Dedicated revenue per truck grew for the ninth year out of the last 10, and
Dedicated operating margin performed within long-term TTS target range
Named a Lead Independent Director
to our Board of Directors
Executed cost structural changes across
organization, yielding $43M in savings
Recognized as one of Newsweek’s America’s
Greatest Workplaces for Diversity, Parents
and Families
Disciplined investments in 2023; transitioning
truckload brokerage, including Reed, and
Intermodal business, to our cloud-based Werner
EDGE® TMS solution to drive profitable growth
Dear Shareholders,
As we reflect on 2023, despite the continuation of a prolonged and arduous operating environment, the Werner team showcased resilience. We
also made a concerted effort to drive structural improvements that will result in long-term value creation for all stakeholders. While our results
this year were not up to our standards, we believe the operational improvements we made will result in profitable growth generation for years
to come.
In 2023, our Dedicated business proved to be durable and resilient, growing full-year revenue net of fuel surcharges and revenue per truck. The
business also generated solid margins despite the challenging backdrop. Our One-Way trucking business’ rate per mile decline was more
favorable than industry benchmarks, and through operational excellence, we significantly increased mileage production throughout the year. In
addition, our Logistics division saw notable growth in both volume and revenue.
Revenues for 2023 were $3.3 billion and our operating income was $176 million, or a 5.4% operating margin. Our diluted earnings per share
was $1.76, down 53%, driven largely by market dynamics including lower equipment gains, inflationary headwinds and rate pressure in One-Way.
Our leadership team and nearly 14,000 talented Werner team members stayed the course, executing on our strategy, upholding the Werner brand
and reputation, putting safety at the forefront of everything we do, and providing superior service to our highly valued customers.
Our Werner DRIVESM strategy continues to serve as the North Star for our decisions and actions. In addition to showing Durability and topline
growth, we executed on meaningful cost improvements, aiding our Results by offsetting rate pressure, cost inflation and declining resale values
of equipment. Separately, our record operating cash flow supported deliberate elevated reinvestment in the business. As a result of this strategy,
we lowered the average age of our tractor fleet closer to our two year goal. We also lowered our debt and returned capital to shareholders through
an 8% dividend increase.
We made significant advancements in Innovation by further modernizing our equipment and moving our business onto one platform. We
transitioned truckload brokerage, including Reed, and Intermodal business, to our new cloud-based Werner EDGE® TMS solution. This will remain
a priority for us in 2024 as we continue to transfer all our businesses onto this platform.
Relative to our core Values and ESG, we were proud to be recognized in 2023 as one of Newsweek’s America’s Greatest Workplaces for Diversity,
Parents and Families. We also realized a 19-year low in our preventable accident rating, which is a testament to our professional drivers,
mechanics and safety associates, as well as our safety-first culture. We continued to give back to our community through our Blue Brigade
volunteer hours. Finally, we bolstered our governance by naming a Lead Independent Director to our Board of Directors. We remain committed
to leveraging Werner DRIVESM as we look toward the future.
While being cautiously optimistic about 2024, we acknowledge both near-term market challenges and latter-half opportunities on the horizon.
We look to drive growth in our core businesses, including Dedicated, Mexico cross-border and Logistics. We will continue our production gains in
One-Way and expand earnings through meaningful cost savings initiatives. We will use our strong cash flow to advance our technology roadmap
and invest for long-term value creation. Last, but certainly not least, the safety of our workforce will always be at the top of our core values.
Our effective execution of these objectives will position us favorably to navigate near-term challenges and capitalize on the opportunities that lie
ahead in an improved freight market. On behalf of the entire team, I extend my sincere gratitude to our shareholders for their continued support
and confidence in our company.
March 12, 2024
Derek J. Leathers
Chairman 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, 2023
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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2023, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately
$2.771 billion (based on the closing sale price of the Registrant’s Common Stock on that date as reported by Nasdaq).
As of February 9, 2024, 63,468,690 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 14, 2024, are incorporated in Part III of this report.
WERNER ENTERPRISES, INC.
INDEX
PART I
Business ..................................................................................................................................
Risk Factors ............................................................................................................................
Unresolved Staff Comments ..................................................................................................
Cybersecurity .........................................................................................................................
Properties ................................................................................................................................
Legal Proceedings ..................................................................................................................
Mine Safety Disclosures .........................................................................................................
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ...............................................................................................
Reserved .................................................................................................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations .
Quantitative and Qualitative Disclosures about Market Risk ................................................
Financial Statements and Supplementary Data ......................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures ........................................................................................................
Other Information ...................................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ...................................
PART III
Directors, Executive Officers and Corporate Governance .....................................................
Executive Compensation ........................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ...............................................................................................................
Certain Relationships and Related Transactions, and Director Independence .......................
Principal Accountant Fees and Services ................................................................................
Exhibit and Financial Statement Schedules ...........................................................................
Form 10-K Summary .............................................................................................................
PART IV
PAGE
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Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
This Annual Report on Form 10-K for the year ended December 31, 2023 (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 (the “Board”) 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 2023, our Truckload
Transportation Services (“TTS”) segment had a fleet of 8,000 trucks, of which 7,740 were company-operated and 260 were
owned and operated by independent contractors. Our Werner Logistics division operated an additional 35 drayage company
trucks and 115 company delivery trucks at the end of 2023. We have historically grown through organic growth, and more
recently through a combination of organic growth and four business acquisitions (discussed below). Our business acquisitions
expanded our fleet size, customer base, geographic market presence, and network of operational facilities. We remain open to
considering acquisitions in North America truckload and logistics companies that are both additive to our business and
accretive to our earnings.
We have two reportable segments – TTS and Werner Logistics. Our TTS segment is comprised of Dedicated and One-Way
Truckload. Dedicated had 5,265 trucks as of December 31, 2023 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 2,735 trucks as of December 31, 2023 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 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
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. Werner Logistics provides services
throughout North America 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”) 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 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.
1
Business Acquisitions
2022 Acquisitions
On November 5, 2022, we acquired 100% of the equity interests in Reed Transport Services, Inc. and RTS-TMS, Inc., doing
business as ReedTMS Logistics (“ReedTMS”). ReedTMS, based in Tampa, Florida, is an asset-light logistics provider and
dedicated truckload carrier that offers a comprehensive suite of freight brokerage and truckload solutions to a diverse customer
base. Prior to the acquisition, ReedTMS achieved revenues of $372.0 million for the 12-month period ended September 30,
2022, 90% freight brokerage and 10% trucking. Freight brokerage and truckload revenues generated by ReedTMS are reported
in our Werner Logistics segment and in Dedicated within our TTS segment, respectively.
On October 1, 2022, we acquired 100% of the equity interests in FAB9, Inc., doing business as Baylor Trucking, Inc.
(“Baylor”). Baylor, based in Milan, Indiana, operates in the east central and south central United States. Prior to the acquisition,
Baylor achieved revenues of $81.5 million for the 12-month period ended August 31, 2022. Revenues generated by Baylor are
reported in One-Way Truckload within our TTS segment.
2021 Acquisitions
On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”). NEHDS is a final
mile residential delivery provider serving customers primarily in the Northeast and Midwest United States markets. NEHDS
delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing
residential and commercial deliveries. Prior to the acquisition, NEHDS achieved revenues of $71 million for the 12-month
period ended September 30, 2021. Revenues generated by NEHDS are reported in Final Mile within our Werner Logistics
segment.
On July 1, 2021, we acquired an 80% equity ownership interest in ECM Associated, LLC ("ECM”). ECM provides regional
truckload carrier services in the Mid-Atlantic, Ohio and Northeast regions of the United States. Prior to the acquisition, ECM
achieved revenues of $108 million in 2020. Revenues generated by ECM are reported in One-Way Truckload within our TTS
segment.
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.
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 2023, TTS segment revenues accounted for 70% of total
operating revenues, Werner Logistics revenues accounted for 28% 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 13 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 2023, our largest 5, 10, 25 and 50 customers comprised 35%, 48%, 65% and 78% of our revenues,
respectively. Our largest customer, Dollar General, accounted for 10% of our total revenues in 2023. Revenues generated by
Dollar General are reported in both of our reportable operating segments. The industry groups of our top 50 customers are 57%
retail and consumer products, 20% food and beverage, 15% manufacturing/industrial, 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 have 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
2
expiration of the contract’s first year. We typically renegotiate rates with our customers for these Dedicated contracts on an
annual basis.
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 trucks at
fixed intervals. 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 have used 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
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, 2023, we employed 9,929 drivers; 707 mechanics and maintenance associates for the
trucking operation; 1,587 office associates for the trucking operation; and 1,586 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. Our U.S. or Canadian associates are not represented by a collective bargaining unit with the exception of fewer
than 30 employees at two locations of a U.S. subsidiary. We generally 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 2023, our trucking business achieved its lowest work injury rate on record, and we achieved our lowest DOT
preventable accident rate per million miles in 19 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 was designated by the U.S. government as an essential industry for
keeping the U.S. supply chain moving. Our drivers and mechanics were 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 follow
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. Through our Inclusion, Diversity, Equity, Accountability & Learning (IDEAL) Council, we are proud to
support 11 Associate Resource Groups (“ARGs”). These groups support our commitment to promoting and maintaining an
inclusive culture for all associates by bringing together individuals from a wide range of backgrounds, experiences and
3
perspectives. The ARGs seek to foster a sense of shared community and empowerment for associates and allies who share and
support a common social identity, such as gender, ethnicity and sexual orientation.
In 2023, Werner, as well as our recently acquired business, ReedTMS, were both recognized among the Top Companies for
Women to Work for in Transportation by the Women in Trucking Association. This was Werner’s sixth consecutive year of
being recognized. Werner was recognized for our support of gender diversity, flexible hours and work requirements,
competitive compensation and benefits, and professional development and career advancement opportunities. In 2023,
Newsweek named Werner as one of America’s Greatest Workplaces for Diversity, America’s Greatest Workplaces, and
America’s Greatest Workplaces for Parents and Families. We were recognized by 50/50 Women on BoardsTM as a “3+”
company for having three or more women on our corporate board of directors in 2022. At Werner, our female driver workforce
is double the national industry average, and over 60% of our driver associates are ethnically diverse. Additionally, over half of
our non-driver associates and our corporate board of directors are female or ethnically diverse. In 2023, Werner was honored to
be recognized as No. 3 on the Top 10 Military Friendly® Spouse Employer list and No. 5 on the Top 10 Military Friendly®
Employer list by VIQTORY. Werner also earned No. 49 on the 2023 Military Times Best for Vets Employer list. Werner was
awarded these designations for its commitment, effort, and success in creating sustainable and meaningful career paths for the
military community. 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 have tightened driver supply.
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 offering competitive 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 (including those owned and operated by Werner) 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. At the end of 2023,
we operated a total of 23 driver training locations to assist with the training and development of drivers for our company and
the industry.
Independent Contractors: We also recognize that independent contractors complement our company-employed drivers. As of
December 31, 2023, we had 260 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 the availability and cost of equipment financing,
continue to make it difficult to recruit and retain independent contractors.
Revenue Equipment
As of December 31, 2023, we operated 7,740 company tractors and 260 tractors owned by independent contractors in our TTS
segment. Our Werner Logistics segment operated an additional 35 drayage company tractors and 115 company delivery trucks
at the end of 2023. The TTS segment company tractors were primarily manufactured by International (a Navistar company),
Freightliner (a Daimler company), Kenworth and Peterbilt (both divisions of PACCAR). The Werner Final Mile company
delivery trucks are primarily manufactured by Hino, International, and Freightliner. We adhere to a comprehensive maintenance
4
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 2.1 years at December 31, 2023, compared to 2.3 years at
December 31, 2022. The average age of our trailer fleet was 4.9 years at December 31, 2023, compared to 5.0 years at
December 31, 2022. Our trucks are equipped with tablet-based telematics, and nearly all of our company-owned trucks have
collision mitigation safety systems and automated manual transmissions.
We operated 30,810 trailers at December 31, 2023, comprised of dry vans, flatbeds, temperature-controlled, and other
specialized trailers. Most of our company-owned 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. Substantially 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 seven locations. At times, we may also trade used trucks to original equipment manufacturers when
purchasing new trucks.
Fuel
In 2023, 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,
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, 2023, 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 we continue to update our fleet of tractors to
provide energy-efficient transportation options for our customers, including investing in and testing alternative fuels, advanced
equipment technologies, and additional fleet enhancements. We currently maintain a late-model truck fleet to take advantage of
the 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 greenhouse gas emissions by 55% compared to a
2020 baseline.
Regulations
As a for-hire motor carrier, Werner is subject to federal, state, local, and international laws and regulations and is regulated by
various federal, state, and local agencies including DOT, Federal Motor Carrier Safety Administration (“FMCSA”), U.S.
Department of Homeland Security, the U.S. Environmental Protection Agency (“EPA”), among others.
DOT and an agency within DOT, the 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 a carrier’s compliance and safety performance. The FAST Act also instructed FMCSA to study
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the accuracy of CSA and SMS data and issue a corrective action plan. The FMCSA provided a report to Congress in 2020
outlining the changes it may make to the CSA program; however, it remains unclear if, when, and to what extent any such
changes will occur. 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.
Continuing in 2023, 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% for 2024.
FMCSA issued its final rule for Entry-Level Driver Training (“ELDT”) in December 2016. However, after delays announced
by FMCSA, the 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.
The Infrastructure Investment and Jobs Act of 2021 required the FMCSA to establish a pilot program to allow persons ages 18,
19, and 20 to operate commercial motor vehicles in interstate commerce. 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.
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. In December 2022, EPA adopted its first final rule, which sets stronger emissions standards to reduce air pollution,
including pollutants that create ozone and particulate matter, from heavy-duty vehicles and engines starting in model year 2027.
In April 2023, EPA announced a proposed rule, Greenhouse Gas Emission Standards for Heavy-Duty Vehicles - Phase 3, which
would phase in stronger greenhouse gas emissions standards and zero-emission vehicle requirements for heavy-duty trucks for
model years 2028-2032. Werner continues monitoring any EPA-related developments impacting its fleet.
California’s ongoing emissions reduction goals have significantly impacted the industry. The California Air Resources Board
(“CARB”) regulations apply to both in-state California carriers and carriers outside of California who own or dispatch
equipment in the state. Werner is impacted by various CARB regulations including the Truck and Bus Regulation, Clean Truck
Check (heavy-duty inspection and maintenance), Advanced Clean Trucks, Advanced Clean Fleets, Temperature Refrigeration
Units, among other currently effective and forthcoming regulations. Werner continues to structure our fleet plans to operate
compliant equipment in California. Approximately 5% of our truck miles in 2023 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 engaging in 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
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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.
Risks Related to our Business and Industry
Our business is subject to overall economic and geopolitical conditions that could have a material adverse effect on our
results of operations and financial condition.
We are sensitive to changes in economic or geopolitical 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 or geopolitical conditions may also impact the financial condition of our
customers, resulting in a decreased demand for services or a greater risk of bad debt losses, and that of our suppliers, which
may affect negotiated pricing or availability of needed goods and services.
Labor and employment matters, including difficulty in recruiting and retaining experienced drivers, recent driver training
school graduates and independent contractors, could impact our results of operations and financial condition.
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 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. 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 and cost of equipment financing. Ongoing 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 have seen significant increased activity by tax
and other regulators regarding worker classification, and class action lawsuits alleging misclassification by transportation
companies have resulted in significant damage awards or monetary settlements. 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,
increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become
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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.
During 2023, union organizing efforts occurred at two locations of a U.S. subsidiary, which resulted in fewer than 30 of our
employees being represented by a union. Additional unionization, if broad-based, could have a material adverse effect on our
costs, efficiency, and profitability. Driver or other employee dissatisfaction and regulations that govern organization procedures
could impact our ability to effectively or timely address any organization efforts.
Increases in fuel prices and shortages of fuel can have a material adverse effect on the results of operations and
profitability.
Increases in fuel prices and shortages of fuel can be caused by, among other things, changes in macroeconomic and geopolitical
conditions. 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, 2023, 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. If we do not invest in and develop technology in a
manner that meets market demands, we may be placed at a competitive disadvantage.
The seasonal shipping pattern generally experienced in the trucking industry may affect our periodic results during
traditional 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 2023, our largest 5, 10, 25 and 50 customers
accounted for 35%, 48%, 65%, and 78% of revenues, respectively. Our largest customer, Dollar General, accounted for 10% of
our total revenues in 2023. 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
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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
13 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 the United States-
Mexico-Canada Agreement (“USMCA”) for Mexico and Canada. The United States, Canada and Mexico ratified the USMCA
as an overhaul and update to the North America Free Trade Agreement, and it became effective in July 2020. We believe
Werner is one of the largest U.S. based truckload carriers in terms of freight volume shipped to and from the United States and
Mexico. There are risks, sometimes unforeseen, associated with international 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.
At the present time, immigration at the southern border has not negatively affected our operations; however, if the situation
intensifies, operations could be affected.
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, or increased costs of, 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
significant financial problems, we could experience difficulty in obtaining needed goods and services because of production
interruptions, limited material availability, or other reasons. At times, tractor and trailer manufacturers have experienced
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 replacement
cycles. Emissions and fuel efficiency regulations may impact equipment availability and pricing. Shortages of equipment,
component parts, and other supplies 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 disruption or failure of our technology
infrastructure or of third-party systems or services integrated therein, or a breach of our systems, networks or processes, or
those of any vendor that maintains or accesses our data, could have a material adverse effect on our business.
We rely increasingly on cloud-based technology and 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 various purposes including, without limitation, enhancing customer
service, planning freight loads, communicating with and dispatching drivers and other capacity providers, billing and collecting
from customers, paying vendors and associates, maintaining sensitive or confidential Company or third-party information or
employee personal information, and generating financial, operational, and other information. We rely on strategic vendors for
certain services that impact our systems and communications, such as, for example, integrated GPS and satellite communication
services and Internet and telecommunications services. System disruption or unavailability could occur due to various events,
including, without limitation, a power outage, a hardware or software failure, a cybersecurity threat or breach, a catastrophic
occurrence, or the disruption of a vendor’s service to us. If any of our information systems, or those of our providers, become
compromised or unavailable, or are taken offline in response to a threat or other event, certain critical functions may be
disrupted, subject to manual performance, or fail.
Our mitigation of these risks includes, without limitation, using certain redundant computer hardware, tools and protocols to
monitor and respond to threats, the work of a dedicated internal cybersecurity team, incident and crisis response plans, and
enterprise-wide information security policies and trainings. However, the security risks associated with information technology
systems have increased in recent years because of the evolving sophistication, activities and methods of cyber attackers. The
9
techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be
difficult to detect, and often are not recognized until launched against a target, and we may be unable or fail to anticipate them
or to implement adequate preventative measures. We may incur costs in responding to a specific event. Fortifying our systems
after a cybersecurity event may be cost prohibitive. Our investments in cybersecurity may not be successful against an attack or
malicious action.
Failure to comply with applicable U.S. and international privacy or data protection regulations or other data protection
standards, on which there is heightened focus, may expose us to litigation, fines, sanctions, or other penalties. The risks
described herein could create reputational harm or financial liability; disrupt our business and/or impact our customers; result in
the loss, disclosure or misuse of operational, confidential or proprietary information; or increase our costs, any of which could
harm our reputation and adversely impact our business, results of operations, and financial condition.
A public health crisis, such as an epidemic, pandemic, or similar outbreak, has had, and may continue to have an adverse
impact on our business, as well as the operations of our customers and suppliers.
The COVID-19 pandemic resulted in a slowdown of economic activity and a disruption in supply chains during 2020 and 2021.
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 took numerous actions to lessen the adverse impact of the COVID-19 pandemic, our future results could
be further impacted by the disruptive effects of a future pandemic or outbreak, 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 an outbreak, governmental actions that may be imposed, as
well as the rate of economic recovery after an outbreak subsides. The unpredictable nature and uncertainty of a public health
crisis could also magnify other risk factors disclosed above and makes it impractical to identify all potential risks.
Risks Related to Legal, Regulatory and Environmental, Social and Governance (“ESG”) Matters
We operate in a highly regulated industry. Compliance with changing transportation, emission, fuel efficiency or other
regulations, or violations of existing or future regulations, could adversely affect our operations and profitability.
We are regulated by DOT and its agency, FMCSA, in the United States and similar governmental transportation agencies in
certain U.S. states and in foreign countries in which we operate. These regulatory agencies have the authority to govern
transportation-related activities, such as safety, authorization to conduct motor carrier operations and other matters. The EPA
and CARB subject us to emissions and fuel efficiency regulations, and additional regulations by these and other agencies may
occur. The Regulations subsection in Item 1 of Part I of this Form 10-K describes several proposed and final regulations that
may have a significant effect on our operations including our productivity, driver recruitment and retention, and capital
expenditures for tractors, trailers, and other equipment necessary to comply with such regulations.
We are subject to environmental laws and regulations dealing with the handling of hazardous materials, aboveground and
underground fuel storage tanks, and discharge and retention of stormwater. 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 regulations, we could be subject to substantial fines or penalties and to civil and criminal
liability.
Increasing scrutiny from investors and other stakeholders regarding ESG related matters may have a negative impact on
our business.
Companies across all industries are facing increasing scrutiny from investors and other stakeholders related to ESG matters,
including practices and disclosures related to environmental stewardship, social responsibility, and diversity, equity and
inclusion. Organizations that provide information to investors and other stakeholders on corporate governance and related
matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by
some investors to inform their investment and proxy statement voting decisions. Unfavorable ESG ratings may lead to negative
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sentiment toward us by investors or other stakeholders, which could have a negative impact on our revenues, stock price and
access to and costs of capital.
We have developed certain initiatives and goals relating to ESG matters. Our ability to successfully execute these initiatives and
accurately report our progress presents numerous operational, financial, legal, reputational and other risks, many of which are
outside our control, and all of which could have a material negative impact on our business. Additionally, the implementation of
these initiatives imposes additional costs on us. If our ESG initiatives and goals do not meet the expectations of our investors or
other stakeholders, which continue to evolve, then our reputation, our ability to attract or retain employees, and our
attractiveness as an investment or business partner could be negatively impacted. Similarly, our failure, or perceived failure, to
pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards in a timely manner, or at all, could
also have similar negative impacts and expose us to government enforcement actions and private litigation.
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,
availability of insurance coverage, or a significant uninsured liability.
We are subject to claims and litigation risks regarding a variety of issues, including without limitation, over-the-road accidents
and contractual, labor and employment, environmental, regulatory, workers’ compensation, and data privacy matters. 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 such 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, or if we incur a significant liability for which we do not have coverage, 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 for our tractors and trailers. We have been in the business of
selling our used company-owned equipment 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.
ITEM 1C.
CYBERSECURITY
Under our “Cloud First, Cloud Now” strategy, we are increasingly relying on cloud-based technology to enable more
innovation, enhance customer service, and keep up with the complex demands of the ever-changing trucking and logistics
landscape. We are incorporating cybersecurity into this strategy by investing in key technology and skillset development to help
protect the confidentiality, integrity, and availability of our systems and electronic data. In addition, we are committed to using
reasonable efforts, given identified or reasonably anticipated threats, to prevent information security breaches. We have not
experienced any such breach in any of the three years shown in the financial statements in this filing or in 2024 through the date
hereof, and cybersecurity threat risks have not materially affected our business strategy, results of operations or financial
condition. Based on our analysis of the current threat environment, we do not believe that any such material impacts are
reasonably likely to occur. See Item 1A of Part I of this Form 10-K for a discussion of risks and uncertainties related to our
information systems and technology infrastructure.
We employ a dedicated cybersecurity team. In coordination with our Chief Information Officer, the team assesses and manages
cybersecurity threat risks with a focus on identity verification, system access and security, and governance, risk, and
compliance. Our Chief Information Officer has extensive information technology and strategic leadership experience, including
modernizing and securing business applications and technology stacks. Our director of cybersecurity is a certified information
systems security professional with broad experience in cybersecurity, much of which was gained working for the U.S. military.
Various members of the cybersecurity team hold industry certifications. The Chief Information Officer regularly shares
cybersecurity developments and concerns with the Chief Executive Officer and with other executive officers as concerns arise
that impact their areas.
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The Audit Committee of the Board is responsible for oversight of risk management related to cybersecurity and policies and
procedures related to the protection of Company proprietary and customer information and compliance with data privacy
requirements. The Audit Committee receives quarterly updates from our Chief Information Officer. Reports may address
evolving trends in cybersecurity, major threat developments, and technologies, solutions, policies, and procedures we use to
detect, prevent, mitigate and remediate threats, respond to incidents and crises, and educate employees on information security
importance and requirements. The Audit Committee has regular opportunities to suggest adjustments to the Company’s
cybersecurity practices. It regularly reports to the Board on fulfillment of its responsibilities, which include cybersecurity risk
management oversight.
To design and update our cybersecurity strategy, including awareness, prevention, detection, response and recovery
components, we strive to align with a respected maturity framework, and we periodically, with the help of a third-party, analyze
our alignment. We use a variety of tools to help identify anomalous activity on our systems, including without limitation logs,
artificial intelligence, software programs, and data analyses. In addition to internal resources, we use third-party services and
software to monitor our cyber environment for detected risks, including without limitation risks from cyber-attackers,
employees, and third-parties that we allow to access or contribute to our information technology systems, and to block threats.
To assess system vulnerability, we periodically simulate threats, and following such exercises, we assess penetration results and
determine and implement remediations.
Executive management fosters a cybersecurity threat awareness and risk mitigation culture by supporting regular educational
phishing simulations and advocating the importance of cybersecurity in communications to employees. We maintain
information security policies to promote employee use of our information technology in a safe manner that helps protect our
systems and data from cybersecurity events, and we require periodic enterprise-wide security training and testing and analyze
test results.
Cybersecurity is integrated with our overall risk management program through cyber coverage as an important component of
our insurance portfolio. We maintain cyber insurance to help protect against potential loss or expense arising from a
cybersecurity incident or data breach. As part of our cyber insurance renewal, we coordinate with our insurance broker cyber
experts to assess our cybersecurity program and align our coverages with our risk management framework. Our oversight
processes for reviewing threats from third-parties that we allow to access or contribute to our information technology systems
are also important to overall risk management. We subject such third-parties to a variety of cybersecurity analyses, which
include our use of risk assessments or scorecards and receipt of third-party audit or other reports related to information security.
We have a program for organized response in the event of a cybersecurity incident. Our Chief Information Officer receives
alerts disseminated via the program and reports to the Chief Executive Officer as deemed prudent. In the event the incident rises
to the level of a crisis, the cyber component of our crisis management plan is triggered. The plan guides a cyber crisis
management team, including representatives from our legal, information technology, finance and operations areas, in analyzing
the type, scope, cause, impact and other details of the crisis. Our analysis includes without limitation identifying affected
systems and exposed data, and in making key decisions to abate, mitigate or respond to the crisis, drawing on pre-identified
third-party sources of forensic and other expertise as deemed necessary or advisable. Responsive steps include oversight of any
warranted or required communications, including without limitation potential outreach to law enforcement, and informing the
Board or Audit Committee of the incident as required by the plan. A final step is for the team to review lessons learned during
the incident with the purpose of strengthening future crisis response. The team periodically reviews and practices its protocols
to enhance its effectiveness.
12
ITEM 2.
PROPERTIES
Our headquarters are located on approximately 147 acres near U.S. Interstate 80 west of Omaha, Nebraska, 63 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:
Location
Omaha, Nebraska
Omaha, Nebraska
Phoenix, Arizona
West Memphis, Arkansas
Fontana, California
Denver, Colorado
Lake City, Florida
Lakeland, Florida
Atlanta, Georgia
Joliet, Illinois
Milan, Indiana
Brownstown, Michigan
Springfield, Ohio
Easton, Pennsylvania
Portland, Tennessee
Dallas, Texas
El Paso, Texas
Laredo, Texas
Owned
or
Leased
Owned
Corporate headquarters, maintenance, truck sales
Description
Owned
Owned
Owned
Owned
Owned Maintenance
Disaster recovery, warehouse
Office, maintenance, driver training school
Office, maintenance
Office, maintenance, truck sales, driver training school
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Office, maintenance
Maintenance
Office, maintenance, truck sales, driver training school
Office, maintenance, truck sales
Office, maintenance, warehouse
Maintenance
Office, maintenance, truck sales
Office, maintenance
Office, maintenance
Office, maintenance, truck sales, driver training school
Office, maintenance
Office, maintenance, transloading, truck sales
Segment
TTS, Werner Logistics,
Corporate
Corporate
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS
TTS, Werner Logistics
At December 31, 2023, we leased (i) operational facilities, office space, 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; (iv) six operational facilities located in Ohio, Indiana, Pennsylvania and Florida; and (v) a terminal facility in
Queretaro, Mexico, which we lease to a third party. The Werner Fleet Sales network has seven locations, which are primarily
located in certain terminals listed above. Our driver training schools operate in 23 locations in the United States, four of which
are located in or near certain terminals listed above, five are located in company-owned facilities, and 14 are located in leased
facilities.
13
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, availability of insurance coverage, or a significant uninsured
liability”, 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 9, 2024, our common stock was held by 425 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 $0.14 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.
14
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
2022 Peer Group
2023 Peer Group
12/31/2018
$
$
$
$
100 $
100 $
100 $
100 $
12/31/2019
12/31/2020
12/31/2021
12/31/2022
140 $
131 $
134 $
134 $
153 $
156 $
176 $
176 $
187 $
200 $
285 $
285 $
12/31/2023
171
207
307
307
160 $
164 $
235 $
234 $
Assuming the investment of $100 on December 31, 2018, 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 Groups over the same period. In 2023, we selected a new Peer Group in
order to more closely align with our benchmarking Peer Group. Our Peer Group includes companies similar to us in the
transportation industry and has the following companies: ArcBest; Covenant Logistics Group; Daseke; Forward Air; Heartland
Express; Hub Group; JB Hunt; Knight-Swift Transportation; Landstar System; Marten Transport; Old Dominion Freight Line;
Saia; and Schneider National. We added Daseke, Inc. to our 2023 Peer Group and removed US Xpress Enterprises, Inc.
(acquired by Knight-Swift Transportation in 2023) and Yellow Corporation (ceased operations in 2023) from our 2023 and
2022 Peer Groups. Our stock price was $42.37 as of December 29, 2023 (the last business day of fiscal year 2023). This price
was used for purposes of calculating the total return on our common stock for the year ended December 31, 2023.
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. As of December 31, 2023, the Company had
purchased 3,688,190 shares pursuant to this authorization and had 2,311,810 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.
15
Werner Enterprises, Inc. (WERN)Standard & Poor’s 5002022 Peer Group2023 Peer Group12/31/1812/31/1912/31/2012/31/2112/31/2212/31/235075100125150175200225250275300325
No shares of common stock were repurchased during fourth quarter 2023 by either the Company or any “affiliated purchaser,”
as defined by Rule 10b-18 of the Exchange Act.
ITEM 6.
RESERVED
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
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:
We acquired the following entities in 2022 and 2021:
•
•
•
•
100% of ReedTMS on November 5, 2022. Freight brokerage and truckload revenues generated by ReedTMS are
reported in our Werner Logistics segment and in Dedicated within our TTS segment, respectively.
100% of Baylor on October 1, 2022. Revenues generated by Baylor are reported in One-Way Truckload within our TTS
segment.
100% of NEHDS on November 22, 2021. Revenues generated by NEHDS are reported in Final Mile within our Werner
Logistics segment.
80% of ECM on July 1, 2021. Revenues generated by ECM are reported in One-Way Truckload within our TTS
segment.
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.
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
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
16
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 with respect to
our TTS segment and qualified third-party capacity providers with respect to our Werner Logistics segment. 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 2023 to 2022, 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, changing used truck and trailer pricing, 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 facility, 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 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, which assumed
achievement of the full earnout. At the end of the twelve-month period following the completed sale of WGL, the full earnout
was achieved. 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 and amortization, 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 2023, we believe we are well positioned with a strong balance sheet and sufficient liquidity. Our debt is at $649
million, or a net debt ratio (debt less cash) of 1.2 times earnings before interest, income taxes, depreciation and amortization for
the year ended December 31, 2023. We had available liquidity of $526 million, considering cash and cash equivalents on hand
and available borrowing capacity of $464 million. As of December 31, 2023, we were in compliance with our debt covenants
and expect to continue to be in compliance in 2024. We currently plan to continue paying our quarterly dividend, which we
17
have paid quarterly since 1987. This cash outlay currently results in nearly $9 million per quarter. Net capital expenditures
(primarily revenue equipment) in 2024 currently are expected to be in the range of $260 million to $310 million.
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
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), net
Income before income taxes
Income tax expense
Net income
Net loss (income) attributable to noncontrolling interest
2023
2022
Percentage
Change in
Dollar Amounts
$
%
$
%
%
$
3,283,499
100.0 $
3,289,978
100.0
(0.2)
1,072,558
345,001
256,494
102,684
138,516
299,509
886,284
18,480
32.7
10.5
7.8
3.1
4.2
9.1
27.0
0.6
1,020,609
437,299
253,096
97,929
147,365
279,923
777,464
15,856
31.0
13.3
7.7
3.0
4.5
8.5
23.6
0.5
(12,443)
(0.4)
(62,639)
(1.9)
3,107,083
94.6
176,416
28,635
147,781
35,491
112,290
92
5.4
0.9
4.5
1.1
3.4
—
2,966,902
323,076
90.2
9.8
324,786
79,206
245,580
9.9
2.4
7.5
(4,324)
(0.2)
5.1
(21.1)
1.3
4.9
(6.0)
7.0
14.0
16.5
(80.1)
4.7
(45.4)
(54.5)
(55.2)
(54.3)
(102.1)
(53.4)
(1,710)
(0.1)
(1,774.6)
Net income attributable to Werner
$
112,382
3.4 $
241,256
7.3
18
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
2023
2022
$
%
$
%
% Chg
$
1,949,445
$
1,982,639
332,388
28,977
419,240
26,807
2,310,810
100.0
2,428,686
100.0
2,141,480
92.7
2,134,131
$
169,330
7.3 $
294,555
$
$
2023
8,326
4,502
7,740
260
8,000
27,850
87.9
12.1
2022
8,437
4,519
8,305
295
8,600
27,650
$
713,762
$
766,013
3,042
2,735
3,153
3,150
(1.7) %
(20.7) %
8.1 %
(4.9) %
0.3 %
(42.5) %
% Chg
(1.3) %
(0.4) %
(6.8) %
(11.9) %
(7.0) %
0.7 %
(6.8) %
(3.5) %
(13.2) %
14.36 %
12.70 % 13.1 %
$
4,512
$
4,672
(3.4) %
(5.5) %
2.2 %
595
8.6 %
(7.4) %
675
(11.9) %
$ 1,235,683
5,284
$ 1,216,626
5,284
5,265
4,496
$
5,450
4,428
$
1.6 %
— %
(3.4) %
1.5 %
19
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)
2023 Compared to 2022
Operating Revenues
2023
2022
$
%
$
%
% Chg
$
910,433
100.0 $
793,492
100.0
14.7 %
761,948
132,606
894,554
15,879
83.7
14.6
98.3
1.7 $
653,185
104,123
757,308
36,184
82.3
13.1
95.4
4.6
$
2023
2022
37
35
2,960
52
39
2,315
16.7 %
27.4 %
18.1 %
(56.1) %
% Chg
(28.8) %
(10.3) %
27.9 %
Operating revenues decreased 0.2% in 2023 compared to 2022. When comparing 2023 to 2022, TTS segment revenues
decreased $117.9 million, or 4.9%. Revenues for the Werner Logistics segment increased $116.9 million or 14.7%.
Dedicated continues to experience steady demand from the majority of our long-term customers, and our Dedicated pipeline of
new opportunities remains healthy. In 2024, we expect freight demand to remain steady in Dedicated and be seasonally weaker
for One-Way Truckload and Werner Logistics early in the year, and then improve in the second half of the year, as capacity
exits the market and retail inventory replenishments reset to normalized levels.
Trucking revenues, net of fuel surcharge, decreased 1.7% in 2023 compared to 2022 due to a 1.3% decrease in the average
number of tractors in service and a 0.4% decrease in average revenues per tractor per week, net of fuel surcharge. During 2023,
One-Way Truckload average revenues per total mile, net of fuel surcharge, decreased 5.5%, as One-Way Truckload was
challenged by elevated transactional spot rate exposure and pricing pressure. We expect ongoing pricing pressure for One-Way
Truckload during the early part of 2024, then moderating later in the year. Dedicated average revenues per tractor per week, net
of fuel surcharge, increased 1.5%. Considering the freight market outlook, we expect average revenues per total mile, net of
fuel surcharge, for the One-Way Truckload fleet to decrease in a range of 6% to 3% in the first half of 2024 when compared to
the first half of 2023, and we expect Dedicated average revenues per tractor per week, net of fuel surcharge, to remain flat or
increase up to 3% in 2024 compared to 2023.
The average number of tractors in service in the TTS segment decreased 1.3% to 8,326 in 2023 compared to 8,437 in 2022, as
we decreased our fleet size to adjust to the challenging freight market conditions. We ended 2023 with 8,000 tractors in the TTS
segment, a year-over-year decrease of 600 tractors. Our Dedicated unit ended 2023 with 5,265 tractors (or 66% of our total TTS
segment fleet) compared to 5,450 tractors (or 63%) at the end of 2022. We currently expect our fleet size at the end of 2024 to
remain flat or decrease up to 3% when compared to the fleet size at the end of 2023, with potential for growth in our Dedicated
unit in the second half of the year. 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 decreased 20.7% to $332.4 million in 2023 from $419.2 million in 2022 due primarily to
lower average diesel fuel prices. 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
20
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.
Werner Logistics revenues are generated by its three operating units. 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 $17.7 million in 2023 and $5.2 million in 2022 for shipments
performed by the TTS segment (also recorded as trucking revenue by the TTS segment), and these transactions between
reporting segments are eliminated in consolidation. Werner Logistics revenues increased 14.7% to $910.4 million in 2023 from
$793.5 million in 2022 primarily due to growth from the November 2022 ReedTMS acquisition. Truckload Logistics revenues
(77% of total Werner Logistics revenues) increased 32% driven by an increase in shipments due to the ReedTMS acquisition,
partially offset by a decline in revenue per shipment. Intermodal revenues (12% of total Werner Logistics revenues) decreased
38% due to a decline in shipments and lower revenue per shipment. Final Mile revenues (11% of total Werner Logistics
revenues) increased $11.0 million, or 12%, despite a softer market for discretionary spending on big and bulky products.
Werner Logistics operating income decreased to $15.9 million in 2023 from $36.2 million in 2022 and operating margin
percentage decreased to 1.7% in 2023 from 4.6% in 2022, due to a competitive pricing environment. In 2024, we expect
Truckload Logistics margins will remain challenged in the near term, but may improve later in the year from further synergies
realized from the integration of our acquired companies. We also expect to continue to generate double-digit revenue growth in
Werner Logistics in 2024, while getting back to a mid-single digit operating margin percentage entering into 2025.
Operating Expenses
Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 94.6% in 2023 compared to
90.2% in 2022. Expense items that impacted the overall operating ratio are described on the following pages. The tables on
pages 18 through 20 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 $51.9 million or 5.1% in 2023 compared to 2022 and increased 1.7% as a percentage of
operating revenues. The higher dollar amount of salaries, wages and benefits expense in 2023 was due primarily to increased
non-driver pay, higher driver pay from 3.4 million more company tractor miles, and higher benefit costs. The increase in non-
driver pay was primarily due to a larger average number of non-driver employees, including the impact from our ReedTMS and
Baylor acquisitions. Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment increased 37.2%,
primarily as a result of the ReedTMS acquisition.
We renewed our workers’ compensation insurance coverage on April 1, 2023. 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 2023 were flat compared to the previous policy year.
While we currently believe the driver recruiting and retention market may be less difficult in the near term, a competitive driver
market presents labor challenges for customers and carriers alike. Several factors impacting the driver market include 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 competitive driver pay, providing a modern tractor and trailer fleet with
the latest safety equipment and technology, investing in 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 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 decreased $92.3 million or 21.1% in 2023 compared to 2022 and decreased 2.8% as a percentage of operating revenues
due to much lower average diesel fuel prices, partially offset by 3.4 million more company tractor miles in 2023. Average diesel
fuel prices, excluding fuel taxes, for the full year 2023 were 80 cents lower than the full year 2022, a 22% decrease.
We continue to employ measures to improve our fuel mpg such as (i) limiting tractor engine idle time by installing auxiliary
power units, (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 a U.S. EPA SmartWay
21
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.
Through February 16, the average diesel fuel price per gallon in 2024 was approximately 53 cents lower than the average diesel
fuel price per gallon in the same period of 2023 and approximately 36 cents lower than the average for first quarter 2023.
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, 2023, we had no derivative financial instruments to
reduce our exposure to fuel price fluctuations.
Supplies and maintenance increased $3.4 million or 1.3% in 2023 compared to 2022 and increased 0.1% as a percentage of
operating revenues. Supplies and maintenance expense increased due to higher costs for over-the-road repairs and the impact of
3.4 million more company tractor miles in 2023. We have taken steps to reduce repair and maintenance expense by growing our
in-house maintenance capabilities throughout our terminal network. We are also developing digital solutions to further optimize
the routing and scheduling of tractors and trailers for preventive maintenance.
Insurance and claims decreased $8.8 million or 6.0% in 2023 compared to 2022 and decreased 0.3% as a percentage of
operating revenues, due primarily to lower expense for large dollar liability claims resulting from a lower amount of
unfavorable reserve development and lower new claims, partially offset by higher expense for new small dollar liability claims,
increasing cost-per-claim, and increased cost for repairs. The majority of the higher unfavorable reserve development in 2022
related to unexpected and unfortunate legal developments for two prior year motor vehicle accidents that have been settled,
including a settlement of a lawsuit in Texas arising from a May 24, 2020 accident for which we recognized $9.5 million of
insurance and claims expense in 2022. We also incurred insurance and claims expense of $5.7 million and $5.4 million in 2023
and 2022, 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 will continue to accrue monthly 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. In 2023, we achieved our lowest DOT
preventable accident rate per million miles in the last 19 years.
We renewed our liability insurance policies on August 1, 2023 and are responsible for the first $10.0 million per claim on all
claims with an annual $12.5 million aggregate for claims between $10.0 million and $20.0 million. For the policy year that
began August 1, 2022 we were 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 $20.0 million. 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, 2023 are
$1.0 million higher than premiums for the previous policy year.
Depreciation and amortization expense increased $19.6 million or 7.0% in 2023 compared to 2022 and increased 0.6% as a
percentage of operating revenues due primarily to the higher cost of new tractors and trailers, a larger company trailer fleet, and
depreciation and amortization on tangible and intangible assets recorded in the ReedTMS and Baylor acquisitions.
The average age of our tractor fleet remains low by industry standards and was 2.1 years as of December 31, 2023, and the
average age of our trailers was 4.9 years. We continued to invest in new tractors and trailers and our terminals in 2023 to
improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel
costs. In 2024, we expect the average age of our tractor and trailer fleets to remain at or near current levels.
Rent and purchased transportation expense increased $108.8 million or 14.0% in 2023 compared to 2022 and increased 3.4% 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, payments to independent contractors in
the TTS segment, and cloud-based technology fees. 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 recorded revenue and
brokered freight expense of $17.7 million in 2023 and $5.2 million in 2022 for shipments performed by the TTS segment (also
recorded as trucking revenue by the TTS segment), and these transactions between reporting segments are eliminated in
consolidation. Werner Logistics purchased transportation expense increased $108.8 million as a result of higher logistics
revenues, including the ReedTMS logistics business, and increased to 83.7% as a percentage of Werner Logistics revenues in
2023 from 82.3% in 2022.
Rent and purchased transportation expense for the TTS segment increased $10.6 million in 2023 compared to 2022 due
primarily to an increase in cloud-based technology fees and more independent contactor miles in 2023, partially offset by lower
22
reimbursements to independent contractors because of lower average diesel fuel prices. Independent contractor miles increased
1.3 million miles in 2023 and as a percentage of total miles were 4.6% in 2023 compared to 4.5% in 2022. Because independent
contractors supply their own tractors and drivers and are responsible for their operating expenses, the increase in independent
contractor miles as a percentage of total miles shifted costs from other expense categories, including (i) salaries, wages and
benefits, (ii) fuel, (iii) depreciation, (iv) supplies and maintenance and (v) taxes and licenses to the rent and purchased
transportation category.
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 were to occur, 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. These increased expenses 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 increased $50.2 million in 2023 compared to 2022 and increased 1.5% as a percentage of operating
revenues due primarily to lower gains on sales of property and equipment (primarily used tractors and trailers), and increased
costs associated with professional technology services related to our multi-year technology and innovation strategy. Gains on
sales of property and equipment 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 property and equipment were $42.4 million
in 2023, compared to $88.6 million in 2022. In 2023, we sold significantly more tractors and trailers than in 2022 and realized
substantially lower average gains per tractor and trailer due to lower pricing in the market for our used equipment, which we
believe is due to decreased demand for our used equipment because of carriers increasingly exiting the trucking industry in
2023 due to the challenging freight market and an increase in the availability of new equipment due to fewer production delays
in 2023 compared to 2022. For the used tractor and trailer market, we expect continued low demand with moderating pricing
and equipment gains through the first half of 2024. As a result, we expect our gains on sales of property and equipment in 2024
to decrease to between $10 million and $30 million.
Other Expense (Income)
Other expense, net of other income, increased $30.3 million in 2023 compared to 2022 due primarily to a $16.7 million increase
in net interest expense, a $12.5 million decrease in the amount of unrealized net gains recognized on our investments in equity
securities, and a loss from our equity method investment of $1.0 million (see Note 7 in the Notes to Consolidated Financial
Statements set forth in Part II of this Form 10-K for information regarding our investments). Net interest expense increased due
to higher interest rates for variable rate debt and an increase in average debt outstanding. In July 2023, we entered into four
additional variable-for-fixed interest rate swap agreements for a notional amount of $130.0 million to further limit our exposure
to increases in interest rates on a portion of our variable-rate indebtedness (see Note 8 in the Notes to Consolidated Financial
Statements set forth in Part II of this Form 10-K regarding these interest rate swaps). We expect net interest expense to increase
up to $10 million in 2024 compared to 2023, primarily due to the repricing of the BMO Term Loan that is maturing in May
2024 and the impact of two interest rate swaps that are expiring in May 2024. We expect these increases in net interest expense
to be partially offset by debt reduction during 2024.
Income Tax Expense
Income tax expense decreased $43.7 million in 2023 compared to 2022, due primarily to lower pre-tax income. The effective
income tax rate (income taxes expressed as a percentage of income before income taxes) was 24.0% in 2023 compared to
24.4% in 2022. The lower income tax rate in 2023 was attributed primarily to a higher amount of favorable discrete income tax
items in 2023, partially offset by the income tax effect of the noncontrolling interest. We currently estimate our full year 2024
effective income tax rate to be approximately 24.5% to 25.5%.
2022 Compared to 2021
For a comparison of the Company’s results of operations for the fiscal year ended December 31, 2022 to the fiscal year ended
December 31, 2021, 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, 2022, which was filed with the U.S. Securities
and Exchange Commission on February 27, 2023.
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, business acquisitions, stock repurchases, and dividend
23
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, 2023 is strong. As of December 31, 2023, we had $61.7 million of
cash and cash equivalents and over $1.5 billion of stockholders’ equity. Cash is invested primarily in short-term money market
funds. In addition, we have a $1.075 billion credit facility, for which our total available borrowing capacity was $463.9 million
as of December 31, 2023. After considering recent developments in the banking sector, we believe the six commercial banks in
our $1.075 billion syndicated credit facility all have strong tier-one capital ratios and good loan-to-deposit ratios. We believe
our liquid assets, cash generated from operating activities, and borrowing capacity under our existing credit facility 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, 2023, we had outstanding debt with an aggregate principal
amount of $648.8 million, with $88.8 million payable within 12 months. We are currently planning to repay the remaining
outstanding principal balance of $86.3 million under the BMO Term Loan in May 2024 using proceeds from the 2022
Credit Agreement. Future interest payments associated with our debt obligations are estimated to be $168.9 million through
2027, with $39.3 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, 2023, we had fixed
lease payment obligations of $40.3 million, with $10.1 million payable within 12 months. See Note 5 in the Notes to
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, 2023, we have committed to property and equipment purchases of
approximately $107.9 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 nearly $9 million
per quarter.
Cash Flows
We generated cash flow from operations of $474.4 million during 2023, a 5.7% or $25.7 million increase in cash flows
compared to $448.7 million during 2022. The increase in net cash provided by operating activities was due primarily to
working capital changes, including a decrease in accounts receivable days sales outstanding, offset by a decrease in net income
during 2023. We were able to make net capital expenditures, make net repayments on our debt, make a strategic loan and
investments, and pay dividends with the net cash provided by operating activities and existing cash balances.
Net cash used in investing activities was $434.9 million during 2023 compared to $514.3 million during 2022. Net cash
invested in our business acquisitions was $0.2 million during 2023 compared to $184.1 million during 2022. Net property and
equipment additions (primarily revenue equipment) were $408.7 million during 2023 compared to $317.6 million during 2022.
We currently estimate net capital expenditures (primarily revenue equipment) in 2024 to be in the range of $260 million to $310
million. We intend to fund these net capital expenditures through cash flows from operations and financing available under our
existing credit facility, if necessary. We also purchased a $25.0 million subordinated promissory note from Mastery Logistics
Systems, Inc. on January 24, 2023, with a maturity date of January 24, 2030 (see Note 9 in the Notes to Consolidated Financial
Statements under Item 8 of Part II of this Form 10-K for information regarding our notes receivable).
Net financing activities used $87.1 million during 2023 and provided $118.0 million during 2022. We had net repayments on
our debt of $45.0 million during 2023, decreasing our outstanding debt to $648.8 million at December 31, 2023. We had net
borrowings on our debt of $266.3 million during 2022, which a portion of the proceeds were used to finance our Baylor and
ReedTMS acquisitions. We paid dividends of $34.2 million during 2023 and $32.2 million during 2022. We increased our
quarterly dividend rate by $0.01 per share, or 8%, beginning with the quarterly dividend paid in July 2023, and we increased
our quarterly dividend rate by $0.01 per share, or 8%, beginning with the dividend paid in July 2022.
On November 9, 2021, our Board of Directors approved a stock repurchase program under which the Company is authorized to
repurchase up to 6,000,000 shares of its common stock. We did not repurchase any shares of common stock in 2023. Financing
activities for 2022 included common stock repurchases of 2,710,304 shares at a cost of $110.4 million. As of December 31,
24
2023, the Company had purchased 3,688,190 shares pursuant to this authorization and had 2,311,810 shares remaining
available for repurchase. The Company has repurchased, and may continue to repurchase, shares of the Company’s common
stock. The timing and amount of such purchases depend upon economic and stock market conditions and other factors.
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 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. 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 and property damage is a critical accounting estimate
that requires us to make significant judgments and estimates and affects our financial statements. The accruals for bodily injury
and property damage (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 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 and property damage during the past three years. At
December 31, 2023 and 2022, we had an accrual of $321.5 million and $323.6 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 for insurance and claims for bodily injury
and property damage at December 31, 2023, would have changed our insurance and claims accrual by approximately $24.8
million.
25
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, 2023, 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 gains were $6.1 million and $2.4
million for the year ended December 31, 2023 and 2022, 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 16.89 Pesos to $1.00 at December 31, 2023 compared to 19.36 Pesos to $1.00 at December 31, 2022.
Interest Rate Risk
We manage interest rate exposure through a mix of variable interest rate debt and interest rate swap agreements. We had $280.0
million of variable interest rate debt outstanding at December 31, 2023, for which the interest rate is effectively fixed at 4.31%
with interest rate swap agreements to reduce our exposure to interest rate increases. In addition, we had $280.0 million of
variable interest rate debt outstanding at December 31, 2023. The interest rates on our credit facility are based on Secured
Overnight Financing Rate (“SOFR”). 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 SOFR interest rate would increase our interest expense by approximately $4.3 million for the next 12-month period.
26
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, 2023 and 2022, 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, 2023, and the related notes and financial statement schedule II valuation and qualifying accounts (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, 2023 and 2022, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2023, 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, 2023, 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 26, 2024 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.
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.
27
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 $81.8 million and
$239.7 million, respectively. The accruals specifically for bodily injury and property damage 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 and property damage
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 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.
/s/ KPMG LLP
We have served as the Company’s auditor since 1999.
Omaha, Nebraska
February 26, 2024
28
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
Loss (gain) on investments in equity securities, net
Loss from equity method investment
Other
Total other expense (income)
Income before income taxes
Income tax expense
Net income
Net loss (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,
2023
2022
2021
$ 3,283,499
$ 3,289,978
$ 2,734,372
1,072,558
1,020,609
345,001
256,494
102,684
138,516
299,509
886,284
18,480
437,299
253,096
97,929
147,365
279,923
777,464
15,856
895,012
245,866
206,701
96,095
98,658
267,700
641,159
13,460
(12,443)
3,107,083
(62,639)
2,966,902
(39,425)
2,425,226
176,416
323,076
309,146
33,535
(6,701)
278
1,046
477
28,635
147,781
35,491
112,290
11,828
(1,731)
(12,195)
—
388
4,423
(1,211)
(40,317)
—
236
(1,710)
(36,869)
324,786
79,206
245,580
346,015
84,537
261,478
92
(4,324)
(2,426)
$
112,382
$
241,256
$
259,052
$
$
1.77
1.76
$
$
3.76
3.74
$
$
3.84
3.82
63,374
63,718
64,125
64,579
67,434
67,855
See Notes to Consolidated Financial Statements.
29
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, net
Comprehensive income
Comprehensive loss (income) attributable to noncontrolling interest
Comprehensive income attributable to Werner
Years Ended December 31,
2023
2022
2021
$
112,290
$
245,580
$
261,478
6,120
(4,512)
1,608
2,426
6,886
9,312
(1,381)
3,610
2,229
113,898
254,892
263,707
92
(4,324)
(2,426)
$
113,990
$
250,568
$
261,281
See Notes to Consolidated Financial Statements.
30
WERNER ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, trade, less allowance of $9,337 and $10,271, 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; 63,444,681 and 63,223,003 shares outstanding, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost; 17,088,855 and 17,310,533 shares, respectively
Total stockholders’ equity
Total liabilities, temporary equity and stockholders’ equity
See Notes to Consolidated Financial Statements.
31
December 31,
2023
2022
$
$
61,723
444,944
25,479
18,077
16,505
67,900
634,628
107,240
518,815
29,875
14,527
17,699
74,459
762,615
115,989
320,976
2,290,376
224,313
2,951,654
978,698
1,972,956
129,104
86,477
334,771
$ 3,157,936
100,594
309,241
2,169,172
306,634
2,885,641
1,060,365
1,825,276
132,717
81,502
295,145
$ 3,097,255
$
135,990
2,500
81,794
50,549
30,282
29,470
330,585
646,250
54,275
239,700
320,180
1,590,990
$
124,483
6,250
78,620
49,793
20,358
30,016
309,520
687,500
59,677
244,946
313,278
1,614,921
38,607
38,699
805
134,894
1,953,385
(9,684)
(551,061)
1,528,339
$ 3,157,936
805
129,837
1,875,873
(11,292)
(551,588)
1,443,635
$ 3,097,255
(In thousands)
Cash flows from operating activities:
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2022
2021
2023
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 112,290
$ 245,580
$ 261,478
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
Loss (gain) on investments in equity securities, net
Loss from equity method investment
Other
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, net
Payments to acquire equity method investment
Purchase of promissory note
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
Distribution to noncontrolling interest
Other
Net cash provided by (used in) financing activities
Effect of exchange rate fluctuations on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
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
299,509
8,153
(42,440)
11,943
(5,246)
278
1,046
(7,612)
73,921
10,266
3,288
8,970
474,366
(598,785)
190,087
(188)
(2,931)
(3,385)
(25,000)
5,258
(434,944)
(50,000)
45,000
(90,000)
50,000
(34,208)
—
(6,359)
—
(1,500)
(87,067)
2,128
(45,517)
107,240
61,723
27,212
17,892
3,145
(4,512)
14,239
—
8,882
—
(800)
$
$
$
279,923
42,553
(88,564)
12,486
7,726
(12,195)
—
(13,295)
3,174
(18,333)
(3,665)
(6,679)
448,711
(507,252)
189,673
(184,118)
(20,250)
—
—
7,614
(514,333)
(3,750)
—
(100,000)
370,000
(32,162)
(110,400)
(4,082)
(1,572)
—
118,034
632
53,044
54,196
$ 107,240
$
$
11,186
40,313
5,577
6,886
5,937
110
8,220
—
13,400
$
$
$
267,700
29,488
(60,528)
10,807
5,582
(40,317)
—
(3,105)
(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
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
Loss
Treasury
Stock
Total
Stockholders’
Equity
Temporary
Equity -
Redeemable
Noncontrolling
Interest
BALANCE, December 31, 2020
Net income attributable to Werner
Net income attributable to
noncontrolling interest
Other 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
BALANCE, December 31, 2021
Net income attributable to Werner
Net income attributable to
noncontrolling interest
Other comprehensive income
Purchase of 2,710,304 shares of
common stock
Dividends on common stock
($0.51 per share)
Equity compensation activity,
143,195 shares
Non-cash equity compensation
expense
Distribution to noncontrolling
interest
BALANCE, December 31, 2022
Net income attributable to Werner
Net loss attributable to
noncontrolling interest
Other comprehensive income
Dividends on common stock
($0.55 per share)
Equity compensation activity,
221,678 shares
Non-cash equity compensation
expense
$
805 $ 116,039 $ 1,438,916 $
(22,833) $ (337,887) $ 1,195,040
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
259,052
—
—
—
(30,864)
(4,942)
10,807
—
—
—
—
—
—
—
—
—
—
2,229
—
—
—
259,052
—
2,229
—
(104,444)
(104,444)
—
—
—
—
—
—
—
(30,864)
672
(4,270)
—
—
—
—
10,807
—
—
—
805
121,904
1,667,104
(20,604) (441,659) 1,327,550
—
—
—
—
—
—
—
—
—
—
—
—
—
241,256
—
—
—
(32,487)
(4,553)
12,486
—
—
—
—
—
—
9,312
—
—
—
241,256
—
9,312
—
(110,400)
(110,400)
—
—
—
—
—
(32,487)
471
(4,082)
—
—
12,486
—
805
129,837
1,875,873
(11,292) (551,588) 1,443,635
—
—
—
—
—
—
—
—
—
—
112,382
—
—
(34,870)
(6,886)
11,943
—
—
—
—
1,608
—
—
—
—
—
—
—
527
—
112,382
—
1,608
(34,870)
(6,359)
11,943
—
—
2,426
—
—
—
—
—
35,322
(1,766)
(35)
35,947
—
4,324
—
—
—
—
—
(1,572)
38,699
—
(92)
—
—
—
—
BALANCE, December 31, 2023
$
805 $ 134,894 $ 1,953,385 $
(9,684) $ (551,061) $ 1,528,339
$
38,607
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”). Redeemable noncontrolling interest on the consolidated balance sheets
represents the portion of a consolidated entity in which we do not have a direct equity ownership. In these notes, the terms
“we,” “us,” or “our” refer to Werner Enterprises, Inc. and its subsidiaries. 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 48%, 46%, and 49% of our revenues for the
years ended December 31, 2023, 2022, and 2021, respectively. Our largest customer, Dollar General, accounted for 10% of our
total revenues in 2023, and 14% of our total revenues in 2022 and 2021. Revenues generated by Dollar General are reported in
both of our reportable operating segments. Dollar General accounted for 10% and 13% of our accounts receivable, trade
balance as of December 31, 2023 and 2022, respectively.
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 and useful lives and salvage
values of property and equipment. 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
property and 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
$6,000
0%
Depreciation expense was $289.2 million, $273.8 million, and $265.8 million for the years ended December 31, 2023, 2022,
and 2021 respectively, and is reported in depreciation and amortization on the consolidated statements of income.
34
Due to the stronger used trailer market and the increased cost of new trailers, a change in accounting estimate was made during
the first quarter of 2022, which decreased depreciation expense by $12.7 million in 2022.
Goodwill: Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired
in business combinations and is allocated to reporting units that are expected to benefit from the combinations. Goodwill is not
amortized, but rather is tested for impairment annually in the fourth quarter, 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. No
impairment charges have resulted from the annual impairment tests.
Amortization of Intangible Assets: Intangible assets with finite lives are amortized on a straight-line basis over their estimated
useful lives, ranging from 10 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. No impairment charges
were recorded during the years ended December 31, 2023, 2022, and 2021.
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. 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, 2023 and are responsible for the first $10.0 million per claim on all
claims with an annual $12.5 million aggregate for claims between $10.0 million and $20.0 million. For the policy year that
began August 1, 2022, we were 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 $20.0 million. For the policy year that began August 1, 2021, we were
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 on 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. We are also responsible for administrative expenses for each occurrence involving bodily injury or property damage.
Our self-insured retention (“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 million per claim on April 1, 2020. We also maintain a $24.9 million bond for the State of Nebraska and a
$15.1 million bond for our workers’ compensation insurance carrier.
35
Under these insurance arrangements, we maintained $49.4 million in letters of credit as of December 31, 2023.
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 attributable to Werner
by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by
dividing net income attributable to Werner 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 restricted stock awards. Performance awards are excluded from the calculation of dilutive potential
common shares until the threshold performance conditions have been satisfied. 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,
2023
2022
2021
$
112,382 $
241,256 $
259,052
63,374
344
63,718
64,125
454
64,579
$
$
1.77 $
1.76 $
3.76 $
3.74 $
67,434
421
67,855
3.84
3.82
Equity Compensation: We have an equity compensation plan that provides for grants of stock options, restricted stock and
units (“restricted awards”), unrestricted stock awards, performance awards and stock appreciation rights to our employees,
directors, and consultants. 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 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.
36
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, 2023, 2022, and 2021, 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, 2023 and 2022,
consisted of foreign currency translation adjustment losses of $10.0 million and $16.2 million, respectively, and gains of $0.3
million and $4.9 million related to changes in fair value of interest rate swaps, net of tax, respectively.
Recently Issued Accounting Pronouncements, Not Yet Effective: In November 2023, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures, with the objective of improving financial reporting, primarily through enhanced disclosures
about significant segment expenses. The provisions of this update are effective for fiscal years beginning after December 15,
2023, and interim periods within fiscal years beginning after December 15, 2024, using a retrospective approach. Early
adoption is permitted. We are evaluating the impact of adopting ASU 2023-07, and we expect this ASU to only impact our
disclosures with no impacts to our results of operations, cash flows, and financial condition.
In December 2023, FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, with the
objective of enhancing the transparency and decision usefulness of income tax information through income tax disclosure
improvements, primarily related to the rate reconciliation and income taxes paid information. The provisions of this update are
effective for annual periods beginning after December 15, 2024, using a prospective approach. Early adoption and retrospective
application are permitted. We are evaluating the impact of adopting ASU 2023-09, and we expect this ASU to only impact our
disclosures with no impacts to our results of operations, cash flows, and financial condition.
(2) BUSINESS ACQUISITIONS
2022 Business Acquisitions
Developments during the year ended December 31, 2023 related to our 2022 business acquisitions are discussed below.
ReedTMS
On November 5, 2022, we acquired 100% of the equity interests in Reed Transport Services, Inc. and RTS-TMS, Inc., doing
business as ReedTMS Logistics (“ReedTMS”), for a final purchase price of $108.6 million after including the impacts of
working capital adjustments, cash acquired, net present value of future insurance payments, and contingent consideration, also
referred to as earnout. We financed the transaction through existing credit facilities. The contingent earnout period related to the
ReedTMS acquisition ended on December 31, 2023 and resulted in an additional cash payment of $1.5 million based on the
achievement level of certain financial performance goals. This payment resulted in a $2.7 million net favorable change to the
contingent earnout liability, which was recorded in other operating expenses on the consolidated statements of income for the
year ended December 31, 2023.
ReedTMS is an asset-light logistics provider and dedicated truckload carrier that offers a comprehensive suite of freight
brokerage and truckload solutions to a diverse customer base. The results of operations for ReedTMS are included in our
consolidated financial statements beginning November 5, 2022. Freight brokerage and truckload revenues generated by
ReedTMS are reported in our Werner Logistics segment and in Dedicated within our Truckload Transportation Services
(“TTS”) segment, respectively. We incurred transaction costs related to the acquisition, such as legal and professional fees, of
$0.7 million for the year ended December 31, 2022, which is included in other operating expenses on the consolidated
statements of income.
Baylor
On October 1, 2022, we acquired 100% of the equity interests in FAB9, Inc., doing business as Baylor Trucking, Inc.
(“Baylor”), for a final purchase price of $89.0 million after including the impacts of working capital adjustments, cash acquired,
and contingent consideration. We financed the transaction through existing credit facilities. The contingent consideration
arrangement requires us to pay the former owner of Baylor an additional amount in cash if Baylor achieves certain performance
financial goals over a three-year period beginning on November 1, 2022. The potential undiscounted future contingent earnout
payment that we could be required to make is between $0 and $15.0 million.
Baylor operates in the east central and south central United States. The results of operations for Baylor are included in our
consolidated financial statements beginning October 1, 2022. Revenues generated by Baylor are reported in One-Way
Truckload within our TTS segment. We incurred transaction costs related to the acquisition, such as legal and professional fees,
of $0.4 million for the year ended December 31, 2022, which is included in other operating expenses on the consolidated
statements of income. No measurement period adjustments were recorded during the year ended December 31, 2023.
37
Purchase Price Allocations
We accounted for the ReedTMS and Baylor purchases 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 allocations for ReedTMS and Baylor were
considered final as of June 30, 2023.
The following table summarizes the purchase price allocation for ReedTMS, including any adjustments (in thousands):
November 5, 2022
Opening Balance Sheet
as Reported at
December 31, 2022
Adjustments (1)
November 5, 2022
Opening Balance Sheet
as Reported at
December 31, 2023
Purchase Price
Cash consideration paid
Cash and cash equivalents acquired
Contingent consideration arrangement
Working capital surplus (deficiency)
Total purchase price (fair value of consideration)
$
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
Goodwill
116,989 $
(12,120)
5,000
(689)
109,180
52,531
35,000
12,000
7,927
107,458
(45,497)
(5,622)
(51,119)
— $
—
(800)
188
(612)
49
(12,485)
15,300
(1)
2,863
(389)
527
138
116,989 (2)
(12,120)
4,200 (3)
(501)
108,568
52,580
22,515
27,300
7,926
110,321
(45,886)
(5,095)
(50,981)
49,228
$
52,841 $
(3,613) $
(1) The measurement period adjustments were recorded during the three months ended March 31, 2023. No material statement of income
effects were identified with these adjustments.
(2) Includes $0.9 million related to the net present value of future insurance payments. At closing, $11.5 million of the cash consideration was
placed in escrow to secure certain indemnification obligations of the sellers and to cover post-closing adjustments. During the three months
ended March 31, 2023, we received $2.1 million from escrow for post-closing adjustments. The remaining balance of the escrow, except for
$0.5 million, was returned to the sellers. In exchange, the sellers obtained a $10.0 million Standby Letter of Credit with the Company named
as beneficiary.
(3) The contingent earnout liability was recorded in other long-term liabilities as of December 31, 2022. For additional information regarding
the valuation of the contingent liability, see Note 6 – Fair Value.
2021 Business Acquisitions
NEHDS
On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”) for a final purchase
price of $62.3 million after including the impacts of contingent consideration and net working capital changes. We financed the
transaction through a combination of cash on hand and existing credit facilities. The contingent earnout period related to the
NEHDS acquisition ended on December 31, 2022 and did not result in any additional cash payments, as the financial
performance goals were not achieved. This resulted in a $2.5 million favorable change to the contingent earnout liability, which
was recorded in other operating expenses on the consolidated statements of income for the year ended December 31, 2022.
NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest United States
markets. NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams
performing residential and commercial deliveries. 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.
38
ECM
On July 1, 2021, we acquired an 80% ownership interest in ECM Associated, LLC ("ECM”) for a final purchase price of
$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. 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.
ECM provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the United States. 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 TTS segment. We incurred transaction costs related to the ECM 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.
(3) REVENUE
Revenue Recognition
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,
2023
2,310,810 $
910,433
(17,690)
3,203,553
79,946
3,283,499 $
2022
2,428,686 $
793,492
(5,218)
3,216,960
73,018
3,289,978 $
2021
2,045,073
622,461
(899)
2,666,635
67,737
2,734,372
$
$
The following table presents our revenues disaggregated by geographic areas in which we conduct business (in thousands):
United States
Mexico
Other
Total revenues
Years Ended December 31,
2023
3,089,205 $
159,170
35,124
3,283,499 $
2022
3,051,788 $
191,126
47,064
3,289,978 $
2021
2,532,720
156,405
45,247
2,734,372
$
$
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.
Transportation Services
We generate nearly all of our revenues by transporting truckload freight shipments for our customers. Transportation services
are carried out by our TTS segment and our Werner Logistics segment. The TTS segment utilizes company-owned and
independent contractor trucks to deliver shipments, while our Werner 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
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
39
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 Werner 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.
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 2023, 2022 and 2021. 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, 2023 and 2022, the accounts receivable, trade, net, balance
was $444.9 million and $518.8 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, 2023 and 2022,
the balance of contract assets was $7.4 million and $8.9 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, 2023 and 2022, the balance of contract liabilities was $0.9 million.
The amount of revenues recognized in 2023 that was included in the December 31, 2022 contract liability balance was $0.9
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.
During 2023, 2022, and 2021, revenues recognized from performance obligations related to prior periods (for example, due to
changes in transaction price) were not material.
40
(4) GOODWILL AND INTANGIBLE ASSETS
The following table summarizes changes in the carrying amount of goodwill by segment for the years ended December 31,
2023 and 2022 (in thousands):
TTS
Werner Logistics
Total
Balance as of December 31, 2021
$
38,084 $
Goodwill recorded in acquisition of ReedTMS
Goodwill recorded in acquisition of Baylor
Purchase accounting adjustments (1)
Balance as of December 31, 2022
Purchase accounting adjustments (1)
Balance as of December 31, 2023
10,341
5,472
—
53,897
(7,841)
36,534 $
42,500
—
(214)
78,820
4,228
74,618
52,841
5,472
(214)
132,717
(3,613)
129,104
$
46,056 $
83,048 $
(1) The purchase accounting adjustments consist of post-closing adjustments related to net assets assumed in the acquisitions of NEHDS and
ReedTMS for the years ended December 31, 2022 and 2023, respectively. For additional information regarding the ReedTMS purchase
accounting adjustments, see Note 2 – Business Acquisitions.
The following table presents acquired intangible assets (in thousands):
Gross
Carrying
Amount
2023
Accumulated
Amortization
December 31,
Net
Carrying
Amount
Gross
Carrying
Amount
2022
Accumulated
Amortization
Customer relationships
$
80,200 $
(13,989) $
66,211 $
64,900 $
(5,714) $
Trade names
24,600
(4,334)
20,266
24,600
(2,284)
Total intangible assets
$
104,800 $
(18,323) $
86,477 $
89,500 $
(7,998) $
Net
Carrying
Amount
59,186
22,316
81,502
Amortization expense on intangible assets was $10.3 million, $6.1 million, and $1.9 million for the years ended December 31,
2023, 2022, and 2021, respectively, and is reported in depreciation and amortization on the consolidated statements of income.
As of December 31, 2023, the estimated future amortization expense for intangible assets by year is as follows (in thousands):
2024
2025
2026
2027
2028
Thereafter (to 2034)
Total
(5) LEASES
$
$
10,070
10,070
10,070
10,070
10,070
36,127
86,477
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):
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
Weighted-average remaining lease term for operating leases
Weighted-average discount rate for operating leases
$
$
$
December 31,
2023
2022
34,814
9,017
27,495
36,512
$
$
$
6.15 years
3.6 %
40,963
9,396
32,897
42,293
6.43 years
3.3 %
The following table presents the maturities of operating lease liabilities as of December 31, 2023 (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total undiscounted operating lease payments
Less: Imputed interest
Present value of operating lease liabilities
Cash Flows
$
$
$
10,142
8,316
6,527
4,459
3,190
7,694
40,328
(3,816)
36,512
During the years ended December 31, 2023, 2022, and 2021, right-of-use assets of $4.7 million, $14.7 million, and $8.2
million, respectively, were recognized as non-cash asset additions that resulted from new operating lease liabilities, and we
acquired right-of-use assets of $8.3 million and $15.6 million as a result of our business acquisitions during the years ended
December 31, 2022 and 2021, respectively. Cash paid for amounts included in the present value of operating lease liabilities
was $11.1 million, $8.5 million, and $4.6 million during the years ended December 31, 2023, 2022, and 2021, respectively, and
are included in operating cash flows.
Operating Lease Expense
Operating lease expense was $22.5 million, $22.1 million, and $15.7 million during the years ended December 31, 2023, 2022,
and 2021, respectively. This expense included $11.5 million, $9.4 million, and $4.8 million for long-term operating leases for
the years ended December 31, 2023, 2022, and 2021, respectively, with the remainder for variable and short-term lease
expense.
Lessor Operating Leases
We are the lessor of tractors and trailers under operating leases with initial terms of 3 to 8 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, 2023, 2022, and 2021 were
$10.9 million, $10.7 million, and $11.7 million, respectively. The following table presents information about the maturities of
these operating leases as of December 31, 2023 (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
$
6,691
686
339
85
—
—
$
7,801
42
(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 fair value hierarchy for our assets and liabilities measured at fair value on a recurring basis (in
thousands):
Assets:
Other non-current assets:
Equity securities (1)
Liabilities:
Other long-term liabilities:
Contingent consideration associated with acquisitions
Level in Fair
Fair Value
December 31,
Value Hierarchy
2023
2022
1
3
$
310 $
723
$
8,896 $
13,400
(1) Represents our investments in autonomous technology companies. For additional information regarding the valuation of these equity
securities, see Note 7 – Investments.
43
The following table presents changes in the fair value of our contingent earnout liabilities for the years ended December 31,
2023 and 2022 (in thousands):
Balance as of December 31, 2021
Contingent consideration associated with the acquisition of Baylor
Contingent consideration associated with the acquisition of ReedTMS
Change in fair value (1)
Balance as of December 31, 2022
Measurement period adjustment associated with the acquisition of ReedTMS (2)
Payment for contingent consideration (3)
Change in fair value (4)
Balance as of December 31, 2023
$
$
2,500
8,400
5,000
(2,500)
13,400
(800)
(1,500)
(2,204)
8,896
(1) The contingent earnout period related to the NEHDS acquisition ended on December 31, 2022 and did not result in any additional cash
payments, as the financial performance goals were not achieved.
(2) The measurement period adjustment was recorded in goodwill on the consolidated balance sheet.
(3) The contingent earnout period related to the ReedTMS acquisition ended on December 31, 2023 and resulted in an additional cash payment,
as certain financial performance goals were achieved.
(4) Includes a net favorable change of $2.7 million to the contingent earnout liability related to the ReedTMS acquisition for the year ended
December 31, 2023.
The estimated fair values of our contingent consideration arrangements are based upon probability-adjusted inputs for each
acquired entity. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair
value of the liability each reporting period. Change in fair value is recorded in other operating expenses on the consolidated
statements of income.
We have ownership interests in investments, primarily Mastery Logistics Systems, Inc. (“MLSI”), which do not have readily
determinable fair values and are accounted for using the measurement alternative in ASC 321, Investments - Equity Securities.
Our ownership interest in Autotech Fund III, L.P. (“Autotech Fund III”) is accounted for under ASC 323, “Investments - Equity
Method and Joint Ventures.” For additional information regarding the valuation of these investments, see Note 7 – Investments.
Fair Value of Financial Instruments Not Recorded at Fair Value
Cash and cash equivalents, accounts receivable trade, and accounts payable are short-term in nature and accordingly are carried
at amounts that approximate fair value.
The carrying amount of our fixed-rate debt not measured at fair value on a recurring basis was $88.8 million and $93.8 million
as of December 31, 2023 and 2022, respectively. The estimated fair value of our fixed-rate debt using the income approach,
based on its net present value, discounted at our current borrowing rate, was $86.7 million and $87.2 million as of
December 31, 2023 and 2022, respectively (categorized as Level 2 of the fair value hierarchy). The carrying amount of our
variable-rate long-term debt approximates fair value due to the duration of our credit arrangement and the variable interest rate
(categorized as Level 2 of the fair value hierarchy).
(7) INVESTMENTS
Equity Investments without Readily Determinable Fair Values
Our strategic equity investments without readily determinable fair values primarily consists of our investment in MLSI, a
transportation management systems company. MLSI is developing a cloud-based transportation management system using
MLSI's SaaS technology which we have agreed to license. These investments are being accounted for under ASC 321 using the
measurement alternative, and are recorded in other noncurrent assets on the consolidated balance sheets. We record changes in
the values of these investments based on events that occur that would indicate the values have changed, in loss (gain) on
investments in equity securities on the consolidated statements of income. As of December 31, 2023 and 2022, the value of our
investment in MLSI was $89.8 million and $86.8 million, respectively, and the value of our other equity investments without
readily determinable fair values was $316 thousand and $250 thousand, respectively.
44
The following table summarizes the activity related to our equity investments without readily determinable fair values during
the periods presented (in thousands):
Investment in equity securities
Upward adjustments (1)
Years Ended December 31,
2023
2022
2021
$
3,066 $
20,250 $
—
28,638
5,000
28,151
(1) During 2022 and 2021, investments by third parties resulted in the remeasurements of our investment in MLSI. Our updated investment
values were based upon the prices paid by third parties.
As of December 31, 2023, cumulative upward adjustments on our equity securities without readily determinable fair values
totaled $56.8 million.
Equity Investments with Readily Determinable Fair Values
We own 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 loss (gain) on investments in equity securities on the consolidated
statements of income. As of December 31, 2023 and 2022, the value of these investments was $0.3 million and $0.7 million,
respectively. For additional information regarding the fair value of these equity investments, see Note 6 – Fair Value.
The following table summarizes the activity related to our equity investments with readily determinable fair values during the
periods presented (in thousands):
Loss (gain) on investments in equity securities, net
Portion of unrealized loss (gain) for the period related to equity securities
still held at the reporting date
$
$
Equity Method Investment
Years Ended December 31,
2023
2022
2021
278 $
16,443 $
(12,166)
270 $
16,443 $
(12,166)
In January 2023, we committed to make a $20.0 million investment in Autotech Fund III (the “Fund”) pursuant to a limited
partnership agreement. The Fund is managed by Autotech Ventures, a venture capital firm focused on ground transportation
technology. Our interest, which represents an ownership percentage of less than 20%, is being accounted for under ASC 323,
“Investments - Equity Method and Joint Ventures.” As a limited partner, we will make periodic capital contributions toward this
total commitment amount. We contributed $3.4 million to the Fund during the year ended December 31, 2023. As of
December 31, 2023, the value of our investment in the Fund was $2.3 million and is recorded in other noncurrent assets on the
consolidated balance sheets. The carrying amount of the Fund as of December 31, 2023 approximates its fair value as of
September 30, 2023, as this is the most recent information available to us at this time. We recognized a loss of $1.0 million
from the Fund for the year ended December 31, 2023, which is reported in loss from equity method investment on the
consolidated statements of income.
(8) DEBT AND CREDIT FACILITIES
On December 20, 2022, we entered into a $1.075 billion unsecured credit facility with a group of lenders (the “2022 Credit
Agreement”), replacing our previous unsecured credit facility with BMO Harris Bank N.A. (“BMO Harris”), dated May 14,
2019, as amended, and the credit agreement with Wells Fargo Bank, National Association, dated March 25, 2022. The 2022
Credit Agreement is scheduled to mature on December 20, 2027 and has a $100.0 million maximum limit for the aggregate
amount of letters of credit issued.
Revolving credit loans drawn under the 2022 Credit Agreement bear interest, at our option, at (i) the Base Rate (the highest of
(a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, or (c) the one-month Term SOFR plus 1.10%), plus a margin
ranging between 0.125% and 0.750%, or (ii) Term SOFR plus 0.10% and a margin ranging between 1.125% and 1.750%.
Swingline loans drawn under the 2022 Credit Agreement bear interest at the Base Rate, as defined above, plus a margin ranging
between 0.125% and 0.750%. The 2022 Credit Agreement also requires us to pay quarterly (i) a letter of credit commission on
the daily amount available to be drawn under such standby letters of credit at rates ranging between 1.125% and 1.750% per
annum and (ii) a nonrefundable commitment fee on the average daily unused amount of the commitment at rates ranging
between 0.125% and 0.250% per annum. The margin, letter of credit commission, and commitment fee rates are based on our
ratio of net funded debt to earnings before interest, income taxes, depreciation and amortization (“EBITDA”). There are no
scheduled principal payments due on the 2022 Credit Agreement until the maturity date, and interest is payable in arrears at
periodic intervals not to exceed three months. In July 2023, we entered into four additional variable-for-fixed interest rate swap
45
agreements for a notional amount of $130.0 million to further limit our exposure to increases in interest rates on a portion of our
variable-rate indebtedness.
On June 30, 2021, we entered into a $100.0 million unsecured fixed-rate term loan commitment with BMO Harris, 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 ("BMO Term Loan"). We are currently planning to repay the remaining outstanding
principal balance under the BMO Term Loan in May 2024 using proceeds from the 2022 Credit Agreement. The outstanding
principal balance of the BMO Term Loan bears interest at a fixed rate of 1.28%, payable quarterly in arrears.
As of December 31, 2023 and 2022, our outstanding debt totaled $648.8 million and $693.8 million, respectively. As of
December 31, 2023, we had an outstanding revolving credit loan balance of $560.0 million under the 2022 Credit Agreement,
including (i) $280.0 million at a variable interest rate of 6.73%, (ii) $150.0 million which is effectively fixed at 2.88% with
interest rate swap agreements through May 2024, (iii) $40.0 million which is effectively fixed at 6.20% with interest rate swap
agreements through July 2025, and (iv) $90.0 million which is effectively fixed at 5.87% with interest rate swap agreements
through July 2026. Our total available borrowing capacity under the 2022 Credit Agreement was $463.9 million as of
December 31, 2023, after considering $51.1 million in stand-by letters of credit under which we are obligated. In addition, as of
December 31, 2023, we had $88.8 million outstanding under the BMO Term Loan at a fixed interest rate of 1.28%.
Availability of such funds under the current debt agreements is conditional upon various customary terms and covenants. Such
covenants include, among other things, two financial covenants requiring us (i) not to exceed a maximum ratio of net funded
debt to EBITDA and (ii) to exceed a minimum ratio of EBITDA to interest expense. As of December 31, 2023 we were in
compliance with these covenants.
At December 31, 2023, the aggregate future maturities of long-term debt by year are as follows (in thousands):
2024
2025
2026
2027
Total
$
$
88,750
—
—
560,000
648,750
(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. On January 24, 2023, we purchased a $25.0 million subordinated promissory note from MLSI with a maturity
date of January 24, 2030. The proceeds of the promissory note may be used by MLSI for working capital and general business
purposes, including a limited amount for possible repayment of certain advances. There are no scheduled principal payments
due on the promissory note until the maturity date, and interest accrues at 7.5% compounded annually, with the first accrued
interest payment due on January 24, 2028, and at the end of each calendar year thereafter. The independent contractor notes
receivable, MLSI subordinated promissory note, and other notes receivable are included in other current assets and other non-
current assets in the consolidated balance sheets. The following table presents our notes receivable (in thousands):
Independent contractor notes receivable
MLSI subordinated promissory note
Other notes receivable
Notes receivable
Less current portion
Notes receivable – non-current
December 31,
2023
2022
$
6,864 $
25,000
7,231
39,095
2,208
$
36,887 $
8,287
—
7,921
16,208
2,691
13,517
46
We also provide financing to some individuals who attended our driver training schools. The student notes receivable is
included in other receivables and other non-current assets in the consolidated balance sheets. The following table presents our
student notes receivable (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,
2023
2022
$
$
64,956 $
(22,702)
42,254
13,705
28,549 $
63,351
(23,491)
39,860
12,574
27,286
Years Ended December 31,
2023
2022
2021
Current:
Federal
State
Foreign
Deferred:
Federal
State
$
17,624 $
23,741 $
7,661
2,053
27,338
10,019
(1,866)
8,153
12,423
489
36,653
38,521
4,032
42,553
Total income tax expense
$
35,491 $
79,206 $
42,049
12,787
213
55,049
27,593
1,895
29,488
84,537
The effective income tax rate differs from the federal corporate tax rate of 21% in 2023, 2022, and 2021 as follows (in
thousands):
Tax at statutory rate
State income taxes, net of federal tax benefits
Other, net
Total income tax expense
Years Ended December 31,
2023
2022
2021
$
$
31,034 $
68,205 $
4,578
(121)
12,999
(1,998)
35,491 $
79,206 $
72,663
11,599
275
84,537
47
The following table presents our deferred income tax assets and liabilities (in thousands):
Deferred income tax assets:
Insurance and claims accruals
Compensation-related accruals
Allowance for uncollectible accounts
Operating lease liabilities
Other
Gross deferred income tax assets
Deferred income tax liabilities:
Property and equipment
Investments in equity securities
Prepaid expenses
Operating lease right-of-use assets
Investment in partnership
Other
Gross deferred income tax liabilities
Net deferred income tax liability
December 31,
2023
2022
$
57,168 $
9,931
2,797
8,733
2,235
80,864
351,352
12,240
7,118
8,327
18,790
3,217
401,044
$
320,180 $
59,275
10,767
3,218
10,324
981
84,565
344,896
12,818
7,526
10,056
19,745
2,802
397,843
313,278
Deferred income tax assets are more likely than not to be realized as a result of the reversal of deferred income tax liabilities.
We recognized a $201 thousand decrease, a $54 thousand increase, and a $49 thousand increase in the net liability for
unrecognized tax benefits for the years ended December 31, 2023, 2022, and 2021, respectively. We recognized net interest
expense of $70 thousand, $42 thousand, and $10 thousand during 2023, 2022, and 2021, respectively. If recognized, $1.7
million, $2.0 million, and $1.9 million of unrecognized tax benefits as of December 31, 2023, 2022 and 2021, respectively,
would impact our effective tax rate. Interest of $0.5 million as of December 31, 2023 and 2022 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 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
2023
December 31,
2022
2021
2,495 $
2,425 $
161
120
(531)
99
320
(349)
2,245 $
2,495 $
2,363
65
320
(323)
2,425
$
$
We file U.S. federal income tax returns, as well as income tax returns in various states and several foreign jurisdictions. The
years 2020 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. 2023 Long-term Incentive Plan (the “Equity Plan”), approved by the Company’s shareholders in
2023, provides for grants to employees, non-employee directors, and consultants of the Company in the form of stock options,
restricted stock and units (“restricted awards”), unrestricted stock 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 options,
unrestricted stock, and stock appreciation rights have been issued under the Equity Plan to date. The maximum number of
48
shares of common stock that may be awarded under the Equity Plan is 4,000,000 shares. As of December 31, 2023, there were
3,791,411 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, 2023, the total unrecognized compensation cost related to non-vested equity compensation awards was
approximately $10.2 million and is expected to be recognized over a weighted average period of 2.4 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,
2023
2022
2021
$
$
$
$
10,229 $
2,634
7,595 $
1,723 $
444
1,279 $
7,803 $
1,954
5,849 $
4,690 $
1,174
3,516 $
6,349
1,587
4,762
4,452
1,113
3,339
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 2024.
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, 2023:
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 ($)
492 $
204
(233)
(19)
444
41.42
44.17
40.44
42.44
43.15
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 weighted-average grant date fair value of restricted awards granted during the years ended December 31, 2023, 2022, and
2021 was $44.17, $42.27, and $42.69, respectively. The total fair value of previously granted restricted awards vested during
the years ended December 31, 2023, 2022, and 2021 was $10.4 million, $7.3 million, and $6.8 million, respectively. We
withheld shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the
applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations were recorded as
treasury stock.
49
Performance Awards
Performance awards entitle the recipient to shares of common stock upon attainment of performance objectives as pre-
established by the Compensation Committee. If the performance objectives are achieved, performance awards currently
outstanding vest, subject to continued employment, 36 months after the grant date of the award. The performance awards do not
confer any voting or dividend rights to recipients until such shares vest and do not have any post-vesting sales restrictions. The
following table summarizes performance award activity for the year ended December 31, 2023:
Nonvested at beginning of period
Granted
Vested
Forfeited
Nonvested at end of period
Number of
Performance Awards
(in thousands)
Weighted-
Average Grant
Date Fair
Value ($)
289 $
121
(126)
(4)
280
37.21
45.07
32.93
38.34
42.15
The 2023 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, 2023 to December 31, 2024.
Shares earned based on cumulative diluted earnings per share may increase or decrease by 25% based on the Company’s total
shareholder return during the three-year period ended December 31, 2025, relative to the total shareholder return of a peer
group of companies for the same period. The 2022 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, 2022 to December 31, 2023. 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, 2024, relative to the total shareholder
return of a peer group of companies for the same period. The 2023 and 2022 performance awards will vest in one installment on
the third anniversary from the respective grant dates. In January 2024, the Compensation Committee determined the 2021 fiscal
year performance objectives were achieved at a level above the target level; although, shares earned based on cumulative
diluted earnings per share were 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 additional
shares earned above the target are included in the granted shares in the activity table above.
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 weighted-average grant date fair value of performance awards granted during the years ended December 31, 2023, 2022,
and 2021 was $45.07, $39.28, and $38.48, respectively. The vesting date fair value of performance awards that vested during
the years ended December 31, 2023, 2022, or 2021 was $5.9 million, $3.0 million and $4.1 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):
2023
2022
2021
$
349
309
297
50
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):
2023
2022
2021
$ 6,351
5,921
4,904
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, 2023, there were 49 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
(12) COMMITMENTS AND CONTINGENCIES
December 31,
2023
2022
$
13,843 $
10,635
10,883
8,509
We have committed to property and equipment purchases of approximately $107.9 million at December 31, 2023.
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 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 $39.8 million and $34.1 million as of December 31, 2023
and 2022, 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, 2023 and 2022.
The Company pursued an appeal of this verdict, and on May 18, 2023, the Texas Court of Appeals overruled Werner’s appeal
and affirmed the trial court’s judgment. The Company has since filed a Petition for Review with the Texas Supreme Court,
51
seeking further review of the Texas Court of Appeals decision. No assurances can be given regarding whether the Texas
Supreme Court will accept the Company’s petition to review or the outcome of any such review.
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. On August 3, 2022, the
Eighth Circuit Court of Appeals vacated the district court’s judgment and remanded the case, for the trial court to determine
whether the plaintiffs should be granted a new trial on the short break claim. On January 10, 2023, the trial court denied
Plaintiff’s motion for a new trial and entered judgment in Werner’s favor on all claims. Plaintiffs again have appealed the case
to the Eighth Circuit Court of Appeals. As of December 31, 2023, 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.
(13) 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 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 is a non-asset-based transportation and logistics provider. Werner Logistics provides services
throughout North America 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”) 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 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.
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 property and equipment not attributable to our operating segments.
52
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.
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,
2023
2022
2021
$
2,310,810 $
2,428,686 $
2,045,073
910,433
78,063
1,883
793,492
71,185
1,833
622,461
66,108
1,629
3,301,189
3,295,196
2,735,271
(17,690)
(5,218)
(899)
$
3,283,499 $
3,289,978 $
2,734,372
Years Ended December 31,
2023
2022
2021
$
169,330 $
294,555 $
281,823
15,879
69
(8,862)
36,184
(2,604)
(5,059)
27,873
4,947
(5,497)
$
176,416 $
323,076 $
309,146
Years Ended December 31,
2023
2022
2021
$
271,245 $
15,395
11,541
1,328
256,768 $
9,989
11,258
1,908
$
299,509 $
279,923 $
245,169
8,833
10,786
2,912
267,700
53
Information about the geographic areas in which we conduct business is summarized below (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.
Revenues
United States
Foreign countries
Mexico
Other
Total foreign countries
Total
Long-lived Assets
United States
Foreign countries
Mexico
Other
Total foreign countries
Total
Years Ended December 31,
2023
2022
2021
$
3,089,205 $
3,051,788 $
2,532,720
159,170
35,124
194,294
191,126
47,064
238,190
156,405
45,247
201,652
3,283,499 $
3,289,978 $
2,734,372
1,948,039 $
1,795,337 $
1,583,766
$
$
24,818
99
24,917
29,819
120
29,939
29,421
56
29,477
$
1,972,956 $
1,825,276 $
1,613,243
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 10% of our total revenues in 2023 and
14% in 2022 and 2021. Revenues generated by Dollar General are reported in both of our reportable operating segments.
54
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, 2023, 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 Securities and Exchange Commission 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, 2023. 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, 2023.
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.
55
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, 2023, 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, 2023, 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, 2023 and 2022, 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, 2023, and the related notes and financial
statement schedule II valuation and qualifying accounts (collectively, the consolidated financial statements), and our report
dated February 26, 2024 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 26, 2024
/s/ KPMG LLP
56
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, 2023
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
During fourth quarter 2023, no information was required to be disclosed in a report on Form 8-K, but not reported.
Director and Officer Trading Arrangements
During fourth quarter 2023, no Company director or officer adopted or terminated a “Rule 10b5-1 trading arrangement” or
“non-Rule 10b5-1 trading arrangement,” as such terms are defined in Item 408(a) of Regulation S-K.
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, 2023, 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
Plan Category
Equity compensation plans approved by
stockholders
(a)
687,932(1)
(b)
$0.00(2)
Includes 687,484 shares to be issued upon vesting of outstanding restricted stock awards.
(1)
(2) As of December 31, 2023, we do not have any outstanding stock options.
57
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)
3,791,411
We do not have any equity compensation plans that were not approved by stockholders.
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)
(1)
Financial Statements and Schedules.
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
27
29
30
31
32
33
34
Financial Statement Schedules: The consolidated financial statement schedule set forth under the following caption is
(2)
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
62
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.
58
Exhibits: The Company has attached or incorporated by reference herein certain exhibits as specified below pursuant to
(3)
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
10.14
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. 2023 Long-Term
Incentive Plan
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated May 9, 2023
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 10.2 of the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2023
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
Compensation Letter Agreement, dated
February 7, 2023, between Christopher
Wikoff and Werner Enterprises, Inc.
Form of Restricted Stock Award Agreement
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; Item
5.02 of the Company’s Current Report on Form 8-K dated
February 10, 2023; Item 5.02 of the Company’s Current
Report on Form 8-K dated February 23, 2023; Item 5.02 of
the Company’s Current Report on Form 8-K dated February
9, 2024
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated February 23, 2023
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated December 1, 2009
Form of Restricted Stock Award Agreement,
effective May 9, 2023
Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2023
Form of Performance-Based Restricted Stock
Award Agreement, effective February 7, 2022
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated February 7, 2022
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
Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated July 1, 2023
Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2021
Exhibit 10.21 to the Company's Annual Report on Form 10-
K for the year ended December 31, 2022
Exhibit 10.20 to the Company's Annual Report on Form 10-
K for the year ended December 31, 2022
Consulting Services Agreement dated July 1,
2023, between John J. Steele and Werner
Enterprises, Inc.
Facility Letter and Promissory Note
Agreement, dated June 30, 2021 between
Werner Enterprises, Inc. and BMO Harris
Bank N.A.
First Amendment to Term Loan Facility
Letter, dated December 20, 2022 between
Werner Enterprises, Inc. and BMO Harris
Bank N.A.
Credit Agreement, dated December 20, 2022
by and among Werner Enterprises, Inc., the
lenders thereto, Wells Fargo Bank, National
Association as Administrative Agent,
Swingline Lender, and Issuing Lender, and
BMO Harris Bank N.A. as Syndication Agent
59
Exhibit
Number
21
23.1
31.1
31.2
32.1
32.2
97
101
104
Description
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)
Incorporated by Reference to:
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Furnished herewith
Furnished herewith
Werner Enterprises, Inc. Clawback Policy,
effective as of December 1, 2023
Filed herewith
The following audited financial information
from Werner Enterprises’ Annual Report on
Form 10-K for the year ended December 31,
2023, formatted in iXBRL (Inline Extensible
Business Reporting Language) includes: (i)
Consolidated Statements of Income for the
years ended December 31, 2023, 2022 and
2021, (ii) Consolidated Statements of
Comprehensive Income for the years ended
December 31, 2023, 2022 and 2021, (iii)
Consolidated Balance Sheets as of December
31, 2023 and 2022, (iv) Consolidated
Statements of Cash Flows for the years ended
December 31, 2023, 2022 and 2021, (v)
Consolidated Statements of Stockholders’
Equity and Temporary Equity - Redeemable
Noncontrolling Interest for the years ended
December 31, 2023, 2022 and 2021, and (vi)
the Notes to Consolidated Financial
Statements as of December 31, 2023.
The cover page from this Annual Report on
Form 10-K for the year ended December 31,
2023, formatted in Inline XBRL (included as
Exhibit 101).
ITEM 16.
FORM 10-K SUMMARY
Not applicable
60
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 26th day of February, 2024.
WERNER ENTERPRISES, INC.
By:
/s/ Derek J. Leathers
Derek J. Leathers
Chairman, Chief Executive Officer and Director
(Principal 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 indicated on this 26th day of February, 2024.
/s/ Scott C. Arves
Scott C. Arves
Director
/s/ Diane K. Duren
Diane K. Duren
Director
/s/ Michelle D. Greene
Michelle D. Greene
Director
/s/ Jack A. Holmes
Jack A. Holmes
Director
/s/ Michelle D. Livingstone
Michelle D. Livingstone
Director
/s/ Vikram Mansharamani, Ph.D.
Vikram Mansharamani, Ph.D.
Director
/s/ Carmen A. Tapio
Carmen A. Tapio
Director
/s/ Alexi A. Wellman
Alexi A. Wellman
Director
/s/ Christopher D. Wikoff
Christopher D. Wikoff
Executive Vice President, Treasurer
and Chief Financial Officer (Principal Financial Officer)
/s/ James L. Johnson
James L. Johnson
Executive Vice President and Chief Accounting Officer
(Principal Accounting Officer)
61
SCHEDULE II
WERNER ENTERPRISES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Year ended December 31, 2023:
Allowance for doubtful accounts
Year ended December 31, 2022:
Allowance for doubtful accounts
Year ended December 31, 2021:
Allowance for doubtful accounts
(In thousands)
Year ended December 31, 2023:
Allowance for doubtful student notes
Year ended December 31, 2022:
Allowance for doubtful student notes
Year ended December 31, 2021:
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
10,271 $
516 $
1,450 $
9,337
9,169 $
1,956 $
854 $
10,271
8,686 $
845 $
362 $
9,169
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Write-offs
(Recoveries)
of Doubtful
Accounts
Balance at
End of
Period
23,491 $
22,318 $
23,107 $
22,702
22,911 $
20,301 $
19,721 $
23,491
19,448 $
18,659 $
15,196 $
22,911
$
$
$
$
$
$
See report of independent registered public accounting firm.
62
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 26, 2024
/s/ Derek J. Leathers
Derek J. Leathers
Chairman 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, Christopher D. Wikoff, 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 26, 2024
/s/ Christopher D. Wikoff
Christopher D. Wikoff
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, 2023 (the “Report”), filed with the Securities and Exchange Commission, I, Derek J. Leathers, Chairman 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 26, 2024
/s/ Derek J. Leathers
Derek J. Leathers
Chairman 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, 2023 (the “Report”), filed with the Securities and Exchange Commission, I, Christopher D. Wikoff, 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 26, 2024
/s/ Christopher D. Wikoff
Christopher D. Wikoff
Executive Vice President, Treasurer and
Chief Financial Officer
Information
CORPORATE 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 14, 2024 at 10 a.m. CDT
at the Embassy Suites Omaha-La Vista
Hotel and Conference Center
12520 Westport Parkway
La Vista, Nebraska 68128-5603
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, 54
Chairman and Chief Executive Officer of the Company.
Served on Board since 2020.
Jack A. Holmes, 64
Chairman of EmergeTMS; Former President and CEO of UPS
Freight. Served on Board since 2018. (2)(3)
Scott C. Arves, 67
Former Director, President and Chief Executive Officer
of Transport America, Inc. Served on Board since 2021.
(3)(4)(5)
Diane K. Duren, 64
Former Executive Vice President, Chief Administrative
Officer and Corporate Secretary of Union Pacific
Corporation. Served on Board since 2017. (1)(2)
Michelle D. Greene, 54
Executive Vice President, Chief Information Officer, Global
Technology and Business Services at Cardinal Health.
Served on Board since 2023. (1)(4)
Michelle D. Livingstone, 65
Former Vice President – Transportation for The Home
Depot. Served on Board since 2022. (2)(4)
Carmen A. Tapio, 58
Founder and Chief Executive Officer of North End
Teleservices, LLC. Served on Board since 2020. (3)(4)
Alexi A. Wellman, 53
Chief Executive Officer of Altaba, Inc.
Served on Board since 2021. (1)(2)
(1) Serves on Audit Committee.
(2) Serves on Compensation Committee.
(3) Serves on Nominating and Corporate Governance Committee.
(4) Serves on ESG Committee.
(5) Lead Independent Director.
Executive Officers
Derek J. Leathers, 54
Chairman and Chief Executive Officer
Nathan J. Meisgeier, 50
President and Chief Legal Officer
Craig T. Callahan, 50
Executive Vice President and Chief Commercial Officer
H. Marty Nordlund, 62
Executive Vice President of Strategic Partnerships
Eric J. Downing, 51
Executive Vice President and Chief Operating Officer
Jim S. Schelble, 63
Executive Vice President and Chief Administrative Officer
James L. Johnson, 60
Executive Vice President and Chief Accounting Officer
Daragh P. Mahon, 55
Executive Vice President and Chief Information Officer
Chris D. Wikoff, 49
Executive Vice President, Chief Financial Officer
and Treasurer