What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-26 · 116 added, 106 removed, 222 unchanged (50% of the section changed)

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• Cautionary Note Regarding Forward-Looking Statements

• Business Acquisitions

• Results of Operations

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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:

• 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.

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, and we operate in the truckload and logistics sectors of the transportation industry.

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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).

We fund these purchases with net cash from operations and financing available under our existing credit facilities, as management deems necessary.

We provide non-trucking services primarily through the three divisions within our Werner Logistics segment (Truckload Logistics, Intermodal, and Final Mile).

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.

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At the end of 2025, we believe we are well positioned with a strong balance sheet and sufficient liquidity.

Our debt is at $650 million, or a net debt ratio (debt less cash) of 1.6 times earnings before interest, income taxes, depreciation and amortization for the year ended December 31, 2024.

Our debt is at $752 million, or a net debt ratio (debt less cash) of 2.0 times earnings before interest, income taxes, depreciation and amortization, and restructuring and impairment for the year ended December 31, 2025.

We had available liquidity of $702 million, considering cash and cash equivalents on hand and available borrowing capacity of $642 million.

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Communications and utilities 15,863 0.5 17,195 0.6 (7.7)

Restructuring and impairment 44,225 1.5 — — N/A

Other 10,202 0.4 12,661 0.4 (19.4)

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Total other expense, net 32,446 1.1 23,666 0.8 37.1

Income before income taxes 42,482 1.4 147,781 4.5 (71.3)

Income (loss) before income taxes (20,789) (0.7) 42,482 1.4 (148.9)

Income tax expense 2,209 0.1 8,912 0.3 (75.2)

Net income 33,570 1.1 112,290 3.4 (70.1)

Net income (loss) (22,998) (0.8) 33,570 1.1 (168.5)

Net loss attributable to noncontrolling interest 8,599 0.3 663 — 1,197.0

Net income attributable to Werner $ 34,233 1.1 $ 112,382 3.4 (69.5)

Net income (loss) attributable to Werner $ (14,399) (0.5) $ 34,233 1.1 (142.1)

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 One-Way Truckload and Dedicated operations within TTS.

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(1) Net of fuel surcharge revenues

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.

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 (loss), as well as certain statistical data regarding the Werner Logistics segment.

Werner Logistics segment (in thousands) $ % $ % % Chg

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Total trailers (at year end) 3,300 3,170 4.1 %

Total containers (at year end) 200 — N/A

Total containers (at year end) 375 200 87.5 %

2025 Compared to 2024

Operating Revenues

Operating revenues decreased 7.7% in 2024 compared to 2023.

When comparing 2024 to 2023, TTS segment revenues decreased $172.5 million, or 7.5%.

Revenues for the Werner Logistics segment decreased $79.1 million, or 8.7%.

While Dedicated customer retention rate and pipeline of opportunities remained strong throughout 2024, the first half of the year experienced a decline in the Dedicated fleet from isolated losses as a result of pricing discipline, followed by greater stability in the fleet during the second half of the year.

In One-Way Truckload, our pricing discipline, combined with better freight options and strong miles per tractor, led to a 6.4% increase in average revenues per tractor per week, net of fuel surcharge during 2024.

Werner Logistics revenues and profitability continue to be impacted by ongoing pricing pressure.

The potential implementation of tariffs on goods imported from China, Mexico, and Canada are expected to impact supply chains, although, it is difficult to forecast the depth and duration of these impacts since the tariff policies continue to evolve.

Absent uncertainties related to tariff policies, we anticipate a challenging but improving environment in 2025.

Trucking revenues, net of fuel surcharge, decreased 5.8% in 2024 compared to 2023 due to an 8.5% decrease in the average number of tractors in service, partially offset by a 3.0% increase in average revenues per tractor per week, net of fuel surcharge.

During 2024, One-Way Truckload average revenues per total mile, net of fuel surcharge, decreased 1.2%.

Despite an 11.4% decline in One-Way Truckload average tractors in service, One-Way Truckload total miles were only down 4.7%, due to the impact of a 7.6% increase in average total miles per tractor per week in 2024.

Dedicated average revenues per tractor per week, net of fuel surcharge, increased 1.1%.

Considering the freight market outlook, we expect average revenues per total mile, net of fuel surcharge, for the One-Way Truckload fleet to increase in a range of 1% to 4% in the first half of 2025 when compared to the first half of 2024, and we expect Dedicated average revenues per tractor per week, net of fuel surcharge, to remain flat or increase up to 3% in 2025 compared to 2024.

TTS had operating income of $75.2 million in 2024 compared to $169.3 million in 2023, and its operating margin percentage decreased to 3.5% in 2024 from 7.3% in 2023.

We believe rate improvements, as a result of our continued pricing discipline, will be the greatest lift to TTS operating margins going forward.

Operating Revenues and Operating Profitability

Operating revenues decreased $55.9 million, or 1.8%, in 2025 compared to 2024.

When comparing 2025 to 2024, TTS segment revenues decreased $86.3 million, or 4.0%, and Werner Logistics segment revenues increased $25.5 million, or 3.1%.

We had operating income of $11.7 million in 2025 compared to $66.1 million in 2024, and our operating margin percentage decreased to 0.4% in 2025 from 2.2% in 2024.

TTS segment had operating income of $16.4 million in 2025 compared to $75.2 million in 2024, and its operating margin percentage decreased to 0.8% in 2025 from 3.5% in 2024.

Our consolidated and TTS segment operating results in 2025 were positively impacted by a $45.7 million liability reversal through insurance and claims expense as a result of a favorable decision related to a lawsuit arising from a December 2014 accident, and a net favorable change of $7.9 million to the contingent earnout liability related to the Baylor Trucking, Inc.

The Baylor Trucking, Inc.

contingent consideration arrangement was finalized through negotiations in April 2025.

These positive impacts were offset by $44.2 million of restructuring and impairment charges and an $18.0 million litigation settlement agreement plus $3.4 million of associated legal fees related to the consolidated class action lawsuits entitled Abarca et al.

In fourth quarter 2025, we began a strategic restructuring of our One-Way Truckload business, a decisive action designed to significantly enhance long-term profitability and fleet utilization by maximizing production and mitigating unprofitable freight.

Key steps in this initiative included exiting selective unprofitable regional and short-haul truckload freight, further integrating our one-way acquisition operations, and a further shift in the One-Way Truckload fleet composition toward more specialized, Expedited, and team capacity.

This repositioning is focused on eliminating underperforming business.

The restructuring resulted in a total charge of $44.2 million in the fourth quarter, of which $42.7 is considered non-cash.

For additional information related to the restructuring and impairment charges, legal proceedings and the contingent consideration arrangement, see Note 13, Note 12 and Note 6, respectively, in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K.

Werner Logistics had operating income $6.7 million in 2025 compared to an operating loss of $0.9 million in 2024, and its operating margin percentage increased to 0.8% in 2025 from (0.1)% in 2024.

The increase in Werner Logistics operating income and operating margin was due primarily to an increase in shipments with gross margin expansion.

We believe Dedicated retention and pipeline remains strong, as we are continuing to see steady momentum in adding new business.

The implementation of new Dedicated fleets awarded in first quarter 2025 started in the later half of second quarter 2025, and continued to progress into the third quarter as we hired drivers and built the new fleets to targeted levels.

Additional Dedicated fleet contracts were awarded in second quarter 2025.

Overall demand was below normal seasonality for most of the second half of 2025, however One-Way Truckload demand improved throughout the same period.

The 2025 peak season shipment volume was lower while 2025 peak revenue per shipment was flat compared to 2024.

Spot freight rates trended positively in fourth quarter 2025 which is consistent with normal seasonality.

Industry capacity has continued to contract following recent regulatory and enforcement actions related to non-domiciled commercial driver's licenses (“CDLs”), B1 Visas, and English Language Proficiency standards.

As challenging operating conditions continue, we are also seeing an increase in bankruptcies in the trucking industry further limiting capacity.

In the TTS segment, trucking revenues, net of fuel surcharge, decreased 2.9% to $1.78 billion in 2025 from $1.84 billion in 2024 due primarily to an 2.4% decrease in the average number of tractors in service and a 0.5% decrease in average revenues per tractor per week, net of fuel surcharge.

TTS average revenues per tractor per week, net of fuel surcharge, decreased due primarily to a 2.1% decrease in One-Way Truckload average total miles per tractor per week, partially offset by a 0.8% increase in One-Way Truckload revenues per total mile, net of fuel surcharge.

One-Way Truckload average tractors in service decreased 4.5% in 2025 compared to 2024.

Dedicated average revenues per tractor per week, net of fuel surcharge, remained flat.

Considering the freight market outlook, we expect average revenues per total mile, net of fuel surcharge, for the One-Way Truckload fleet to remain flat or increase up to 3% in the first half of 2026 when compared to the first half of 2025, and we expect Dedicated average revenues per tractor per week, net of fuel surcharge, to be in the range of a 1% decrease to a 2% increase in 2026 compared to 2025.

The average number of tractors in service in the TTS segment decreased 2.4% to 7,437 in 2025 compared to 7,619 in 2024.

The prolonged weak freight market combined with the impact from certain fleet losses as a result of maintaining our pricing and operating margin discipline resulted in fewer tractors at the end of 2024.

We ended 2024 with 7,450 tractors in the TTS segment, a year-over-year decrease of 550 tractors compared to the end of 2023.

The prolonged weak freight market combined with the implementation of our One-Way Truckload restructuring plan resulted in fewer tractors at the end of 2025, as we ended 2025 with 7,100 tractors in the TTS segment, a year-over-year decrease of 350 tractors compared to the end of 2024.

Within TTS, Dedicated ended 2025 with 4,850 tractors (or 68% of our total TTS segment fleet) compared to 4,840 tractors (or 65%) at the end of 2024.

We currently expect our TTS segment fleet size at the end of 2025 to increase in a range of 1% to 5% when compared to the fleet size at the end of 2024, with more weighted to the second half of the year.

We currently expect our TTS segment fleet size at the end of 2026 to increase in a range of 23% to 28% when compared to the fleet size at the end of 2025, which includes FirstFleet tractors.

We cannot predict whether future driver shortages, if any, would have a further adverse effect on our fleet size.

If such a driver market shortage were to occur, it could result in further fleet size reductions, and our results of operations could be adversely affected.

Trucking fuel surcharge revenues decreased 20.8% to $263.3 million in 2024 from $332.4 million in 2023 due primarily to lower average diesel fuel prices and the impact of 38.7 million fewer company tractor miles.

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.

Trucking fuel surcharge revenues decreased 12.7% to $229.9 million in 2025 from $263.3 million in 2024 due primarily to the impact of 47.0 million fewer company tractor miles and 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.

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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 are generated by its three divisions.

Werner Logistics recorded revenue and brokered freight expense of $9.3 million in 2025 and $14.4 million in 2024 for certain 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 decreased 8.7% to $831.3 million in 2024 from $910.4 million in 2023.

Truckload Logistics revenues (76% of total Werner Logistics segment revenues) decreased $72.1 million, or 10%, compared to 2023, driven by a decrease in shipments and a decline in revenue per shipment.

The Power Only solution, which utilizes third-party carriers who provide only a driver and a tractor, represented a growing portion of the Truckload Logistics volume in 2024, as Power Only volumes increased over 24% in 2024 compared to 2023.

Intermodal revenues (13% of total Werner Logistics segment revenues) increased $2.3 million, or 2%, in 2024, due to an increase in shipments, partially offset by a decline in revenue per shipment.

Werner Logistics revenues increased 3.1% to $856.9 million in 2025 from $831.3 million in 2024.

Truckload Logistics revenues (75% of total Werner Logistics segment revenues) increased $13.1 million, or 2%, compared to 2024, driven by an increase in shipments.

The PowerLink solution, which utilizes third-party carriers who provide only a driver and a tractor, represented a growing portion of Truckload Logistics operations in 2025.

PowerLink revenues increased 11% in 2025 compared to 2024.

Intermodal revenues (15% of total Werner Logistics segment revenues) increased $17.1 million, or 16%, in 2025, due to a 17% increase in shipments and flat revenue per shipment.

Final Mile revenues (10% of total Werner Logistics segment revenues) decreased $4.7 million, or 5%, in 2025 due to lower volume for furniture and appliances.

Werner Logistics had an operating loss of $0.9 million in 2024 compared to operating income of $15.9 million in 2023, and its operating margin percentage decreased to (0.1)% in 2024 from 1.7% in 2023.

The operating environment continues to be competitive, which is pressuring Werner Logistics operating margins.

Operating Expenses

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The tables on pages 17 through 19 show the consolidated statements of income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the prior year, as well as the operating ratios, operating margins, and certain statistical information for our two reportable segments, TTS and Werner Logistics.

Salaries, wages and benefits decreased $37.7 million, or 3.5%, in 2024 compared to 2023 and increased 1.4% as a percentage of operating revenues.

The lower dollar amount of salaries, wages and benefits expense in 2024 was due primarily to the impact of 38.7 million fewer company tractor miles and decreased non-driver pay, partially offset by higher benefit costs resulting primarily from elevated health care claims.

The decrease in non-driver pay was due primarily to a smaller average number of non-driver employees.

Salaries, wages and benefits decreased $34.1 million, or 3.3%, in 2025 compared to 2024 and decreased 0.4% as a percentage of operating revenues.

The lower dollar amount of salaries, wages and benefits expense in 2025 was due primarily to the impact of 47.0 million fewer company tractor miles and decreased non-driver pay, partially offset by the impact of an $18.0 million litigation settlement agreement discussed above.

The $18.0 million litigation settlement is included in our TTS segment.

The decrease in non-driver pay was due primarily to a smaller average number of non-driver employees, partially offset by

severance expense of $1.3 million from cost saving initiatives.

Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment decreased 12.0% in 2025 compared to 2024.

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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 2024 are $0.3 million higher than the previous policy year.

Our workers’ compensation insurance premiums for the policy year beginning April 2025 are $0.1 million lower than 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.

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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 2025 was approximately 21 cents lower than the average diesel fuel price per gallon in the same period of 2024 and approxima te ly 26 cents lower than the average for first quarter 2024.

Through February 16, the average diesel fuel price per gallon in 2026 was 14 cents lower than the average diesel fuel price per gallon in the same period of 2025 and 10 cents lower than the average for first quarter 2025.

Shortages of fuel, increases in fuel prices and petroleum product rationing can have a material adverse effect on our operations and profitability.

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As of December 31, 2025, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

Supplies and maintenance decreased $10.4 million, or 4.1%, in 2024 compared to 2023 and increased 0.3% as a percentage of operating revenues.

Supplies and maintenance expense decreased due primarily to lower driver and placement driver-related costs such as lodging, driver advertising, and maintenance supplies, lower costs for tires and over-the-road repairs, and the impact of 38.7 million fewer company tractor miles in 2024.

These decreases were partially offset by higher costs for tolls.

We have taken steps to reduce repair and maintenance expense by growing our in-house maintenance capabilities throughout our terminal network.

Insurance and claims increased $6.9 million, or 5.0%, in 2024 compared to 2023 and increased 0.6% as a percentage of operating revenues.

We had higher expense for large dollar liability claims, primarily due to a higher amount of unfavorable reserve development and higher expense for new claims.

These increases were partially offset by lower expense for small dollar liability claims, resulting primarily from a higher amount of favorable reserve development and lower expense for new claims.

We also incurred insurance and claims expense of $4.5 million and $5.7 million in 2024 and 2023, respectively, for accrued interest related to a previously-disclosed adverse jury verdict rendered on May 17, 2018, which we are continuing to defend.

Interest is accrued at $0.5 million per month until such time as the outcome of the litigation is finalized, excluding months where the plaintiffs requested an extension of time to respond to our petition to review.

For additional information related to this lawsuit, see Note 12 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K.

Supplies and maintenance increased $2.2 million, or 0.9%, in 2025 compared to 2024 and increased 0.2% as a percentage of operating revenues.

Supplies and maintenance expense increased due primarily to higher costs for tires and advertising, partially offset by lower costs for over-the-road tractor maintenance and the impact of 47.0 million fewer company tractor miles in 2025.

Taxes and licenses decreased $6.8 million, or 7.0%, in 2025 compared to 2024 and decreased 0.2% as a percentage of operating revenues due primarily to lower costs for fuel taxes.

The decrease in fuel tax expense in 2025 was impacted by 47.0 million fewer company tractor miles.

Insurance and claims decreased $29.4 million, or 20.2%, in 2025 compared to 2024 and decreased 0.9% as a percentage of operating revenues due primarily to the impact of a $45.7 million liability reversal through insurance and claims expense as a result of a favorable decision in 2025 related to an adverse jury verdict rendered on May 17, 2018 for a December 2014 accident, effectively ending the lawsuit in favor of Werner.

We also incurred insurance and claims expense of $4.5 million in 2024 for accrued interest related to the adverse jury verdict rendered on May 17, 2018.

We continued to accrue pre-tax insurance and claims expense for interest at $0.5 million per month (excluding months where the plaintiffs requested an extension of time to respond to our petition for review) until our appeal was finalized in 2025.

For additional information related to this legal proceeding, see Note 12 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K.

The favorable impact of the liability reversal was partially offset by higher expense for liability claims.

We had higher expense for large dollar liability claims, resulting primarily from higher amount of unfavorable reserve development.

Our expense for small dollar liability claims was also higher, primarily due to a lower amount of favorable reserve development and

higher expense for new claims.

The expense for new claims was impacted by decreased cost per claim in 2025 compared to 2024.

The majority of our insurance and claims expense results from our claim experience and claim development under our self-insurance program;

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We maintain liability insurance coverage with insurance carriers in excess of the $15.0 million per claim.

Our liability insurance premiums for the policy year that began August 1, 2024 are lower than premiums for the previous policy year as a result of changes in our retention level and aggregate insurance limits.

Depreciation and amortization expense decreased $9.1 million, or 3.0%, in 2024 compared to 2023 and increased 0.5% as a percentage of operating revenues due primarily to decreases in depreciation of tractors as we had fewer average tractors in service, and technology equipment as we continue to transition to more cloud-based technology solutions.

These decreases were partially offset by the higher cost of new tractors and trailers.

Our liability insurance premiums for the policy year that began August 1, 2025 are slightly higher than premiums for the previous policy year.

Depreciation and amortization expense decreased $4.1 million, or 1.4%, in 2025 compared to 2024 and remained flat as a percentage of operating revenues due primarily to decreases in depreciation of tractors as we had fewer average tractors in service, and technology equipment as we continue to transition to more cloud-based technology solutions.

These decreases were partially offset by an increase in depreciation for trailers due to higher costs for recent specialty trailer purchases.

The average age of our tractor fleet remains low by industry standards and was 2.7 years as of December 31, 2025, and the average age of our trailers was 5.6 years.

We continued to invest in new tractors and trailers, technology, and our terminal network in 2025 to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs.

Rent and purchased transportation expense decreased $41.4 million, or 4.7%, in 2024 compared to 2023 and increased 0.9% 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.

Rent and purchased transportation expense increased $58.0 million, or 6.9%, in 2025 compared to 2024 and increased 2.5% as a percentage of operating revenues.

The payments to third-party capacity providers generally vary depending on changes in the volume of services generated by the Werner Logistics segment.

Werner Logistics purchased transportation expense decreased $54.5 million as a result of lower logistics revenues, but increased to 85.1% as a percentage of Werner Logistics revenues in 2024 from 83.7% in 2023 due to the competitive operating environment in 2024.

Rent and purchased transportation expense for the TTS segment increased $9.8 million in 2024 compared to 2023 due primarily to higher cloud-based technology fees, more independent contractor miles, and additional operational facility costs.

These increases were partially offset by lower reimbursements to independent contractors because of lower average diesel fuel prices in 2024.

Werner Logistics purchased transportation expense increased $27.4 million as a result of higher logistics revenues, and increased to 85.8% as a percentage of Werner Logistics revenues in 2025 from 85.1% in 2024 due to the competitive operating environment in 2025.

Rent and purchased transportation expense for the TTS segment increased $18.9 million in 2025 compared to 2024 due primarily to more independent contractor miles, higher technology-related costs, and additional operational facility costs.

Independent contractor miles increased 6.8 million miles in 2025 and as a percentage of total miles were 6.2% in 2025 compared to 4.9% in 2024.

These increases were partially offset by lower reimbursements to independent contractors because of lower average diesel fuel prices in 2025.

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.

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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 $25.1 million in 2024 compared to 2023 and increased 0.8% as a percentage of operating revenues due primarily to lower gains on sales of property and equipment (primarily used tractors and trailers) and the impact of a $2.7 million net favorable change to a contingent earnout in 2023 related to the ReedTMS acquisition.

These increases were partially offset by decreased costs associated with professional technology services and decreased bad debt expense.

Other operating expenses decreased $2.5 million in 2025 compared to 2024 and remained flat as a percentage of operating revenues due primarily to the impact of a $7.8 million net favorable change to the contingent earnout liability related to the Baylor Trucking, Inc.

acquisition, partially offset by legal fees related to the Abarca et al.

Werner litigation discussed above and increased bad debt expense.

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 $15.3 million in 2024, including $7.0 million from the sale of real estate, compared to $42.4 million in 2023.

In 2024, we sold fewer tractors and substantially more trailers than in 2023 and realized lower average gains per tractor and trailer due to lower pricing in the market for our used equipment.

For the used tractor and trailer market, we expect stable demand and pricing through the first half of 2025, with moderate improvement in the second half of the year as a result of an improving operating environment, along with upcoming environmental regulations as carriers look to upgrade their fleets and prepare for these mandates.

In 2025, we plan to sell fewer tractors and trailers at higher prices, resulting in expected gains on our used equipment to range between $8 million and $18 million.

Gains on sales of property and equipment were $15.7 million in 2025 compared to $15.3 million, including $7.0 million from the sale of real estate, in 2024.

We sold fewer tractors and trailers in 2025 compared to 2024 and realized much higher average gains per tractor and trailer, as used equipment values have been elevated due largely to global trade policy.

We expect used equipment values to

remain stable in the near term given manufacturing production constraints and the evolving regulatory environment that will be an incentive towards higher quality used assets, including assets with lower miles and remaining warranties.

Other Expense (Income)

Other expense, net of other income, decreased $5.0 million in 2024 compared to 2023 due primarily to an $8.2 million increase in the amount of gains on our investments in equity securities and a $1.6 million increase in the amount of earnings from our equity method investment (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), partially offset by a $5.5 million increase in net interest expense.

Net interest expense increased due to the impact of replacing lower-cost debt and interest rate swaps with higher-cost debt and interest rate swaps upon certain maturities in 2024 and higher interest rates for variable-rate debt, partially offset by a decrease in average debt outstanding.

In May 2024, we repaid the remaining outstanding principal balance under the BMO Term Loan using proceeds from the 2022 Credit Agreement, and two variable-for-fixed interest rate swap agreements with an aggregate notional amount of $150.0 million matured.

Subsequent to May 2024, we entered into three variable-for-fixed interest rate swap agreements with an aggregate notional amount of $225.0 million to 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 for further information on our debt and interest rate swaps).

We expect net interest expense to be flat in 2025 compared to 2024, higher in the first half and lower in the second half of 2025.

Other expense, net of other income, increased $8.8 million in 2025 compared to 2024 due primarily to an $7.9 million decrease in the amount of net earnings recognized from our investments (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 remained flat in 2025 compared to 2024 (see Note 8 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K for further information on our debt and interest rate swaps).

We expect net interest expense to increase in 2026 compared to 2025, as we anticipate higher average outstanding debt in 2026 due primarily to the previously mentioned acquisition of FirstFleet.

Income Tax Expense

Income tax expense decreased $6.7 million in 2025 compared to 2024, due primarily to lower pre-tax income and a decrease in the effective income tax rate.

Our effective income tax rate (income taxes expressed as a percentage of income before income taxes) was 21.0% in 2024 compared to 24.0% in 2023.

The lower income tax rate was attributed primarily to certain discrete

return-to-provision adjustments for a prior year.

We currently estimate our full year 2025 effective income tax rate to be approximately 25.0% to 26.0%.

Our effective income tax rate (income taxes expressed as a percentage of income (loss) before income taxes) decreased to (10.6)% in 2025 compared to 21.0% in 2024 due primarily to the impact of $4.7 million of unfavorable return to provision adjustments related to changes in deferred tax assets and liabilities for acquired entities and a subsidiary located in Mexico.

We estimate our full year 2026 effective income tax rate to be approximately 25.5% to 26.5%.

2024 Compared to 2023

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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 $419.1 million as of December 31, 2024.

In addition, we have a maximum borrowing capacity of $1.4 billion under our credit facilities, for which our total available borrowing capacity was $702.0 million as of December 31, 2025.

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 stockholder returns for the foreseeable future.

We believe our liquid assets, cash generated from operating activities, and borrowing capacity under our existing credit facilities will provide sufficient funds to meet our cash requirements and our planned stockholder 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, 2024, we had outstanding debt with an aggregate principal amount of $650.0 million, with $20.0 million expected to be paid within 12 months.

Future interest payments associated with our debt obligations are estimated to be $120.4 million through 2028, with $39.7 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.

• Debt Obligations and Interest Payments – As of December 31, 2025, we had outstanding debt with an aggregate principal amount of $752.0 million, with none expected to be paid within 12 months.

As of December 31, 2025, future interest payments associated with our debt obligations are estimated to be $87.8 million through 2028, with $40.7 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 credit facilities and the timing of expected future principal payments.

On January 27, 2026, we acquired 100% of the equity interests of FirstFleet for $245 million, which includes a maximum $35 million earnout based on gross revenue net of fuel surcharge for the period April 1, 2026, through March 31, 2027.

Under a separate agreement, we also acquired real estate properties from FirstFleet for $37.8 million.

We funded these transactions using cash on hand and our existing revolving credit facility.

We also assumed finance leases estimated at $57.0 million.

As of January 31, 2026, the total aggregate borrowings outstanding under our revolver and accounts receivable securitization facility was $884.6 million.

Including the estimated value of the finance leases assumed, our total debt increased by $189.6 million during the month of January 2026 primarily as a result of the acquisition.

• Operating Leases – We have entered into operating leases primarily for real estate.

As of December 31, 2025, we had fixed lease payment obligations of $46.1 million, with $17.1 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.

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, 2025, we have committed to property and equipment purchases of approximately $24.9 million within the next 12 months.

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We generated cash flow from operations of $181.8 million during 2025, a 44.9% or $147.9 million decrease in cash flows compared to $329.7 million during 2024.

The decrease in net cash provided by operating activities was due primarily to a decrease in net income during 2024 and working capital changes.

The decrease in net cash provided by operating activities was due primarily to working capital changes and a decrease in net income and insurance,claims and other long-term accruals during 2025, partially offset by restructuring costs recorded in 2025.

We were able to make net capital expenditures, repay debt, make strategic investments, pay dividends, and repurchase company stock with the net cash provided by operating activities and existing cash balances, supplemented by borrowings under our existing credit facility.

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Net property and equipment additions (primarily revenue equipment) were $162.7 million during 2025 compared to $234.9 million during 2024.

We currently estimate net capital expenditures (primarily revenue equipment) in 2025 to be in the range of $185 million to $235 million, which is lower than historical ranges as our portfolio evolves to be more asset light.

We intend to fund these net capital expenditures through cash flows from operations and financing available under our existing credit facility, if necessary.

During 2023, we purchased a $25.0 million subordinated promissory note from Mastery Logistics Systems, Inc.

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 $105.7 million during 2024 compared to $87.1 million during 2023.

We had net borrowings on our debt of $1.3 million during 2024, slightly increasing our outstanding debt to $650.0 million at December 31, 2024.

We had net repayments on our debt of $45.0 million during 2023.

We paid dividends of $35.1 million during 2024 and $34.2 million during 2023.

We increased our quarterly dividend rate by $0.01 per share, or 8%, beginning with the quarterly dividend paid in July 2023.

Financing activities for 2024 also included common stock repurchases of 1,787,810 shares at a cost of $67.1 million.

We did not repurchase any shares of common stock in 2023.

On May 14, 2024, the Board of Directors approved a new stock repurchase program under which the Company is authorized to repurchase up to 5,000,000 shares of its common stock.

Given our strong balance sheet and proactive fleet management, we entered 2025 with a higher-than-normal inventory of new tractors ready to support growth.

These factors, combined with a deliberate shift to a more asset light operational mix resulted in net capital expenditures below our historical range in 2025.

We currently estimate net capital expenditures (primarily revenue equipment) in 2026 to be in the range of $185 million to $255 million.

We intend to fund these net capital expenditures through cash flows from operations and financing available under our existing credit facilities, if necessary.

Net financing activities provided $7.3 million during 2025 compared to using $105.7 million during 2024.

We had net borrowings on our debt of $102.0 million during 2025, increasing our outstanding debt to $752.0 million at December 31, 2025.

We had net borrowings on our debt of $1.3 million during 2024.

We paid dividends of $34.1 million during 2025 and $35.1 million during 2024, and we currently plan to continue paying a quarterly dividend.

Financing activities for 2025 also included common stock repurchases of 2,113,007 shares at a cost of $55.6 million, including broker commissions and excise taxes.

Financing activities for 2024 included common stock repurchases of 1,787,810 shares at a cost of $67.1 million, including broker commissions and excise taxes.

On August 7, 2025, the Board of Directors approved a new stock repurchase program under which the Company is authorized to repurchase up to 5,000,000 shares of its common stock.

Upon approval of the new program, the Board of Directors withdrew the previous stock repurchase authorization, which had 1,783,342 shares remaining available for repurchase.

As of December 31, 2024, the Company had purchased 1,103,651 shares pursuant to the new authorization and had 3,896,349 shares remaining available for repurchase.

As of December 31, 2025, the Company had not purchased any shares pursuant to the new authorization and had 5,000,000 shares remaining available for repurchase.

The Company has repurchased, and may continue to repurchase, shares of the Company’s common stock.

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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.

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.

3 unchanged sentences

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 7. Management’s Discussion and Analysis