What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-28 compared with 2021-02-24 · 69 added, 47 removed, 172 unchanged (40% 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 Chairman.

Werner, who started the business with one truck at the age of 19.

He served as our Chairman until his term ended at the 2021 Annual Meeting of Stockholders, and was then named Chairman Emeritus by the Board of Directors in recognition of his longstanding leadership.

We were incorporated in the State of Nebraska in September 1982 and completed our initial public offering in June 1986 with a fleet of 632 trucks as of February 1986.

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Our Werner Logistics division operated an additional 55 intermodal drayage trucks at the end of 2021.

We acquired ECM Associated, LLC (“ECM”) in July 2021 and NEHDS Logistics, LLC (“NEHDS”) in November 2021.

ECM, through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service (“MCS”) subsidiaries, provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the U.S.

and operates nearly 500 trucks and 2,000 trailers in its network of eight operational facilities and 18 drop yards.

ECM achieved revenues of $108 million in 2020.

NEHDS is a final mile residential delivery provider with access to a network of 400 final mile delivery trucks serving customers primarily in the Northeast and Midwest U.S.

NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries through a network of 19 cross dock, warehouse and customer facilities.

We are rebranding NEHDS with our existing final mile business as Werner Final Mile.

NEHDS achieved revenues of $71 million for the 12-month period ended September 2021.

These acquisitions expanded our fleet size, geographic market presence, and network of operational facilities.

Additional information regarding these acquisitions is included in Note 2 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K.

We have two reportable segments – TTS and Werner Logistics.

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(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;

(iii) the regional short-haul (“Regional”) fleet, including ECM, provides comparable truckload van service within geographic regions across the United States;

and (iv) the Temperature Controlled fleet provides truckload services for temperature sensitive products over irregular routes utilizing temperature-controlled trailers.

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We focus on transporting consumer nondurable products that generally ship more consistently throughout the year and whose volumes are generally more stable during a slowdown in the economy.

Our Werner Logistics segment is a non-asset-based transportation and logistics provider and generates the majority of our non-trucking revenues through four operating units.

These four Werner Logistics operating units are as follows:

Our Werner Logistics segment is a non-asset-based transportation and logistics provider and generates the majority of our non-trucking revenues through three operating units.

These three Werner Logistics operating units are as follows:

(i) Truckload Logistics, which uses contracted carriers to complete shipments for brokerage customers and freight management customers for which we offer a full range of single-source logistics management services and solutions;

(ii) the intermodal (“Intermodal”) unit offers rail transportation through alliances with rail and drayage providers as an alternative to truck transportation;

(iii) Werner Global Logistics international (“WGL”) provides complete management of global shipments from origin to destination using a combination of air, ocean, truck and rail transportation modes;

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.

and (iii) Werner Final Mile (“Final Mile”), including NEHDS, offers residential and commercial deliveries of large or heavy items using third-party agents, independent contractors, and Company employees with two-person delivery teams operating a liftgate

straight truck.

In first quarter 2021, we completed the previously-announced sale of the Werner Global Logistics (“WGL”) freight forwarding services for international ocean and air shipments to Scan Global Logistics Group.

WGL generated revenues of $53 million in 2020.

Prior to the sale of WGL, Werner Logistics provided international services throughout North America and Asia, with additional coverage throughout Australia, Europe, South America, and Africa.

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

Werner Logistics had transportation services contracts with 26,834 carriers as of December 31, 2021 .

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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 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 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.

In 2021, TTS segment revenues accounted for 75% of total operating revenues, Werner Logistics revenues accounted for 23% of total operating revenues, and the remaining 2% was recorded in non-reportable segments.

Our Werner Logistics segment manages the transportation and logistics requirements for customers, providing customers with additional sources of truck capacity, alternative modes of transportation, and systems analysis to optimize transportation needs.

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

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

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Many of our One-Way Truckload customer contracts may be terminated upon 30 days’ notice, which is common in the truckload industry.

We are moving toward longer-term Dedicated customer contracts, most of which are two to five years in length (including some contracts with annual evergreen clauses) and generally may be terminated by either party typically upon 90 days or more notice following the expiration of the contract’s first year.

We are moving toward longer-term Dedicated customer contracts, most of which are two to five years in length (including some contracts with annual evergreen clauses) and generally may be terminated by either party typically upon a notice period following the expiration of the contract’s first year.

We typically renegotiate rates with our customers for these Dedicated contracts on an annual basis.

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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.

Since January 2021, we use an 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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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.

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.

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and 1,483 associates for Werner Logistics, international, driving schools and other non-trucking operations.

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

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

None of our U.S.

or Canadian associates are represented by a collective bargaining unit, and we consider relations with our associates to be good.

Health & Safety:

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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.

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

Diversity & Inclusion:

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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.

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

In 2021, all management associates completed diversity training focusing on unconscious bias and inclusion and we formed the Inclusion, Diversity, Equity, Accountability & Learning (IDEAL) Council to lead the creation, direction, and growth of Associate Resource Groups (“ARGs”).

We currently have nine associate-led ARGs whose aim is to foster a diverse and inclusive workplace and provide support and help in personal and career development and create a safe space where associates can speak honestly and forthrightly.

In 2022, we intend to establish reasonable goals for the advancement and retention of, and to increase and elevate, women and diverse talent in the management pipeline.

In 2021, we were recognized among the Top Companies for Women to Work for in Transportation by the Women in Trucking Association for the fourth consecutive year.

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

At Werner, our female driver workforce is 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.

At Werner, our female driver workforce is well over the national average, and approximately half of our driver associates are ethnically diverse.

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

Werner was also honored to be the only trucking company recognized as a 2021 Military Friendly® Company by VIQTORY Media.

It is the fifth consecutive year Werner has received this designation.

We are widely recognized as a transportation leader in military hiring with veterans and veteran spouses.

Professional Driver Recruitment:

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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.

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.

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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.

At the end of 2021, we operated a total of 19 driver training locations to assist with the training and development of drivers for our company and the industry, and we expect to open three new driver training locations during first quarter 2022.

Independent Contractors:

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Independent contractors also provide us with another source of drivers to support our fleet.

We intend to maintain our emphasis on independent contractor recruiting, in addition to company driver recruitment.

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.

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As of December 31, 2021 , we operated 8,050 company tractors and 290 tractors owned by independent contractors in our TTS segment.

Our Werner Logistics segment operated an additional 31 company tractors at the end of 2020.

The company tractors were primarily manufactured by Freightliner (a Daimler company), Peterbilt and Kenworth (both divisions of PACCAR) and International (a Navistar company).

Our Werner Logistics segment operated an additional 55 drayage company tractors and 90 company delivery trucks at the end of 2021.

The TTS segment company tractors were primarily manufactured by Freightliner (a Daimler company), Peterbilt and Kenworth (both divisions of PACCAR) and International (a Navistar company).

The Werner Final Mile company delivery trucks are manufactured by Hino.

We adhere to a comprehensive maintenance program for both company tractors and trailers.

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We also regulate the vehicle speed of company trucks to improve safety and fuel efficiency.

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.

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

The average age of our TTS segment company truck fleet was 2.2 years at December 31, 2021 , compared to 2.0 years at December 31, 2020.

The average age of our trailer fleet was 4.5 years at December 31, 2021 , compared to 4.0 years at December 31, 2020.

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

We operated 27,225 company-owned trailers at December 31, 2021 , comprised of dry vans, flatbeds, temperature-controlled, and other specialized trailers.

Most of our trailers were manufactured by Wabash National Corporation.

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.

Most of our trailers were manufactured by Wabash National Corporation and Great Dane.

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

All of our trailers have satellite tracking devices.

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Werner Fleet Sales has been in business since 1992 and operates in 8 locations.

We may also trade used trucks to original equipment manufacturers when purchasing new trucks.

In 2020, we purchased nearly all of our fuel from a predetermined network of fuel truck stops throughout the United States, of which approximately 94% was purchased from three large fuel truck stop chains.

At times, we may also trade used trucks to original equipment manufacturers when purchasing new trucks.

In 2021, we purchased nearly all of our fuel from a predetermined network of fuel truck stops throughout the United States comprised mostly of three large fuel truck stop chains.

We negotiate discounted pricing based on historical purchase volumes with these fuel truck stop chains and other factors.

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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.

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.

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The tanks are routinely inspected to help prevent and detect such problems.

We are committed to supporting global efforts to reduce carbon emissions and to continually evaluate and identify new environmental initiatives to support global sustainability efforts.

We currently maintain a late-model truck fleet to take advantage of latest technologies to reduce fuel consumption and emissions.

Our future environmental goals include doubling intermodal usage by 2030, thereby further reducing emissions, and by 2035, reducing carbon emissions by 55% compared to a 2007 baseline, with 30% or more of all Company truck miles being executed by zero emission vehicles.

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.

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

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.

Continuing in 2022, motor carriers are required to perform annual random drug tests for 50% of existing drivers.

The rate was increased from 25% on January 1, 2020 in response to the 2018 FMCSA Drug and Alcohol Testing Survey, which reported an increase to 1.0% of the random testing positive rate for controlled substances.

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

FMCSA issued its final rule for Entry-Level Driver Training (“ELDT”) in December 2016.

The original compliance date was February 7, 2020.

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

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

However, after delays announced by FMCSA, the new effective date was February 7, 2022.

ELDT now requires anyone wanting to obtain a Commercial Driver’s License to successfully complete a specific program of theory and behind-the-wheel instruction provided by a school or other entity on FMCSA’s new Training Provider Registry.

We are in compliance with the ELDT rule.

Following the signing of the Infrastructure Investment and Jobs Act (IIJA) on November 15, 2021, the FMCSA is required to establish a pilot program to allow persons ages 18, 19, and 20 to operate commercial motor vehicles in interstate commerce.

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.

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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In January 2020, EPA announced an Advance Notice of Proposed Rulemaking that would establish new standards for highway heavy-duty engines to lower nitrogen oxide emissions.

In August 2021, EPA announced plans to reduce greenhouse gas emissions from Heavy-Duty Trucks through a series of rulemakings over the next three years.

The first rulemaking, to be finalized in 2022, will apply to heavy-duty vehicles starting in model year 2027.

California’s ongoing emissions reduction goals have significantly impacted the industry.

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

Approximately 4% of our truck miles in 2021 were in the state of California.

Our operations are subject to applicable federal, state, and local environmental laws and regulations, many of which are implemented by the EPA and similar state regulatory agencies.

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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