What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-24 compared with 2020-02-27 · 70 added, 57 removed, 149 unchanged (46% of the section changed)

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We were founded in 1956 by Clarence L.

Werner, who started the business with one truck at the age of 19 and serves as our Executive Chairman.

Werner, who started the business with one truck at the age of 19 and serves as our Chairman.

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.

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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, grocery products and manufactured products.

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.

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and (iv) Werner Final Mile (“Final Mile”) offers home and business deliveries of large or heavy items using third-party agents with two associates operating a liftgate straight truck.

Our Brokerage unit had transportation services contracts with 25,535 carriers as of December 31, 2019.

Werner Logistics had transportation services contracts with 28,622 carriers as of December 31, 2020.

Marketing and Operations

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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 2019, TTS segment revenues accounted for 77% of total operating

revenues and Werner Logistics revenues accounted for 20% of total operating revenues.

In 2020, TTS segment revenues accounted f or 78% of total operating revenues, Werner Logistics revenues accounted for 20% 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, a global delivery network and systems analysis to optimize transportation needs.

Werner Logistics services include (i) truck brokerage, (ii) freight management, (iii) intermodal transport, (iv) international and (v) final mile.

The Werner Logistics international services are provided through our domestic and global subsidiary companies and include (i) ocean, air and ground transportation services, (ii) door-to-door freight forwarding and (iii) customs brokerage.

Most Werner Logistics international services are provided throughout North America and Asia with additional coverage throughout Australia, Europe, South America and Africa.

The Werner Logistics international services were provided through our domestic and global subsidiary companies and include (i) ocean, air and ground transportation services, (ii) door-to-door freight forwarding and (iii) customs brokerage.

Most Werner Logistics international services were provided throughout North America and Asia with additional coverage throughout Australia, Europe, South America and Africa.

We recently announced the sale of the WGL freight forwarding services for international ocean and air shipments to Scan Global Logistics, which is expected to close on February 26, 2021.

Werner Logistics will continue to provide North American truck brokerage, freight management, intermodal and final mile services.

Werner Logistics is highly dependent on qualified associates, information systems and the services of qualified third-party capacity providers.

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During 2020, our largest 5, 10, 25 and 50 customers comprised 36%, 49%, 67% and 79% of our revenues, respectively.

No single customer generated more than 9% of our revenues in 2019.

Our largest customer, Dollar General, accounted for 12% of our total revenues in 2020.

Revenues generated by Dollar General are reported in both of our reportable operating segments.

The industry groups of our top 50 customers are 53% retail and consumer products, 20% manufacturing/industrial, 18% food and beverage and 9% logistics and other.

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This technology also allows us to plan and monitor shipment progress.

We automatically monitor truck movement and obtain specific data on the location of all trucks in the fleet every 15 minutes.

We automatically monitor truck movement and obtain specific data on the location of all trucks in the fleet every five minutes.

Using the real-time global positioning data obtained from the devices, we have advanced application systems to improve customer and driver service.

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We have used electronic logging devices (“ELDs”) to monitor and enforce drivers’ hours of service since 1996.

During 2020, we replaced our previous communications technology with a new untethered, tablet-based telematics solution that provides an enhanced and more efficient driver experience.

In the trucking industry, revenues generally follow a seasonal pattern.

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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.

Employee Associates and Independent Contractors

Human Capital Resources

Employee Count:

As of December 31, 2020, we employed 9,342 drivers;

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and 1,045 associates for Werner Logistics, international, driving schools and other non-trucking operations.

We also had 540 independent contractors who provide both a tractor and a driver or drivers.

Most of our associates are based in the U.S., with about 1% based in Mexico, Canada, and China.

None of our U.S., Canadian or Chinese associates are represented by a collective bargaining unit, and we consider relations with our associates to be good.

Health & Safety:

Werner maintains a safety culture that is based on the premise of eliminating workplace incidents, risks and hazards.

In 2020, we achieved our lowest work injury rate in 15 years.

The Werner Safety Department is responsible for all compliance and training issues as it relates to drivers under DOT regulation and Werner policy.

Responsibilities of the department include developing and delivering all driver training on items such as safety issues, driver certification, driver testing, and hazmat.

Our strong safety culture is demonstrated by ongoing investments in advanced equipment technologies, which lead to improved safety for our professional drivers.

Nearly all of our company-owned trucks have collision-mitigation safety systems, automated manual transmissions, and forward-facing cameras.

During the COVID-19 pandemic, the transportation industry has been designated by the U.S.

government as an essential industry for keeping the U.S.

supply chain moving.

Our drivers and mechanics have been on the front lines to ensure the delivery of essential products, and we take this responsibility seriously.

Our primary focus will always be protecting the health and personal safety of our associates, their families and communities, and our customers.

Our leadership team meets frequently to address issues related to customers, freight, drivers, safety, staffing, human resources, and costs and provides regular updates to all our associates.

Throughout our offices and terminal network, we are closely following the safety guidelines set forth by the Centers for Disease Control and Prevention (“CDC”) and World Health Organization (“WHO”), including hygiene and social distancing.

We made and intend to continue making significant investments in personal protective products to keep our associates safe, and over half of our office associates continue working from home.

We introduced Werner-specific associate relief plans to provide rapid and needed assistance to those Werner associates affected by the virus.

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 commit to embrace these values as we move toward an increasingly inclusive culture where every associate feels empowered to bring their whole self to Werner.

In 2020, we were recognized among the Top Companies for Women to Work for in Transportation by the Women in Trucking Association for the third consecutive year.

Werner was recognized for our support of gender diversity, flexible hours and work requirements, competitive compensation and benefits, and professional development opportunities and career advancement opportunities.

At Werner, our female driver workforce is approximately double the national average, and more than half of our driver associates are ethically diverse.

Additionally, over half of our non-driver associates are female or ethnically diverse.

Werner was also named a top 30 Best for Vets Employer in 2020 by Military Times for the sixth consecutive year, placing above all other trucking companies.

We are widely recognized as a transportation leader in military hiring, with veterans and veteran spouses comprising approximately 20 percent of our workforce.

Professional Driver Recruitment:

We recognize that our professional driver workforce is one of our most valuable assets.

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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).

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.

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and (iii) individual drivers’ desire to be home more frequently.

The driver market was extremely competitive in 2019, and the supply of recent driver training school graduates continues to tighten.

We believe that a declining number of, and increased competition for, driver training school graduates, the 50-year low domestic unemployment rate, aging truck driver demographics and increased truck safety regulations are tightening driver supply.

We believe our strong mileage utilization, attractive and varied pay packages, financial strength, safety record, and new truck fleet are attractive to drivers when compared to many other carriers.

Additionally, we believe our large percentage of driving jobs in shorter-haul operations (such as Dedicated and Regional) that allow drivers to return home more often is attractive to drivers.

We believe that a declining number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck safety regulations are tightening driver supply.

At Werner, we continue to take actions to strengthen our driver recruiting and retention to make Werner a preferred choice for the best drivers.

Our efforts include raising driver pay, maintaining a new truck and trailer fleet, purchasing best-in-class safety features for all new trucks, investing in our driver training school network and collaborating with customers to improve or eliminate unproductive freight.

We are focused on providing strong mileage utilization and a large percentage of driving jobs in shorter-haul operations (such as Dedicated and Regional) that allow drivers to return home more often.

We continue to improve our terminal network to enhance the driver experience.

Our new untethered, tablet-based telematics solution implemented in 2020 provides Werner drivers with a more efficient experience through smart workflow, best-in-class navigation, improved safety features and reduced manual data entry.

While the trucking industry suffers from high driver turnover rates, we are proud that our efforts in recent years have continued to have positive results on our driver retention.

Talent Development:

We utilize recent driver training school graduates as a significant source of new drivers.

These drivers have completed a training program at a driver training school and hold a commercial driver’s license (“CDL”).

They continue to gain industry experience by partnering with a Werner-certified leader prior to that driver becoming a solo driver with their own truck.

As mentioned above, the recruiting environment for recent driver training school graduates remained challenging in 2019.

The availability of these drivers has been negatively impacted by the decreased availability of student loan financing for driver training schools.

At the end of 2019, we owned two driver training schools that operate a total of 14 driver training locations to assist with the training and development of drivers for our company and the industry.

As economic conditions improve and regulatory changes are implemented, competition for experienced drivers and recent driver training school graduates may increase and could become more challenging in 2020.

We cannot predict whether we will experience future shortages in the availability of experienced drivers or driver training school graduates.

If such a shortage were to occur and additional driver pay rate increases became necessary to attract and retain experienced drivers or driver training school graduates, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases.

They continue to gain industry experience through our career track program by partnering with a Werner-certified leader prior to that driver becoming a solo driver with their own truck.

As mentioned above, the recruiting environment for recent driver training school graduates became even more challenging in 2020 as social distancing requirements, state licensing cut backs and temporary closures limited the number of placement drivers entering our career track program.

The availability of these drivers has also been negatively impacted by the decreased availability of student loan financing for driver training schools.

At the end of 2020, we owned two driver training schools that operate a total of 14 driver training locations to assist with the training and development of drivers for our company and the industry, and we plan to open four new driver training locations during 2021.

Independent Contractors:

We also recognize that independent contractors complement our company-employed drivers.

As of December 31, 2020, we had 440 independent contractors.

Independent contractors supply their own tractors and drivers and are responsible for their operating expenses.

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Challenging operating conditions, including inflationary cost increases that are the responsibility of independent contractors and a shortage of financing available to independent contractors for equipment purchases, continue to make it difficult to recruit and retain independent contractors.

If a shortage of independent contractors occurs, additional increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract and retain a sufficient number of drivers.

These increases could negatively affect our results of operations to the extent that we could not obtain corresponding freight rate increases.

Revenue Equipment

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The average age of our company truck fleet was 2.0 years at December 31, 2020, compared to 1.9 years at December 31, 2019.

At December 31, 2019, the average age of our trailer fleet was 4.0 years, compared to 4.1 years at December 31, 2018.

The average age of our trailer fleet was 4.0 years at both December 31, 2020 and December 31, 2019.

All of our trucks are equipped with satellite tracking devices, and nearly all of our company-owned trucks have collision mitigation safety systems and automated manual transmissions.

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Most of our trailers were manufactured by Wabash National Corporation.

Nearly all of our dry van trailer fleet consisted of 53-foot composite (DuraPlate ® ) trailers, and we also provide other trailer lengths, such as 48-foot and 57-foot trailers, to meet the specialized needs of certain customers.

Nearly all of our trailers have satellite tracking.

Nearly all of our dry van trailer fleet consisted of 53-foot composite (DuraPlate ® ) trailers, and we also provide other trailer lengths to meet the specialized needs of certain customers.

All of our trailers have satellite tracking devices.

Our wholly-owned subsidiary, Werner Fleet Sales, sells our used trucks and trailers.

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As of December 31, 2020, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

We maintain aboveground and underground fuel storage tanks at many of our terminals.

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 regulated by the U.S.

DOT and certain areas of our business are subject to applicable federal, state and international laws and regulations.

As a for-hire motor carrier, we are regulated by the DOT, and certain areas of our business are subject to applicable federal, state and international laws and regulations.

DOT and an agency within DOT, the Federal Motor Carrier Safety Administration (“FMCSA”), generally govern matters such as safety requirements and compliance, registration to engage in motor carrier operations, drivers’ hours of service (“HOS”), and certain mergers, consolidations, and acquisitions.

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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 July 1, 2013, includes provisions affecting restart periods, rest breaks, on-duty time, and penalties for violations.

Subsequent actions allowed the pre-July 2013 restart provisions to remain in effect indefinitely, pending further action from FMCSA.

In August 2019, FMCSA published a Notice of Proposed Rulemaking proposing changes to HOS requirements, which Werner continues to monitor.

The HOS of Drivers Final Rule which became effective September 29, 2020, includes provisions for short haul, adverse driving conditions, a revision to the 30-minute rest break requirement, and split-sleeper berth which allows drivers to split their 10-hour off duty period in different ways.

In August 2020, FMCSA proposed a pilot program allowing commercial drivers to pause their 14-hour driving window, which Werner continues to monitor.

Werner is the industry leader for ELDs to record driver hours and pioneered the Werner Paperless Logging System in 1996 that was subsequently approved for our use by FMCSA in 1998.

FMCSA’s ELD Final Rule went into effect in December 2017, requiring all motor carriers to have certified ELDs that meet specific standards for documenting HOS.

The out-of-service enforcement of ELDs began April 1, 2018, and carriers using automatic onboard logging devices were required to transition to ELDs by December 16, 2019.

The FMCSA Commercial Driver’s License Drug and Alcohol Clearinghouse (the “Clearinghouse”) Final Rule was published in December 2016 with the effective date of January 6, 2020.

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Motor carriers are also required to query the database prior to hiring an applicant and on an annual basis.

After experiencing intermittent technical issues upon implementation, FMCSA published a notice on January 22, 2020 that the Clearinghouse is fully operational and mandatory use is now in effect.

Effective January 1, 2020, motor carriers are required to perform annual random drug tests for 50 percent of existing drivers, an increase from the previous 25 percent rate.

The rate was increased in response to the 2018 FMCSA Drug and Alcohol Testing Survey, which reported an increase to 1.0 percent of the random testing positive rate for controlled substances.

Continuing in 2021, motor carriers are required to perform annual random drug tests for 50 percent 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 percent of the random testing positive rate for controlled substances.

The minimum annual percentage rate for random alcohol testing remains at 10 percent.

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However, FMCSA announced a two-year delay of the rule, and the new effective date is February 7, 2022.

will continue to monitor the status of this rulemaking as it will directly impact our training schools and the hiring of professional drivers.

We will continue to monitor the status of this rulemaking as it will directly impact our training schools and the hiring of professional drivers.

Environmental Protection Agency (“EPA”) and DOT announced in August 2016 Phase 2 of the Greenhouse Gas and Fuel Efficiency Standards for Medium and Heavy-Duty Trucks.

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Werner continues to structure our fleet plans to operate compliant equipment in California.

WGL, through its domestic and global subsidiary companies, holds a variety of licenses required to carry out its international services.

These licenses permit WGL to provide services as a Non-Vessel Operating Common Carrier (“NVOCC”), customs broker, freight forwarder, indirect air carrier, accredited cargo agent, as well as to provide other services.

These international services subject WGL to regulation by the Transportation Security Administration (“TSA”) and Customs and Borders Protection (“CBP”) agencies of the U.S.

Department of Homeland Security, the U.S.

Federal Maritime Commission (“FMC”), the International Air Transport Association (“IATA”), as well as similar regulatory agencies in foreign jurisdictions.

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.

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We do not believe that compliance with these regulations has a material effect on our capital expenditures, earnings and competitive position.

The United States-Mexico-Canada Agreement (“USMCA”) was signed by President Trump, Prime Minister Trudeau, and then Mexican President Nieto on November 30, 2018 to serve as a successor for the North American Free Trade Agreement (“NAFTA”).

All three countries must ratify USMCA to replace NAFTA.

Mexico and the United States have ratified USMCA.

For Canada to ratify, the agreement must pass through its own legislative process first.

We conduct a substantial amount of business in international freight shipments to and from the United States, Mexico, and Canada (see Note 10 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K).

We believe we are one of the largest truckload carriers in terms of freight volume shipped to and from the United States, Mexico, and Canada.

Canada announced changes to its Commercial Vehicle Drivers HOS Regulations mandating the use of ELDs on June 13, 2019.

The new ELD mandate is similar to requirements in the United States without introducing any impediments to trade, and will become effective on June 12, 2021.

The ELD regulations in Canada are not expected to have negative effects to our business model as Werner has used ELDs to record HOS since our Canadian operations started in 2000.

Werner is dedicated to participating in the development of meaningful public policy by continuing to evaluate local, state, and federal legislative and regulatory actions that impact our operations.

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Our TTS segment competes primarily with other truckload carriers.

Logistics companies, intermodal companies, railroads, less-than-truckload carriers and private carriers provide competition for both our TTS and Werner Logistics segments.

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.

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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.

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.

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

What changed 10-K

Item 1. Business