favorable impact of the non-cash reduction in deferred income tax expense of $111 million, or $1.52 per diluted share,
in fourth quarter 2017 due to the Tax Cuts and Jobs Act of 2017.
** 2019 includes a $3.75 per share special dividend declared in May 2019.
TOTAL ASSETS
OPERATING REVENUES
2021
$2,603,713
2020
$2,156,676
2019
$2,143,864
2018
$2,083,504
2017
$1,807,991
2021
$2,734,372
2020
$2,372,178
2019
$2,463,701
2018
$2,457,914
2017
$2,116,737
DILUTED EARNINGS PER SHARE
2021
$3.82
2020
$2.44
2019
$2.38
2018
$2.33
2017
$2.80
Werner
achieved
another
record year
of financial
results in
2021.
TO OUR SHAREHOLDERS
Werner achieved another record year of financial results in 2021, despite the many disruptions and
challenges faced by our company and our industry.
As the economy rebounded from shocks formed by the pandemic, truckload and logistics freight demand
outpaced industry capacity. Increased consumer spending and supply chain bottlenecks led to inventory
shortages. COVID issues persisted, and labor challenges escalated.
This environment also produced cost inflation, including a very competitive market for truck drivers.
Shortages of component parts and labor limited industry production of new trucks and trailers, causing
fleets to age and used truck and trailer pricing to increase to record levels.
I am extremely proud of how our Werner team adapted to these changing conditions. Despite the
obstacles, we safely delivered on our promises to Werner customers, with superior on-time
service and advanced solutions.
For the year, revenues increased 15% to $2.7 billion, while our diluted earnings per
share increased 57% to $3.82. Both metrics set new Werner records. For the year, our
Truckload Transportation Services segment grew revenues by 11% and operating
income by 27%. Our Logistics segment increased revenues by 32% and more than
quadrupled their operating income.
Engaged and active operational execution, combined with the durability and
diversification of our Dedicated, One-Way Truckload and Logistics businesses,
contributed to our improved results.
To proactively manage the challenging driver market, we are leveraging the strength
of our industry-leading driver training schools. During the year, we expanded our
school locations from 13 to 19. We added schools in strategically targeted geographic
markets that align closely with our freight base. Our schools are developing well-trained
drivers, including many who decide to join Werner. These driver school graduates that
join Werner are able to further refine their skills with certified and experienced Werner leader
drivers. For the year, our driver hires increased 17%.
In July, we acquired an 80% equity ownship interest in the ECM Transport Group based in Cheswick,
Pennsylvania. ECM operates regional short-haul truckload fleets that serve the Mid-Atlantic, Ohio and
Northeast geographic markets. ECM operates 500 trucks and is known for its excellent safety and service
performance, an outstanding leadership team and highly-skilled drivers with superior driver retention.
In November, we acquired NEHDS Logistics, LLC based in Monroe, Connecticut. NEHDS is a leading,
high-service final mile company delivering big and bulky products in the Northeast and Midwest, using
2-person delivery teams for residential and commercial deliveries. NEHDS, which had $71 million of
revenues in the year preceding the acquisition, has access to a growing network of 400 delivery trucks
with a network of 19 cross-dock, warehouse and customer facilities. NEHDS, with its talented team of
associates, is being combined with our existing final mile business, branded as Werner Final Mile.
For both acquisitions, we retained their talented leadership teams and associates. Both companies
met our stringent acquisition criteria of being additive to our business and accretive to our earnings.
Integration with ECM and NEHDS is proceeding ahead of expectations. I am pleased to welcome the
elite teams of ECM and NEHDS professionals to Werner.
Over the past year, we made tremendous progress by strengthening and enhancing our information
technology systems through Werner EDGE. We are developing innovative products for our customers,
drivers and capacity providers with SaaS solutions to produce better, faster and more secure software
solutions. At the same time, we are actively committed to being on the leading edge for autonomous
and alternative fuel truck developments, as they continue to evolve.
Werner was founded in 1956 with the simple belief that if we do the right thing for our drivers, associates
and customers, the results will follow. During this past year, we formalized our commitment to do the
right thing for our planet as part of our evolving sustainability strategy. While ESG (Environmental,
Social and Governance) concepts have long been woven into the fabric of Werner, the issuance of our
inaugural corporate social responsibility report last year further elevates our commitment to conducting
our business in a socially and environmentally responsible manner.
As we pass the 65-year mark in Werner’s history, we are rebuilt to thrive with one of the most durable, stable
and resilient business models in the industry. Our diversified portfolio of high-service Dedicated, One-
Way Truckload and Logistics businesses is uniquely designed to produce strong financial performance in
a variety of freight markets.
Werner is continually raising the bar for safety and service through superior execution and operational
performance. The elite women and men of Werner consistently deliver on our promises to our winning
customers with an unwavering commitment to excellence. I would like to sincerely thank the Werner family
of professional drivers, mechanics and non-driver associates for their resourcefulness, determination,
persistence and creativity.
March 8, 2022
Derek J. Leathers
Chairman, President
and Chief Executive Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[Mark one]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒
☐
For the transition period from ___________ to __________
Commission File Number: 0-14690
WERNER ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nebraska
(State or other jurisdiction of
incorporation or organization)
14507 Frontier Road
Post Office Box 45308
Omaha , Nebraska
(Address of principal executive offices)
47-0648386
(I.R.S. Employer
Identification No.)
68145-0308
(Zip Code)
(402) 895-6640
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 Par Value
Trading Symbol(s)
WERN
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large Accelerated Filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for these purposes that all executive officers and Directors
are “affiliates” of the Registrant) as of June 30, 2021, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately
$3.001 billion (based on the closing sale price of the Registrant’s Common Stock on that date as reported by Nasdaq).
As of February 7, 2022, 65,803,101 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Registrant for the Annual Meeting of Stockholders to be held May 10, 2022, are incorporated in Part III of this report.
WERNER ENTERPRISES, INC.
INDEX
PART I
Page
Item 1.
Business .............................................................................................................................................................. 1
Item 1A.
Risk Factors ........................................................................................................................................................ 6
Item 1B.
Unresolved Staff Comments ............................................................................................................................. 10
Item 2.
Item 3.
Item 4.
Properties .......................................................................................................................................................... 11
Legal Proceedings ............................................................................................................................................. 12
Mine Safety Disclosures ................................................................................................................................... 12
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
Item 6.
Item 7.
of Equity Securities ........................................................................................................................................... 12
Reserved ............................................................................................................................................................ 14
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................ 15
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk ........................................................................... 25
Item 8.
Item 9.
Financial Statements and Supplementary Data ................................................................................................. 26
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................ 54
Item 9A.
Controls and Procedures ................................................................................................................................... 54
Item 9B.
Other Information ............................................................................................................................................. 56
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ............................................................. 56
PART III
Item 10.
Directors, Executive Officers and Corporate Governance ................................................................................ 56
Item 11.
Executive Compensation ................................................................................................................................... 56
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .......... 56
Item 13.
Certain Relations and Related Transactions, and Director Independence ......................................................... 57
Item 14.
Principal Accountant Fees and Services ........................................................................................................... 57
PART IV
Item 15.
Exhibit and Financial Statement Schedules ...................................................................................................... 57
Item 16.
Form 10-K Summary ........................................................................................................................................ 59
This Annual Report on Form 10-K for the year ended December 31, 2021 (this “Form 10-K”) and the documents incorporated
herein by reference contain forward-looking statements based on expectations, estimates and projections as of the date of this
filing. Actual results may differ materially from those expressed in such forward-looking statements. For further guidance, see
Item 1A of Part I and Item 7 of Part II of this Form 10-K.
Unless otherwise indicated, references to “we,” “us,” “our,” “Company,” or “Werner” mean Werner Enterprises, Inc. and its
subsidiaries.
PART I
ITEM 1.
BUSINESS
General
We are a transportation and logistics company engaged primarily in transporting truckload shipments of general commodities in
both interstate and intrastate commerce. We also provide logistics services through our Werner Logistics segment. We believe
we are one of the largest truckload carriers in the United States (based on total operating revenues), and our headquarters are
located in Omaha, Nebraska, near the geographic center of our truckload service area. We were founded in 1956 by Clarence L.
Werner, who started the business with one truck at the age of 19. He served as our Chairman until his term ended at the 2021
Annual Meeting of Stockholders, and was then named Chairman Emeritus by the Board of Directors in recognition of his
longstanding leadership. We were incorporated in the State of Nebraska in September 1982 and completed our initial public
offering in June 1986 with a fleet of 632 trucks as of February 1986. At the end of 2021, our Truckload Transportation Services
(“TTS”) segment had a fleet of 8,340 trucks, of which 8,050 were company-operated and 290 were owned and operated by
independent contractors. Our Werner Logistics division operated an additional 55 intermodal drayage trucks at the end of 2021.
We acquired ECM Associated, LLC (“ECM”) in July 2021 and NEHDS Logistics, LLC (“NEHDS”) in November 2021. ECM,
through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service (“MCS”) subsidiaries, provides regional
truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the U.S. and operates nearly 500 trucks and 2,000
trailers in its network of eight operational facilities and 18 drop yards. ECM achieved revenues of $108 million in 2020.
NEHDS is a final mile residential delivery provider with access to a network of 400 final mile delivery trucks serving
customers primarily in the Northeast and Midwest U.S. markets. NEHDS delivers primarily big and bulky products (primarily
furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries through a network of
19 cross dock, warehouse and customer facilities. We are rebranding NEHDS with our existing final mile business as Werner
Final Mile. NEHDS achieved revenues of $71 million for the 12-month period ended September 2021. These acquisitions
expanded our fleet size, geographic market presence, and network of operational facilities. Additional information regarding
these acquisitions is included in Note 2 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form
10-K.
We have two reportable segments – TTS and Werner Logistics. Our TTS segment is comprised of Dedicated and One-Way
Truckload. Dedicated had 5,235 trucks as of December 31, 2021 and provides truckload services dedicated to a specific
customer, generally for a retail distribution center or manufacturing facility, utilizing either dry van or specialized trailers. One-
Way Truckload had 3,105 trucks as of December 31, 2021 and includes the following operating fleets: (i) the medium-to-long-
haul van (“Van”) fleet transports a variety of consumer nondurable products and other commodities in truckload quantities over
irregular routes using dry van trailers, including Mexico cross-border routes; (ii) the expedited (“Expedited”) fleet provides
time-sensitive truckload services utilizing driver teams; (iii) the regional short-haul (“Regional”) fleet, including ECM, provides
comparable truckload van service within geographic regions across the United States; and (iv) the Temperature Controlled fleet
provides truckload services for temperature sensitive products over irregular routes utilizing temperature-controlled trailers. Our
TTS fleets operate throughout the 48 contiguous U.S. states pursuant to operating authority, both common and contract, granted
by the U.S. Department of Transportation (“DOT”) and pursuant to intrastate authority granted by various U.S. states. We also
have authority to operate in several provinces of Canada and to provide through-trailer service into and out of Mexico. The
principal types of freight we transport include retail store merchandise, consumer products, food and beverage products and
manufactured products. We focus on transporting consumer nondurable products that generally ship more consistently
throughout the year and whose volumes are generally more stable during a slowdown in the economy.
Our Werner Logistics segment is a non-asset-based transportation and logistics provider and generates the majority of our non-
trucking revenues through three operating units. These three Werner Logistics operating units are as follows: (i) Truckload
Logistics, which uses contracted carriers to complete shipments for brokerage customers and freight management customers for
which we offer a full range of single-source logistics management services and solutions; (ii) the intermodal (“Intermodal”) unit
offers rail transportation through alliances with rail and drayage providers as an alternative to truck transportation; and (iii)
Werner Final Mile (“Final Mile”), including NEHDS, offers residential and commercial deliveries of large or heavy items using
third-party agents, independent contractors, and Company employees with two-person delivery teams operating a liftgate
1
straight truck. In first quarter 2021, we completed the previously-announced sale of the Werner Global Logistics (“WGL”)
freight forwarding services for international ocean and air shipments to Scan Global Logistics Group. WGL generated revenues
of $53 million in 2020. Prior to the sale of WGL, Werner Logistics provided international services throughout North America
and Asia, with additional coverage throughout Australia, Europe, South America, and Africa. Werner Logistics continues to
provide North American truck brokerage, freight management, intermodal, and final mile services. Werner Logistics had
transportation services contracts with 26,834 carriers as of December 31, 2021.
Marketing and Operations
Our business philosophy is to provide superior on-time customer service at a significant value for our customers. To accomplish
this, we operate premium modern tractors and trailers. This equipment has fewer mechanical and maintenance issues and helps
attract and retain experienced drivers. We continually develop our business processes and technology to improve customer
service and driver retention. We focus on customers who value the broad geographic coverage, diversified truck and logistics
services, equipment capacity, technology, customized services and flexibility available from a large, financially-stable
transportation and logistics provider.
We operate in the truckload and logistics sectors of the transportation industry. Our TTS segment provides specialized services
to customers based on (i) each customer’s trailer needs (such as van and temperature-controlled trailers), (ii) geographic area
(regional and medium-to-long-haul van, including transport throughout Mexico and Canada), (iii) time-sensitive shipments
(expedited) or (iv) conversion of their private fleet to us (dedicated). In 2021, TTS segment revenues accounted for 75% of total
operating revenues, Werner Logistics revenues accounted for 23% of total operating revenues, and the remaining 2% was
recorded in non-reportable segments. Our Werner Logistics segment manages the transportation and logistics requirements for
customers, providing customers with additional sources of truck capacity, alternative modes of transportation, and systems
analysis to optimize transportation needs. Werner Logistics services include (i) truck brokerage, (ii) freight management,
(iii) intermodal transport, and (iv) final mile. Werner Logistics is highly dependent on qualified associates, information systems
and the services of qualified third-party capacity providers. You can find the revenues generated by services that accounted for
more than 10% of our consolidated revenues, consisting of TTS and Werner Logistics, for the last three years in Note 3 and
Note 14 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K.
We have a diversified freight base but are dependent on a relatively small number of customers for a significant portion of our
revenues. During 2021, our largest 5, 10, 25 and 50 customers comprised 38%, 49%, 66% and 79% of our revenues,
respectively. Our largest customer, Dollar General, accounted for 14% of our total revenues in 2021. Revenues generated by
Dollar General are reported in both of our reportable operating segments. The industry groups of our top 50 customers are 59%
retail and consumer products, 18% manufacturing/industrial, 15% food and beverage and 8% logistics and other. Many of our
One-Way Truckload customer contracts may be terminated upon 30 days’ notice, which is common in the truckload industry.
We are moving toward longer-term Dedicated customer contracts, most of which are two to five years in length (including
some contracts with annual evergreen clauses) and generally may be terminated by either party typically upon a notice period
following the expiration of the contract’s first year. We typically renegotiate rates with our customers for these Dedicated
contracts on an annual basis.
All of our company and independent contractor tractors are equipped with communication devices. These devices enable us and
our drivers to conduct two-way communication using standardized and freeform messages. This technology also allows us to
plan and monitor shipment progress. We automatically monitor truck movement and obtain specific data on the location of all
trucks in the fleet every five minutes. Using the real-time global positioning data obtained from the devices, we have advanced
application systems to improve customer and driver service. Examples of such application systems include: (i) an electronic
logging system which records and monitors drivers’ hours of service and integrates with our information systems to pre-plan
driver shipment assignments based on real-time available driving hours; (ii) software that pre-plans shipments drivers can trade
enroute to meet driver home-time needs without compromising on-time delivery schedules; and (iii) automated “possible late
load” tracking that informs the operations department of trucks possibly operating behind schedule, allowing us to take
preventive measures to avoid late deliveries. In 1998, we began a successful pilot program and subsequently became the first
trucking company in the United States to receive an exemption from DOT to use a global positioning-based paperless log
system as an alternative to the paper logbooks traditionally used by truck drivers to track their daily work activities. We have
used electronic logging devices (“ELDs”) to monitor and enforce drivers’ hours of service since 1996. Since January 2021, we
use an untethered, tablet-based telematics solution that provides an enhanced and more efficient driver experience.
Seasonality
In the trucking industry, revenues generally follow a seasonal pattern. Peak freight demand has historically occurred in the
months of September, October and November. After the December holiday season and during the remaining winter months, our
freight volumes are typically lower because some customers reduce shipment levels. Our operating expenses have historically
been higher in the winter months due primarily to decreased fuel efficiency, increased cold weather-related maintenance costs
2
of revenue equipment and increased insurance and claims costs attributed to adverse winter weather conditions. We attempt to
minimize the impact of seasonality through our marketing program by seeking additional freight from certain customers during
traditionally slower shipping periods and focusing on transporting consumer nondurable products. Revenue can also be affected
by adverse weather conditions, holidays and the number of business days that occur during a given period because revenue is
directly related to the available working days of shippers.
Human Capital Resources
Employee Count: As of December 31, 2021, we employed 9,988 drivers; 595 mechanics and maintenance associates for the
trucking operation; 1,459 office associates for the trucking operation; and 1,483 associates for Werner Logistics, international,
driving schools and other non-trucking operations. Most of our associates are based in the U.S., with about 1% based in Mexico
and Canada. None of our U.S. or Canadian associates are represented by a collective bargaining unit, and we consider relations
with our associates to be good.
Health & Safety: Werner maintains a safety culture that is based on the premise of eliminating workplace incidents, risks and
hazards. In 2021, we achieved our lowest work injury rate in 16 years. The Werner Safety Department is responsible for all
compliance and training issues as it relates to drivers under DOT regulation and Werner policy. Responsibilities of the
department include developing and delivering all driver training on items such as safety issues, driver certification, driver
testing, and hazmat.
Our strong safety culture is demonstrated by ongoing investments in advanced equipment technologies, which lead to improved
safety for our professional drivers. Nearly all of our company-owned trucks have collision-mitigation safety systems, automated
manual transmissions, and forward-facing cameras.
During the COVID-19 pandemic, the transportation industry has been designated by the U.S. government as an essential
industry for keeping the U.S. supply chain moving. Our drivers and mechanics have been on the front lines to ensure the
delivery of essential products, and we take this responsibility seriously. Our primary focus will always be protecting the health
and personal safety of our associates, their families and communities, and our customers. Throughout our offices and terminal
network, we are closely following the safety guidelines set forth by the Centers for Disease Control and Prevention (CDC) and
World Health Organization (WHO).
Diversity & Inclusion: At Werner, we support and encourage the diverse voices and perspectives of our associates, our
customers and our suppliers. Diversity contributes to innovation and connects us to the many communities we serve. We
embrace these values as we move toward an increasingly inclusive culture where every associate feels empowered to bring their
whole self to Werner. In 2021, all management associates completed diversity training focusing on unconscious bias and
inclusion and we formed the Inclusion, Diversity, Equity, Accountability & Learning (IDEAL) Council to lead the creation,
direction, and growth of Associate Resource Groups (“ARGs”). We currently have nine associate-led ARGs whose aim is to
foster a diverse and inclusive workplace and provide support and help in personal and career development and create a safe
space where associates can speak honestly and forthrightly. In 2022, we intend to establish reasonable goals for the
advancement and retention of, and to increase and elevate, women and diverse talent in the management pipeline.
In 2021, we were recognized among the Top Companies for Women to Work for in Transportation by the Women in Trucking
Association for the fourth consecutive year. Werner was recognized for our support of gender diversity, flexible hours and work
requirements, competitive compensation and benefits, and professional development opportunities and career advancement
opportunities. At Werner, our female driver workforce is well over the national average, and approximately half of our driver
associates are ethnically diverse. Additionally, approximately half of our non-driver associates are female or ethnically diverse.
Werner was also honored to be the only trucking company recognized as a 2021 Military Friendly® Company by VIQTORY
Media. It is the fifth consecutive year Werner has received this designation. We are widely recognized as a transportation leader
in military hiring with veterans and veteran spouses.
Professional Driver Recruitment: We recognize that our professional driver workforce is one of our most valuable assets.
Most of our professional drivers are compensated on a per-mile basis. For most company-employed drivers, the rate per mile
generally increases with the drivers’ length of service. Professional drivers may earn additional compensation through incentive
performance pay programs and for performing additional work associated with their job (such as loading and unloading freight
and making extra stops and shorter mileage trips).
At times, there are driver shortages in the trucking industry. Availability of experienced drivers can be affected by (i) changes
in the demographic composition of the workforce; (ii) alternative employment opportunities other than truck driving that
become available in the economy; and (iii) individual drivers’ desire to be home more frequently. We believe that a declining
number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck
safety regulations are tightening driver supply.
3
At Werner, we continue to take actions to strengthen our driver recruiting and retention to make Werner a preferred choice for
the best drivers. Our efforts include raising driver pay, maintaining a new truck and trailer fleet, purchasing best-in-class safety
features for all new trucks, investing in our driver training school network and collaborating with customers to improve or
eliminate unproductive freight. We are focused on providing strong mileage utilization and a large percentage of driving jobs in
shorter-haul operations (such as Dedicated and Regional) that allow drivers to return home more often. We continue to improve
our terminal network to enhance the driver experience. Our untethered, tablet-based telematics solution implemented in 2020
provides Werner drivers with a more efficient experience through smart workflow, best-in-class navigation, improved safety
features and reduced manual data entry. While the trucking industry suffers from high driver turnover rates, we are proud that
our efforts in recent years have continued to have positive results on our driver retention.
Talent Development: We utilize recent driver training school graduates as a significant source of new drivers. These drivers
have completed a training program at a driver training school and hold a commercial driver’s license (“CDL”). They continue
to gain industry experience through our career track program by partnering with a Werner-certified leader prior to that driver
becoming a solo driver with their own truck. As mentioned above, the recruiting environment for recent driver training school
graduates became even more challenging in 2021 as social distancing requirements, state licensing cut backs and temporary
closures limited the number of placement drivers entering our career track program. The availability of these drivers has also
been negatively impacted by the decreased availability of student loan financing for driver training schools. At the end of 2021,
we operated a total of 19 driver training locations to assist with the training and development of drivers for our company and
the industry, and we expect to open three new driver training locations during first quarter 2022.
Independent Contractors: We also recognize that independent contractors complement our company-employed drivers. As of
December 31, 2021, we had 290 independent contractors. Independent contractors supply their own tractors and drivers and are
responsible for their operating expenses. Independent contractors also provide us with another source of drivers to support our
fleet. We, along with others in the trucking industry, however, continue to experience independent contractor recruitment and
retention difficulties that have persisted over the past several years. Challenging operating conditions, including inflationary
cost increases that are the responsibility of independent contractors and a shortage of financing available to independent
contractors for equipment purchases, continue to make it difficult to recruit and retain independent contractors.
Revenue Equipment
As of December 31, 2021, we operated 8,050 company tractors and 290 tractors owned by independent contractors in our TTS
segment. Our Werner Logistics segment operated an additional 55 drayage company tractors and 90 company delivery trucks at
the end of 2021. The TTS segment company tractors were primarily manufactured by Freightliner (a Daimler company),
Peterbilt and Kenworth (both divisions of PACCAR) and International (a Navistar company). The Werner Final Mile company
delivery trucks are manufactured by Hino. We adhere to a comprehensive maintenance program for both company tractors and
trailers. We inspect independent contractor tractors prior to acceptance for compliance with Werner and DOT operational and
safety requirements. We periodically inspect these tractors, in a manner similar to company tractor inspections, to monitor
continued compliance. We also regulate the vehicle speed of company trucks to improve safety and fuel efficiency.
The average age of our TTS segment company truck fleet was 2.2 years at December 31, 2021, compared to 2.0 years at
December 31, 2020. The average age of our trailer fleet was 4.5 years at December 31, 2021, compared to 4.0 years at
December 31, 2020. All of our trucks are equipped with satellite tracking devices, and nearly all of our company-owned trucks
have collision mitigation safety systems and automated manual transmissions.
We operated 27,225 company-owned trailers at December 31, 2021, comprised of dry vans, flatbeds, temperature-controlled,
and other specialized trailers. Most of our trailers were manufactured by Wabash National Corporation and Great Dane. Nearly
all of our dry van trailer fleet consisted of 53-foot composite trailers, and we also provide other trailer lengths to meet the
specialized needs of certain customers. All of our trailers have satellite tracking devices.
Our wholly-owned subsidiary, Werner Fleet Sales, sells our used trucks and trailers. Werner Fleet Sales has been in business
since 1992 and operates in 8 locations. At times, we may also trade used trucks to original equipment manufacturers when
purchasing new trucks.
Fuel
In 2021, we purchased nearly all of our fuel from a predetermined network of fuel truck stops throughout the United States
comprised mostly of three large fuel truck stop chains. We negotiate discounted pricing based on historical purchase volumes
with these fuel truck stop chains and other factors.
Shortages of fuel, increases in fuel prices and rationing of petroleum products can have a material adverse effect on our
operations and profitability. Our customer fuel surcharge reimbursement programs generally enable us to recover from our
customers a majority, but not all, of higher fuel prices compared to normalized average fuel prices. These fuel surcharges,
4
which automatically adjust depending on the U.S. Department of Energy (“DOE”) weekly retail on-highway diesel fuel prices,
enable us to recoup much of the higher cost of fuel when prices increase and provide customers with the benefit of lower fuel
costs when fuel prices decline. We do not generally recoup higher fuel costs for empty and out-of-route miles (which are not
billable to customers) and truck idle time. We cannot predict whether fuel prices will increase or decrease in the future or the
extent to which fuel surcharges will be collected from customers. As of December 31, 2021, we had no derivative financial
instruments to reduce our exposure to fuel price fluctuations.
We maintain aboveground and underground fuel storage tanks at some of our terminals. Leakage or damage to these facilities
could expose us to environmental clean-up costs. The tanks are routinely inspected to help prevent and detect such problems.
We are committed to supporting global efforts to reduce carbon emissions and to continually evaluate and identify new
environmental initiatives to support global sustainability efforts. We currently maintain a late-model truck fleet to take
advantage of latest technologies to reduce fuel consumption and emissions. Our future environmental goals include doubling
intermodal usage by 2030, thereby further reducing emissions, and by 2035, reducing carbon emissions by 55% compared to a
2007 baseline, with 30% or more of all Company truck miles being executed by zero emission vehicles.
Regulations
As a for-hire motor carrier, we are regulated by the DOT, and certain areas of our business are subject to applicable federal,
state, and international laws and regulations. DOT and an agency within DOT, the Federal Motor Carrier Safety Administration
(“FMCSA”), generally govern matters such as safety requirements and compliance, registration to engage in motor carrier
operations, drivers’ hours of service (“HOS”), and certain mergers, consolidations, and acquisitions. Werner maintains a
satisfactory safety rating, which is the highest available rating of the three safety ratings given by FMCSA. A conditional or
unsatisfactory safety rating could adversely impact Werner’s business, as some of our customer contracts require a satisfactory
rating. Werner must also comply with federal, state, and international regulations which govern equipment weight and
dimensions.
FMCSA’s Compliance, Safety, Accountability (“CSA”) safety initiative monitors the safety performance of motor carriers.
CSA uses the Safety Measurement System (“SMS”) to analyze data from roadside inspections, crash reports, and investigation
results. The Fixing America’s Surface Transportation (“FAST”) Act of 2015 directed FMCSA to remove from public view
certain information regarding carrier’s compliance and safety performance. The FAST Act also instructed FMCSA to study the
accuracy of CSA and SMS data and issue a corrective action plan. Werner continues to monitor FMCSA’s actions and CSA
related developments.
Interstate motor carriers are subject to the FMCSA HOS regulations, which govern our drivers’ operating hours. The HOS of
Drivers Final Rule which became effective September 29, 2020, includes provisions for short haul, adverse driving conditions,
a revision to the 30-minute rest break requirement, and split-sleeper berth which allows drivers to split their 10-hour off duty
period in different ways. In August 2020, FMCSA proposed a pilot program allowing commercial drivers to pause their 14-hour
driving window, which Werner continues to monitor.
Werner is the industry leader for ELDs to record driver hours and pioneered the Werner Paperless Logging System in 1996 that
was subsequently approved for our use by FMCSA in 1998. FMCSA’s ELD Final Rule went into effect in December 2017,
requiring all motor carriers to have certified ELDs that meet specific standards for documenting HOS.
The FMCSA Commercial Driver’s License Drug and Alcohol Clearinghouse (the “Clearinghouse”) Final Rule was published in
December 2016 with the effective date of January 6, 2020. The Clearinghouse requires motor carriers, designated service
agents, medical review officers, and substance abuse professionals to submit records related to drug and alcohol tests, including
test refusals and positive drug test results, to the nationwide database. Motor carriers are also required to query the database
prior to hiring an applicant and on an annual basis.
Continuing in 2022, motor carriers are required to perform annual random drug tests for 50% of existing drivers. The rate was
increased from 25% on January 1, 2020 in response to the 2018 FMCSA Drug and Alcohol Testing Survey, which reported an
increase to 1.0% of the random testing positive rate for controlled substances. The minimum annual percentage rate for random
alcohol testing remains at 10%.
FMCSA issued its final rule for Entry-Level Driver Training (“ELDT”) in December 2016. However, after delays announced
by FMCSA, the new effective date was February 7, 2022. ELDT now requires anyone wanting to obtain a Commercial Driver’s
License to successfully complete a specific program of theory and behind-the-wheel instruction provided by a school or other
entity on FMCSA’s new Training Provider Registry. We are in compliance with the ELDT rule.
Following the signing of the Infrastructure Investment and Jobs Act (IIJA) on November 15, 2021, the FMCSA is required to
establish a pilot program to allow persons ages 18, 19, and 20 to operate commercial motor vehicles in interstate commerce.
5
The FMCSA’s Safe Driver Apprenticeship Pilot Program is currently accepting applications by motor carriers who are willing
to participate in the pilot program, and FMCSA plans to limit the participation to 1,000 carriers and 3,000 apprentices.
The U.S. Environmental Protection Agency (“EPA”) and DOT announced in August 2016 Phase 2 of the Greenhouse Gas and
Fuel Efficiency Standards for Medium and Heavy-Duty Trucks. The final rule requires a reduction of carbon emissions and fuel
savings from engines, vehicles, and new trailers to be phased in over the next decade. In January 2020, EPA announced an
Advance Notice of Proposed Rulemaking that would establish new standards for highway heavy-duty engines to lower nitrogen
oxide emissions. In August 2021, EPA announced plans to reduce greenhouse gas emissions from Heavy-Duty Trucks through
a series of rulemakings over the next three years. The first rulemaking, to be finalized in 2022, will apply to heavy-duty
vehicles starting in model year 2027.
California’s ongoing emissions reduction goals have significantly impacted the industry. The California Air Resources Board
regulations not only apply to California intrastate carriers, but also to carriers outside of California who own or dispatch
equipment in the state. Werner continues to structure our fleet plans to operate compliant equipment in California.
Approximately 4% of our truck miles in 2021 were in the state of California.
Our operations are subject to applicable federal, state, and local environmental laws and regulations, many of which are
implemented by the EPA and similar state regulatory agencies. These laws and regulations govern the management of
hazardous wastes, discharge of pollutants into the air and surface and underground waters and disposal of certain substances.
We do not believe that compliance with these regulations has a material effect on our capital expenditures, earnings, and
competitive position.
Werner is dedicated to participating in the development of meaningful public policy by continuing to evaluate local, state, and
federal legislative and regulatory actions that impact our operations.
Competition
The freight transportation industry is highly competitive and includes thousands of trucking and non-asset-based logistics
companies. We have a small share of the markets we target. Our TTS segment competes primarily with other truckload carriers.
Logistics companies, digital brokers, intermodal companies, railroads, less-than-truckload carriers and private carriers provide
competition for both our TTS and Werner Logistics segments. Our Werner Logistics segment also competes for the services of
third-party capacity providers.
Competition for the freight we transport or manage is based primarily on service, efficiency, available capacity and, to some
degree, on freight rates alone. We believe that few other truckload carriers have greater financial resources, own more
equipment or carry a larger volume of freight than us. We believe we are one of the largest carriers in the truckload
transportation industry based on total operating revenues.
Internet Website
We maintain an Internet website where you can find additional information regarding our business and operations. The website
address is www.werner.com. On the website, we make certain investor information available free of charge, including our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, stock ownership reports filed
under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any amendments to such
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. This information is included on our website as
soon as reasonably practicable after we electronically file or furnish such materials to the U.S. Securities and Exchange
Commission (“SEC”). We also provide our corporate governance materials, such as Board committee charters and our Code of
Corporate Conduct, on our website free of charge, and we may occasionally update these materials when necessary to comply
with SEC and NASDAQ rules or to promote the effective and efficient governance of our company. Information provided on
our website is not incorporated by reference into this Form 10-K.
ITEM 1A.
RISK FACTORS
The following risks and uncertainties may cause our actual results, business, financial condition and cash flows to materially
differ from those anticipated in the forward-looking statements included in this Form 10-K. Caution should be taken not to
place undue reliance on forward-looking statements made herein because such statements speak only to the date they were
made. Unless otherwise required by applicable securities laws, we undertake no obligation or duty to revise or update any
forward-looking statements contained herein to reflect subsequent events or circumstances or the occurrence of unanticipated
events. Also refer to the Cautionary Note Regarding Forward-Looking Statements in Item 7 of Part II of this Form 10-K.
6
Risks Related to our Business and Industry
Our business is subject to overall economic conditions that could have a material adverse effect on our results of operations.
We are sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand
and industry truck capacity. When shipping volumes decline or available truck capacity increases, freight pricing generally
becomes more competitive as carriers compete for loads to maintain truck productivity. We may be negatively affected by
future economic conditions including employment levels, business conditions, fuel and energy costs, public health crises,
interest rates and tax rates. Economic conditions may also impact the financial condition of our customers, resulting in a greater
risk of bad debt losses, and that of our suppliers, which may affect negotiated pricing or availability of needed goods and
services.
Difficulty in recruiting and retaining experienced drivers, recent driver training school graduates and independent
contractors impacts our results of operations.
At times, the trucking industry has experienced driver shortages. Driver availability may be affected by changing workforce
demographics, alternative employment opportunities, national unemployment rates, freight market conditions, availability of
financial aid for driver training schools and changing industry regulations. If such a shortage were to occur and additional driver
pay rate increases were necessary to attract and retain drivers, our results of operations would be negatively impacted to the
extent that we could not obtain corresponding freight rate increases. Additionally, a shortage of drivers could result in idled
equipment, which would affect our profitability and would limit growth opportunities.
Independent contractor availability may also be affected by both inflationary cost increases that are the responsibility of
independent contractors and the availability of equipment financing. On-going federal and state legislative challenges to the
independent contractor model could also affect independent contractor availability. In recent years, the topic of the
classification of individuals as employees or independent contractors has gained increased attention among federal and state
regulators as well as the plaintiffs’ bar. Various legislative or regulatory proposals have been introduced at the federal and state
levels that may affect the classification status of individuals as independent contractors or employees for either employment tax
purposes (e.g., withholding, social security, Medicare and unemployment taxes) or other benefits available to employees (e.g.,
workers’ compensation benefits and minimum wage). Recently, certain states (most prominently, California) have seen
significant increased activity by tax and other regulators and numerous class action lawsuits filed against transportation
companies that engage independent contractors. Potential changes, if any, that could impact the legal classification of the
independent contractor relationship between us and our independent contractors could have a material adverse effect on our
ability to recruit and retain independent contractors. If a shortage of independent contractors occurs, additional increases in per-
mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract
and retain a sufficient number of drivers. These increases would negatively affect our results of operations to the extent that we
would be unable to obtain corresponding freight rate increases.
Moreover, class action litigation in this area against other transportation companies has resulted in significant damage awards
and/or monetary settlements for workers who have been allegedly misclassified as independent contractors.
Increases in fuel prices and shortages of fuel can have a material adverse effect on the results of operations and
profitability.
To lessen the effect of fluctuating fuel prices on our margins, we have fuel surcharge programs with our customers. These
programs generally enable us to recover a majority, but not all, of the fuel price increases. Fuel prices that change rapidly in
short time periods also impact our recovery because the surcharge rate in most programs only changes once per week. Fuel
shortages, increases in fuel prices and petroleum product rationing could have a material adverse impact on our operations and
profitability. To the extent that we cannot recover the higher cost of fuel through customer fuel surcharges, our financial results
would be negatively impacted. As of December 31, 2021, we had no derivative financial instruments to reduce our exposure to
fuel price fluctuations.
We operate in a highly competitive industry, which may limit growth opportunities and reduce profitability.
The freight transportation industry is highly competitive and includes thousands of trucking and non-asset-based logistics
companies. We compete primarily with other truckload carriers in our TTS segment. Logistics companies, digital brokers,
intermodal companies, railroads, less-than-truckload carriers and private carriers also provide a lesser degree of competition in
our TTS segment, but such providers are more direct competitors in our Werner Logistics segment. Competition for the freight
we transport or manage is based primarily on service, efficiency, available capacity and, to some degree, on freight rates alone.
This competition could have an adverse effect on either the number of shipments we transport or the freight rates we receive,
which could limit our growth opportunities and reduce our profitability.
7
The seasonal pattern generally experienced in the trucking industry may affect our periodic results during traditionally
slower shipping periods and winter months.
In the trucking industry, revenues generally follow a seasonal pattern which may affect our results of operations. After the
December holiday season and during the remaining winter months, our freight volumes are typically lower because some
customers reduce shipment levels. Our operating expenses have historically been higher in the winter months because of cold
temperatures and other adverse winter weather conditions which result in decreased fuel efficiency, increased cold weather-
related maintenance costs of revenue equipment and increased insurance and claims costs. Revenue can also be affected by
adverse weather conditions, holidays and the number of business days during a given period because revenue is directly related
to the available working days of shippers.
We depend on key customers, the loss or financial failure of which may have a material adverse effect on our operations and
profitability.
A significant portion of our revenue is generated from key customers. During 2021, our largest 5, 10, 25 and 50 customers
accounted for 38%, 49%, 66%, and 79% of revenues, respectively. Our largest customer, Dollar General, accounted for 14% of
the our total revenues in 2021. We do not have long-term contractual relationships with many of our key One-Way Truckload
customers. Most of our Dedicated customer contracts are two to five years in length and generally may be terminated by either
party typically upon a notice period following the expiration of the contract’s first year. We typically renegotiate rates with our
customers for these Dedicated contracts annually. We cannot provide any assurance that key customer relationships will
continue at the same levels. If a key customer substantially reduced or terminated our services, it could have a material adverse
effect on our business and results of operations. We review our customers’ financial conditions for granting credit, monitor
changes in customers’ financial conditions on an ongoing basis and review individual past-due balances and collection
concerns. However, a key customer’s financial failure may negatively affect our results of operations.
We depend on the services of third-party capacity providers, the availability of which could affect our profitability and limit
growth in our Werner Logistics segment.
Our Werner Logistics segment is highly dependent on the services of third-party capacity providers, such as other truckload
carriers, less-than-truckload carriers, final-mile delivery contractors, and railroads. Many of those providers face the same
economic challenges as we do and therefore are actively and competitively soliciting business. These economic conditions may
have an adverse effect on the availability and cost of third-party capacity. If we are unable to secure the services of these third-
party capacity providers at reasonable rates, our results of operations could be adversely affected.
If we cannot effectively manage the challenges associated with doing business internationally, our revenues and profitability
may suffer.
Our results are affected by the success of our operations in Mexico and other foreign countries in which we operate (see Note
14 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K). We are subject to risks of
doing business internationally, including fluctuations in foreign currencies, changes in the economic strength of the countries in
which we do business, difficulties in enforcing contractual obligations and intellectual property rights, burdens of complying
with a wide variety of international and United States export and import laws, and social, political, and economic instability.
Additional risks associated with our foreign operations, including restrictive trade policies and imposition of duties, taxes, or
government royalties by foreign governments, are present but have been largely mitigated by the terms of NAFTA for Mexico
and Canada. The United States, Canada and Mexico ratified the USMCA as an overhaul and update to NAFTA, and it became
effective in July 2020. We believe we are one of the largest truckload carriers in terms of freight volume shipped to and from
the United States, Mexico, and Canada. It is currently difficult for Werner to anticipate the full impact of this agreement on
foreign trade and our Mexico operations. The agreement permitting cross border movements for both United States and
Mexican based carriers into the United States and Mexico presents additional risks in the form of potential increased
competition and the potential for increased congestion on the cross border lanes between countries.
We rely on the services of key personnel, the loss of which could impact our future success.
We are highly dependent on the services of key personnel, including our executive officers. Although we believe we have an
experienced and highly qualified management team, the loss of the services of these key personnel could have a significant
adverse impact on us and our future profitability.
Difficulty in obtaining materials, equipment, goods, and services from our vendors and suppliers could adversely affect our
business.
We are dependent on our vendors and suppliers. We believe we have good vendor relationships and that we are generally able
to obtain favorable pricing and other terms from vendors and suppliers. If we fail to maintain satisfactory relationships with our
vendors and suppliers, or if our vendors and suppliers are unable to provide the products and materials we need or experience
8
significant financial problems, we could experience difficulty in obtaining needed goods and services because of production
interruptions, limited material availability, or other reasons. Currently, tractor and trailer manufacturers are experiencing
significant shortages of semiconductor chips and other component parts and supplies, forcing many manufacturers to reduce or
suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles,
which could have a material adverse effect on our business, financial condition, and results of operations, particularly our
maintenance expense, mileage productivity, and driver retention.
We use our information systems extensively for day-to-day operations, and service interruptions or a failure of our
information technology infrastructure or a breach of our information security systems, networks or processes could have a
material adverse effect on our business.
We depend on the stability, availability and security of our information systems to manage our business. Much of our software
was developed internally or by adapting purchased software applications to suit our needs. Our information systems are used
for planning loads, communicating with and dispatching drivers and other capacity providers, billing customers, paying vendors
and providing financial reports. We rely on strategic vendors for GPS and satellite communication services, which are
integrated in our information systems. If any of our critical information systems fail or become unavailable, or those of our
service providers, we would have to perform certain functions manually, which could temporarily affect our ability to
efficiently manage our operations. We have redundant computer hardware systems to reduce this risk. We also maintain
information security policies to protect our systems and data from cyber security events and threats. The security risks
associated with information technology systems have increased in recent years because of the increased sophistication,
activities and evolving techniques of perpetrators of cyber attacks. The techniques used to obtain unauthorized access, disable
or degrade service or sabotage systems change frequently, may be difficult to detect for a long time and often are not
recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement
adequate preventative measures. A failure in or breach of our information technology security systems, or those of our third-
party service providers, as a result of cyber attacks or unauthorized network access could disrupt our business, result in the
disclosure or misuse of confidential or proprietary information, increase our costs and/or cause losses and reputational damage.
In addition, recently, there has also been heightened regulatory and enforcement focus on data protection in the U.S., and failure
to comply with applicable U.S. data protection regulations or other data protection standards may expose us to litigation, fines,
sanctions or other penalties, which could harm our reputation and adversely impact our business, results of operations and
financial condition.
The COVID-19 pandemic has adversely impacted our business, as well as the operations of our customers and suppliers.
The COVID-19 pandemic has resulted in a slowdown of economic activity and a disruption in supply chains. Our business is
sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand and
industry truck capacity. Such conditions may also impact the financial condition of our customers, resulting in a greater risk of
bad debt losses, and that of our suppliers, which may affect the availability or pricing of needed goods and services. Although
we have taken numerous actions to lessen the adverse impact of the COVID-19 pandemic, our 2022 results could be further
impacted by the disruptive effects of COVID-19, including but not limited to adverse effects on freight volumes and pricing and
availability of qualified personnel. Such outbreaks could affect our operations and business continuity if a significant number of
our essential employees, overall or in a key location, are quarantined from contraction of or exposure to the disease or if future
governmental orders prevent our employees or critical suppliers (including individuals that have not received mandated
vaccinations) from working. Our compliance with mandates could lead to employee absences, resignations, labor disputes, or
work stoppages. The degree of disruption is difficult to predict because of many factors, including the uncertainty surrounding
the magnitude and duration of the pandemic, governmental actions that have been and may continue to be imposed, as well as
the rate of economic recovery after the pandemic subsides. The unpredictable nature and uncertainty of the current COVID-19
pandemic could also magnify other risk factors disclosed above and makes it impractical to identify all potential risks.
Risks Related to Laws and Regulations
We operate in a highly regulated industry. Changes in existing regulations or violations of existing or future regulations
could adversely affect our operations and profitability.
We are regulated by the DOT and its agency the FMCSA in the United States and similar governmental transportation agencies
in foreign countries in which we operate. We are also regulated by agencies in certain U.S. states. These regulatory agencies
have the authority to govern transportation-related activities, such as safety, authorization to conduct motor carrier operations
and other matters. The Regulations subsection in Item 1 of Part I of this Form 10-K describes several proposed and pending
regulations that may have a significant effect on our operations including our productivity, driver recruitment and retention and
capital expenditures.
9
Our operations are subject to applicable environmental laws and regulations, the violation of which could result in
substantial fines or penalties.
In addition to direct regulation by DOT, FMCSA, EPA and other federal, state, and local agencies, we are subject to applicable
environmental laws and regulations dealing with the handling of hazardous materials, aboveground and underground fuel
storage tanks, discharge and retention of storm-water, and emissions from our vehicles. We operate in industrial areas, where
truck terminals and other industrial activities are located and where groundwater or other forms of environmental contamination
have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous waste
disposal, among others. We also maintain bulk fuel storage at some of our facilities. 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
material adverse effect on our business and operating results. If we fail to comply with applicable environmental regulations,
we could be subject to substantial fines or penalties and to civil and criminal liability. Tractors and trailers used in our daily
operations have been affected by regulatory changes related to air emissions and fuel efficiency, and may be adversely affected
in the future by new regulatory actions.
Risks Related to Financial Matters
Our earnings could be reduced by increases in the number of insurance claims, cost per claim, costs of insurance premiums
or availability of insurance coverage.
We are self-insured for a significant portion of liability resulting from bodily injury, property damage, cargo and associate
workers’ compensation and health benefit claims. This is supplemented by premium-based insurance coverage with insurance
carriers above our self-insurance level for each type of coverage. To the extent we experience a significant increase in the
number of claims, cost per claim (including costs resulting from large verdicts) or insurance premium costs for coverage in
excess of our retention and deductible amounts, our operating results would be negatively affected. Although we believe our
aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or
more claims could exceed our aggregate coverage limits. In addition, the transportation industry has recently experienced
significant increases in premiums for insurance coverage above self-insurance levels. Healthcare legislation and inflationary
cost increases could also have a negative effect on our results.
Decreased demand for our used revenue equipment could result in lower unit sales and resale values.
We are sensitive to changes in used equipment prices and demand, especially with respect to tractors. We have been in the
business of selling our company-owned trucks since 1992, when we formed our wholly-owned subsidiary Werner Fleet Sales.
Reduced demand for used equipment could result in a lower volume of sales or lower sales prices, either of which could
negatively affect our proceeds from sales of assets.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
10
ITEM 2.
PROPERTIES
Our headquarters are located on approximately 138 acres near U.S. Interstate 80 west of Omaha, Nebraska, 55 acres of which
are undeveloped. Our headquarter facilities have suitable space available to accommodate planned needs for at least the next
three to five years. We also have several terminals throughout the United States, consisting of office and/or maintenance
facilities. In addition, we own parcels of land in several locations in the United States for future terminal development. Our
terminal locations are described below:
Owned or Leased
Description
Location
Omaha, Nebraska
Omaha, Nebraska
Phoenix, Arizona
West Memphis, Arkansas
Fontana, California
Denver, Colorado
Lake City, Florida
Lakeland, Florida
Atlanta, Georgia
Joliet, Illinois
Brownstown, Michigan
Springfield, Ohio
Easton, Pennsylvania
Dallas, Texas
El Paso, Texas
Laredo, Texas
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Corporate headquarters, maintenance,
truck sales
Disaster recovery, warehouse
Office, maintenance
Office, maintenance
Office, maintenance, truck sales
Maintenance
Office, maintenance
Maintenance
Office, maintenance, truck sales
Office, maintenance, truck sales
Maintenance
Office, maintenance, truck sales
Office, maintenance, truck sales
Office, maintenance, truck sales
Office, maintenance
Segment
TTS, Werner Logistics,
Corporate
Corporate
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
Office, maintenance, transloading,
truck sales
TTS, Werner Logistics
At December 31, 2021, we leased (i) small sales offices, brokerage offices and trailer parking yards in various locations
throughout the United States and (ii) office space in Mexico and Canada. We own (i) a 96-room motel located near our Omaha
headquarters; (ii) an 85-room hotel located near our Atlanta terminal; (iii) a 71-room private driver lodging facility at our Dallas
terminal; and (iv) a terminal facility in Queretaro, Mexico, which we lease to a third party. The Werner Fleet Sales network has
nine locations, which are located in certain terminals listed above. Our driver training schools operate in 19 locations in the
United States, either in certain terminals listed above or in company-owned or leased facilities. As a result of our ECM and
NEHDS acquisitions during 2021, we added eight operational facilities, 18 drop yards, and a network of 19 cross dock,
warehouse, and customer facilities.
11
ITEM 3.
LEGAL PROCEEDINGS
We are a party subject to routine litigation incidental to our business, primarily involving claims for bodily injury, property
damage, cargo and workers’ compensation incurred in the transportation of freight. For more information about our insurance
program and legal proceedings, see Item 1A, Risk Factors – “Our earnings could be reduced by increases in the number of
insurance claims, cost per claim, costs of insurance premiums or availability of insurance coverage”, Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates, and Item 8,
Financial Statements and Supplementary Data – Note 1 and Note 12.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Our common stock trades on the NASDAQ Global Select MarketSM tier of the NASDAQ Stock Market under the symbol
“WERN”. As of February 7, 2022, our common stock was held by 413 stockholders of record. Because many of our shares of
common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number
of stockholders represented by these record holders.
Dividend Policy
We have paid cash dividends on our common stock following each fiscal quarter since the first payment in July 1987. Our
current quarterly dividend rate is $0.12 per common share. We currently intend to continue paying a regular quarterly dividend.
We do not currently anticipate any restrictions on our future ability to pay such dividends. However, we cannot give any
assurance that dividends will be paid in the future or of the amount of any such quarterly or special dividends because they are
dependent on our earnings, financial condition, and other factors.
Equity Compensation Plan Information
For information on our equity compensation plans, please refer to Item 12 of Part III of this Form 10-K.
12
Performance Graph
Comparison of Five-Year Cumulative Total Return
The following graph is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of
Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or
subsequent filing by us under the Securities Act of 1933 or the Exchange Act except to the extent we specifically request that
such information be incorporated by reference or treated as soliciting material.
Werner Enterprises, Inc. (WERN)
Standard & Poor’s 500
2021 Peer Group
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2016
$
$
$
100 $
100 $
100 $
145 $
122 $
130 $
112 $
116 $
104 $
156 $
153 $
140 $
12/31/2021
209
233
300
170 $
181 $
184 $
Assuming the investment of $100 on December 31, 2016, and reinvestment of all dividends, the graph above compares the
cumulative total stockholder return on our common stock for the last five fiscal years with the cumulative total return of
Standard & Poor’s 500 Market Index and our Peer Group over the same period. Our Peer Group includes companies similar to
us in the transportation industry and has the following companies: ArcBest; Covenant Transportation; Forward Air; Heartland
Express; Hub Group; JB Hunt; Knight-Swift Transportation; Landstar System; Marten Transport; Old Dominion Freight Line;
Saia; Schneider National; US Xpress; and YRC Worldwide. Our stock price was $47.66 as of December 31, 2021. This price
was used for purposes of calculating the total return on our common stock for the year ended December 31, 2021.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On November 9, 2021, our Board of Directors approved and announced a new stock repurchase program under which the
Company is authorized to repurchase up to 6,000,000 shares of its common stock. On the same day, our Board of Directors
withdrew the previous stock repurchase authorization that was approved on May 14, 2019, which had 1,496,983 shares
remaining available for repurchase. As of December 31, 2021, the Company had purchased 977,886 shares pursuant to the new
authorization and had 5,022,114 shares remaining available for repurchase. The Company may purchase shares from time to
time depending on market, economic and other factors. The authorization will continue unless withdrawn by the Board of
Directors.
13
Werner Enterprises, Inc. (WERN)Standard & Poor’s 500Peer Group12/31/1612/31/1712/31/1812/31/1912/31/2012/31/216080100120140160180200220240260280300320
The following table summarizes our stock repurchases during fourth quarter 2021 made pursuant to the May 2019 (140,459
shares) and November 2021 (977,886 shares) stock repurchase authorizations. The Company did not purchase any shares
during fourth quarter 2021 other than pursuant to these authorizations. All stock repurchases were made by the Company or on
its behalf and not by any “affiliated purchaser”, as defined by Rule 10b-18 of the Exchange Act.
Issuer Purchases of Equity Securities
Period
Total Number of Shares
(or Units) Purchased
Average Price Paid
per Share (or Unit)
Total Number of Shares
(or Units) Purchased as
Part of Publicly Announced
Plans or Programs
Maximum Number (or
Approximate Dollar Value)
of Shares (or Units) that May
Yet Be Purchased Under the
Plans or Programs
October 1-31, 2021
November 1-30, 2021
December 1-31, 2021
Total
ITEM 6.
RESERVED
— $
776,112 $
342,233 $
1,118,345 $
—
46.29
44.56
45.76
—
776,112
342,233
1,118,345
1,637,442
5,364,347
5,022,114
14
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) summarizes the financial
statements from management’s perspective with respect to our financial condition, results of operations, liquidity and other
factors that may affect actual results. The MD&A is organized in the following sections:
•
•
•
•
•
•
•
Cautionary Note Regarding Forward-Looking Statements
Business Acquisitions
Overview
COVID-19
Results of Operations
Liquidity and Capital Resources
Critical Accounting Estimates
Cautionary Note Regarding Forward-Looking Statements:
This Annual Report on Form 10-K contains historical information and forward-looking statements based on information
currently available to our management. The forward-looking statements in this report, including those made in this Item 7
(Management’s Discussion and Analysis of Financial Condition and Results of Operations), are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These safe harbor provisions encourage
reporting companies to provide prospective information to investors. Forward-looking statements can be identified by the use of
certain words, such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” and other similar terms and
language. We believe the forward-looking statements are reasonable based on currently available information. However,
forward-looking statements involve risks, uncertainties and assumptions, whether known or unknown, that could cause our
actual results, business, financial condition and cash flows to differ materially from those anticipated in the forward-looking
statements. A discussion of important factors relating to forward-looking statements is included in Item 1A (Risk Factors) of
Part I of this Form 10-K. Readers should not unduly rely on the forward-looking statements included in this Form 10-K because
such statements speak only to the date they were made. Unless otherwise required by applicable securities laws, we undertake
no obligation or duty to update or revise any forward-looking statements contained herein to reflect subsequent events or
circumstances or the occurrence of unanticipated events.
Business Acquisitions:
ECM Acquisition
On July 1, 2021, we acquired an 80% equity ownership interest in ECM for a cash purchase price of $141.3 million after net
working capital changes and net of cash acquired. ECM achieved revenues of $108 million in 2020 with an operating margin of
19.8%. ECM consists of ECM Transport and MCS, which are regional truckload carriers that together operate nearly 500 trucks
and 2,000 trailers in the Mid-Atlantic, Ohio and Northeast regions of the U.S. with low driver turnover. Revenues generated by
ECM Transport and MCS are reported in One-Way Truckload within our TTS segment.
We financed the transaction through a combination of cash on hand, existing credit facilities and a new $100.0 million
unsecured fixed-rate term loan maturing in May 2024 with BMO Harris Bank N.A., one of our two lead banks. The remaining
20% ownership interest in ECM is retained by Ed Meier, founder and President of ECM.
NEHDS Acquisition
On November 22, 2021, we acquired 100% of the equity interests in NEHDS for a cash purchase price of $63.1 million after
including the impacts of contingent consideration, net working capital changes and cash acquired. We financed the transaction
through a combination of cash on hand and existing credit facilities. NEHDS achieved revenues of $71 million for the 12-
month period ended September 2021 and produced an average annual revenues growth rate of 27% over the last three years.
NEHDS is a final mile residential delivery provider with access to a network of 400 final mile delivery trucks serving
customers primarily in the Northeast and Midwest U.S. markets. Revenues generated by NEHDS are reported in Final Mile
within our Werner Logistics segment.
Additional information regarding the ECM and NEHDS acquisitions is included in Note 2 in the Notes to Consolidated
Financial Statements under Item 8 of Part II of this Form 10-K.
Overview:
We have two reportable segments, TTS and Werner Logistics, and we operate in the truckload and logistics sectors of the
transportation industry. In the truckload sector, we focus on transporting consumer nondurable products that generally ship
more consistently throughout the year. In the logistics sector, besides managing transportation requirements for individual
15
customers, we provide additional sources of truck capacity, alternative modes of transportation, a North American delivery
network and systems analysis to optimize transportation needs. Our success depends on our ability to efficiently and effectively
manage our resources in the delivery of truckload transportation and logistics services to our customers. Resource requirements
vary with customer demand, which may be subject to seasonal or general economic conditions. Our ability to adapt to changes
in customer transportation requirements is essential to efficiently deploy resources and make capital investments in tractors and
trailers (with respect to our TTS segment) or obtain qualified third-party capacity at a reasonable price (with respect to our
Werner Logistics segment). We may also be affected by our customers’ financial failures or loss of customer business.
Revenues for our TTS segment operating units (Dedicated and One-Way Truckload) are typically generated on a per-mile basis
and also include revenues such as stop charges, loading and unloading charges, equipment detention charges and equipment
repositioning charges. To mitigate our risk to fuel price increases, we recover additional fuel surcharge revenues from our
customers that generally recoup a majority of the increased fuel costs; however, we cannot assure that current recovery levels
will continue in future periods. Because fuel surcharge revenues fluctuate in response to changes in fuel costs, we identify them
separately and exclude them from the statistical calculations to provide a more meaningful comparison between periods. The
key statistics used to evaluate trucking revenues, net of fuel surcharge, are (i) average revenues per tractor per week, (ii)
average percentage of empty miles (miles without trailer cargo), (iii) average trip length (in loaded miles) and (iv) average
number of tractors in service. General economic conditions, seasonal trucking industry freight patterns and industry capacity are
important factors that impact these statistics. Our TTS segment also generates a small amount of revenues categorized as non-
trucking revenues, which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico
where the TTS segment utilizes a third-party capacity provider. We exclude such revenues from the statistical calculations.
Our most significant resource requirements are company drivers, independent contractors, tractors and trailers. Independent
contractors supply their own tractors and drivers and are responsible for their operating expenses. Our financial results are
affected by company driver and independent contractor availability and the markets for new and used revenue equipment. We
are self-insured for a significant portion of bodily injury, property damage and cargo claims; workers’ compensation claims;
and associate health claims (supplemented by premium-based insurance coverage above certain dollar levels). For that reason,
our financial results may also be affected by driver safety, medical costs, weather, legal and regulatory environments and
insurance coverage costs to protect against catastrophic losses.
The operating ratio is a common industry measure used to evaluate our profitability and that of our TTS segment operating
fleets. The operating ratio consists of operating expenses expressed as a percentage of operating revenues. The most significant
variable expenses that impact the TTS segment are driver salaries and benefits, fuel, fuel taxes (included in taxes and licenses
expense), payments to independent contractors (included in rent and purchased transportation expense), supplies and
maintenance and insurance and claims. As discussed further in the comparison of operating results for 2021 to 2020, several
industry-wide issues have caused, and could continue to cause, costs to increase in future periods. These issues include
shortages of drivers or independent contractors, changing fuel prices, compliance with new or proposed regulations and
tightening of the commercial truck liability insurance market. Our main fixed costs include depreciation expense for tractors
and trailers and equipment licensing fees (included in taxes and licenses expense). The TTS segment requires substantial cash
expenditures for tractor and trailer purchases. We fund these purchases with net cash from operations and financing available
under our existing credit facilities, as management deems necessary.
We provide non-trucking services primarily through the three operating units within our Werner Logistics segment (Truckload
Logistics, Intermodal, and Final Mile). In first quarter 2021, we completed the previously-announced sale of the Werner Global
Logistics (“WGL”) freight forwarding services for international ocean and air shipments to Scan Global Logistics Group. WGL
had annual revenues of $53 million in 2020, and we realized a $1.0 million gain from the sale in first quarter 2021. Unlike our
TTS segment, the Werner Logistics segment is less asset-intensive and is instead dependent upon qualified associates,
information systems and qualified third-party capacity providers. The largest expense item related to the Werner Logistics
segment is the cost of purchased transportation we pay to third-party capacity providers. This expense item is recorded as rent
and purchased transportation expense. Other operating expenses consist primarily of salaries, wages and benefits, as well as
depreciation, supplies and maintenance, and other general expenses. We evaluate the Werner Logistics segment’s financial
performance by reviewing operating expenses and operating income expressed as a percentage of revenues. Purchased
transportation expenses as a percentage of revenues can be impacted by the rates charged to customers and the costs of securing
third-party capacity. We have a mix of contracted long-term rates and variable rates for the cost of third-party capacity, and we
cannot assure that our operating results will not be adversely impacted in the future if our ability to obtain qualified third-party
capacity providers changes or the rates of such providers increase.
At the end of 2021, we believe we are well positioned with a strong balance sheet and sufficient liquidity. Our debt is at $428
million, or a net debt ratio of 0.6 times earnings before interest, income taxes, depreciation and amortization for the year ended
December 31, 2021. We had available liquidity of $169 million, considering cash on hand and available credit facilities of $115
million. We also have sufficient cushion with our debt covenants. We currently plan to continue paying our quarterly dividend,
16
which we have paid quarterly since 1987. This cash outlay currently results in slightly less than $8 million per quarter. Net
capital expenditures (primarily revenue equipment) in 2022 currently are expected to be in the range of $275 million to $325
million.
COVID-19:
The COVID-19 pandemic continues to impact the U.S. and global economies and has resulted in ongoing supply chain
challenges. During the pandemic, the transportation industry has been designated by the U.S. government as an essential
industry for keeping the U.S. supply chain moving. We are monitoring and reacting to the evolving nature of the pandemic,
governmental responses, and their impacts on our business, including employee availability. We are working hard to stay
healthy while safely delivering our customers’ freight on time. Throughout our offices and terminal network, we are closely
following the safety guidelines set forth by the Centers for Disease Control and Prevention (CDC) and World Health
Organization (WHO).
Over the past several years, we have repositioned Werner to increase our ability to execute through different macroeconomic
environments. We believe our freight base, which is heavily weighted toward customers delivering essential products that are
continually being restocked in today’s economy, enabled us to more effectively manage through the difficult economic
environment created by the pandemic. While there remain significant uncertainties related to COVID-19 and its effect on the
economy, we believe that demand for our services will be strong in 2022.
Results of Operations:
The following table sets forth the consolidated statements of income in dollars and as a percentage of total operating revenues
and the percentage increase or decrease in the dollar amounts of those items compared to the prior year.
(in thousands)
Operating revenues
$
%
$
%
%
$
2,734,372
100.0 $
2,372,178
100.0
15.3
2021
2020
Percentage
Change in
Dollar
Amounts
Operating expenses:
Salaries, wages and benefits
Fuel
Supplies and maintenance
Taxes and licenses
Insurance and claims
Depreciation and amortization
Rent and purchased transportation
Communications and utilities
Other
Total operating expenses
Operating income
Total other expense (income)
Income before income taxes
Income tax expense
Net income
Net income attributable to noncontrolling interest
895,012
32.7
795,847
33.6
245,866
206,701
96,095
98,658
267,700
641,159
13,460
9.0
7.6
3.5
3.6
9.8
23.4
0.5
(39,425)
(1.4)
2,425,226
309,146
88.7
11.3
(36,869)
(1.4)
346,015
12.7
84,537
261,478
3.1
9.6
(2,426)
(0.1)
157,124
175,842
95,746
109,816
263,286
519,184
14,474
13,421
6.6
7.4
4.0
4.6
11.1
21.9
0.6
0.6
2,144,740
90.4
227,438
2,744
224,694
55,616
169,078
—
9.6
0.1
9.5
2.4
7.1
—
7.1
12.5
56.5
17.5
0.4
(10.2)
1.7
23.5
(7.0)
(393.8)
13.1
35.9
(1,443.6)
54.0
52.0
54.6
N/A
53.2
Net income attributable to Werner
$
259,052
9.5 $
169,078
17
The following tables set forth the operating revenues, operating expenses and operating income for the TTS segment and
certain statistical data regarding our TTS segment operations, as well as statistical data for the One-Way Truckload and
Dedicated operating units within TTS.
TTS segment (in thousands)
Trucking revenues, net of fuel surcharge
Trucking fuel surcharge revenues
Non-trucking and other operating revenues
Operating revenues
Operating expenses
Operating income
TTS segment
Average tractors in service
Average revenues per tractor per week (1)
Total tractors (at year end)
Company
Independent contractor
Total tractors
Total trailers (at year end)
One-Way Truckload
Trucking revenues, net of fuel surcharge (in 000’s)
Average tractors in service
Total tractors (at year end)
Average percentage of empty miles
Average revenues per tractor per week (1)
Average % change in revenues per total mile (1)
Average % change in total miles per tractor per week
Average completed trip length in miles (loaded)
Dedicated
Trucking revenues, net of fuel surcharge (in 000’s)
Average tractors in service
Total tractors (at year end)
Average revenues per tractor per week (1)
(1)
Net of fuel surcharge revenues
2021
2020
$
%
$
%
% Chg
$
1,789,148
$
1,667,394
234,164
21,761
158,611
17,204
2,045,073
100.0
1,843,209
100.0
1,763,250
86.2
1,621,202
$
281,823
13.8 $
222,007
88.0
12.0
7.3 %
47.6 %
26.5 %
11.0 %
8.8 %
26.9 %
$
2021
7,982
4,311
8,050
290
8,340
25,760
2020
% Chg
7,757
4,134
$
2.9 %
4.3 %
7,390
440
7,830
23,125
8.9 %
(34.1) %
6.5 %
11.4 %
$
710,673
$
694,868
2,942
3,105
3,096
2,885
2.3 %
(5.0) %
7.6 %
11.25 %
12.06 % (6.7) %
$
4,645
$
4,315
7.6 %
17.3 %
(8.2) %
786
0.9 %
1.6 %
852
(7.7) %
$ 1,078,475
$
972,526
10.9 %
5,040
5,235
4,116
$
4,661
4,945
4,012
$
8.1 %
5.9 %
2.6 %
18
The following tables set forth the Werner Logistics segment’s revenues, purchased transportation expense, other operating
expenses (primarily salaries, wages and benefits expense), total operating expenses, and operating income, as well as certain
statistical data regarding the Werner Logistics segment.
Werner Logistics segment (in thousands)
Operating revenues
Operating expenses:
Purchased transportation expense
Other operating expenses
Total operating expenses
Operating income
Werner Logistics segment
Average tractors in service
Total tractors (at year end)
Total trailers (at year end)
2021 Compared to 2020
Operating Revenues
2021
2020
$
%
$
%
% Chg
$
622,461
100.0 $
469,791
100.0
32.5 %
535,379
59,209
594,588
27,873
86.0
9.5
95.5
4.5 $
407,308
56,478
463,786
6,005
86.7
12.0
98.7
1.3
$
2021
2020
41
55
1,465
31
31
1,275
31.4 %
4.8 %
28.2 %
364.2 %
% Chg
32.3 %
77.4 %
14.9 %
Operating revenues increased 15.3% in 2021 compared to 2020. When comparing 2021 to 2020, TTS segment revenues
increased $201.9 million, or 11.0%. Revenues for the Werner Logistics segment increased $152.7 million or 32.5%.
Freight demand was strong throughout 2021 in our Dedicated and One-Way Truckload fleets. Freight demand has continued to
be strong during the first two months of 2022.
Trucking revenues, net of fuel surcharge, increased 7.3% in 2021 compared to 2020 due to a 4.3% increase in average revenues
per tractor per week, net of fuel surcharge and a 2.9% increase in the average number of tractors in service. The increase in
average revenues per tractor was due primarily to improved pricing in both Dedicated and One-Way Truckload, partially offset
by a decline in miles per tractor caused by tractors down due to equipment parts shortages, more drivers unavailable to work
due to COVID quarantine protocols, a 2% shorter average loaded length of haul for the TTS segment, and other factors. We
currently expect average revenues per total mile, net of fuel surcharge, for the One-Way Truckload fleet to remain strong for the
first half of 2022 and to increase in a range of 16% to 19% when compared to the first half of 2021, and we expect Dedicated
average revenues per tractor per week, net of fuel surcharge, to increase in a range of 3% to 5% in 2022 compared to 2021.
The average number of tractors in service in the TTS segment increased 2.9% to 7,982 in 2021 compared to 7,757 in 2020. We
ended 2021 with 8,340 tractors in the TTS segment, a year-over-year increase of 510 tractors, primarily resulting from the
nearly 500 tractors acquired in the ECM acquisition. Our Dedicated unit ended 2021 with 5,235 tractors (or 63% of our total
TTS segment fleet) compared to 4,945 tractors at the end of 2020. We currently expect our fleet size at the end of 2022 to be in
a range of 2% to 5% higher when compared to the fleet size at the end of 2021, subject to driver availability and timing of
delivery of new tractors from our equipment manufacturers. We cannot predict whether future driver shortages, if any, will
adversely affect our ability to maintain our fleet size. If such a driver market shortage were to occur, it could result in a fleet
size reduction, and our results of operations could be adversely affected.
Trucking fuel surcharge revenues increased 47.6% to $234.2 million in 2021 from $158.6 million in 2020 due primarily to
higher average diesel fuel prices, partially offset by fewer miles in 2021. These revenues represent collections from customers
for the increase in fuel and fuel-related expenses, including the fuel component of our independent contractor cost (recorded as
rent and purchased transportation expense) and fuel taxes (recorded in taxes and licenses expense), when diesel fuel prices rise.
Conversely, when fuel prices decrease, fuel surcharge revenues decrease. To lessen the effect of fluctuating fuel prices on our
margins, we collect fuel surcharge revenues from our customers for the cost of diesel fuel and taxes in excess of specified base
fuel price levels according to terms in our customer contracts. Fuel surcharge rates generally adjust weekly based on an
independent U.S. Department of Energy fuel price survey which is released every Monday. Our fuel surcharge programs are
designed to (i) recoup higher fuel costs from customers when fuel prices rise and (ii) provide customers with the benefit of
lower fuel costs when fuel prices decline. These programs generally enable us to recover a majority, but not all, of the fuel price
increases. The remaining portion is generally not recoverable because it results from empty and out-of-route miles (which are
not billable to customers) and tractor idle time. Fuel prices that change rapidly in short time periods also impact our recovery
because the surcharge rate in most programs only changes once per week.
19
Werner Logistics revenues are generated by its three operating units, following the sale of its WGL freight forwarding services
for international ocean and air shipments in first quarter 2021. Werner Logistics revenues exclude revenues for full truckload
shipments transferred to the TTS segment, which are recorded as trucking revenues by the TTS segment. Werner Logistics also
recorded revenue and brokered freight expense of $0.9 million in 2021 and $0.1 million in 2020 for movements performed by
the TTS segment (also recorded as trucking revenue by the TTS segment), primarily related to Intermodal drayage, and these
transactions between reporting segments are eliminated in consolidation. Werner Logistics revenues increased 32.5% to $622.5
million in 2021 from $469.8 million in 2020 due primarily to higher pricing and volume growth in Truckload Logistics and
Intermodal, and an $8.8 million increase in Final Mile revenues primarily due to the impact of NEHDS acquired in November
2021. Truckload Logistics revenues (68% of total Logistics revenues) increased 58% due to 29% higher revenues per shipment
and a 23% increase in volume. Intermodal revenues (26% of total Logistics revenues) increased 37% due to 35% higher
revenues per shipment and a 1% increase in volume. Werner Logistics operating income increased to $27.9 million in 2021
compared to $6.0 million in 2020, due to revenue growth and a 320 basis point expansion of operating margin percentage in a
strong freight market. The Werner Logistics operating margin percentage increased to 4.5% in 2021 from 1.3% in 2020. We
expect Werner Logistics to achieve continued revenue and operating income growth in 2022.
Operating Expenses
Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 88.7% in 2021 compared to
90.4% in 2020. Expense items that impacted the overall operating ratio are described on the following pages. The tables on
pages 17 through 19 show the consolidated statements of income in dollars and as a percentage of total operating revenues and
the percentage increase or decrease in the dollar amounts of those items compared to the prior year, as well as the operating
ratios, operating margins and certain statistical information for our two reportable segments, TTS and Werner Logistics.
Salaries, wages and benefits increased $99.2 million or 12.5% in 2021 compared to 2020 and decreased 0.9% as a percentage of
operating revenues. The higher dollar amount of salaries, wages and benefits expense in 2021 was due primarily to increased
driver pay, including: (i) driver pay rate increases, (ii) incentive recruiting bonuses, and (iii) minimum pay guarantees, and
higher benefits expense, including group health insurance. These increases were partially offset by 20.5 million fewer company
tractor miles during 2021. In January 2021, we implemented driver pay increases of approximately $10 million annually in our
One-Way Truckload fleet, and another pay increase in August of approximately $11 million annually. Within Dedicated, we
continue to implement pay increases as needed. As a result, driver pay per company driver mile increased 15% in 2021. Non-
driver salaries, wages and benefits in our non-trucking Werner Logistics segment increased 4.1%.
We renewed our workers’ compensation insurance coverage on April 1, 2021. Our coverage levels are the same as the prior
policy year. We continue to maintain a self-insurance retention of $2.0 million per claim. Our workers’ compensation insurance
premiums for the policy year beginning April 2021 are $0.3 million higher than the premiums for the previous policy year.
Strong consumer demand combined with a severely constrained driver market is presenting labor challenges for customers and
carriers alike and became more challenging in 2021, as the strong freight market caused increased competition for the finite
number of experienced drivers that meet our hiring standards. Several ongoing market factors persisted including a declining
number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck
safety regulations. We continue to take significant actions to strengthen our driver recruiting and retention as we strive to be the
truckload employer of choice, including raising driver pay, providing a modern tractor and trailer fleet with the latest safety
equipment and technology, investing and expanding our driver training school network and offering a wide variety of driving
positions including daily and weekly home time opportunities. We are unable to predict whether we will experience future
driver shortages or maintain our current driver retention rates. If such a driver shortage were to occur and additional driver pay
rate increases became necessary to attract and retain drivers, our results of operations would be negatively impacted to the
extent that we could not obtain corresponding freight rate increases.
Fuel increased $88.7 million or 56.5% in 2021 compared to 2020 and increased 2.4% as a percentage of operating revenues due
to higher average diesel fuel prices, partially offset by 20.5 million fewer company tractor miles in 2021. Average diesel fuel
prices, excluding fuel taxes, for the full year 2021 were 85 cents per gallon higher than the full year 2020, a 64% increase.
We continue to employ measures to improve our fuel mpg such as (i) limiting tractor engine idle time, (ii) optimizing the speed,
weight and specifications of our equipment and (iii) implementing mpg-enhancing equipment changes to our fleet including
new tractors, more aerodynamic tractor features, idle reduction systems, trailer tire inflation systems, trailer skirts and
automated manual transmissions to reduce our fuel gallons purchased. However, fuel savings from mpg improvement is
partially offset by higher depreciation expense and the additional cost of diesel exhaust fluid. Although our fuel management
programs require significant capital investment and research and development, we intend to continue these and other
environmentally conscious initiatives, including our active participation as an EPA SmartWay Transport Partner. The
SmartWay Transport Partnership is a national voluntary program developed by the EPA and freight industry representatives to
reduce greenhouse gases and air pollution and promote cleaner, more efficient ground freight transportation.
20
Through February 18, the average diesel fuel price per gallon in 2022 was approximately $1.03 higher than the average diesel
fuel price per gallon in the same period of 2021 and approximately 88 cents higher than the average for first quarter 2021.
Shortages of fuel, increases in fuel prices and petroleum product rationing can have a material adverse effect on our operations
and profitability. We are unable to predict whether fuel price levels will increase or decrease in the future or the extent to which
fuel surcharges will be collected from customers. As of December 31, 2021, we had no derivative financial instruments to
reduce our exposure to fuel price fluctuations.
Supplies and maintenance increased $30.9 million or 17.5% in 2021 compared to 2020 and increased 0.2% as a percentage of
operating revenues. The higher dollar amount of supplies and maintenance expense was due primarily to higher equipment
maintenance costs, driver lodging expenses and driver sourcing costs. Our driver sourcing costs were higher due to startup costs
for our new and planned driving school location additions.
Insurance and claims decreased $11.2 million or 10.2% in 2021 compared to 2020 and decreased 1.0% as a percentage of
operating revenues, due primarily to lower expense for new large dollar claims and a lower amount of unfavorable development
on large dollar claims, partially offset by higher liability insurance premiums of $7.7 million. In January 2020, one of our
tractors was involved in a serious accident. We self-insure for the first $10.0 million of liability coverage for this policy period,
and have appropriate excess liability coverage with insurance carriers above that amount. As a result, we recorded $10.0 million
of insurance and claims expense in first quarter 2020 for this accident. We also incurred insurance and claims expense of $5.1
million and $4.9 million in 2021 and 2020, respectively, for accrued interest related to a previously-disclosed adverse jury
verdict rendered on May 17, 2018, which we are appealing (see Note 12 in the Notes to Consolidated Financial Statements set
forth in Part II of this Form 10-K). Interest is accrued at $0.4 million per month, until such time as the outcome of our appeal is
finalized. The majority of our insurance and claims expense results from our claim experience and claim development under our
self-insurance program; the remainder results from insurance premiums for claims in excess of our self-insured limits.
We renewed our liability insurance policies on August 1, 2021 and are responsible for the first $10.0 million per claim on all
claims with an annual $10.0 million aggregate for claims between $10.0 million and $15.0 million. For the policy year that
began August 1, 2020, we were responsible for the first $10.0 million per claim with no aggregates. We maintain liability
insurance coverage with insurance carriers in excess of the $10.0 million per claim. Our liability insurance premiums for the
policy year that began August 1, 2021 are $7.0 million higher than premiums for the previous policy year.
Depreciation and amortization expense increased $4.4 million or 1.7% in 2021 compared to 2020 and decreased 1.3% as a
percentage of operating revenues due primarily to depreciation and amortization on tangible and intangible assets recorded in
the ECM and NEHDS acquisitions, partially offset by the impact of a change in accounting estimate that was made in the first
quarter 2020, which increased depreciation expense by $9.6 million in 2020. During the first quarter of 2020, we changed the
estimated life of certain tractors expected to be sold in 2020 to more rapidly depreciate these tractors to their estimated residual
values due to the weak used tractor market. These tractors continued to depreciate at the same higher rate per tractor until all
were sold in 2020. This change in accounting estimate had no effect on 2021.
The average age of our tractor fleet remains low by industry standards and was 2.2 years as of December 31, 2021, and the
average age of our trailers was 4.5 years. We continued to invest in new tractors and trailers and our terminals in 2021 to
improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel
costs. We currently intend to maintain the average age of our tractor and trailer fleet at or near current levels in 2022, subject to
timing of delivery of new tractors and trailers from our equipment manufacturers.
Rent and purchased transportation expense increased $122.0 million or 23.5% in 2021 compared to 2020 and increased 1.5% as
a percentage of operating revenues. Rent and purchased transportation expense consists mostly of payments to third-party
capacity providers in the Werner Logistics segment and other non-trucking operations and payments to independent contractors
in the TTS segment. The payments to third-party capacity providers generally vary depending on changes in the volume of
services generated by the Werner Logistics segment. Werner Logistics purchased transportation expense increased $128.1
million as a result of higher logistics revenues, and decreased to 86.0% as a percentage of Werner Logistics revenues in 2021
from 86.7% in 2020.
Rent and purchased transportation expense for the TTS segment decreased $6.0 million in 2021 compared to 2020. This
decrease is due primarily to lower payments to independent contractors in 2021 compared to 2020, resulting from 22.6 million
fewer independent contractor miles driven in 2021. Higher average diesel fuel prices in 2021 also resulted in a higher per-mile
settlement rate for independent contractors. Independent contractor miles as a percentage of total miles were 5.8% in 2021 and
8.3% in 2020. Because independent contractors supply their own tractors and drivers and are responsible for their operating
expenses, the decrease in independent contractor miles as a percentage of total miles shifted costs from the rent and purchased
transportation category to other expense categories, including (i) salaries, wages and benefits, (ii) fuel, (iii) depreciation, (iv)
supplies and maintenance and (v) taxes and licenses.
21
Challenging operating conditions continue to make independent contractor recruitment and retention difficult. Such conditions
include inflationary cost increases that are the responsibility of independent contractors and a shortage of financing available to
independent contractors for equipment purchases. Historically, we have been able to add company tractors and recruit
additional company drivers to offset any decrease in the number of independent contractors. If a shortage of independent
contractors and company drivers occurs, further increases in per-mile settlement rates (for independent contractors) and driver
pay rates (for company drivers) may become necessary to attract and retain these drivers. This could negatively affect our
results of operations to the extent that we would not be able to obtain corresponding freight rate increases.
Other operating expenses decreased $52.8 million in 2021 compared to 2020 and decreased 2.0% as a percentage of operating
revenues. Gains on sales of assets (primarily used tractors and trailers) are reflected as a reduction of other operating expenses
and are reported net of sales-related expenses (which include costs to prepare the equipment for sale). Gains on sales of assets
were $61.5 million in 2021, compared to $11.3 million in 2020. In 2021, we sold fewer tractors and trailers than in 2020. We
realized substantially higher average gains per tractor and trailer sold in 2021 due to significantly improved pricing in the
market for our used equipment, which we believe is a result of increased demand for previously used equipment because of
production delays limiting availability of new equipment in the industry.
Other Expense (Income)
Other expense (income) decreased $39.6 million in 2021 compared to 2020 due primarily to a $40.3 million net unrealized gain
recognized on our investments in equity securities (see Note 7 in the Notes to Consolidated Financial Statements set forth in
Part II of this Form 10-K).
Income Tax Expense
Income tax expense increased $28.9 million in 2021 compared to 2020, due to higher pre-tax income, partially offset by a
slightly lower effective income tax rate (income taxes expressed as a percentage of income before income taxes) in 2021 of
24.4% compared to 24.8% in 2020. We currently estimate our full year 2022 effective income tax rate to be approximately
24.5% to 25.5%.
2020 Compared to 2019
For a comparison of the Company’s results of operations for the fiscal year ended December 31, 2020 to the fiscal year ended
December 31, 2019, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the U.S. Securities
and Exchange Commission on February 24, 2021.
Liquidity and Capital Resources:
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level
of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing
arrangements, and working capital management. Capital expenditures, stock repurchases, and dividend payments are
components of our cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic
and other changes in the business environment. Management’s approach to capital allocation focuses on investing in key
priorities that support our business and growth strategies and providing shareholder returns, while funding ongoing operations.
Management believes our financial position at December 31, 2021 is strong. As of December 31, 2021, we had $54.2 million of
cash and cash equivalents and over $1.3 billion of stockholders’ equity. Cash is invested primarily in government portfolio
money market funds. In addition, we have a $300.0 million and a $200.0 million credit facility, for which our total available
borrowing capacity was $115.1 million as of December 31, 2021 (see Note 8 in the Notes to Consolidated Financial Statements
under Item 8 of Part II of this Form 10-K for information regarding our credit agreements). We believe our liquid assets, cash
generated from operating activities, and borrowing capacity under our existing credit facilities will provide sufficient funds to
meet our cash requirements and our planned shareholder returns for the foreseeable future.
Our material cash requirements include the following contractual and other obligations.
•
•
Debt Obligations and Interest Payments – As of December 31, 2021, we had outstanding debt with an aggregate principal
amount of $427.5 million, with $5.0 million payable within 12 months. Future interest payments associated with our debt
obligations are estimated to be $14.6 million through 2024, with $6.2 million payable within 12 months. See Note 8 in the
Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K for further detail of our debt and the
timing of expected future principal payments.
Operating Leases – We have entered into operating leases primarily for real estate. As of December 31, 2021, we had fixed
lease payment obligations of $32.1 million, with $7.0 million payable within 12 months. See Note 5 in the Notes to
22
Consolidated Financial Statements under Item 8 of Part II of this Form 10-K for further detail of our lease obligations and
the timing of expected future payments.
•
Purchase Obligations – As of December 31, 2021, we have committed to property and equipment purchases of
approximately $163.2 million within the next 12 months.
In addition to our cash requirements, the Board of Directors has authorized us to deliver value to shareholders through stock
repurchases and quarterly cash dividends. The stock repurchase program does not obligate the Company to acquire any specific
number of shares. We plan to continue paying a quarterly dividend, which currently results in a cash outlay of slightly less than
$8 million per quarter.
Cash Flows
We generated cash flow from operations of $332.8 million during 2021 compared to $445.9 million during 2020. The decrease
in net cash provided by operating activities was due primarily to working capital changes resulting from changes in accounts
receivable, higher federal and state estimated income tax payments, and the deferral of 2020 employer payroll tax payments as
permitted under the CARES Act. We were able to make net capital expenditures, repay debt, pay dividends, and repurchase
stock with the net cash provided by operating activities and existing cash balances, supplemented by borrowings under our
existing credit facilities.
Net cash used in investing activities was $397.3 million during 2021 compared to $263.3 million during 2020. Net cash
invested in our ECM and NEHDS acquisitions during 2021 was $201.8 million. Net property additions (primarily revenue
equipment) were $193.0 million for during 2021 compared to $266.2 million during 2020. We currently estimate net capital
expenditures (primarily revenue equipment) in 2022 to be in the range of $275 million to $325 million. We intend to fund these
net capital expenditures through cash flows from operations and financing available under our existing credit facilities, if
necessary.
Net financing activities provided $89.7 million during 2021 and used $186.0 million during 2020. We had net borrowings of
$227.5 million during 2021, bringing our outstanding debt at December 31, 2021 to $427.5 million. The proceeds were
primarily used to finance our ECM and NEHDS acquisitions. During 2020, we repaid $100.0 million of debt, net of
borrowings. We paid dividends of $29.1 million during 2021 and $24.9 million during 2020. We increased our quarterly
dividend rate by $0.01 per share, or 11%, beginning with the quarterly dividend paid in May 2021, and we increased our
quarterly dividend rate by $0.02 per share, or 20%, beginning with the dividend paid in July 2021.
Financing activities for 2021 also included common stock repurchases of 2,297,911 shares at a cost of $104.4 million. We
repurchased 1,482,992 shares during 2020 at a cost of $56.5 million. The Company has repurchased, and may continue to
repurchase, shares of the Company’s common stock. The timing and amount of such purchases depends upon economic and
stock market conditions and other factors. On November 9, 2021, our Board of Directors approved a new stock repurchase
program under which the Company is authorized to repurchase up to 6,000,000 shares of its common stock. On the same day,
our Board of Directors withdrew the previous stock repurchase authorization, which had 1,496,983 shares remaining available
for repurchase. As of December 31, 2021, the Company had purchased 977,886 shares pursuant to the new authorization and
had 5,022,114 shares remaining available for repurchase.
23
Critical Accounting Estimates:
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires us to make estimates and assumptions that affect the (i) reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (ii) reported amounts of
revenues and expenses during the reporting period. We evaluate these estimates on an ongoing basis as events and
circumstances change, utilizing historical experience, consultation with experts and other methods considered reasonable in the
particular circumstances. Actual results could differ from those estimates and may significantly impact our results of operations
from period to period. It is also possible that materially different amounts would be reported if we used different estimates or
assumptions.
Estimates of accrued liabilities for insurance and claims for bodily injury, property damage and workers’ compensation is a
critical accounting estimate that requires us to make significant judgments and estimates and affects our financial statements.
The accruals for bodily injury, property damage and workers’ compensation (current and non-current) are recorded at the
estimated ultimate payment amounts and are based upon individual case estimates and actuarial estimates of loss development
for reported losses and incurred-but-not-reported losses using loss development factors based upon past experience. In order to
determine the loss development factors, we make judgments relating to the comparability of historical claims to current claims.
These judgments consider the nature, frequency, severity, and age of claims, and industry, regulatory, and company-specific
trends impacting the development of claims. An independent actuary reviews our calculation of the undiscounted self-insurance
reserves for bodily injury and property damage claims and workers’ compensation claims at year-end. The actual cost to settle
our self-insured claim liabilities can differ from our reserve estimates because of a number of uncertainties, including the
inherent difficulty in estimating the severity of a claim and the potential amount to defend and settle a claim. We have not made
any material changes in the accounting methodology or assumptions used to calculate our accrued liabilities for insurance and
claims for bodily injury, property damage, and workers’ compensation during the past three years. At December 31, 2021 and
2020, we had an accrual of $309.8 million and $308.6 million, respectively, for estimated insurance and claims for (i) cargo
loss and damage, (ii) bodily injury and property damage, (iii) group health, and (iv) workers’ compensation claims not covered
by insurance. A 10% change in actuarial estimates at December 31, 2021, would have changed our insurance and claims accrual
by approximately $29.3 million.
24
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in commodity prices, foreign currency exchange rates, and interest rates.
Commodity Price Risk
The price and availability of diesel fuel are subject to fluctuations attributed to changes in the level of global oil production,
refining capacity, regulatory changes, seasonality, weather and other market factors. Historically, we have recovered a majority,
but not all, of fuel price increases from customers in the form of fuel surcharges. We implemented customer fuel surcharge
programs with most of our customers to offset much of the higher fuel cost per gallon. However, we do not recover all of the
fuel cost increase through these surcharge programs. As of December 31, 2021, we had no derivative financial instruments to
reduce our exposure to fuel price fluctuations.
Foreign Currency Exchange Rate Risk
We conduct business in foreign countries, primarily in Mexico. To date, most foreign revenues are denominated in U.S.
Dollars, and we receive payment for foreign freight services primarily in U.S. Dollars to reduce direct foreign currency risk.
Assets and liabilities maintained by a foreign subsidiary company in the local currency are subject to foreign exchange gains or
losses. Foreign currency translation gains and losses primarily relate to changes in the value of revenue equipment owned by a
subsidiary in Mexico, whose functional currency is the Peso. Foreign currency translation losses were $1.4 million and $2.9
million for the years ended December 31, 2021 and 2020, respectively, and were recorded in accumulated other comprehensive
loss within stockholders’ equity in the consolidated balance sheets. The exchange rate between the Mexican Peso and the
U.S. Dollar was 20.58 Pesos to $1.00 at December 31, 2021 compared to 19.95 Pesos to $1.00 at December 31, 2020.
Interest Rate Risk
We manage interest rate exposure through a mix of variable interest rate debt and interest rate swap agreements. We had $150
million of variable interest rate debt outstanding at December 31, 2021, for which the interest rate is effectively fixed at 2.34%
through May 2024 with two interest rate swap agreements to reduce our exposure to interest rate increases. In addition, we had
$180.0 million of variable interest rate debt outstanding at December 31, 2021. Interest rates on the variable rate debt and our
unused credit facilities are based on the LIBOR. See Note 8 in the Notes to Consolidated Financial Statements under Item 8 of
Part II of this Form 10-K for further detail of our debt. Assuming this level of borrowing, a hypothetical one-percentage point
increase in the LIBOR interest rate would increase our annual interest expense by approximately $1.8 million.
Due to uncertainty surrounding the suitability and sustainability of the London Interbank Offered Rate (LIBOR), central banks
and global regulators have called for financial market participants to prepare for the discontinuation of LIBOR. On March 5,
2021, ICE Benchmark Administration ratified its proposal on ceasing publication of one-week and two-month settings of the
USD LIBOR benchmark at the end of December 2021, and ceasing publication of the remaining overnight and one-, three-, six-
and 12-month USD LIBOR settings at the end of the June 2023. LIBOR is a widely-referenced benchmark rate, and our
unsecured credit facilities are referenced to LIBOR. We are communicating with our banks regarding the eventual transition to
a new benchmark rate.
25
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Werner Enterprises, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Werner Enterprises, Inc. and subsidiaries (the Company) as
of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity
and temporary equity - redeemable noncontrolling interest, and cash flows for each of the years in the three‑year period ended
December 31, 2021, and the related notes and financial statement schedule II listed in the Index in Item 15(a)(2) (collectively,
the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the years in the three‑year period ended December 31, 2021, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
26
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of insurance and claims accruals
As discussed in Note 1 to the consolidated financial statements, the Company estimates the insurance and claims
accruals related to (1) cargo loss and damage, (2) bodily injury and property damage, (3) group health, and (4)
workers’ compensation claims not covered by insurance. The Company’s current and non-current insurance and claims
accruals were $72.6 million and $237.2 million, respectively. The accruals specifically for bodily injury, property
damage, and workers’ compensation are based upon individual case estimates and actuarial estimates of loss
development for reported losses and incurred-but-not-reported losses using loss development factors based upon past
experience. In order to determine the loss development factors, the Company makes judgments relating to the
comparability of historical claims to current claims. These judgments consider the nature, frequency, severity and age
of claims, and industry, regulatory, and company-specific trends impacting the development of claims. The Company
has an independent actuary review their calculation of these undiscounted insurance and claims accruals.
We identified the evaluation of the Company’s insurance and claims accruals related to bodily injury, property
damage, and workers’ compensation claims not covered by insurance as a critical audit matter. Specifically, evaluating
the loss development factors used to determine these insurance and claims accruals involved a high degree of
complexity and subjectivity. In addition, specialized skills were needed to evaluate the Company’s models to calculate
these undiscounted insurance and claims accruals.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to these insurance and claims accruals,
including controls related to the determination of loss development factors used to determine these insurance and
claims accruals. We involved actuarial professionals with specialized skills and knowledge who assisted in:
•
•
•
assessing the models used by the Company to determine these insurance and claims accruals for consistency with
generally accepted actuarial standards
assessing the determination of loss development factors used in the models for consistency with historical
Company data and industry, regulatory, and company-specific trends
developing an independent expectation of the Company’s insurance and claims accruals and comparing to the
Company’s estimate.
We tested historical claims paid and claims reported, but not paid, that are used as an input to the Company’s models
to calculate these insurance and claims accruals for consistency with data used in the prior year. We tested actual
claims paid and claims reported, but not paid, for the current year that are used as an input to the Company’s models to
calculate these insurance and claims accruals for consistency with the Company’s actual claims paid and claims
reported, but not paid. We compared the Company’s prior period insurance and claims accruals to actual claims in the
current period to assess the Company’s ability to accurately estimate costs.
We have served as the Company’s auditor since 1999.
Omaha, Nebraska
February 28, 2022
/s/ KPMG LLP
27
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Operating revenues
Operating expenses:
Salaries, wages and benefits
Fuel
Supplies and maintenance
Taxes and licenses
Insurance and claims
Depreciation and amortization
Rent and purchased transportation
Communications and utilities
Other
Total operating expenses
Operating income
Other expense (income):
Interest expense
Interest income
Gain on investments in equity securities, net
Other
Total other expense (income)
Income before income taxes
Income tax expense
Net income
Net income attributable to noncontrolling interest
Net income attributable to Werner
Earnings per share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Years Ended December 31,
2021
2020
2019
$ 2,734,372
$ 2,372,178
$ 2,463,701
895,012
245,866
206,701
96,095
98,658
267,700
641,159
13,460
795,847
157,124
175,842
95,746
109,816
263,286
519,184
14,474
818,487
235,928
182,909
95,525
88,913
249,527
549,438
15,303
(39,425)
2,425,226
13,421
2,144,740
2,199
2,238,229
309,146
227,438
225,472
4,423
(1,211)
(40,317)
236
(36,869)
346,015
84,537
261,478
(2,426)
4,215
(1,634)
—
163
2,744
224,694
55,616
169,078
—
6,854
(3,326)
—
38
3,566
221,906
54,962
166,944
—
$
259,052
$
169,078
$
166,944
$
$
3.84
3.82
$
$
2.45
2.44
$
$
2.40
2.38
67,434
67,855
69,018
69,427
69,567
70,026
See Notes to Consolidated Financial Statements.
28
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income (loss):
Foreign currency translation adjustments
Change in fair value of interest rate swaps, net of tax
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to Werner
Years Ended December 31,
2021
2020
2019
$
261,478
$
169,078
$
166,944
(1,381)
3,610
2,229
(2,867)
(5,238)
(8,105)
1,996
(651)
1,345
263,707
160,973
168,289
(2,426)
—
—
$
261,281
$
160,973
$
168,289
See Notes to Consolidated Financial Statements.
29
WERNER ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, trade, less allowance of $9,169 and $8,686, respectively
Other receivables
Inventories and supplies
Prepaid taxes, licenses and permits
Other current assets
Total current assets
Property and equipment, at cost:
Land
Buildings and improvements
Revenue equipment
Service equipment and other
Total property and equipment
Less – accumulated depreciation
Property and equipment, net
Goodwill
Intangible assets, net
Other non-current assets
Total assets
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Current portion of long-term debt
Insurance and claims accruals
Accrued payroll
Accrued expenses
Other current liabilities
Total current liabilities
Long-term debt, net of current portion
Other long-term liabilities
Insurance and claims accruals, net of current portion
Deferred income taxes
Total liabilities
Commitments and contingencies
Temporary equity - redeemable noncontrolling interest
Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 shares authorized; 80,533,536 shares
issued; 65,790,112 and 67,931,726 shares outstanding, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost; 14,743,424 and 12,601,810 shares, respectively
Total stockholders’ equity
Total liabilities, temporary equity and stockholders’ equity
See Notes to Consolidated Financial Statements.
30
December 31,
2021
2020
$
$
54,196
460,518
24,449
11,140
17,549
63,361
631,213
29,334
341,104
23,491
12,062
17,231
33,694
456,916
77,172
287,331
1,910,874
282,448
2,557,825
944,582
1,613,243
74,618
55,315
229,324
$ 2,603,713
72,103
253,708
1,798,511
281,013
2,405,335
862,077
1,543,258
—
—
156,502
$ 2,156,676
$
$
93,987
5,000
72,594
44,333
28,758
24,011
268,683
422,500
43,314
237,220
268,499
1,240,216
83,263
25,000
76,917
35,594
25,032
28,208
274,014
175,000
43,114
231,638
237,870
961,636
35,947
—
805
121,904
1,667,104
(20,604)
(441,659)
1,327,550
$ 2,603,713
805
116,039
1,438,916
(22,833)
(337,887)
1,195,040
$ 2,156,676
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2020
2019
2021
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 261,478
$ 169,078
$ 166,944
Depreciation and amortization
Deferred income taxes
Gain on disposal of property and equipment
Non-cash equity compensation
Insurance and claims accruals, net of current portion
Other
Gains on investment in equity securities
Changes in certain working capital items:
Accounts receivable, net
Other current assets
Accounts payable
Other current liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Additions to property and equipment
Proceeds from sales of property and equipment
Net cash invested in acquisitions
Investment in equity securities
Decrease in notes receivable
Net cash used in investing activities
Cash flows from financing activities:
Repayments of short-term debt
Proceeds from issuance of short-term debt
Repayments of long-term debt
Proceeds from issuance of long-term debt
Dividends on common stock
Repurchases of common stock
Tax withholding related to net share settlements of restricted stock awards
Stock options exercised
Distribution to noncontrolling interest
Net cash provided by (used in) financing activities
Effect of exchange rate fluctuations on cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period(1)
Supplemental disclosures of cash flow information:
Interest paid
Income taxes paid
Supplemental schedule of non-cash investing and financing activities:
Notes receivable issued upon sale of property and equipment
Change in fair value of interest rate swaps
Property and equipment acquired included in accounts payable
Property and equipment disposed included in other receivables
Dividends accrued but not yet paid at end of period
Noncontrolling interest associated with acquisition
Contingent consideration associated with acquisition
267,700
29,488
(60,528)
10,807
5,582
(3,105)
(40,317)
(101,007)
(27,903)
14,742
(24,118)
332,819
(370,850)
177,801
(201,845)
(10,000)
7,593
(397,301)
(27,500)
5,000
—
250,000
(29,083)
(104,444)
(4,270)
—
(35)
89,668
(324)
24,862
29,334
54,196
4,228
81,185
5,953
3,610
7,124
—
7,895
33,556
2,500
$
$
$
263,286
(10,233)
(11,271)
8,903
3,420
13,641
—
(18,258)
(7,390)
(2,483)
37,216
445,909
(413,065)
146,824
—
(5,000)
7,966
(263,275)
(90,000)
40,000
(50,000)
—
(24,888)
(56,521)
(4,553)
—
—
(185,962)
(780)
(4,108)
33,442
29,334
4,415
54,173
3,441
(5,238)
12,250
30
6,114
—
—
249,527
16,401
(21,557)
8,077
14,188
(3,360)
—
15,081
975
(7,537)
(12,095)
426,644
(420,748)
136,873
—
—
11,566
(272,309)
—
—
(100,000)
275,000
(286,190)
(42,301)
(1,899)
171
—
(155,219)
396
(488)
33,930
33,442
6,441
49,599
6,764
(651)
21,138
18,600
6,232
—
—
$
$
$
$
$
$
(Continued on following page)
See Notes to Consolidated Financial Statements.
31
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Consolidated
Balance Sheets
(In thousands)
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash included in other current assets
Total cash, cash equivalents and restricted cash
Years Ended December 31,
2021
2020
2019
$
$
54,196
—
54,196
$
$
29,334
—
29,334
$
$
26,418
7,024
33,442
See Notes to Consolidated Financial Statements.
32
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND
TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST
(In thousands, except share and per
share amounts)
Common
Stock
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’
Equity
Temporary
Equity -
Redeemable
Noncontrolling
Interest
$
805 $ 107,455 $ 1,413,746 $
(16,073) $ (241,180) $ 1,264,753
$
166,944
1,345
—
168,289
BALANCE, December 31, 2018
Comprehensive income
Purchase of 1,300,000 shares of
common stock
Dividends on common stock
($4.11 per share)
Equity compensation activity,
102,552 shares
Non-cash equity compensation
expense
—
—
—
—
—
—
(286,082)
(2,883)
8,077
—
—
—
—
—
—
(42,301)
(42,301)
—
(286,082)
1,155
(1,728)
—
8,077
BALANCE, December 31, 2019
805
112,649
1,294,608
(14,728) (282,326) 1,111,008
Comprehensive income
Purchase of 1,482,992 shares of
common stock
Dividends on common stock
($0.36 per share)
Equity compensation activity,
170,193 shares
Non-cash equity compensation
expense
—
—
—
—
—
169,078
(8,105)
—
160,973
—
(24,770)
(5,513)
8,903
—
—
—
—
—
—
(56,521)
(56,521)
—
(24,770)
960
—
(4,553)
8,903
BALANCE, December 31, 2020
805
116,039
1,438,916
(22,833) (337,887) 1,195,040
Comprehensive income
Purchase of 2,297,911 shares of
common stock
Dividends on common stock
($0.46 per share)
Equity compensation activity,
156,297 shares
Non-cash equity compensation
expense
Investment in noncontrolling
interest
Purchase accounting adjustments
Distribution to noncontrolling
interest
—
—
—
—
—
—
—
—
—
—
—
(4,942)
10,807
—
—
—
259,052
2,229
—
261,281
2,426
—
—
(104,444)
(104,444)
(30,864)
—
—
—
—
—
—
—
—
—
—
—
—
(30,864)
672
(4,270)
—
—
—
—
10,807
—
—
—
—
—
—
—
35,322
(1,766)
(35)
BALANCE, December 31, 2021
$
805 $ 121,904 $ 1,667,104 $
(20,604) $ (441,659) $ 1,327,550
$
35,947
See Notes to Consolidated Financial Statements.
33
WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Werner Enterprises,
Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany accounts and transactions relating to these
entities have been eliminated.
Nature of Business: The Company is a truckload transportation and logistics provider operating under the jurisdiction of the
U.S. Department of Transportation, similar governmental transportation agencies in the foreign countries in which we operate
and various U.S. state regulatory authorities. Our ten largest customers comprised 49% of our revenues for the years ended
December 31, 2021 and 2020, and 41% for the year ended December 31, 2019. Our largest customer, Dollar General,
accounted for 14% and 12% of our total revenues in 2021 and 2020, respectively. Revenues generated by Dollar General are
reported in both of our reportable operating segments. No single customer generated more than 9% of our total revenues in
2019.
Use of Management Estimates: The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the
(i) reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and (ii) reported amounts of revenues and expenses during the reporting period. The most significant
estimates that affect our financial statements include the accrued liabilities for insurance and claims, useful lives and salvage
values of property and equipment, estimates for income taxes and the allowance for doubtful accounts. Actual results could
differ from those estimates.
Cash and Cash Equivalents: We consider all highly liquid investments, purchased with a maturity of three months or less, to
be cash equivalents. Accounts at banks with an aggregate excess of the amount of checks issued over cash balances are included
in current liabilities in the consolidated balance sheets, and changes in such accounts are reported as a financing activity in the
consolidated statements of cash flows.
Trade Accounts Receivable: We record trade accounts receivable at the invoiced amounts, net of an allowance for doubtful
accounts for potentially uncollectible receivables. We review the financial condition of customers for granting credit and
determine the allowance based on analysis of individual customers’ financial condition, historical write-off experience and
national economic conditions. We evaluate the adequacy of our allowance for doubtful accounts quarterly. Past due balances
over 90 days and exceeding a specified amount are reviewed individually for collectibility. Account balances are charged off
against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We
do not have any off-balance-sheet credit exposure related to our customers.
Inventories and Supplies: Inventories and supplies are stated at the lower of average cost and net realizable value and consist
primarily of revenue equipment parts, tires, fuel and supplies. Tires placed on new revenue equipment are capitalized as a part
of the equipment cost. Replacement tires are expensed when placed in service.
Property, Equipment, and Depreciation: Additions and improvements to property and equipment are capitalized at cost,
while maintenance and repair expenditures are charged to operations as incurred. Gains and losses on the sale or exchange of
equipment are recorded in other operating expenses.
Depreciation is calculated based on the cost of the asset, reduced by the asset’s estimated salvage value, using the straight-line
method. Accelerated depreciation methods are used for income tax purposes. The lives and salvage values assigned to certain
assets for financial reporting purposes are different than for income tax purposes. For financial reporting purposes, assets are
generally depreciated using the following estimated useful lives and salvage values:
Building and improvements
Tractors
Trailers
Service and other equipment
Lives
30 years
80 months
12 years
3-10 years
Salvage Values
0%
$0 - $10,000
$1,000 - $6,000
0%
During first quarter 2020, we changed the estimated life of certain trucks expected to be sold in 2020 to more rapidly depreciate
the trucks to their estimated residual values due to the weak used truck market. The effect of this change in accounting estimate
34
was a $9.6 million increase to 2020 depreciation expense. These trucks continued to depreciate at the same higher rate per
truck, until all were sold in 2020.
Goodwill: Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired
in a business combination and is allocated to reporting units that are expected to benefit from the combination. Goodwill is not
amortized, but rather is tested for impairment annually in October, or more frequently if indicators of a potential impairment
exist. Impairment exists when the carrying amount of a reporting unit that includes goodwill exceeds its fair value, resulting in
an impairment charge for the excess up to the amount of goodwill allocated to the reporting unit. To test goodwill for
impairment, we have the option to first perform a qualitative assessment to determine if it is more likely than not that the
carrying amount of a reporting unit exceeds its fair value. If a qualitative test indicates a potential for impairment, a quantitative
impairment test must be performed. Alternatively, we may bypass the qualitative assessment and perform a quantitative
impairment test. A qualitative assessment considers relevant events and circumstances such as macroeconomic, industry, and
market conditions; legal, regulatory, and competitive environments; and overall financial performance. For a quantitative
impairment test, we estimate the fair values of the goodwill reporting units and compare it to their carrying values. The
estimated fair values of the reporting units are established using a combination of the income and market approaches. Our first
annual goodwill impairment test is scheduled to be performed in October 2022. As of December 31, 2021, there were no
indications of goodwill impairment.
Amortization of Intangible Assets: Intangible assets with finite lives are amortized on a straight-line basis over their estimated
useful lives, ranging from ten to 12 years.
Long-Lived Assets and Intangible Assets: We review our long-lived assets and finite-lived intangible assets for impairment
whenever events or circumstances indicate the carrying amount of such assets may not be recoverable. If based on that review,
changes in circumstances indicate that the carrying amount of such assets may not be recoverable, we evaluate recoverability by
comparing the undiscounted cash flows associated with the asset to the asset's carrying amount. We also evaluate the remaining
useful lives of intangible assets to determine if events or trends warrant a revision to the remaining period of amortization. An
impairment loss would be recognized if the carrying amount of the long-lived asset or intangible asset is not recoverable and the
carrying amount exceeds its fair value. For long-lived assets classified as held and used, the carrying amount is not recoverable
when the carrying value of the long-lived asset exceeds the sum of the future net cash flows. We do not separately identify
assets by operating segment because tractors and trailers are routinely transferred from one operating fleet to another. As a
result, none of our long-lived assets have identifiable cash flows from use that are largely independent of the cash flows of other
assets and liabilities. Thus, the asset group used to assess impairment would include all of our assets.
Insurance and Claims Accruals: Insurance and claims accruals (both current and non-current) reflect the estimated cost
(including estimated loss development, incurred-but-not-reported losses and loss adjustment expenses) for (i) cargo loss and
damage, (ii) bodily injury and property damage, (iii) group health and (iv) workers’ compensation claims not covered by
insurance. The costs for cargo, bodily injury and property damage insurance and claims are included in insurance and claims
expense in the consolidated statements of income; the costs of group health and workers’ compensation claims are included in
salaries, wages and benefits expense. The insurance and claims accruals are recorded at the estimated ultimate payment
amounts. The accruals for bodily injury, property damage and workers’ compensation are based upon individual case estimates
and actuarial estimates of loss development for reported losses and incurred-but-not-reported losses using loss development
factors based upon past experience. In order to determine the loss development factors, we make judgments relating to the
comparability of historical claims to current claims. These judgments consider the nature, frequency, severity, and age of
claims, and industry, regulatory, and company-specific trends impacting the development of claims. Actual costs related to
insurance and claims have not differed materially from estimated accrued amounts for all years presented. An independent
actuary reviews our calculation of the undiscounted self-insurance reserves for bodily injury and property damage claims and
workers’ compensation claims at year-end.
We renewed our liability insurance policies on August 1, 2021 and are responsible for the first $10.0 million per claim on all
claims with an annual $10.0 million aggregate for claims between $10.0 million and $15.0 million. For the policy year that
began August 1, 2020, we were responsible for the first $10.0 million per claim with no aggregates. Our self-insured retention
(“SIR”) and deductible amount was $3.0 million, with an additional $5.0 million deductible per claim for each claim between
5.0 million and $10.0 million, for policy years from August 1, 2017 through July 31, 2020, and we were also responsible for
annual aggregate amounts of liability for claims in excess of the SIR/ deductible. We maintain liability insurance coverage with
insurance carriers in excess of the $10.0 million per claim. We are also responsible for administrative expenses for each
occurrence involving bodily injury or property damage.
Our SIR for workers’ compensation claims is $2.0 million per claim, with premium-based coverage (issued by insurance
companies) for claims exceeding this amount. Our SIR for workers’ compensation claims increased from $1.0 million to $2.0
35
million per claim on April 1, 2020. We also maintain a $25.6 million bond for the State of Nebraska and a $13.4 million bond
for our workers’ compensation insurance carrier.
Under these insurance arrangements, we maintained $43.0 million in letters of credit as of December 31, 2021.
Revenue Recognition: The consolidated statements of income reflect recognition of operating revenues (including fuel
surcharge revenues) and related direct costs over time as control of the promised services is transferred to our customers, in an
amount that reflects the consideration we expect to be entitled to in exchange for those services. For shipments where a third-
party capacity provider (including independent contractors under contract with us) is utilized to provide some or all of the
service, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net
basis).
Foreign Currency Translation: Local currencies are generally considered the functional currencies outside the United States.
Assets and liabilities are translated at year-end exchange rates for operations in local currency environments. Foreign revenues
and expense items denominated in the functional currency are translated at the average rates of exchange prevailing during the
year. Foreign currency translation adjustments reflect the changes in foreign currency exchange rates applicable to the net assets
of the foreign operations. Foreign currency translation adjustments are recorded in accumulated other comprehensive loss
within stockholders’ equity in the consolidated balance sheets and as a separate component of comprehensive income in the
consolidated statements of comprehensive income.
Income Taxes: Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income tax assets and liabilities are measured using the enacted tax rates that are expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In accounting for uncertain tax positions, we recognize the tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties directly
related to income tax matters in income tax expense.
Common Stock and Earnings Per Share: Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net
income by the weighted average number of common shares outstanding plus the effect of dilutive potential common shares
outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock
options and restricted stock awards. There are no differences in the numerators of our computations of basic and diluted
earnings per share for any periods presented. The computation of basic and diluted earnings per share is shown below (in
thousands, except per share amounts).
Net income attributable to Werner
Weighted average common shares outstanding
Dilutive effect of stock-based awards
Shares used in computing diluted earnings per share
Basic earnings per share
Diluted earnings per share
Years Ended December 31,
2021
2020
2019
$
$
$
259,052 $
67,434
169,078 $
69,018
421
67,855
3.84 $
3.82 $
409
69,427
2.45 $
2.44 $
166,944
69,567
459
70,026
2.40
2.38
There were no options to purchase shares of common stock that were outstanding during the periods indicated above that were
excluded from the computation of diluted earnings per share because the option purchase price was greater than the average
market price of the common shares during the period. Performance awards are excluded from the calculation of dilutive
potential common shares until the threshold performance conditions have been satisfied.
Equity Compensation: We have an equity compensation plan that provides for grants of non-qualified stock options, restricted
stock and units (“restricted awards”), performance awards and stock appreciation rights to our associates and directors. We
apply the fair value method of accounting for equity compensation awards. Issuances of stock upon an exercise of stock options
or vesting of restricted stock are made from treasury stock; shares reacquired to satisfy tax withholding obligations upon vesting
of restricted stock are recorded as treasury stock. Grants of stock options, restricted stock, and performance awards vest in
36
increments, and we recognize compensation expense over the requisite service period of each award. We accrue compensation
expense for performance awards for the estimated number of shares expected to be issued using the most current information
available at the date of the financial statements. If the performance objectives are not met, no compensation expense will be
recognized, and any previously recognized compensation expense will be reversed. We account for forfeitures in the period in
which they occur.
Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other
comprehensive income (loss) refers to revenues, expenses, gains and losses that are not included in net income, but rather are
recorded directly in stockholders’ equity. For the years ended December 31, 2021, 2020 and 2019, comprehensive income
consists of net income, foreign currency translation adjustments and change in fair value of interest rate swaps. The components
of accumulated other comprehensive loss reported in the consolidated balance sheets as of December 31, 2021 and 2020,
consisted of foreign currency translation adjustments of $18.6 million and $17.2 million, respectively, and changes in fair value
of interest rate swaps, net of tax, of $2.0 million and $5.6 million, respectively.
New Accounting Pronouncements Adopted: In December 2019, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes,” which reduces complexity in accounting for income taxes by removing certain exceptions to the general principles
stated in Topic 740 and by clarifying and amending existing guidance to improve consistent application of and simplify other
areas of Topic 740. The Company adopted ASU 2019-12 as of January 1, 2021. Upon adoption, this update had no effect on our
financial position, results of operations, and cash flows.
Accounting Standards Updates Not Yet Effective: In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate
Reform (Topic 848)” which provides optional guidance for a limited period of time to ease the potential burden in accounting
for reference rate reform on financial reporting. The provisions of this update are effective for all entities as of March 12, 2020
through December 31, 2022 and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or
another reference rate expected to be discontinued because of reference rate reform. We are evaluating the impact of the
optional expedients in this update and their applicability to modifications of our existing credit facilities and hedging
relationships that reference LIBOR.
(2) BUSINESS ACQUISITIONS
ECM Acquisition
On July 1, 2021, pursuant to a Unit Purchase Agreement, we acquired an 80% ownership interest in ECM Associated, LLC
("ECM”), based in Cheswick, Pennsylvania, for $141.3 million after net working capital changes and net of cash acquired. We
have an exclusive option to purchase the remaining 20% ownership interest in ECM upon the occurrence of certain events or
after a period of five years following transaction close, based on a fixed multiple of ECM’s average annual adjusted earnings
before interest, taxes, depreciation and amortization. The noncontrolling interest holder also has an option to put the remaining
20% ownership interest to us on the same terms. We record the 20% remaining interest in temporary equity – redeemable
noncontrolling interest in the consolidated balance sheets.
ECM, through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service (“MCS”) subsidiaries, provides regional
truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the U.S. and operates nearly 500 trucks and 2,000
trailers in its network of eight operational facilities and 18 drop yards. The primary reason for this acquisition was to expand
our fleet size, operational facilities, geographic market presence, and short-haul expertise in a segment in which consumer
demand and supply chain needs are growing.
We financed the cash transaction through a combination of cash on hand, existing credit facilities, and the addition of a $100.0
million unsecured fixed-rate term loan commitment with BMO Harris Bank N.A. on June 30, 2021. For more information
regarding our debt, see Note 8 – Debt and Credit Facilities.
The results of operations for ECM are included in our consolidated financial statements beginning July 1, 2021. Revenues
generated by ECM are reported in our Truckload Transportation Services (“TTS”) segment. We incurred transaction costs
related to the acquisition, such as legal and professional fees, of $1.0 million for the year ended December 31, 2021, which is
included in other operating expenses on the consolidated statements of income.
NEHDS Acquisition
On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”), based in Monroe,
Connecticut, for a cash purchase price of $63.1 million after including the impacts of contingent consideration, net working
capital changes and cash acquired. We financed the transaction through a combination of cash on hand and existing credit
facilities. NEHDS is a final mile residential delivery provider with access to a network of 400 final mile delivery trucks serving
37
customers primarily in the Northeast and Midwest U.S. markets. NEHDS delivers primarily big and bulky products (primarily
furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries through a network of
19 cross dock, warehouse, and customer facilities.
The results of operations for NEHDS are included in our consolidated financial statements beginning November 22, 2021.
Revenues generated by NEHDS are reported in Final Mile within our Werner Logistics segment. We incurred transaction costs
related to the acquisition, such as legal and professional fees, of $0.6 million for the year ended December 31, 2021, which is
included in other operating expenses on the consolidated statements of income.
Purchase Price Allocations
We accounted for the purchases of ECM and NEHDS using the acquisition method of accounting under U.S. generally accepted
accounting principles (GAAP). The purchase price of each acquisition has been allocated to the assets acquired and liabilities
assumed using market data and valuation techniques. The purchase price allocation for ECM is considered final. The estimated
fair values of the assets acquired and liabilities assumed are considered provisional for NEHDS, pending the completion of the
valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, and the calculation of
deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed. The determination of estimated
fair values requires management to make significant estimates and assumptions. We believe that the information available
provides a reasonable basis for estimating the values of assets acquired and liabilities assumed in the NEHDS acquisition;
however, these provisional estimates may be adjusted upon the availability of new information regarding facts and
circumstances which existed at the acquisition date, and such adjustments may impact future earnings. We expect to finalize the
valuation of assets and liabilities for NEHDS as soon as practicable, but not later than one year from the acquisition date. Any
adjustments to the initial estimates of the fair value of the acquired assets and liabilities assumed in the NEHDS acquisition will
be recorded as adjustments to the respective assets and liabilities, with the residual amounts allocated to goodwill.
The purchase price allocations for ECM and NEHDS as of December 31, 2021 are summarized as follows (in thousands):
ECM
NEHDS
Purchase Price
Cash consideration paid
Cash and cash equivalents acquired
Contingent consideration arrangement
Working capital surplus (deficiency)
Total purchase price (fair value of consideration)
Provisional Purchase Price Allocation
Current assets
Property and equipment
Intangible assets
Other non-current assets
Total assets acquired
Current liabilities
Other long-term liabilities
Total liabilities assumed
Temporary equity - redeemable noncontrolling interest in ECM
155,686 (1)
(13,327)
—
(1,068)
141,291
17,468
88,632
37,200
3,644
146,944
(7,721)
(2,460)
(10,181)
(33,556)
Goodwill
$
38,084
$
60,332 (2)
(332)
2,500 (3)
554
63,054
3,508
5,420
20,000
12,122
41,050
(4,014)
(10,516)
(14,530)
—
36,534
(1) At closing, $1.5 million of the cash consideration was placed in escrow to cover post-closing adjustments and to secure certain
indemnification obligations of the sellers.
(2) At closing, $3.1 million of the cash consideration was placed in escrow to cover post-closing adjustments and to secure certain
indemnification obligations of the sellers.
(3) The contingent consideration arrangement, also referred to as earnout, requires us to pay the former owners of NEHDS additional amounts
in cash if certain levels of gross profit and revenues are earned during calendar year 2022. The potential undiscounted amount of all future
earnout payments that we could be required to make is between $0 and $4.0 million. The fair value of the contingent consideration
arrangement of $2.5 million was estimated by management.
38
Goodwill and Intangible Assets
Goodwill associated with the ECM and NEHDS acquisitions was primarily attributable to acquiring and retaining each of the
companies’ existing networks and the anticipated synergies from combining the operations of the Company and the acquired
companies. The goodwill associated with the acquisitions above is expected to be deductible for income tax purposes.
We have allocated a total of $57.2 million of the purchase prices above to finite-lived intangible assets, consisting of customer
relationships and trade names. The estimated fair values of the intangible assets were determined, with the assistance of an
independent third-party valuation firm, using the multi-period excess earnings method for customer relationships and the relief-
from-royalty method for trade names. All methods are forms of the income approach, which require a forecast of all the
expected future cash flows.
The following table summarizes the major classes of intangible assets and the respective weighted-average estimated
amortization periods:
Customer relationships
Trade names
Total intangible assets
(3) REVENUE
Revenue Recognition
Estimated Fair Value
(in thousands)
Weighted-Average Estimated
Amortization Period
(Years)
$
$
40,200
17,000
57,200
10
12
Revenues are recognized over time as control of the promised services is transferred to our customers, in an amount that reflects
the consideration we expect to be entitled to in exchange for those services.
The following table presents our revenues disaggregated by revenue source (in thousands):
Truckload Transportation Services
Werner Logistics
Inter-segment eliminations
Transportation services
Other revenues
Total revenues
Years Ended December 31,
2021
2,045,073 $
622,461
2020
1,843,209 $
469,791
(899)
(107)
2,666,635
67,737
2,734,372 $
2,312,893
59,285
2,372,178 $
$
$
2019
1,909,776
489,729
(243)
2,399,262
64,439
2,463,701
The following table presents our revenues disaggregated by geographic areas in which we conduct business (in thousands).
Operating revenues for foreign countries include revenues for (i) shipments with an origin or destination in that country and (ii)
other services provided in that country. If both the origin and destination are in a foreign country, the revenues are attributed to
the country of origin.
United States
Mexico
Other
Total revenues
Transportation Services
Years Ended December 31,
2021
2,532,720 $
156,405
45,247
2,734,372 $
2020
2,144,105 $
149,438
78,635
2,372,178 $
2019
2,191,560
197,470
74,671
2,463,701
$
$
We generate nearly all of our revenues by transporting truckload freight shipments for our customers. Transportation services
are carried out by our Truckload Transportation Services (“TTS”) segment and our Werner Logistics (“Logistics”) segment.
The TTS segment utilizes company-owned and independent contractor trucks to deliver shipments, while the Logistics segment
uses third-party capacity providers.
We generate revenues from billings for transportation services under contracts with customers, generally on a rate per mile or
per shipment, based on origin and destination of the shipment. Our performance obligation arises when we receive a shipment
order to transport a customer’s freight and is satisfied upon delivery of the shipment. The transaction price may be defined in a
39
transportation services agreement or negotiated with the customer prior to accepting the shipment order. A customer may
submit several shipment orders for transportation services at various times throughout a service agreement term, but each
shipment represents a distinct service that is a separately identified performance obligation. We often provide additional or
ancillary services as part of the shipment (such as loading/unloading and stops in transit) which are not distinct or are not
material in the context of the contract; therefore, the revenues for these services are recognized with the freight transaction
price. The average transit time to complete a shipment is approximately 3 days. Invoices for transportation services are typically
generated soon after shipment delivery and, while payment terms and conditions vary by customer, are generally due within 30
days after the invoice date.
The consolidated statements of income reflect recognition of transportation revenues (including fuel surcharge revenues) and
related direct costs over time as the shipment is being delivered. We use distance shipped (for the TTS segment) and transit
time (for the Logistics segment) to measure progress and the amount of revenues recognized over time, as the customer
simultaneously receives and consumes the benefit. Determining a measure of progress requires us to make judgments that affect
the timing of revenues recognized. We have determined that the methods described provide a faithful depiction of the transfer
of services to the customer.
For shipments where a third-party capacity provider (including independent contractors under contract with us) is utilized to
provide some or all of the service, we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e.,
report revenues on a net basis). Generally, we report such revenues on a gross basis, that is, we recognize both revenues for the
service we bill to the customer and rent and purchased transportation expense for transportation costs we pay to the third-party
provider. Where we are the principal, we control the transportation service before it is provided to our customers, which is
supported by us being primarily responsible for fulfilling the shipment obligation to the customer and having a level of
discretion in establishing pricing with the customer.
During 2021, 2020, and 2019, revenues recognized from performance obligations related to prior periods (for example, due to
changes in transaction price) were not material.
Other Revenues
Other revenues include revenues from our driver training schools, transportation-related activities such as third-party equipment
maintenance and equipment leasing, and other business activities. These revenues are generally recognized over time and
accounted for 2% of our total revenues in both 2021 and 2020, and 3% of our total revenues in 2019. Revenues from our driver
training schools require us to make judgments regarding price concessions in determining the amount of revenues to recognize.
Contract Balances and Accounts Receivable
A receivable is an unconditional right to consideration and is recognized when shipments have been completed and the related
performance obligation has been fully satisfied. At December 31, 2021 and 2020, the accounts receivable, trade, net, balance
was $460.5 million and $341.1 million, respectively. Contract assets represent a conditional right to consideration in exchange
for goods or services and are transferred to receivables when the rights become unconditional. At December 31, 2021 and 2020,
the balance of contract assets was $9.0 million and $6.9 million, respectively. We have recognized contract assets within the
other current assets financial statement caption on the consolidated balance sheets. These contract assets are considered current
assets as they will be settled in less than 12 months.
Contract liabilities represent advance consideration received from customers and are recognized as revenues over time as the
related performance obligation is satisfied. At December 31, 2021 and 2020, the balance of contract liabilities was $1.2 million
and $1.5 million, respectively. The amount of revenues recognized in 2021 that was included in the December 31, 2020
contract liability balance was $1.5 million. We have recognized contract liabilities within the accounts payable and other
current liabilities financial statement captions on the consolidated balance sheets. These contract liabilities are considered
current liabilities as they will be settled in less than 12 months.
Performance Obligations
We have elected to apply the practical expedient in Accounting Standards Codification (“ASC”) Topic 606, Revenue From
Contracts With Customers, to not disclose the value of remaining performance obligations for contracts with an original
expected length of one year or less. Remaining performance obligations represent the transaction price allocated to future
reporting periods for freight shipments started but not completed at the reporting date that we expect to recognize as revenue in
the period subsequent to the reporting date; transit times generally average approximately 3 days.
40
(4) GOODWILL AND INTANGIBLE ASSETS
The following table summarizes changes in the carrying amount of goodwill by segment for the year ended December 31, 2021
(in thousands):
Balance as of December 31, 2020
Goodwill recorded in acquisition of ECM
Goodwill recorded in acquisition of NEHDS
Purchase accounting adjustments (1)
Balance as of December 31, 2021
TTS
Werner Logistics
Total
$
$
— $
44,710
—
(6,626)
38,084 $
— $
—
36,534
—
36,534 $
—
44,710
36,534
(6,626)
74,618
(1) The purchase accounting adjustments are primarily attributable to post-closing adjustments related to assets assumed in, and the redeemable
noncontrolling interest associated with, the acquisition of ECM.
Acquired intangible assets consists of the following as of December 31, 2021 (in thousands):
Customer relationships
Trade names
Total intangible assets
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
$
40,200 $
17,000
57,200 $
(1,177) $
(708)
(1,885) $
39,023
16,292
55,315
No acquired intangible assets were recorded on the consolidated balance sheet as of December 31, 2020. Amortization expense
on intangible assets was $1.9 million for the year ended December 31, 2021. As of December 31, 2021, the estimated future
amortization expense for intangible assets by year is as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter (to 2033)
Total
(5) LEASES
Estimated
Amortization
Expense
5,437
5,437
5,437
5,437
5,437
28,130
55,315
$
$
We have entered into operating leases primarily for real estate. The leases have terms which range from 1 year to 18 years, and
some include options to renew. Renewal terms are included in the lease term when it is reasonably certain that we will exercise
the option to renew.
Operating leases are included in other non-current assets, other current liabilities and other long-term liabilities on the
consolidated balance sheets. These assets and liabilities are recognized based on the present value of future minimum lease
payments over the lease term at commencement date, using our incremental borrowing rate because the rate implicit in each
lease is not readily determinable. We have certain contracts for real estate that may contain lease and non-lease components
which we have elected to treat as a single lease component. Lease expense for operating leases is recognized on a straight-line
basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is
incurred. Lease expense is reported in rent and purchased transportation on the consolidated statements of income.
41
The following table presents balance sheet and other operating lease information (dollars in thousands):
Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)
Current lease liabilities (recorded in other current liabilities)
Long-term lease liabilities (recorded in other long-term liabilities)
Total operating lease liabilities
Other Information
Weighted-average remaining lease term for operating leases
Weighted-average discount rate for operating leases
December 31,
2021
2020
$
$
$
28,458
6,380
22,634
29,014
$
$
$
9,951
3,421
6,949
10,370
7.63 years
2.7 %
3.82 years
3.3 %
The following table presents the maturities of operating lease liabilities as of December 31, 2021 (in thousands):
Maturity of Lease Liabilities
2022
2023
2024
2025
2026
Thereafter
Total undiscounted operating lease payments
Less: Imputed interest
Present value of operating lease liabilities
Cash Flows
$
$
$
7,048
5,638
4,681
3,882
2,739
8,077
32,065
(3,051)
29,014
An initial right-of-use asset of $8.7 million was recognized as a non-cash asset addition with the adoption of the new lease
accounting standard on January 1, 2019. During the years ended December 31, 2021, 2020, and 2019, additional right-of-use
assets of $8.2 million, $2.8 million, and $6.1 million, respectively, were recognized as non-cash asset additions that resulted
from new operating lease liabilities, and we acquired right-of-use assets of $15.6 million as a result of our business acquisitions
during the year ended December 31, 2021. Cash paid for amounts included in the present value of operating lease liabilities was
$4.6 million, $3.9 million, and $3.8 million during the years ended December 31, 2021, 2020, and 2019, respectively, and are
included in operating cash flows.
Operating Lease Expense
Operating lease expense was $15.7 million, $10.1 million, and $8.5 million during the years ended December 31, 2021, 2020,
and 2019, respectively. This expense included $4.8 million for long-term operating leases for the year ended December 31,
2021 and $3.8 million for both years ended December 31, 2020 and 2019, with the remainder for variable and short-term lease
expense.
42
Lessor Operating Leases
We are the lessor of tractors and trailers under operating leases with initial terms of 2 to 10 years. We recognize revenue for
such leases on a straight-line basis over the term of the lease. Revenues for the years ended December 31, 2021, 2020, and 2019
were $11.7 million, $12.6 million, and $13.9 million, respectively. The following table presents information about the
maturities of these operating leases as of December 31, 2021 (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$
7,468
358
—
—
—
—
$
7,826
(6) FAIR VALUE
Fair Value Measurement — Definition and Hierarchy
ASC 820-10, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a
liability (an exit price) in an orderly transaction between market participants at the measurement date.
ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and
minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable
inputs reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data
obtained from sources independent of the Company. Unobservable inputs reflect our own assumptions about the assumptions
market participants would use in pricing the asset or liability, developed based on the best information available in the
circumstances.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as
follows:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.
Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly. Such inputs include quoted prices in markets that are not active, quoted prices for similar assets and liabilities in
active and inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are
derived principally from or corroborated by observable market data by correlation or other means.
Level 3 — Unobservable inputs for the asset or liability, where there is little, if any, observable market activity or data for
the asset or liability.
In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value.
This pricing methodology applies to our Level 1 assets and liabilities. If quoted prices in active markets for identical assets and
liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other
than the quoted prices that are observable, either directly or indirectly. This pricing methodology would apply to Level 2 assets
and liabilities.
The following table presents the Company's fair value hierarchy for assets measured at fair value on a recurring basis (in
thousands):
Other non-current assets:
Equity securities (1)
Level in Fair
Fair Value
December 31,
Value Hierarchy
2021
2020
1
$
17,166
N/A
(1) Represents our investments in autonomous technology companies. For additional information regarding the valuation of these equity
securities, see Note 7 – Investments.
We have no material liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020.
43
Our ownership interest in Mastery Logistics Systems, Inc. (“MLSI”) does not have a readily determinable fair value and is
accounted for using the measurement alternative in ASC 321, Investments - Equity Securities. For additional information
regarding the valuation of our investment in MLSI, see Note 7 – Investments.
Fair Value of Financial Instruments Not Recorded at Fair Value
Cash, accounts receivable trade, and accounts payable are short-term in nature and accordingly are carried at amounts that
approximate fair value. These financial instruments are recorded at or near their respective transaction prices and historically
have been settled or converted to cash at approximately that value (categorized as Level 2 of the fair value hierarchy).
The carrying amounts of our long-term debt approximate fair value due to the duration of our credit arrangements and the
variable interest rates (categorized as Level 2 of the fair value hierarchy).
(7) INVESTMENTS
Equity Investments without Readily Determinable Fair Values
In 2020, we entered into a strategic partnership with MLSI, a transportation management systems company. We are
collaborating with MLSI to develop a cloud-based transportation management system using MLSI's SaaS technology which we
have agreed to license. In both November 2020 and September 2021, we paid MLSI $5.0 million for shares of its preferred
stock. As of December 31, 2021, our ownership percentage in MLSI was approximately 9.8%. This investment is being
accounted for under ASC 321 using the measurement alternative, and is recorded in other noncurrent assets on the consolidated
balance sheets. We record changes in the value of this investment, based on events that occur that would indicate the value of
our investment in MLSI has changed, in other expense (income) on the consolidated statements of income. During 2021, an
investment by a third-party resulted in the remeasurement of our investment in MLSI and we recognized a $28.2 million
unrealized gain on our investment based upon the price paid by the third party. As of December 31, 2021 and 2020, the value of
our investment was $38.2 million and $5.0 million, respectively.
Equity Investments with Readily Determinable Fair Values
During 2021, we acquired strategic minority equity investments in autonomous technology companies, which are being
accounted for under ASC 321 and are recorded in other noncurrent assets on the consolidated balance sheets. We record
changes in the value of these investments, based on the share prices reported by Nasdaq, in other expense (income) on the
consolidated statements of income. We recognized a $12.1 million net unrealized gain on these investments for the year ended
December 31, 2021. For additional information regarding the fair value of these equity investments, see Note 6 – Fair Value.
(8) DEBT AND CREDIT FACILITIES
On June 30, 2021, we amended our existing credit agreement, dated May 14, 2019, with BMO Harris Bank N.A. The
amendment added an unsecured fixed-rate term loan commitment not to exceed a principal amount of $100.0 million and
increased our borrowing capacity with BMO Harris Bank N.A. from $200.0 million to $300.0 million. The outstanding
principal balance of the term loan bears interest at a fixed rate of 1.28%.
As of December 31, 2021, we had a $300.0 million and a $200.0 million unsecured committed credit facility with Wells Fargo
Bank, N.A. and BMO Harris Bank N.A. (together, the “Credit Facilities”), respectively, which will expire on May 14, 2024.
Borrowings under the Credit Facilities bear variable interest based on the London Interbank Offered Rate (“LIBOR”). In
addition, we had a $100.0 million unsecured fixed-rate term loan commitment with BMO Harris Bank N.A., as described
above, with quarterly principal payments of $1.25 million, which began on September 30, 2021, and a final payment of
principal and interest due and payable on May 14, 2024.
As of December 31, 2021 and 2020, our outstanding debt totaled $427.5 million and $200.0 million, respectively. As of
December 31, 2021, we had $330.0 million outstanding under the Credit Facilities, including (i) $180.0 million at a weighted
average variable interest rate of 0.78%; (ii) $75.0 million at a variable interest rate of 0.78%, which is effectively fixed at 2.32%
with an interest rate swap agreement through May 14, 2024; and (iii) $75.0 million at a variable interest rate of 0.80%, which is
effectively fixed at 2.36% with an interest rate swap agreement through May 14, 2024. In addition, as of December 31, 2021,
we had $97.5 million outstanding under the term loan at a fixed interest rate of 1.28%. The $500.0 million of borrowing
capacity under our Credit Facilities at December 31, 2021, is further reduced by $54.9 million in stand-by letters of credit under
which we are obligated. Each of the debt agreements includes, among other things, financial covenants requiring us (i) to
exceed a minimum ratio of earnings before interest, income taxes, depreciation and amortization to interest expense and/or (ii)
not to exceed a maximum ratio of total funded debt to earnings before interest, income taxes, depreciation and amortization (as
such terms are defined in each credit facility). As of December 31, 2021, we were in compliance with these covenants.
44
At December 31, 2021, the aggregate future maturities of long-term debt by year are as follows (in thousands):
2022
2023
2024
2025
2026
Total
$
$
5,000
5,000
417,500
—
—
427,500
(9) NOTES RECEIVABLE
We provide financing to some individuals who want to become independent contractors by purchasing a tractor from us and
leasing their services to us. We maintain a primary security interest in the tractor until the independent contractor pays the note
balance in full. Independent contractor notes receivable are included in other current assets and other non-current assets in the
consolidated balance sheets. At December 31, notes receivable consisted of the following (in thousands):
Independent contractor notes receivable
Other notes receivable
Notes receivable
Less current portion
Notes receivable – non-current
December 31,
2021
2020
$
$
7,358 $
10,665
18,023
3,386
14,637 $
10,335
9,425
19,760
3,807
15,953
We also provide financing to some individuals who attended our driver training schools. The student notes receivable are
included in other receivables and other non-current assets in the consolidated balance sheets. At December 31, student notes
receivable consisted of the following (in thousands):
Student notes receivable
Allowance for doubtful student notes receivable
Total student notes receivable, net of allowance
Less current portion, net of allowance
Student notes receivable – non-current
(10) INCOME TAXES
Income tax expense consisted of the following (in thousands):
December 31,
2021
2020
$
$
62,791 $
(22,911)
39,880
13,416
26,464 $
60,081
(19,448)
40,633
12,216
28,417
Years Ended December 31,
2021
2020
2019
Current:
Federal
State
Foreign
Deferred:
Federal
State
$
42,049 $
53,297 $
12,787
213
55,049
27,593
1,895
29,488
12,106
446
65,849
(8,988)
(1,245)
(10,233)
Total income tax expense
$
84,537 $
55,616 $
45
29,102
9,547
(88)
38,561
15,094
1,307
16,401
54,962
The effective income tax rate differs from the federal corporate tax rate of 21% in 2021, 2020, and 2019 as follows (in
thousands):
Tax at statutory rate
State income taxes, net of federal tax benefits
Other, net (1)
Total income tax expense
Years Ended December 31,
2021
2020
2019
$
$
72,663 $
47,186 $
11,599
275
8,580
(150)
84,537 $
55,616 $
46,600
8,575
(213)
54,962
(1) Prior year amounts within the table have been reclassified to conform to current year presentation.
At December 31, deferred income tax assets and liabilities consisted of the following (in thousands):
Deferred income tax assets:
Insurance and claims accruals
Compensation-related accruals
Allowance for uncollectible accounts
Operating lease liabilities (1)
Other (1)
Gross deferred income tax assets
Deferred income tax liabilities:
Property and equipment
Investments in equity securities
Prepaid expenses
Operating lease right-of-use assets (1)
Investment in partnership
Other (1)
Gross deferred income tax liabilities
Net deferred income tax liability
December 31,
2021
2020
$
55,233 $
12,203
3,958
7,033
1,644
80,071
305,002
10,985
7,269
6,955
17,076
1,283
348,570
$
268,499 $
54,913
16,054
4,070
2,530
2,844
80,411
308,145
—
6,333
2,485
—
1,318
318,281
237,870
(1) Prior year amounts within the table have been reclassified to conform to current year presentation.
Deferred income tax assets are more likely than not to be realized as a result of future taxable income and reversal of deferred
income tax liabilities.
We recognized a $49 thousand increase in the net liability for unrecognized tax benefits for the year ended December 31, 2021,
and a $141 thousand decrease for the year ended December 31, 2020. We accrued interest expense of $0.1 million during 2021
and 2020, excluding from both years the reversal of accrued interest related to the adjustment of uncertain tax positions. If
recognized, $1.9 million and $1.8 million of unrecognized tax benefits as of December 31, 2021 and 2020, respectively, would
impact our effective tax rate. Interest of $0.4 million as of December 31, 2021 and 2020 has been reflected as a component of
the total liability. We expect no other significant increases or decreases for uncertain tax positions during the next 12 months.
The reconciliations of beginning and ending gross balances of unrecognized tax benefits for 2021 and 2020 are shown below
(in thousands).
Unrecognized tax benefits, beginning balance
Gross increases – tax positions in prior period
Gross increases – current period tax positions
Settlements
Unrecognized tax benefits, ending balance
46
December 31,
2021
2020
$
$
2,363 $
65
320
(323)
2,425 $
2,541
92
220
(490)
2,363
We file U.S. federal income tax returns, as well as income tax returns in various states and several foreign jurisdictions. The
years 2018 and forward are open for examination by the U.S. Internal Revenue Service (“IRS”), and various years are open for
examination by state and foreign tax authorities. State and foreign jurisdictional statutes of limitations generally range from
three to four years.
(11) EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS
Equity Compensation Plan
The Werner Enterprises, Inc. Amended and Restated Equity Plan (the “Equity Plan”), approved by the Company’s shareholders
in 2013, provides for grants to employees and non-employee directors of the Company in the form of nonqualified stock
options, restricted stock and units (“restricted awards”), performance awards, and stock appreciation rights. The Board of
Directors or the Compensation Committee of our Board of Directors determines the terms of each award, including the type,
recipients, number of shares subject to and vesting conditions of each award. No awards of stock appreciation rights have been
issued under the Equity Plan to date. The maximum number of shares of common stock that may be awarded under the Equity
Plan is 20,000,000 shares. The maximum aggregate number of shares that may be awarded to any one person in any one
calendar year under the Equity Plan is 500,000. As of December 31, 2021, there were 6,508,744 shares available for granting
additional awards.
Equity compensation expense is included in salaries, wages and benefits within the consolidated statements of income. As of
December 31, 2021, the total unrecognized compensation cost related to non-vested equity compensation awards was
approximately $11.8 million and is expected to be recognized over a weighted average period of 1.6 years. The following table
summarizes the equity compensation expense and related income tax benefit recognized in the consolidated statements of
income (in thousands):
Restricted awards:
Pre-tax compensation expense
Tax benefit
Restricted stock expense, net of tax
Performance awards:
Pre-tax compensation expense
Tax benefit
Performance award expense, net of tax
Years Ended December 31,
2021
2020
2019
$
$
$
$
6,349 $
1,587
4,762 $
4,452 $
1,113
3,339 $
5,409 $
1,379
4,030 $
3,503 $
893
2,610 $
4,943
1,258
3,685
3,156
803
2,353
We do not have a formal policy for issuing shares upon vesting of restricted and performance awards. Such shares are generally
issued from treasury stock. From time to time, we repurchase shares of our common stock, the timing and amount of which
depends on market and other factors. Historically, the shares acquired from such repurchases have provided us with sufficient
quantities of stock to issue for equity compensation. Based on current treasury stock levels, we do not expect to repurchase
additional shares specifically for equity compensation during 2022.
Stock Options
Stock options are granted at prices equal to the market value of the common stock on the date the option award is granted. No
stock option awards were outstanding as of December 31, 2021 or 2020, and there were no stock option awards granted or
exercised during the years ended December 31, 2021 or 2020. No stock options were granted during the year ended December
31, 2019, and the total intrinsic value of stock options exercised during the year ended December 31, 2019 was $136 thousand.
47
Restricted Awards
Restricted stock entitles the holder to shares of common stock when the award vests. Restricted stock units entitle the holder to
a combination of cash or stock equal to the value of common stock when the unit vests. The value of these shares may fluctuate
according to market conditions and other factors. Restricted awards currently outstanding vest over periods ranging from 12 to
60 months from the grant date of the award. The restricted awards do not confer any voting or dividend rights to recipients until
such shares vest and do not have any post-vesting sales restrictions. The following table summarizes restricted award activity
for the year ended December 31, 2021:
Nonvested at beginning of period
Granted
Vested
Forfeited
Nonvested at end of period
Number of
Restricted
Awards (in
thousands)
Weighted
Average Grant
Date Fair
Value ($)
367 $
160
(158)
(13)
356
35.78
42.69
34.82
36.88
39.27
We estimate the fair value of restricted awards based upon the market price of the underlying common stock on the date of
grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior
to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for
any known future changes in the dividend rate. Cash settled restricted stock units are recorded as a liability within the
consolidated balance sheets and are adjusted to fair value each reporting period.
The total fair value of previously granted restricted awards vested during the years ended December 31, 2021, 2020, and 2019
was $6.8 million, $5.4 million, and $4.0 million, respectively. We withheld shares based on the closing stock price on the
vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares
withheld to satisfy the tax withholding obligations were recorded as treasury stock.
Performance Awards
Performance awards entitle the recipient to shares of common stock upon attainment of performance objectives as pre-
established by the Compensation Committee. If the performance objectives are achieved, performance awards currently
outstanding vest, subject to continued employment, 36 months after the grant date of the award. The performance awards do not
confer any voting or dividend rights to recipients until such shares vest and do not have any post-vesting sales restrictions. The
following table summarizes performance award activity for the year ended December 31, 2021:
Nonvested at beginning of period
Granted
Vested
Forfeited
Nonvested at end of period
Number of
Performance Awards (in
thousands)
Weighted
Average Grant
Date Fair
Value ($)
262 $
77
(100)
(10)
229
32.96
38.48
33.04
32.88
34.77
The 2021 performance awards are earned based upon the level of attainment by the Company of specified performance
objectives related to cumulative diluted earnings per share for the two-year period from January 1, 2021 to December 31, 2022.
Shares earned based on cumulative diluted earnings per share may be capped based on the Company’s total shareholder return
during the three-year period ended December 31, 2023, relative to the total shareholder return of a peer group of companies for
the same period. The 2021 performance awards will vest in one installment on the third anniversary from the grant date. The
2020 performance awards are earned based upon the level of attainment by the Company of specified performance objectives
related to cumulative diluted earnings per share for the two-year period from January 1, 2020 to December 31, 2021. Shares
earned based on cumulative diluted earnings per share may be capped based on the absolute total shareholder return during the
three-year period ended December 31, 2022. The 2020 performance awards will vest in one installment on the third anniversary
from the grant date. In January 2022, the Compensation Committee determined the 2019 fiscal year performance objectives
were achieved at a level above the threshold level but below the target level, and the amount of shares earned below the target
are included in the forfeited shares in the activity table above.
48
We estimate the fair value of performance awards based upon the market price of the underlying common stock on the date of
grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior
to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for
any known future changes in the dividend rate.
The vesting date fair value of performance awards that vested during the years ended December 31, 2021, 2020 and 2019 was
$4.1 million, $5.8 million and $1.2 million, respectively. We withheld shares based on the closing stock price on the vesting
date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to
satisfy the tax withholding obligations were recorded as treasury stock.
Employee Stock Purchase Plan
Employee associates that meet certain eligibility requirements may participate in our Employee Stock Purchase Plan (the
“Purchase Plan”). Eligible participants designate the amount of regular payroll deductions and/or a single annual payment (each
subject to a yearly maximum amount) that is used to purchase shares of our common stock on the over-the-counter market. The
maximum annual contribution amount is currently $20,000. These purchases are subject to the terms of the Purchase Plan. We
contribute an amount equal to 15% of each participant’s contributions under the Purchase Plan. Interest accrues on Purchase
Plan contributions at a rate of 5.25% until the purchase is made. We pay the trading commissions and administrative charges
related to purchases of common stock under the Purchase Plan. Our contributions for the Purchase Plan were as follows (in
thousands):
2021
2020
2019
$
297
283
265
401(k) Retirement Savings Plan
We have an Employees’ 401(k) Retirement Savings Plan (the “401(k) Plan”). Associates are eligible to participate in the 401(k)
Plan if they have been continuously employed with us or one of our subsidiaries for six months or more. We match a portion of
each associate’s 401(k) Plan elective deferrals. Salaries, wages and benefits expense in the accompanying consolidated
statements of income includes our 401(k) Plan contributions and administrative expenses, which were as follows (in
thousands):
2021
2020
2019
$ 4,904
4,748
4,414
Nonqualified Deferred Compensation Plan
The Executive Nonqualified Excess Plan (the “Excess Plan”) is our nonqualified deferred compensation plan for the benefit of
eligible key managerial associates whose 401(k) Plan contributions are limited because of IRS regulations affecting highly
compensated associates. Under the terms of the Excess Plan, participants may elect to defer compensation on a pre-tax basis
within annual dollar limits we establish. At December 31, 2021, there were 45 participants in the Excess Plan. Although our
current intention is not to do so, we may also make matching credits and/or profit sharing credits to participants’ accounts as we
so determine each year. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are
subject to general creditor claims until distributed to the participant. Under current federal tax law, we are not allowed a current
income tax deduction for the compensation deferred by participants, but we are allowed a tax deduction when a distribution
payment is made to a participant from the Excess Plan. The accumulated benefit obligation is included in other long-term
liabilities in the consolidated balance sheets. We purchased life insurance policies to fund the future liability. The aggregate
market value of the life insurance policies is included in other non-current assets in the consolidated balance sheets.
The accumulated benefit obligation and aggregate market value of the life insurance policies were as follows (in thousands):
Accumulated benefit obligation
Aggregate market value
December 31,
2021
2020
$
12,755 $
10,621
11,321
9,104
49
(12) COMMITMENTS AND CONTINGENCIES
We have committed to property and equipment purchases of approximately $163.2 million at December 31, 2021.
We are involved in certain claims and pending litigation, including those described herein, arising in the ordinary course of
business. The majority of these claims relate to bodily injury, property damage, cargo and workers’ compensation incurred in
the transportation of freight, as well as certain class action litigation related to personnel and employment matters. We accrue
for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has
been incurred and the amount of the loss can be reasonably estimated. Based on the knowledge of the facts, management
believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse
effect on our consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and
our view of these matters may change in the future as the litigation and related events unfold.
On May 17, 2018, in Harris County District Court in Houston, Texas, a jury rendered an adverse verdict against Werner
Enterprises, Inc. (the “Company”) in a lawsuit arising from a December 30, 2014 accident between a Werner tractor-trailer and
a passenger vehicle. On July 30, 2018, the court entered a final judgment against Werner for $92.0 million, including pre-
judgment interest.
The Company has premium-based liability insurance to cover the potential outcome from this jury verdict. Under the
Company’s insurance policies in effect on the date of this accident, the Company’s maximum liability for this accident is $10.0
million (plus pre-judgment and post-judgment interest) with premium-based coverage that exceeds the jury verdict amount. As
a result of this jury verdict, the Company had recorded a liability of $28.8 million and $23.6 million as of December 31, 2021
and 2020, respectively. Under the terms of the Company’s insurance policies, the Company is the primary obligor of the
verdict, and as such, the Company has also recorded a $79.2 million receivable from its third-party insurance providers in other
non-current assets and a corresponding liability of the same amount in the long-term portion of insurance and claims accruals in
the consolidated balance sheets as of December 31, 2021 and 2020.
The Company is pursuing an appeal of this verdict. No assurances can be given regarding the outcome of any such appeal.
We have been involved in class action litigation in the U.S. District Court for the District of Nebraska, in which the plaintiffs
allege that we owe drivers for unpaid wages under the Fair Labor Standards Act (“FLSA”) and the Nebraska Wage Payment
and Collection Act and that we failed to pay minimum wage per hour for drivers in our Career Track Program, related to short
break time and sleeper berth time. The period covered by this class action suit is August 2008 through March 2014. The case
was tried to a jury in May 2017, resulting in a verdict of $0.8 million in plaintiffs’ favor on the short break matter and a verdict
in our favor on the sleeper berth matter. As a result of various post-trial motions, the court awarded $0.5 million to the plaintiffs
for attorney fees and costs. Plaintiffs appealed the post-verdict amounts awarded by the trial court for fees, costs and liquidated
damages, and the Company filed a cross appeal on the verdict that was in plaintiffs’ favor. The United States Court of Appeals
for the Eighth Circuit denied Plaintiffs’ appeal and granted Werner’s appeal, vacating the judgment in favor of the plaintiffs.
The appellate court sent the case back to the trial court for proceedings consistent with the appellate court’s opinion. On June
22, 2020, the trial court denied Plaintiffs’ request for a new trial and entered judgment in favor of the Company, dismissing the
case with prejudice. On July 21, 2020, Plaintiffs’ counsel filed a notice of appeal of that dismissal, and that appeal remains
pending. As of December 31, 2021, we have an accrual for the jury’s award, attorney fees and costs in the short break matter
and had not accrued for the sleeper berth matter.
We are also involved in certain class action litigation in which the plaintiffs allege claims for failure to provide meal and rest
breaks, unpaid wages, unauthorized deductions and other items. Based on the knowledge of the facts, management does not
currently believe the outcome of these class actions is likely to have a material adverse effect on our financial position or results
of operations. However, the final disposition of these matters and the impact of such final dispositions cannot be determined at
this time.
50
(13) RELATED PARTY TRANSACTIONS
The Company leases land from a trust in which the Company’s Chairman Emeritus is the sole trustee. The annual rent
payments under this lease are $1.00 per year. The Company is responsible for all real estate taxes and maintenance costs related
to the property, which are recorded as expenses in the consolidated statements of income. The Company has made leasehold
improvements to the land for facilities used for business meetings and customer promotion. The cost of these improvements
was approximately $7.1 million, and the net book value (cost less accumulated depreciation) at December 31, 2021 was
approximately $2.2 million.
(14) SEGMENT INFORMATION
We have two reportable segments – Truckload Transportation Services and Werner Logistics.
The TTS segment consists of two operating units, Dedicated and One-Way Truckload. These units are aggregated because they
have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment
reporting. Dedicated provides truckload services dedicated to a specific customer, generally for a retail distribution center or
manufacturing facility, utilizing either dry van or specialized trailers. One-Way Truckload is comprised of the following
operating fleets: (i) the medium-to-long-haul van (“Van”) fleet transports a variety of consumer nondurable products and other
commodities in truckload quantities over irregular routes using dry van trailers, including Mexico cross-border routes; (ii) the
expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams; (iii) the regional short-haul
(“Regional”) fleet, including ECM, provides comparable truckload van service within geographic regions across the United
States; and (iv) the Temperature Controlled fleet provides truckload services for temperature sensitive products over irregular
routes utilizing temperature-controlled trailers. Revenues for the TTS segment include a small amount of non-trucking revenues
which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico where we utilize a
third-party capacity provider.
The Werner Logistics segment generates the majority of our non-trucking revenues through three operating units that provide
non-trucking services to our customers. These three Werner Logistics operating units are as follows: (i) Truckload Logistics,
which uses contracted carriers to complete shipments for brokerage customers and freight management customers for which we
offer a full range of single-source logistics management services and solutions; (ii) the intermodal (“Intermodal”) unit offers rail
transportation through alliances with rail and drayage providers as an alternative to truck transportation; and (iii) Werner Final
Mile (“Final Mile”), including NEHDS, offers residential and commercial deliveries of large or heavy items using third-party
agents, independent contractors, and Company employees with two-person delivery teams operating a liftgate straight truck. In
first quarter 2021, we completed the previously-announced sale of the Werner Global Logistics (“WGL”) freight forwarding
services for international ocean and air shipments to Scan Global Logistics Group, and we realized a $1.0 million gain when the
transaction closed on February 26, 2021. Werner Logistics will continue to provide North American truck brokerage, freight
management, intermodal and final mile services.
We generate other revenues from our driver training schools, transportation-related activities such as third-party equipment
maintenance and equipment leasing, and other business activities. None of these operations meets the quantitative reporting
thresholds. As a result, these operations are grouped in “Other” in the tables below. “Corporate” includes revenues and
expenses that are incidental to our activities and are not attributable to any of our operating segments, including gains and losses
on sales of assets not attributable to our operating segments.
We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment. Based
on our operations, certain revenue-generating assets (primarily tractors and trailers) are interchangeable between segments.
Depreciation for these interchangeable assets is allocated to segments based on the actual number of units utilized by the
segment during the period. Other depreciation and amortization is allocated to segments based on specific identification or as a
percentage of a metric such as average number of tractors. Inter-segment eliminations represent transactions between reporting
segments that are eliminated in consolidation.
51
The following tables summarize our segment information (in thousands):
Revenues by Segment
Truckload Transportation Services
Werner Logistics
Other
Corporate
Subtotal
Inter-segment eliminations
Total
Operating Income (loss) by Segment
Truckload Transportation Services
Werner Logistics
Other
Corporate
Total
Depreciation and Amortization by Segment
Truckload Transportation Services
Werner Logistics
Other
Corporate
Total
Years Ended December 31,
2021
2020
2019
$
2,045,073 $
1,843,209 $
1,909,776
622,461
66,108
1,629
469,791
57,276
2,009
489,729
61,850
2,589
2,735,271
2,372,285
2,463,944
(899)
(107)
(243)
$
2,734,372 $
2,372,178 $
2,463,701
Years Ended December 31,
2021
2020
2019
$
281,823 $
222,007 $
202,660
27,873
4,947
6,005
3,839
(5,497)
(4,413)
16,288
5,535
989
$
309,146 $
227,438 $
225,472
Years Ended December 31,
2021
2020
2019
$
245,169 $
239,858 $
228,768
8,833
10,786
2,912
7,712
11,705
4,011
7,182
10,980
2,597
$
267,700 $
263,286 $
249,527
52
Information about the geographic areas in which we conduct business is summarized below (in thousands) as of and for the
years ended December 31, 2021, 2020 and 2019. Operating revenues for foreign countries include revenues for (i) shipments
with an origin or destination in that country and (ii) other services provided in that country. If both the origin and destination
are in a foreign country, the revenues are attributed to the country of origin.
Revenues
United States
Foreign countries
Mexico
Other
Total foreign countries
Total
Long-lived Assets
United States
Foreign countries
Mexico
Other
Total foreign countries
Total
2021
2020
2019
$
2,532,720 $
2,144,105 $
2,191,560
156,405
45,247
201,652
149,438
78,635
228,073
197,470
74,671
272,141
$
2,734,372 $
2,372,178 $
2,463,701
$
1,583,766 $
1,506,862 $
1,487,591
29,421
56
29,477
36,222
174
36,396
38,428
257
38,685
$
1,613,243 $
1,543,258 $
1,526,276
We generate substantially all of our revenues within the United States or from North American shipments with origins or
destinations in the United States. Our largest customer, Dollar General, accounted for 14% and 12% of our total revenues in
2021 and 2020, respectively. Revenues generated by Dollar General are reported in both of our reportable operating segments.
No single customer generated more than 9% of our total revenues in 2019.
53
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
No disclosure under this item was required within the two most recent fiscal years ended December 31, 2021, or any subsequent
period, involving a change of accountants or disagreements on accounting and financial disclosure.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Exchange Act Rule 15d-15(e). Our disclosure controls and
procedures are designed to provide reasonable assurance of achieving the desired control objectives. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are
effective at a reasonable assurance level in enabling us to record, process, summarize and report information required to be
included in our periodic filings with the SEC within the required time period and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
We have confidence in our internal controls and procedures. Nevertheless, our management, including the Chief Executive
Officer and Chief Financial Officer, does not expect that the internal controls or disclosure procedures and controls will prevent
all errors or intentional fraud. An internal control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal
control system must reflect that resource constraints exist, and the benefits of controls must be evaluated relative to their costs.
Because of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that
all control issues, misstatements and instances of fraud, if any, have been prevented or detected.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal
control over financial reporting is a process designed to provide reasonable assurance to our management and Board of
Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes (i) maintaining
records that in reasonable detail accurately and fairly reflect our transactions; (ii) providing reasonable assurance that
transactions are recorded as necessary for preparation of our financial statements; (iii) providing reasonable assurance that
receipts and expenditures of company assets are made in accordance with management authorization; and (iv) providing
reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our
financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because (i) changes in conditions may occur or (ii) the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. This
assessment is based on the criteria for effective internal control described in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management
concluded that our internal control over financial reporting was effective as of December 31, 2021.
Management has engaged KPMG LLP (“KPMG”), the independent registered public accounting firm that audited the
consolidated financial statements included in this Form 10-K, to attest to and report on the effectiveness of our internal control
over financial reporting. KPMG’s report is included herein.
54
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Werner Enterprises, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Werner Enterprises, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated
statements of income, comprehensive income, stockholders’ equity and temporary equity - redeemable noncontrolling interest,
and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial
statement schedule II listed in the Index in Item 15(a)(2) (collectively, the consolidated financial statements), and our report
dated February 28, 2022 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Omaha, Nebraska
February 28, 2022
/s/ KPMG LLP
55
Changes in Internal Control over Financial Reporting
Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer,
concluded that no changes in our internal control over financial reporting occurred during the quarter ended December 31, 2021
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
During fourth quarter 2021, no information was required to be disclosed in a report on Form 8-K, but not reported.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
PART III
Certain information required by Part III is omitted from this Form 10-K because we will file a definitive proxy statement
pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Form
10-K, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement
which specifically address the items set forth herein are incorporated by reference.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item, with the exception of the Code of Corporate Conduct discussed below, is incorporated
herein by reference to our Proxy Statement.
Code of Corporate Conduct
We adopted our Code of Corporate Conduct, which is our code of ethics, that applies to our principal executive officer,
principal financial officer, principal accounting officer and all other officers, employee associates, and directors. The Code of
Corporate Conduct is available on our website, www.werner.com in the “Investors” section. We will post on our website any
amendment to, or waiver from, any provision of our Code of Corporate Conduct that applies to our Chief Executive Officer,
Chief Financial Officer or Chief Accounting Officer (if any) within four business days of any such event.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to our Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item, with the exception of the equity compensation plan information presented below, is
incorporated herein by reference to our Proxy Statement.
Equity Compensation Plan Information
The following table summarizes, as of December 31, 2021, information about compensation plans under which our equity
securities are authorized for issuance:
Number of Securities to
be Issued upon Exercise
of Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(a)
594,417(1)
(b)
$0.00(2)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)
6,508,744
Plan Category
Equity compensation plans
approved by stockholders
Includes 594,167 shares to be issued upon vesting of outstanding restricted stock awards.
(1)
(2) As of December 31, 2021, we do not have any outstanding stock options.
We do not have any equity compensation plans that were not approved by stockholders.
56
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated herein by reference to our Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent registered public accounting firm is KPMG LLP, Omaha, NE, Auditor Firm ID:185.
The information required by this Item is incorporated herein by reference to our Proxy Statement.
PART IV
ITEM 15.
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements and Schedules.
(1) Financial Statements: See Part II, Item 8 hereof.
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity and Temporary Equity - Redeemable
Noncontrolling Interest
Notes to Consolidated Financial Statements
Page
26
28
29
30
31
33
34
(2) Financial Statement Schedules: The consolidated financial statement schedule set forth under the following caption is
included herein. The page reference is to the consecutively numbered pages of this report on Form 10-K.
Schedule II—Valuation and Qualifying Accounts
Page
61
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to
be set forth therein is included in the Consolidated Financial Statements or Notes thereto.
57
(3) Exhibits: The Company has attached or incorporated by reference herein certain exhibits as specified below pursuant to
Rule 12b-32 under the Exchange Act.
Exhibit
Number
3(i)
3(ii)
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Description
Incorporated by Reference to:
Restated Articles of Incorporation of Werner
Enterprises, Inc.
Exhibit 3(i) to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2007
Revised and Restated By-Laws of Werner
Enterprises, Inc.
Exhibit 3.1 to the Company’s Current Report on Form 8-K
dated August 14, 2018
Description of Common Stock
Exhibit 4.1 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2019
Werner Enterprises, Inc. Amended and
Restated Equity Plan
Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2021
Non-Employee Director Compensation
Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2020; Item 8.01 of
the Company’s Current Report on Form 8-K dated May 12,
2020
The Executive Nonqualified Excess Plan of
Werner Enterprises, Inc., restated
Exhibit 10.3 to the Company’s Annual Report on Form 10-
K for the year ended December 31, 2017
Named Executive Officer Compensation
Lease Agreement, as amended February 8,
2007, between the Company and Clarence L.
Werner, Trustee of the Clarence L. Werner
Revocable Trust
License Agreement, dated February 8, 2007
between the Company and Clarence L.
Werner, Trustee of the Clarence L. Werner
Revocable Trust
Item 5.02 of the Company’s Current Report on Form 8-K
dated February 11, 2019; Item 5.02 of the Company’s
Current Report on Form 8-K dated February 13, 2020; Item
5.02 of the Company’s Current Report on Form 8-K dated
April 15, 2020; Item 5.02 of the Company’s Current Report
on Form 8-K dated February 11, 2021; Item 5.02 of the
Company’s Current Report on Form 8-K dated February 7,
2022
Exhibit 10.5 to the Company’s Annual Report on Form 10-
K for the year ended December 31, 2006
Exhibit 10.6 to the Company’s Annual Report on Form 10-
K for the year ended December 31, 2006
Form of Notice of Grant of Nonqualified
Stock Option
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated November 29, 2007
Form of Restricted Stock Award Agreement
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated December 1, 2009
Form of Performance-Based Restricted Stock
Award Agreement
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated February 10, 2014
Werner Enterprises, Inc. Change in Control
Severance Plan
Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2021
Credit Agreement, dated May 14, 2019
between Werner Enterprises, Inc. and Wells
Fargo Bank, National Association
Facility Letter Agreement, dated May 14,
2019 between Werner Enterprises, Inc. and
BMO Harris Bank N.A.
First Amendment to Credit Agreement, dated
October 20, 2020 between Werner
Enterprises, Inc. and Wells Fargo Bank,
National Association
Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2019
Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2019
Exhibit 10.12 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2020
58
Incorporated by Reference to:
Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2021
Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2021
Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2021
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Furnished herewith
Furnished herewith
Exhibit
Number
10.14
10.15
10.16
21
23.1
31.1
31.2
32.1
32.2
101
104
Description
Facility Letter and Promissory Note
Agreement, dated June 30, 2021 between
Werner Enterprises, Inc. and BMO Harris
Bank N.A.
First Amendment to Facility Letter
Agreement, dated June 30, 2021 between
Werner Enterprises, Inc. and BMO Harris
Bank N.A.
Second Amendment to Credit Agreement,
dated June 29, 2021 between Werner
Enterprises, Inc. and Wells Fargo Bank,
National Association
Subsidiaries of the Registrant
Consent of KPMG LLP
Certification of the Chief Executive Officer
pursuant to Rules 13a-14(a) and 15d-14(a) of
the Securities Exchange Act of 1934 (Section
302 of the Sarbanes-Oxley Act of 2002)
Certification of the Chief Financial Officer
pursuant to Rules 13a-14(a) and 15d-14(a) of
the Securities Exchange Act of 1934 (Section
302 of the Sarbanes-Oxley Act of 2002)
Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350 (Section
906 of the Sarbanes-Oxley Act of 2002)
Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 (Section
906 of the Sarbanes-Oxley Act of 2002)
The following audited financial information
from Werner Enterprises’ Annual Report on
Form 10-K for the year ended December 31,
2021, formatted in iXBRL (Inline Extensible
Business Reporting Language) includes: (i)
Consolidated Statements of Income for the
years ended December 31, 2021, December
31, 2020 and December 31, 2019, (ii)
Consolidated Statements of Comprehensive
Income for the years ended December 31,
2021, December 31, 2020 and December 31,
2019, (iii) Consolidated Balance Sheets as of
December 31, 2021 and December 31, 2020,
(iv) Consolidated Statements of Cash Flows
for the years ended December 31, 2021,
December 31, 2020 and December 31, 2019,
(v) Consolidated Statements of Stockholders’
Equity and Temporary Equity - Redeemable
Noncontrolling Interest for the years ended
December 31, 2021, December 31, 2020 and
December 31, 2019, and (vi) the Notes to
Consolidated Financial Statements as of
December 31, 2021.
The cover page from this Annual Report on
Form 10-K for the year ended December 31,
2021, formatted in Inline XBRL (included as
Exhibit 101).
ITEM 16.
FORM 10-K SUMMARY
Not applicable
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 28th day of February, 2022.
By:
/s/ Derek J. Leathers
WERNER ENTERPRISES, INC.
Derek J. Leathers
Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Position
Date
Chairman, President, Chief Executive Officer and Director
February 28, 2022
(Principal Executive Officer)
Director
Director
Director
Director
Director
Director
/s/ Derek J. Leathers
Derek J. Leathers
/s/ Scott C. Arves
Scott C. Arves
/s/ Kenneth M. Bird, Ed.D.
Kenneth M. Bird, Ed.D.
/s/ Diane K. Duren
Diane K. Duren
/s/ Jack A. Holmes
Jack A. Holmes
/s/ Carmen A. Tapio
Carmen A. Tapio
/s/ Alexi A. Wellman
Alexi A. Wellman
/s/ John J. Steele
John J. Steele
/s/ James L. Johnson
James L. Johnson
/s/ Vikram Mansharamani, Ph.D.
Vikram Mansharamani, Ph.D.
Director
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
Executive Vice President, Treasurer
and Chief Financial Officer (Principal Financial Officer)
February 28, 2022
Executive Vice President, Chief Accounting Officer
and Corporate Secretary (Principal Accounting Officer)
February 28, 2022
60
SCHEDULE II
WERNER ENTERPRISES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Year ended December 31, 2021:
Allowance for doubtful accounts
Year ended December 31, 2020:
Allowance for doubtful accounts
Year ended December 31, 2019:
Allowance for doubtful accounts
(In thousands)
Year ended December 31, 2021:
Allowance for doubtful student notes
Year ended December 31, 2020:
Allowance for doubtful student notes
Year ended December 31, 2019:
Allowance for doubtful student notes
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Write-offs
(Recoveries)
of Doubtful
Accounts
Balance at
End of
Period
8,686 $
845 $
362 $
9,169
7,921 $
2,261 $
1,496 $
8,686
8,613 $
219 $
911 $
7,921
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Write-offs
(Recoveries)
of Doubtful
Accounts
Balance at
End of
Period
19,448 $
18,659 $
15,196 $
22,911
21,317 $
16,529 $
18,398 $
19,448
19,361 $
19,834 $
17,878 $
21,317
$
$
$
$
$
$
See report of independent registered public accounting firm.
61
EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, Derek J. Leathers, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Werner Enterprises, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 28, 2022
/s/ Derek J. Leathers
Derek J. Leathers
Chairman, President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, John J. Steele, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Werner Enterprises, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 28, 2022
/s/ John J. Steele
John J. Steele
Executive Vice President, Treasurer and Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Annual Report of Werner Enterprises, Inc. (the “Company”) on Form 10-K for the period ending
December 31, 2021 (the “Report”), filed with the Securities and Exchange Commission, I, Derek J. Leathers, Chairman,
President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
February 28, 2022
/s/ Derek J. Leathers
Derek J. Leathers
Chairman, President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Annual Report of Werner Enterprises, Inc. (the “Company”) on Form 10-K for the period ending
December 31, 2021 (the “Report”), filed with the Securities and Exchange Commission, I, John J. Steele, Executive Vice
President, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
February 28, 2022
/s/ John J. Steele
John J. Steele
Executive Vice President, Treasurer and
Chief Financial Officer
INFORMATION
GLOBAL HEADQUARTERS
Werner Enterprises, Inc.
14507 Frontier Road
P.O. Box 45308
Omaha, Nebraska 68145-0308
Telephone: 402.895.6640
werner.com
email: werner@werner.com
ANNUAL MEETING
The Annual Meeting will be held on
May 10, 2022 at 10 a.m. CDT,
at the Embassy Suites Omaha-LaVista
Hotel and Conference Center,
12520 Westport Parkway,
LaVista, Nebraska.
STOCK LISTING
The company’s common stock trades on The NASDAQ
Global Select MarketSM under the symbol WERN.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP
1212 North 96th Street, Suite 300
Omaha, Nebraska 68114-2274
STOCK TRANSFER AGENT AND REGISTRAR
Equiniti Trust Company
Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
Telephone: 800.468.9716
shareowneronline.com
BOARD OF DIRECTORS
Derek J. Leathers, 52
Chairman, President and Chief Executive Officer of the Company.
Served on Board since 2020.
Kenneth M. Bird, Ed.D., 74
President and Chief Executive Officer - Avenue Scholars.
Served on Board since 2002. (2) (3) (4)
Diane K. Duren, 62
Former Executive Vice President, Chief Administrative Officer
and Corporate Secretary of Union Pacific Corporation.
Served on Board since 2017. (1) (2) (4)
Jack A. Holmes, 62
Chairman of Emerge TMS; Former President and CEO of UPS Freight.
Served on Board since 2018. (1) (2) (3)
Carmen A. Tapio, 56
Founder, President and Chief Executive Officer of
North End Teleservices, LLC.
Served on Board since 2020. (2) (3) (4)
Scott C. Arves, 65
Former Director, President and Chief Executive Officer of
Transport America, Inc.
Served on Board since 2021. (1) (2) (3)
Vikram Mansharamani, Ph.D., 48
Lecturer at Harvard University
Served on Board since 2021. (1) (3) (4)
Alexi A. Wellman, 51
Chief Executive Officer of Altaba, Inc.
Served on Board since 2021. (1) (2) (4)
(1) Serves on audit committee. (2) Serves on compensation committee.
(3) Serves on nominating and corporate governance committee. (4) Serves on ESG committee.
EXECUTIVE OFFICERS
Derek J. Leathers, 52
Chairman, President and Chief Executive Officer
James L. Johnson, 58
Executive Vice President, Chief Accounting Officer and Corporate Secretary
H. Marty Nordlund, 60
Senior Executive Vice President and Chief Operating Officer
Craig T. Callahan, 48
Executive Vice President and Chief Commercial Officer
John J. Steele, 64
Executive Vice President, Treasurer and Chief Financial Officer
Nathan J. Meisgeier, 48
Executive Vice President and Chief Legal Officer
Jim S. Schelble, 61
Executive Vice President and Chief Administrative Officer
Daragh P. Mahon, 53
Executive Vice President and Chief Information Officer
®
Corporate Headquarters I 14507 Frontier Road I P.O. Box 45308 I Omaha, Nebraska I 68145-0308
402.895.6640 I 800.228.2240 I Werner.com I DriveWerner.com
Werner Enterprises, Inc. is a SmartWay© Transport partner
Werner Enterprises, Inc. is a SmartWay© Transport
partner and honored to be named a 2021 SmartWay High
Performer by the United States Environmental Protection
Agency (EPA) for its efforts to produce more efficient and
sustainable supply chain transportation solutions.