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What changed in WERNER ENTERPRISES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WERNER ENTERPRISES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+248 added−246 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in WERNER ENTERPRISES INC's 2023 10-K

248 paragraphs added · 246 removed · 211 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

57 edited+5 added−10 removed46 unchanged
Biggest changeWe operated 29,965 trailers at December 31, 2022, comprised of dry vans, flatbeds, temperature-controlled, and other specialized trailers. Most of our company-owned trailers were manufactured by Wabash National Corporation and Great Dane. Nearly all of our dry van trailer fleet consisted of 53-foot composite trailers, and we also provide other trailer lengths to meet the specialized needs of certain customers.
Biggest changeOur trucks are equipped with tablet-based telematics, and nearly all of our company-owned trucks have collision mitigation safety systems and automated manual transmissions. We operated 30,810 trailers at December 31, 2023, comprised of dry vans, flatbeds, temperature-controlled, and other specialized trailers. Most of our company-owned trailers were manufactured by Wabash National Corporation and Great Dane.
Our TTS fleets operate throughout the 48 contiguous U.S. states pursuant to operating authority, both common and contract, granted by the U.S. Department of Transportation (“DOT”) and pursuant to intrastate authority granted by various U.S. states. We also have authority to operate in several provinces of Canada and to provide through-trailer service into and out of Mexico.
Our TTS fleets operate throughout the 48 contiguous U.S. states pursuant to operating authority, both common and contract, granted by U.S. Department of Transportation (“DOT”) and pursuant to intrastate authority granted by various U.S. states. We also have authority to operate in several provinces of Canada and to provide through-trailer service into and out of Mexico.
CSA uses the Safety Measurement System (“SMS”) to analyze data from roadside inspections, crash reports, and investigation results. The Fixing America’s Surface Transportation (“FAST”) Act of 2015 directed FMCSA to remove from public view certain information regarding carrier’s compliance and safety performance.
CSA uses the Safety Measurement System (“SMS”) to analyze data from roadside inspections, crash reports, and investigation results. The Fixing America’s Surface Transportation (“FAST”) Act of 2015 directed FMCSA to remove from public view certain information regarding a carrier’s compliance and safety performance.
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.
He served as our Chairman until his term ended at the 2021 Annual Meeting of Stockholders, and was then named Chairman Emeritus by the Board of Directors (the “Board”) in recognition of his longstanding leadership.
As of December 31, 2022, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. We maintain aboveground and underground fuel storage tanks at some of our terminals. Leakage or damage to these facilities could expose us to environmental clean-up costs. The tanks are routinely inspected to help prevent and detect such problems.
As of December 31, 2023, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. We maintain aboveground and underground fuel storage tanks at some of our terminals. Leakage or damage to these facilities could expose us to environmental clean-up costs. The tanks are routinely inspected to help prevent and detect such problems.
Diversity contributes to innovation and connects us to the many communities we serve. We embrace these values as we move toward an increasingly inclusive culture where every associate feels empowered to bring their whole self to Werner. Through our Inclusion, Diversity, Equity, Accountability & Learning (IDEAL) Council, we are proud to support ten Associate Resource Groups (“ARGs”).
Diversity contributes to innovation and connects us to the many communities we serve. We embrace these values as we move toward an increasingly inclusive culture where every associate feels empowered to bring their whole self to Werner. Through our Inclusion, Diversity, Equity, Accountability & Learning (IDEAL) Council, we are proud to support 11 Associate Resource Groups (“ARGs”).
Fuel In 2022, 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.
Fuel In 2023, we purchased nearly all of our fuel from a predetermined network of fuel truck stops throughout the United States comprised mostly of three large fuel truck stop chains. We negotiate discounted pricing based on historical purchase volumes with these fuel truck stop chains and other factors.
DOT and an agency within DOT, the Federal Motor Carrier Safety Administration (“FMCSA”), generally govern matters such as safety requirements and compliance, registration to engage in motor carrier operations, drivers’ hours of service (“HOS”), and certain mergers, consolidations, and acquisitions. Werner maintains a satisfactory safety rating, which is the highest available rating of the three safety ratings given by FMCSA.
DOT and an agency within DOT, the FMCSA, generally govern matters such as safety requirements and compliance, registration to engage in motor carrier operations, drivers’ hours of service (“HOS”), and certain mergers, consolidations, and acquisitions. Werner maintains a satisfactory safety rating, which is the highest available rating of the three safety ratings given by FMCSA.
A conditional or unsatisfactory safety rating could adversely impact Werner’s business, as some of our customer contracts require a satisfactory rating. Werner must also comply with federal, state, and international regulations which govern equipment weight and dimensions. 5 Table of Contents FMCSA’s Compliance, Safety, Accountability (“CSA”) safety initiative monitors the safety performance of motor carriers.
A conditional or unsatisfactory safety rating could adversely impact Werner’s business, as some of our customer contracts require a satisfactory rating. Werner must also comply with federal, state, and international regulations which govern equipment weight and dimensions. FMCSA’s Compliance, Safety, Accountability (“CSA”) safety initiative monitors the safety performance of motor carriers.
Competition for the freight we transport or manage is based primarily on service, efficiency, available capacity and, to some degree, on freight rates alone. We believe that few other truckload carriers have greater financial resources, own more equipment or carry a larger volume of freight than us.
Competition for the freight we transport or manage is based primarily on service, efficiency, available capacity and, to some degree, on freight rates alone. We believe that few other truckload carriers have greater financial resources, own more 6 Table of Contents equipment or carry a larger volume of freight than us.
Revenues generated by Dollar General are reported in both of our reportable operating segments. The industry groups of our top 50 customers are 60% retail and consumer products, 17% manufacturing/industrial, 15% food and beverage and 8% logistics and other. Many of our One-Way Truckload customer contracts may be terminated upon 30 days’ notice, which is common in the truckload industry.
Revenues generated by Dollar General are reported in both of our reportable operating segments. The industry groups of our top 50 customers are 57% retail and consumer products, 20% food and beverage, 15% manufacturing/industrial, and 8% logistics and other. Many of our One-Way Truckload customer contracts may be terminated upon 30 days’ notice, which is common in the truckload industry.
One-Way Truckload had 3,150 trucks as of December 31, 2022 and includes the following operating fleets: (i) the medium-to-long-haul van (“Van”) fleet transports a variety of consumer nondurable products and other commodities in truckload quantities over irregular routes using dry van trailers, including Mexico cross-border routes; (ii) the expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams; (iii) the regional short-haul (“Regional”) fleet provides comparable truckload van service within geographic regions across the United States; and (iv) the Temperature Controlled fleet provides truckload services for temperature sensitive products over irregular routes utilizing temperature-controlled trailers.
One-Way Truckload had 2,735 trucks as of December 31, 2023 and includes the following operating fleets: (i) the medium-to-long-haul van (“Van”) fleet transports a variety of consumer nondurable products and other commodities in truckload quantities over irregular routes using dry van trailers, including Mexico cross-border routes; (ii) the expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams; (iii) the regional short-haul (“Regional”) fleet provides comparable truckload van service within geographic regions across the United States; and (iv) the Temperature Controlled fleet provides truckload services for temperature sensitive products over irregular routes utilizing temperature-controlled trailers.
Our 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.
Our efforts include offering competitive driver pay, maintaining a new truck and trailer fleet, purchasing best-in-class safety features for all new trucks, investing in our driver training school network and collaborating with customers to improve or eliminate unproductive freight.
These groups support our commitment to promoting and maintaining an inclusive culture for all associates by bringing together individuals from a wide range of backgrounds, experiences and perspectives.
These groups support our commitment to promoting and maintaining an inclusive culture for all associates by bringing together individuals from a wide range of backgrounds, experiences and 3 Table of Contents perspectives.
The ARGs seek to foster a sense of shared community and empowerment for associates and allies who share and 3 Table of Contents support a common social identity, such as gender, ethnicity and sexual orientation.
The ARGs seek to foster a sense of shared community and empowerment for associates and allies who share and support a common social identity, such as gender, ethnicity and sexual orientation.
Dedicated had 5,450 trucks as of December 31, 2022 and provides truckload services dedicated to a specific customer, generally for a retail distribution center or manufacturing facility, utilizing either dry van or specialized trailers.
Dedicated had 5,265 trucks as of December 31, 2023 and provides truckload services dedicated to a specific customer, generally for a retail distribution center or manufacturing facility, utilizing either dry van or specialized trailers.
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. 6 Table of Contents Competition The freight transportation industry is highly competitive and includes thousands of trucking and non-asset-based logistics companies. We have a small share of the markets we target.
Werner is dedicated to participating in the development of meaningful public policy by engaging in local, state, and federal legislative and regulatory actions that impact our operations. Competition The freight transportation industry is highly competitive and includes thousands of trucking and non-asset-based logistics companies. We have a small share of the markets we target.
On July 1, 2021, we acquired an 80% equity ownership interest in ECM Associated, LLC ("ECM”). ECM provides regional truckload carrier services in the Mid-Atlantic, Ohio and Northeast regions of the United States. Prior to the acquisition, ECM achieved revenues of $108 million in 2020. Revenues generated by ECM are reported in One-Way Truckload within our TTS segment.
Revenues generated by NEHDS are reported in Final Mile within our Werner Logistics segment. On July 1, 2021, we acquired an 80% equity ownership interest in ECM Associated, LLC ("ECM”). ECM provides regional truckload carrier services in the Mid-Atlantic, Ohio and Northeast regions of the United States. Prior to the acquisition, ECM achieved revenues of $108 million in 2020.
In 2022, our trucking business achieved its lowest work injury rate in 17 years and we achieved the lowest DOT preventable accident rate per million miles in 10 years. The Werner Safety Department is responsible for all compliance and training issues as it relates to drivers under DOT regulation and Werner policy.
In 2023, our trucking business achieved its lowest work injury rate on record, and we achieved our lowest DOT preventable accident rate per million miles in 19 years. The Werner Safety Department is responsible for all compliance and training issues as it relates to drivers under DOT regulation and Werner policy.
This equipment has fewer mechanical and maintenance issues and helps attract and retain experienced drivers. We continually develop our business processes and technology to improve customer service and driver retention.
To accomplish this, we operate premium modern tractors and trailers. This equipment has fewer mechanical and maintenance issues and helps attract and retain experienced drivers. We continually develop our business processes and technology to improve customer service and driver retention.
Freight brokerage and truckload revenues generated by ReedTMS are reported in our Werner Logistics segment and in Dedicated within our TTS segment, respectively. On October 1, 2022, we acquired 100% of the equity interests in FAB9, Inc., doing business as Baylor Trucking, Inc. (“Baylor”).
Freight brokerage and truckload revenues generated by ReedTMS are reported in our Werner Logistics segment and in Dedicated within our TTS segment, respectively. On October 1, 2022, we acquired 100% of the equity interests in FAB9, Inc., doing business as Baylor Trucking, Inc. (“Baylor”). Baylor, based in Milan, Indiana, operates in the east central and south central United States.
We have a diversified freight base but are dependent on a relatively small number of customers for a significant portion of our revenues. During 2022, our largest 5, 10, 25 and 50 customers comprised 35%, 46%, 63% and 77% of our revenues, respectively. Our largest customer, Dollar General, accounted for 14% of our total revenues in 2022.
We have a diversified freight base but are dependent on a relatively small number of customers for a significant portion of our revenues. During 2023, our largest 5, 10, 25 and 50 customers comprised 35%, 48%, 65% and 78% of our revenues, respectively. Our largest customer, Dollar General, accounted for 10% of our total revenues in 2023.
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 Infrastructure Investment and Jobs Act of 2021 required the FMCSA to establish a pilot program to allow persons ages 18, 19, and 20 to operate commercial motor vehicles in interstate commerce.
Human Capital Resources Employee Count: As of December 31, 2022, we employed 10,249 drivers; 693 mechanics and maintenance associates for the trucking operation; 1,610 office associates for the trucking operation; and 1,748 associates for Werner Logistics, international, driving schools and other non-trucking operations. Most of our associates are based in the U.S., with about 1% based in Mexico and Canada.
Human Capital Resources Employee Count: As of December 31, 2023, we employed 9,929 drivers; 707 mechanics and maintenance associates for the trucking operation; 1,587 office associates for the trucking operation; and 1,586 associates for Werner Logistics, international, driving schools and other non-trucking operations. Most of our associates are based in the U.S., with about 1% based in Mexico and Canada.
In 2022, TTS segment revenues accounted for 74% of total operating revenues, Werner Logistics revenues accounted for 24% of total operating revenues, and the remaining 2% was recorded in non-reportable segments.
In 2023, TTS segment revenues accounted for 70% of total operating revenues, Werner Logistics revenues accounted for 28% of total operating revenues, and the remaining 2% was recorded in non-reportable segments.
As of December 31, 2022, we had 295 independent contractors. Independent contractors supply their own tractors and drivers and are responsible for their operating expenses. Independent contractors also provide us with another source of drivers to support our fleet.
Independent Contractors: We also recognize that independent contractors complement our company-employed drivers. As of December 31, 2023, we had 260 independent contractors. Independent contractors supply their own tractors and drivers and are responsible for their operating expenses. Independent contractors also provide us with another source of drivers to support our fleet.
None of our U.S. or Canadian associates are represented by a collective bargaining unit, and we consider relations with our associates to be good. Health & Safety: Werner maintains a safety culture that is based on the premise of eliminating workplace incidents, risks and hazards.
Our U.S. or Canadian associates are not represented by a collective bargaining unit with the exception of fewer than 30 employees at two locations of a U.S. subsidiary. We generally consider relations with our associates to be good. Health & Safety: Werner maintains a safety culture that is based on the premise of eliminating workplace incidents, risks and hazards.
At the end of 2022, our Truckload Transportation Services (“TTS”) segment had a fleet of 8,600 trucks, of which 8,305 were company-operated and 295 were owned and operated by independent contractors. Our Werner Logistics division operated an additional 39 drayage company trucks and 101 company delivery trucks at the end of 2022.
At the end of 2023, our Truckload Transportation Services (“TTS”) segment had a fleet of 8,000 trucks, of which 7,740 were company-operated and 260 were owned and operated by independent contractors. Our Werner Logistics division operated an additional 35 drayage company trucks and 115 company delivery trucks at the end of 2023.
The minimum annual percentage rate for random alcohol testing remains at 10%. FMCSA issued its final rule for Entry-Level Driver Training (“ELDT”) in December 2016. However, after delays announced by FMCSA, the new effective date was February 7, 2022.
FMCSA issued its final rule for Entry-Level Driver Training (“ELDT”) in December 2016. However, after delays announced by FMCSA, the effective date was February 7, 2022.
Additional information regarding these acquisitions is included in Note 2 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K. Marketing and Operations Our business philosophy is to provide superior on-time customer service at a significant value for our customers. To accomplish this, we operate premium modern tractors and trailers.
Revenues generated by ECM are reported in One-Way Truckload within our TTS segment. Additional information regarding these acquisitions is included in Note 2 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K. Marketing and Operations Our business philosophy is to provide superior on-time customer service at a significant value for our customers.
Most of our professional drivers are compensated on a per-mile basis. For most company-employed drivers, the rate per mile generally increases with the drivers’ length of service.
Professional Driver Recruitment: We recognize that our professional driver workforce is one of our most valuable assets. Most of our professional drivers are compensated on a per-mile basis. For most company-employed drivers, the rate per mile generally increases with the drivers’ length of service.
Substantially all of our trailers have satellite tracking devices. Our wholly-owned subsidiary, Werner Fleet Sales, sells our used trucks and trailers. Werner Fleet Sales has been in business since 1992 and operates in seven locations. At times, we may also trade used trucks to original equipment manufacturers when purchasing new trucks.
Werner Fleet Sales has been in business since 1992 and operates in seven locations. At times, we may also trade used trucks to original equipment manufacturers when purchasing new trucks.
NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries. Prior to the acquisition, NEHDS achieved revenues of $71 million for the 12-month period ended September 30, 2021. Revenues generated by NEHDS are reported in Final Mile within our Werner Logistics segment.
NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest United States markets. NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries. Prior to the acquisition, NEHDS achieved revenues of $71 million for the 12-month period ended September 30, 2021.
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 rate was increased from 25% on January 1, 2020 in response to the 2018 FMCSA Drug and Alcohol Testing Survey, which reported an increase to 1.0% of the random testing positive rate for controlled substances. The minimum annual percentage rate for random alcohol testing remains at 10% for 2024.
The FAST Act also instructed FMCSA to study the accuracy of CSA and SMS data and issue a corrective action plan. Werner continues to monitor FMCSA’s actions and CSA related developments. Interstate motor carriers are subject to the FMCSA HOS regulations, which govern our drivers’ operating hours.
Werner continues to monitor FMCSA’s actions and CSA related developments. Interstate motor carriers are subject to the FMCSA HOS regulations, which govern our drivers’ operating hours.
We adhere to a comprehensive maintenance program for both company tractors and trailers. We inspect independent contractor tractors prior to acceptance for compliance with Werner and DOT operational and safety requirements. We periodically inspect these tractors, in a manner similar to company tractor inspections, to monitor continued compliance.
We inspect independent contractor tractors prior to acceptance for compliance with Werner and DOT operational and safety requirements. We periodically inspect these tractors, in a manner similar to company tractor inspections, to monitor continued compliance. We also regulate the vehicle speed of company trucks to improve safety and fuel efficiency.
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.
They continue to gain industry experience through our career track program by partnering with a Werner-certified leader prior to that driver becoming a solo driver with their own truck. At the end of 2023, we operated a total of 23 driver training locations to assist with the training and development of drivers for our company and the industry.
In December 2022, EPA adopted its first final rule, which sets stronger emissions standards to reduce air pollution, including pollutants that create ozone and particulate matter, from heavy-duty vehicles and engines starting in model year 2027. California’s ongoing emissions reduction goals have significantly impacted the industry.
In August 2021, EPA announced plans to reduce greenhouse gas emissions from Heavy-Duty Trucks through a series of rulemakings over the next three years. In December 2022, EPA adopted its first final rule, which sets stronger emissions standards to reduce air pollution, including pollutants that create ozone and particulate matter, from heavy-duty vehicles and engines starting in model year 2027.
The FMCSA’s Safe Driver Apprenticeship Pilot Program is currently accepting applications by motor carriers who are willing to participate in the pilot program, and FMCSA plans to limit the participation to 1,000 carriers and 3,000 apprentices. The U.S.
The FMCSA’s Safe Driver Apprenticeship Pilot Program is currently accepting applications by motor carriers who are willing to participate in the pilot program, and FMCSA plans to limit the participation to 1,000 carriers and 3,000 apprentices. EPA and DOT announced in August 2016 Phase 2 of the Greenhouse Gas and Fuel Efficiency Standards for Medium and Heavy-Duty Trucks.
Werner was awarded these designations for its commitment, effort and success in creating sustainable and meaningful career paths for the military community. We are widely recognized as a transportation leader in military hiring with veterans and veteran spouses. Professional Driver Recruitment: We recognize that our professional driver workforce is one of our most valuable assets.
Werner also earned No. 49 on the 2023 Military Times Best for Vets Employer list. Werner was awarded these designations for its commitment, effort, and success in creating sustainable and meaningful career paths for the military community. We are widely recognized as a transportation leader in military hiring with veterans and veteran spouses.
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.
We, along with others in the trucking industry, however, continue to experience independent contractor recruitment and retention difficulties that have persisted over the past several years. Challenging operating conditions, including inflationary cost increases that are the responsibility of independent contractors and the availability and cost of equipment financing, continue to make it difficult to recruit and retain independent contractors.
Our Werner Logistics segment operated an additional 39 drayage company tractors and 101 company delivery trucks at the end of 2022. The TTS segment company tractors were primarily manufactured by International (a Navistar company), Freightliner (a Daimler company), Kenworth and Peterbilt (both divisions of PACCAR). The Werner Final Mile company delivery trucks are primarily manufactured by Hino.
The TTS segment company tractors were primarily manufactured by International (a Navistar company), Freightliner (a Daimler company), Kenworth and Peterbilt (both divisions of PACCAR). The Werner Final Mile company delivery trucks are primarily manufactured by Hino, International, and Freightliner. We adhere to a comprehensive maintenance 4 Table of Contents program for both company tractors and trailers.
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 final rule requires a reduction of carbon emissions and fuel savings from engines, vehicles, and new trailers to be phased in over the next decade. In January 2020, EPA announced an Advance Notice of Proposed Rulemaking that would establish new standards for highway heavy-duty engines to lower nitrogen oxide emissions.
We do not believe that compliance with these regulations has a material effect on our capital expenditures, earnings, and competitive position.
These laws and regulations govern the management of hazardous wastes, discharge of pollutants into the air and surface and underground waters and disposal of certain substances. We do not believe that compliance with these regulations has a material effect on our capital expenditures, earnings, and competitive position.
Werner Logistics had over 70,000 qualified carrier logistics relationships as of December 31, 2022. 1 Table of Contents Business Acquisitions 2022 Acquisitions On November 5, 2022, we acquired 100% of the equity interests in Reed Transport Services, Inc. and RTS-TMS, Inc., doing business as ReedTMS Logistics (“ReedTMS”).
Prior to the sale of WGL, Werner Logistics provided international services throughout North America and Asia, with additional coverage throughout Australia, Europe, South America, and Africa. 1 Table of Contents Business Acquisitions 2022 Acquisitions On November 5, 2022, we acquired 100% of the equity interests in Reed Transport Services, Inc. and RTS-TMS, Inc., doing business as ReedTMS Logistics (“ReedTMS”).
We also regulate the vehicle speed of company trucks to improve safety and fuel efficiency. The average age of our TTS segment company truck fleet was 2.3 years at December 31, 2022, compared to 2.2 years at December 31, 2021.
The average age of our TTS segment company truck fleet was 2.1 years at December 31, 2023, compared to 2.3 years at December 31, 2022. The average age of our trailer fleet was 4.9 years at December 31, 2023, compared to 5.0 years at December 31, 2022.
Our operations are subject to applicable federal, state, and local environmental laws and regulations, many of which are implemented by the EPA and similar state regulatory agencies. These laws and regulations govern the management of hazardous wastes, discharge of pollutants into the air and surface and underground waters and disposal of certain substances.
Approximately 5% of our truck miles in 2023 were in the state of California. Our operations are subject to applicable federal, state, and local environmental laws and regulations, many of which are implemented by the EPA and similar state regulatory agencies.
Revenues generated by Baylor are reported in One-Way Truckload within our TTS segment. 2021 Acquisitions On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”). NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest United States markets.
Prior to the acquisition, Baylor achieved revenues of $81.5 million for the 12-month period ended August 31, 2022. Revenues generated by Baylor are reported in One-Way Truckload within our TTS segment. 2021 Acquisitions On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”).
At Werner, our female driver workforce is double the industry average, and over half of our driver associates are ethnically diverse. Additionally, over half of our non-driver associates and our corporate board of directors are female or ethnically diverse.
We were recognized by 50/50 Women on Boards TM as a “3+” company for having three or more women on our corporate board of directors in 2022. At Werner, our female driver workforce is double the national industry average, and over 60% of our driver associates are ethnically diverse.
During 2022, we created an advancement and retention plan, under which new programs are being implemented to increase and elevate women and diverse talent in the management pipeline. In 2022, Werner, as well as our recently acquired business, ReedTMS, were both recognized among the Top Companies for Women to Work for in Transportation by the Women in Trucking Association.
In 2023, Werner, as well as our recently acquired business, ReedTMS, were both recognized among the Top Companies for Women to Work for in Transportation by the Women in Trucking Association. This was Werner’s sixth consecutive year of being recognized.
The California Air Resources Board regulations not only apply to California intrastate carriers, but also to carriers outside of California who own or dispatch equipment in the state. Werner continues to structure our fleet plans to operate compliant equipment in California. Approximately 4% of our truck miles in 2022 were in the state of California.
The California Air Resources Board (“CARB”) regulations apply to both in-state California carriers and carriers outside of California who own or dispatch equipment in the state.
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.
We currently maintain a late-model truck fleet to take advantage of the latest technologies to reduce fuel consumption and emissions. Our future environmental goals include doubling intermodal usage by 2030, thereby further reducing emissions, and by 2035, reducing greenhouse gas emissions by 55% compared to a 2020 baseline.
Regulations As a for-hire motor carrier, we are regulated by the DOT, and certain areas of our business are subject to applicable federal, state, and international laws and regulations.
Regulations As a for-hire motor carrier, Werner is subject to federal, state, local, and international laws and regulations and is regulated by various federal, state, and local agencies including DOT, Federal Motor Carrier Safety Administration (“FMCSA”), U.S. Department of Homeland Security, the U.S. Environmental Protection Agency (“EPA”), among others.
In 2022, Werner was honored to be recognized as No. 1 on the Top 10 Company Military Friendly® Spouse Employer list and No. 4 on the Top 10 Military Friendly® Employer list by VIQTORY. These serve as Werner’s highest rankings ever received in these categories.
Additionally, over half of our non-driver associates and our corporate board of directors are female or ethnically diverse. In 2023, Werner was honored to be recognized as No. 3 on the Top 10 Military Friendly® Spouse Employer list and No. 5 on the Top 10 Military Friendly® Employer list by VIQTORY.
This was Werner’s fifth consecutive year of being recognized. Werner was recognized for our support of gender diversity, flexible hours and work requirements, competitive compensation and benefits, and professional development and career advancement opportunities. We were also recognized by 50/50 Women on Boards TM as a “3+” company for having three or more women on our corporate board of directors.
Werner was recognized for our support of gender diversity, flexible hours and work requirements, competitive compensation and benefits, and professional development and career advancement opportunities. In 2023, Newsweek named Werner as one of America’s Greatest Workplaces for Diversity, America’s Greatest Workplaces, and America’s Greatest Workplaces for Parents and Families.
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.
In August 2020, FMCSA proposed a pilot program allowing commercial drivers to pause their 14-hour driving window, which Werner continues to monitor. Continuing in 2023, motor carriers are required to perform annual random drug tests for 50% of existing drivers.
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, including testing of alternative fuels and investing in start-stop idle reduction technology for our trucks. We currently maintain a late-model truck fleet to take advantage of latest technologies to reduce fuel consumption and emissions.
We are committed to supporting global efforts to reduce carbon emissions and we continue to update our fleet of tractors to provide energy-efficient transportation options for our customers, including investing in and testing alternative fuels, advanced equipment technologies, and additional fleet enhancements.
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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.
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Revenue Equipment As of December 31, 2023, we operated 7,740 company tractors and 260 tractors owned by independent contractors in our TTS segment. Our Werner Logistics segment operated an additional 35 drayage company tractors and 115 company delivery trucks at the end of 2023.
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Baylor, based in Milan, Indiana, operates 200 trucks and 980 trailers in the east central and south central United States. Prior to the acquisition, Baylor achieved revenues of $81.5 million for the 12-month period ended August 31, 2022.
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Nearly all of our dry van trailer fleet consisted of 53-foot composite trailers, and we also provide other trailer lengths to meet the specialized needs of certain customers. Substantially all of our trailers have satellite tracking devices. Our wholly-owned subsidiary, Werner Fleet Sales, sells our used trucks and trailers.
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As mentioned above, the recruiting environment for recent driver training school graduates became even more challenging in 2021 as social distancing requirements, state licensing cut backs and temporary closures limited the number of placement drivers entering our career track program.
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The FAST Act also instructed FMCSA to study 5 Table of Contents the accuracy of CSA and SMS data and issue a corrective action plan. The FMCSA provided a report to Congress in 2020 outlining the changes it may make to the CSA program; however, it remains unclear if, when, and to what extent any such changes will occur.
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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.
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In April 2023, EPA announced a proposed rule, Greenhouse Gas Emission Standards for Heavy-Duty Vehicles - Phase 3, which would phase in stronger greenhouse gas emissions standards and zero-emission vehicle requirements for heavy-duty trucks for model years 2028-2032. Werner continues monitoring any EPA-related developments impacting its fleet. California’s ongoing emissions reduction goals have significantly impacted the industry.
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At the end of 2022, we operated a total of 23 driver training locations to assist with the training and development of drivers for our company and the industry, and we expect to open one new driver training location during the first half of 2023. Independent Contractors: We also recognize that independent contractors complement our company-employed drivers.
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Werner is impacted by various CARB regulations including the Truck and Bus Regulation, Clean Truck Check (heavy-duty inspection and maintenance), Advanced Clean Trucks, Advanced Clean Fleets, Temperature Refrigeration Units, among other currently effective and forthcoming regulations. Werner continues to structure our fleet plans to operate compliant equipment in California.
Removed
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. 4 Table of Contents Revenue Equipment As of December 31, 2022, we operated 8,305 company tractors and 295 tractors owned by independent contractors in our TTS segment.
Removed
The average age of our trailer fleet was 5.0 years at December 31, 2022, compared to 4.5 years at December 31, 2021. 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.
Removed
FMCSA’s ELD Final Rule went into effect in December 2017, requiring all motor carriers to have certified ELDs that meet specific standards for documenting HOS. The FMCSA Commercial Driver’s License Drug and Alcohol Clearinghouse (the “Clearinghouse”) Final Rule was published in December 2016 with the effective date of January 6, 2020.
Removed
The Clearinghouse requires motor carriers, designated service agents, medical review officers, and substance abuse professionals to submit records related to drug and alcohol tests, including test refusals and positive drug test results, to the nationwide database. Motor carriers are also required to query the database prior to hiring an applicant and on an annual basis.
Removed
Environmental Protection Agency (“EPA”) and DOT announced in August 2016 Phase 2 of the Greenhouse Gas and Fuel Efficiency Standards for Medium and Heavy-Duty Trucks. The final rule requires a reduction of carbon emissions and fuel savings from engines, vehicles, and new trailers to be phased in over the next decade.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMuch of our software was developed internally or by adapting purchased software applications to suit our needs. Our information systems are used for planning loads, communicating with and dispatching drivers and other capacity providers, billing customers, paying vendors and providing financial reports. We rely on strategic vendors for GPS and satellite communication services, which are integrated in our information systems.
Biggest changeWe rely increasingly on cloud-based technology and depend on the stability, availability and security of our information systems to manage our business. Much of our software was developed internally or by adapting purchased software applications to suit our needs.
To the extent that we cannot recover the higher cost of fuel through customer fuel surcharges, our financial results would be negatively impacted. As of December 31, 2022, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. We operate in a highly competitive industry, which may limit growth opportunities and reduce profitability.
To the extent that we cannot recover the higher cost of fuel through customer fuel surcharges, our financial results would be negatively impacted. As of December 31, 2023, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. We operate in a highly competitive industry, which may limit growth opportunities and reduce profitability.
If such a shortage were to occur and additional driver pay rate increases were necessary to attract and retain drivers, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases. Additionally, a shortage of drivers could result in idled equipment, which would affect our profitability and would limit growth opportunities.
If such a shortage were to occur and driver pay rate increases became necessary to attract and retain drivers, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases. Additionally, a shortage of drivers could result in idled equipment, which would affect our profitability and would limit growth opportunities.
This is supplemented by premium-based insurance coverage with insurance carriers above our self-insurance level for each type of coverage.
This is supplemented by premium-based insurance coverage with insurance carriers above our self-insurance level for each such type of coverage.
Various legislative or regulatory proposals have been introduced at the federal and state levels that may affect the classification status of individuals as independent contractors or employees for either employment tax 7 Table of Contents purposes (e.g., withholding, social security, Medicare and unemployment taxes) or other benefits available to employees (e.g., workers’ compensation benefits and minimum wage).
Various legislative or regulatory proposals have been introduced at the federal and state levels that may affect the classification status of individuals as independent contractors or employees for either employment tax purposes (e.g., withholding, social security, Medicare and unemployment taxes) or other benefits available to employees (e.g., workers’ compensation benefits and minimum wage).
Independent contractor availability may also be affected by both inflationary cost increases that are the responsibility of independent contractors and the availability of equipment financing. On-going federal and state legislative challenges to the independent contractor model could also affect independent contractor availability.
Independent contractor availability may also be affected by both inflationary cost increases that are the responsibility of independent contractors and the availability and cost of equipment financing. Ongoing federal and state legislative challenges to the independent contractor model could also affect independent contractor availability.
Risks Related to our Business and Industry Our business is subject to overall economic conditions that could have a material adverse effect on our results of operations. We are sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand, and industry truck capacity.
Risks Related to our Business and Industry Our business is subject to overall economic and geopolitical conditions that could have a material adverse effect on our results of operations and financial condition. We are sensitive to changes in economic or geopolitical conditions that impact customer shipping volumes, industry freight demand, and industry truck capacity.
Healthcare legislation and inflationary cost increases could also have a negative effect on our results. Decreased demand for our used revenue equipment could result in lower unit sales and resale values. We are sensitive to changes in used equipment prices and demand, especially with respect to tractors.
Healthcare legislation and inflationary cost increases could also have a negative effect on our results. Decreased demand for our used revenue equipment could result in lower unit sales and resale values. We are sensitive to changes in used equipment prices and demand for our tractors and trailers.
Although we believe we have an experienced and highly qualified management team, the loss of the services of these key personnel could have a significant adverse impact on us and our future profitability. Difficulty in obtaining materials, equipment, goods, and services from our vendors and suppliers could adversely affect our business. We are dependent on our vendors and suppliers.
Although we believe we have an experienced and highly qualified management team, the loss of the services of these key personnel could have a significant adverse impact on us and our future profitability. Difficulty in obtaining, or increased costs of, materials, equipment, goods, and services from our vendors and suppliers could adversely affect our business.
We believe we have good vendor relationships and that we are generally able to obtain favorable pricing and other terms from vendors and suppliers.
We are dependent on our vendors and suppliers. We believe we have good vendor relationships and that we are generally able to obtain favorable pricing and other terms from vendors and suppliers.
Additional risks associated with our foreign operations, including restrictive trade policies and imposition of duties, taxes, or government royalties by foreign governments, are present but have been largely mitigated by the terms of USMCA for Mexico and Canada.
Additional risks associated with our foreign operations, including restrictive trade policies and imposition of duties, taxes, or government royalties by foreign governments, are present but have been largely mitigated by the terms of the United States-Mexico-Canada Agreement (“USMCA”) for Mexico and Canada.
Continued shortages of these component parts and supplies could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense, mileage productivity, and driver retention.
Shortages of equipment, component parts, and other supplies could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense, mileage productivity, and driver retention.
We have been in the business of selling our company-owned trucks since 1992, when we formed our wholly-owned subsidiary Werner Fleet Sales. Reduced demand for used equipment could result in a lower volume of sales or lower sales prices, either of which could negatively affect our proceeds from sales of assets.
We have been in the business of selling our used company-owned equipment since 1992, when we formed our wholly-owned subsidiary Werner Fleet Sales. Reduced demand for used equipment could result in a lower volume of sales or lower sales prices, either of which could negatively affect our proceeds from sales of assets. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
To the extent we experience a significant increase in the number of claims, cost per claim (including costs resulting from large verdicts) or insurance premium costs for coverage in excess of our retention and deductible amounts, our operating results would be negatively affected.
To the extent we experience a significant increase in the number of claims, cost per claim (including costs resulting from large verdicts) or insurance premium costs for coverage in excess of our retention and deductible amounts, or if we incur a significant liability for which we do not have coverage, our operating results would be negatively affected.
If our ESG initiatives and goals do not meet the expectations of our investors or other stakeholders, which continue to evolve, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment and business partner could be negatively impacted.
Additionally, the implementation of these initiatives imposes additional costs on us. If our ESG initiatives and goals do not meet the expectations of our investors or other stakeholders, which continue to evolve, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment or business partner could be negatively impacted.
These economic conditions may have an adverse effect on the availability and cost of third-party capacity. If we are unable to secure the services of these third-party capacity providers at reasonable rates, our results of operations could be adversely affected. If we cannot effectively manage the challenges associated with doing business internationally, our revenues and profitability may suffer.
If we are unable to secure the services of these third-party capacity providers at reasonable rates, our results of operations could be adversely affected. If we cannot effectively manage the challenges associated with doing business internationally, our revenues and profitability may suffer.
At times, the trucking industry has experienced driver shortages. Driver availability may be affected by changing workforce demographics, alternative employment opportunities, national unemployment rates, freight market conditions, availability of financial aid for driver training schools and changing industry regulations.
Driver availability may be affected by changing workforce demographics, alternative employment opportunities, national unemployment rates, freight market conditions, availability of financial aid for driver training schools and changing industry regulations.
The agreement permitting cross border movements for both United States and Mexican based carriers into the United States and Mexico presents additional risks in the form of potential increased competition and the potential for increased congestion on the cross border lanes between countries.
There are risks, sometimes unforeseen, associated with international operations. The agreement permitting cross border movements for both United States and Mexican based carriers into the United States and Mexico presents additional risks in the form of potential increased competition and the potential for increased congestion on the cross-border lanes between countries.
We typically renegotiate rates with our customers for these Dedicated contracts annually. We cannot provide any assurance that key customer relationships will continue at the same levels. If a key customer substantially reduced or terminated our services, it could have a material adverse effect on our business and results of operations.
We cannot provide any assurance that key customer relationships will continue at the same levels. If a key customer substantially reduced or terminated our services, it could have a material adverse effect on our business and results of operations.
The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be difficult to detect for a long time and often are not recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures.
The 9 Table of Contents techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently, may be difficult to detect, and often are not recognized until launched against a target, and we may be unable or fail to anticipate them or to implement adequate preventative measures.
Tractor and trailer manufacturers have experienced significant shortages of semiconductor chips and other component parts and supplies, forcing many manufacturers to reduce or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles.
At times, tractor and trailer manufacturers have experienced significant shortages of semiconductor chips and other component parts and supplies, forcing many manufacturers to reduce or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened replacement cycles. Emissions and fuel efficiency regulations may impact equipment availability and pricing.
Our ability to successfully execute these initiatives and accurately report our progress presents numerous operational, financial, legal, reputational and other risks, many of which are outside our control, and all of which could have a material negative impact on our business. Additionally, the implementation of these initiatives imposes additional costs on us.
We have developed certain initiatives and goals relating to ESG matters. Our ability to successfully execute these initiatives and accurately report our progress presents numerous operational, financial, legal, reputational and other risks, many of which are outside our control, and all of which could have a material negative impact on our business.
The United States, Canada and Mexico ratified the USMCA as an overhaul and update to NAFTA, and it became effective in July 2020. We believe Werner is one of the largest U.S. based truckload carriers in terms of freight volume shipped to and from the United States and Mexico. There are risks, sometimes unforeseen, associated with international operations.
The United States, Canada and Mexico ratified the USMCA as an overhaul and update to the North America Free Trade Agreement, and it became effective in July 2020. We believe Werner is one of the largest U.S. based truckload carriers in terms of freight volume shipped to and from the United States and Mexico.
We review our customers’ financial conditions for granting credit, monitor changes in customers’ financial conditions on an ongoing basis and review individual past-due balances and collection concerns.
We review our customers’ financial conditions for granting credit, monitor changes in customers’ financial conditions on an ongoing basis and review individual past-due balances and collection concerns. However, a key customer’s financial failure may negatively affect our results of operations.
We do not have long-term contractual relationships with many of our key One-Way Truckload customers. Most of our Dedicated customer contracts are two to five years in length and generally may be terminated by either party typically upon a notice period following the expiration of the contract’s first year.
Most of our Dedicated customer contracts are two to five years in length and generally may be terminated by either party typically upon a notice period following the expiration of the contract’s first year. We typically renegotiate rates with our customers for these Dedicated contracts annually.
The unpredictable nature and uncertainty of a public health crisis could also magnify other risk factors disclosed above and makes it impractical to identify all potential risks. Risks Related to Laws and Regulations We operate in a highly regulated industry. Changes in existing regulations or violations of existing or future regulations could adversely affect our operations and profitability.
The unpredictable nature and uncertainty of a public health crisis could also magnify other risk factors disclosed above and makes it impractical to identify all potential risks. Risks Related to Legal, Regulatory and Environmental, Social and Governance (“ESG”) Matters We operate in a highly regulated industry.
Economic conditions may also impact the financial condition of our customers, resulting in a greater risk of bad debt losses, and that of our suppliers, which may affect negotiated pricing or availability of needed goods and services. Difficulty in recruiting and retaining experienced drivers, recent driver training school graduates and independent contractors impacts our results of operations.
Economic or geopolitical conditions may also impact the financial condition of our customers, resulting in a decreased demand for services or a greater risk of bad debt losses, and that of our suppliers, which may affect negotiated pricing or availability of needed goods and services.
We operate in industrial areas, where truck terminals and other industrial activities are located and where groundwater or other forms of environmental contamination have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. We also maintain bulk fuel storage at some of our facilities.
Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous waste disposal, among others. We also maintain bulk fuel storage at some of our facilities.
Increasing scrutiny from investors and other stakeholders regarding environmental, social, and governance (“ESG”) related matters may have a negative impact on our business. Companies across all industries are facing increasing scrutiny from investors and other stakeholders related to ESG matters, including practices and disclosures related to environmental stewardship, social responsibility, and diversity, equity and inclusion.
Companies across all industries are facing increasing scrutiny from investors and other stakeholders related to ESG matters, including practices and disclosures related to environmental stewardship, social responsibility, and diversity, equity and inclusion. Organizations that provide information to investors and other stakeholders on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.
In the trucking industry, revenues generally follow a seasonal pattern which may affect our results of operations. After the December holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels.
After the December holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels.
Risks Related to Financial Matters Our earnings could be reduced by increases in the number of insurance claims, cost per claim, costs of insurance premiums or availability of insurance coverage. We are self-insured for a significant portion of liability resulting from bodily injury, property damage, cargo and associate workers’ compensation and health benefit claims.
Risks Related to Financial Matters Our earnings could be reduced by increases in the number of insurance claims, cost per claim, costs of insurance premiums, availability of insurance coverage, or a significant uninsured liability.
The Regulations subsection in Item 1 of Part I of this Form 10-K describes several proposed and pending regulations that may have a significant effect on our operations including our productivity, driver recruitment and retention and capital expenditures. Our operations are subject to applicable environmental laws and regulations, the violation of which could result in substantial fines or penalties.
The Regulations subsection in Item 1 of Part I of this Form 10-K describes several proposed and final regulations that may have a significant effect on our operations including our productivity, driver recruitment and retention, and capital expenditures for tractors, trailers, and other equipment necessary to comply with such regulations.
Our Werner Logistics segment is highly dependent on the services of third-party capacity providers, such as other truckload carriers, less-than-truckload carriers, final-mile delivery contractors, and railroads. Many of those providers face the same economic challenges as we do and therefore are actively and competitively soliciting business.
We depend on the services of third-party capacity providers, the availability of which could affect our profitability and limit growth in our Werner Logistics segment. Our Werner Logistics segment is highly dependent on the services of third-party capacity providers, such as other truckload carriers, less-than-truckload carriers, final-mile delivery contractors, and railroads.
If a shortage of independent contractors occurs, additional increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract and retain a sufficient number of drivers. These increases would negatively affect our results of operations to the extent that we would be unable to obtain corresponding freight rate increases.
If a shortage of independent contractors occurs, increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become 7 Table of Contents necessary to attract and retain a sufficient number of drivers.
We use our information systems extensively for day-to-day operations, and service interruptions or a failure of our information technology infrastructure or a breach of our information security systems, networks or processes could have a material adverse effect on our business. We depend on the stability, availability and security of our information systems to manage our business.
We use our information systems extensively for day-to-day operations, and disruption or failure of our technology infrastructure or of third-party systems or services integrated therein, or a breach of our systems, networks or processes, or those of any vendor that maintains or accesses our data, could have a material adverse effect on our business.
A significant portion of our revenue is generated from key customers. During 2022, our largest 5, 10, 25 and 50 customers accounted for 35%, 46%, 63%, and 77% of revenues, respectively. Our largest customer, Dollar General, accounted for 14% of the our total revenues in 2022.
A significant portion of our revenue is generated from key customers. During 2023, our largest 5, 10, 25 and 50 customers accounted for 35%, 48%, 65%, and 78% of revenues, respectively. Our largest customer, Dollar General, accounted for 10% of our total revenues in 2023. We do not have long-term contractual relationships with many of our key One-Way Truckload customers.
We also maintain information security policies to protect our systems and data from cyber security events and threats. The security risks associated with information technology systems have increased in recent years because of the increased sophistication, activities and evolving techniques of perpetrators of cyber attacks.
However, the security risks associated with information technology systems have increased in recent years because of the evolving sophistication, activities and methods of cyber attackers.
In addition, recently, there has also been heightened regulatory and enforcement focus on data protection in the U.S., and failure to comply with applicable U.S. data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties, which could harm our reputation and adversely impact our business, results of operations and financial condition.
Failure to comply with applicable U.S. and international privacy or data protection regulations or other data protection standards, on which there is heightened focus, may expose us to litigation, fines, sanctions, or other penalties.
Unfavorable ESG ratings may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and costs of capital. 10 Table of Contents We have developed certain initiatives and goals relating to ESG matters.
Such ratings are used by some investors to inform their investment and proxy statement voting decisions. Unfavorable ESG ratings may lead to negative 10 Table of Contents sentiment toward us by investors or other stakeholders, which could have a negative impact on our revenues, stock price and access to and costs of capital.
This competition could have an adverse effect on either the number of shipments we transport or the freight rates we receive, which could limit our growth opportunities and reduce our profitability. The seasonal pattern generally experienced in the trucking industry may affect our periodic results during traditionally slower shipping periods and winter months.
This competition could have an adverse effect on either the number of shipments we transport or the freight rates we receive, which could limit our growth opportunities and reduce our profitability. If we do not invest in and develop technology in a manner that meets market demands, we may be placed at a competitive disadvantage.
Recently, certain states (most prominently, California) have seen significant increased activity by tax and other regulators and numerous class action lawsuits filed against transportation companies that engage independent contractors.
Recently, certain states have seen significant increased activity by tax and other regulators regarding worker classification, and class action lawsuits alleging misclassification by transportation companies have resulted in significant damage awards or monetary settlements.
We are regulated by DOT and its agency, FMCSA, in the United States and similar governmental transportation agencies in foreign countries in which we operate. We are also regulated by agencies in certain U.S. states. These regulatory agencies have the authority to govern transportation-related activities, such as safety, authorization to conduct motor carrier operations and other matters.
Compliance with changing transportation, emission, fuel efficiency or other regulations, or violations of existing or future regulations, could adversely affect our operations and profitability. We are regulated by DOT and its agency, FMCSA, in the United States and similar governmental transportation agencies in certain U.S. states and in foreign countries in which we operate.
In addition to direct regulation by DOT, FMCSA, EPA and other federal, state, and local agencies, we are subject to applicable environmental laws and regulations dealing with the handling of hazardous materials, aboveground and underground fuel storage tanks, discharge and retention of storm-water, and emissions from our vehicles.
We are subject to environmental laws and regulations dealing with the handling of hazardous materials, aboveground and underground fuel storage tanks, and discharge and retention of stormwater. We operate in industrial areas, where truck terminals and other industrial activities are located and where groundwater or other forms of environmental contamination have occurred.
If we fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability. Tractors and trailers used in our daily operations have been affected by regulatory changes related to air emissions and fuel efficiency, and may be adversely affected in the future by new regulatory actions.
If we fail to comply with applicable regulations, we could be subject to substantial fines or penalties and to civil and criminal liability. Increasing scrutiny from investors and other stakeholders regarding ESG related matters may have a negative impact on our business.
Removed
Moreover, class action litigation in this area against other transportation companies has resulted in significant damage awards and/or monetary settlements for workers who have been allegedly misclassified as independent contractors. Increases in fuel prices and shortages of fuel can have a material adverse effect on the results of operations and profitability.
Added
Labor and employment matters, including difficulty in recruiting and retaining experienced drivers, recent driver training school graduates and independent contractors, could impact our results of operations and financial condition. At times, the trucking industry has experienced driver shortages.
Removed
However, a key customer’s financial failure may negatively affect our results of operations. 8 Table of Contents We depend on the services of third-party capacity providers, the availability of which could affect our profitability and limit growth in our Werner Logistics segment.
Added
These increases would negatively affect our results of operations to the extent that we would be unable to obtain corresponding freight rate increases. During 2023, union organizing efforts occurred at two locations of a U.S. subsidiary, which resulted in fewer than 30 of our employees being represented by a union.
Removed
If any of our critical information systems fail or become unavailable, or those of our service providers, we would have to perform certain functions manually, which could temporarily affect our ability to efficiently manage our operations. We have redundant computer hardware systems to reduce this risk.
Added
Additional unionization, if broad-based, could have a material adverse effect on our costs, efficiency, and profitability. Driver or other employee dissatisfaction and regulations that govern organization procedures could impact our ability to effectively or timely address any organization efforts. Increases in fuel prices and shortages of fuel can have a material adverse effect on the results of operations and profitability.
Removed
A failure in or breach of our information technology security systems, or those of our third- 9 Table of Contents party service providers, as a result of cyber attacks or unauthorized network access could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, increase our costs and/or cause losses and reputational damage.
Added
The seasonal shipping pattern generally experienced in the trucking industry may affect our periodic results during traditional slower shipping periods and winter months. In the trucking industry, revenues generally follow a seasonal pattern which may affect our results of operations.
Removed
Organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions.
Added
Many of those providers face the same economic challenges as we do and therefore are actively and competitively soliciting business. These economic conditions may 8 Table of Contents have an adverse effect on the availability and cost of third-party capacity.
Added
Our information systems are used for various purposes including, without limitation, enhancing customer service, planning freight loads, communicating with and dispatching drivers and other capacity providers, billing and collecting from customers, paying vendors and associates, maintaining sensitive or confidential Company or third-party information or employee personal information, and generating financial, operational, and other information.
Added
We rely on strategic vendors for certain services that impact our systems and communications, such as, for example, integrated GPS and satellite communication services and Internet and telecommunications services.
Added
System disruption or unavailability could occur due to various events, including, without limitation, a power outage, a hardware or software failure, a cybersecurity threat or breach, a catastrophic occurrence, or the disruption of a vendor’s service to us.
Added
If any of our information systems, or those of our providers, become compromised or unavailable, or are taken offline in response to a threat or other event, certain critical functions may be disrupted, subject to manual performance, or fail.
Added
Our mitigation of these risks includes, without limitation, using certain redundant computer hardware, tools and protocols to monitor and respond to threats, the work of a dedicated internal cybersecurity team, incident and crisis response plans, and enterprise-wide information security policies and trainings.
Added
We may incur costs in responding to a specific event. Fortifying our systems after a cybersecurity event may be cost prohibitive. Our investments in cybersecurity may not be successful against an attack or malicious action.
Added
The risks described herein could create reputational harm or financial liability; disrupt our business and/or impact our customers; result in the loss, disclosure or misuse of operational, confidential or proprietary information; or increase our costs, any of which could harm our reputation and adversely impact our business, results of operations, and financial condition.
Added
These regulatory agencies have the authority to govern transportation-related activities, such as safety, authorization to conduct motor carrier operations and other matters. The EPA and CARB subject us to emissions and fuel efficiency regulations, and additional regulations by these and other agencies may occur.
Added
We are subject to claims and litigation risks regarding a variety of issues, including without limitation, over-the-road accidents and contractual, labor and employment, environmental, regulatory, workers’ compensation, and data privacy matters. We are self-insured for a significant portion of liability resulting from bodily injury, property damage, cargo and associate workers’ compensation and health benefit claims.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed2 unchanged
Biggest changeOur terminal locations are described below: Location Owned or Leased Description Segment Omaha, Nebraska Owned Corporate headquarters, maintenance, truck sales TTS, Werner Logistics, Corporate Omaha, Nebraska Owned Disaster recovery, warehouse Corporate Phoenix, Arizona Owned Office, maintenance TTS West Memphis, Arkansas Owned Office, maintenance TTS Fontana, California Owned Office, maintenance, truck sales, driver training school TTS Denver, Colorado Owned Maintenance TTS Lake City, Florida Owned Office, maintenance TTS Lakeland, Florida Leased Maintenance TTS Atlanta, Georgia Owned Office, maintenance, truck sales TTS Joliet, Illinois Owned Office, maintenance, truck sales TTS Milan, Indiana Owned Office, maintenance, warehouse TTS Brownstown, Michigan Owned Maintenance TTS Springfield, Ohio Owned Office, maintenance TTS Easton, Pennsylvania Owned Office, maintenance TTS Portland, Tennessee Leased Office, maintenance TTS Dallas, Texas Owned Office, maintenance, truck sales, driver training school TTS El Paso, Texas Owned Office, maintenance TTS Laredo, Texas Owned Office, maintenance, transloading, truck sales TTS, Werner Logistics At December 31, 2022, we leased (i) operational facilities, office space, and trailer parking yards in various locations throughout the United States and (ii) office space in Mexico and Canada.
Biggest changeOur terminal locations are described below: Location Owned or Leased Description Segment Omaha, Nebraska Owned Corporate headquarters, maintenance, truck sales TTS, Werner Logistics, Corporate Omaha, Nebraska Owned Disaster recovery, warehouse Corporate Phoenix, Arizona Owned Office, maintenance, driver training school TTS West Memphis, Arkansas Owned Office, maintenance TTS Fontana, California Owned Office, maintenance, truck sales, driver training school TTS Denver, Colorado Owned Maintenance TTS Lake City, Florida Owned Office, maintenance TTS Lakeland, Florida Leased Maintenance TTS Atlanta, Georgia Owned Office, maintenance, truck sales, driver training school TTS Joliet, Illinois Owned Office, maintenance, truck sales TTS Milan, Indiana Owned Office, maintenance, warehouse TTS Brownstown, Michigan Owned Maintenance TTS Springfield, Ohio Owned Office, maintenance, truck sales TTS Easton, Pennsylvania Owned Office, maintenance TTS Portland, Tennessee Leased Office, maintenance TTS Dallas, Texas Owned Office, maintenance, truck sales, driver training school TTS El Paso, Texas Owned Office, maintenance TTS Laredo, Texas Owned Office, maintenance, transloading, truck sales TTS, Werner Logistics At December 31, 2023, we leased (i) operational facilities, office space, and trailer parking yards in various locations throughout the United States and (ii) office space in Mexico and Canada.
ITEM 2. PROPERTIES Our headquarters are located on approximately 133 acres near U.S. Interstate 80 west of Omaha, Nebraska, 53 acres of which are undeveloped. Our headquarter facilities have suitable space available to accommodate planned needs for at least the next three to five years. We also have several terminals throughout the United States, consisting of office and/or maintenance facilities.
ITEM 2. PROPERTIES Our headquarters are located on approximately 147 acres near U.S. Interstate 80 west of Omaha, Nebraska, 63 acres of which are undeveloped. Our headquarter facilities have suitable space available to accommodate planned needs for at least the next three to five years. We also have several terminals throughout the United States, consisting of office and/or maintenance facilities.
The Werner Fleet Sales network has seven locations, which are primarily located in certain terminals listed above. Our driver training schools operate in 23 locations in the United States, two of which are located in certain terminals listed above, seven are located in company-owned facilities, and 14 are located in leased facilities. 12 Table of Contents
The Werner Fleet Sales network has seven locations, which are primarily located in certain terminals listed above. Our driver training schools operate in 23 locations in the United States, four of which are located in or near certain terminals listed above, five are located in company-owned facilities, and 14 are located in leased facilities. 13 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest change(WERN) $ 100 $ 77 $ 108 $ 118 $ 145 $ 124 Standard & Poor’s 500 $ 100 $ 96 $ 126 $ 149 $ 192 $ 157 2022 Peer Group $ 100 $ 80 $ 107 $ 142 $ 231 $ 189 Assuming the investment of $100 on December 31, 2017, and reinvestment of all dividends, the graph above compares the cumulative total stockholder return on our common stock for the last five fiscal years with the cumulative total return of Standard & Poor’s 500 Market Index and our Peer Group over the same period.
Biggest change(WERN) $ 100 $ 140 $ 153 $ 187 $ 160 $ 171 Standard & Poor’s 500 $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 2022 Peer Group $ 100 $ 134 $ 176 $ 285 $ 235 $ 307 2023 Peer Group $ 100 $ 134 $ 176 $ 285 $ 234 $ 307 Assuming the investment of $100 on December 31, 2018, and reinvestment of all dividends, the graph above compares the cumulative total stockholder return on our common stock for the last five fiscal years with the cumulative total return of Standard & Poor’s 500 Market Index and our Peer Groups over the same period.
Dividend Policy We have paid cash dividends on our common stock following each fiscal quarter since the first payment in July 1987. Our current quarterly dividend rate is $0.13 per common share. We currently intend to continue paying a regular quarterly dividend. We do not currently anticipate any restrictions on our future ability to pay such dividends.
Dividend Policy We have paid cash dividends on our common stock following each fiscal quarter since the first payment in July 1987. Our current quarterly dividend rate is $0.14 per common share. We currently intend to continue paying a regular quarterly dividend. We do not currently anticipate any restrictions on our future ability to pay such dividends.
Equity Compensation Plan Information For information on our equity compensation plans, please refer to Item 12 of Part III of this Form 10-K. 13 Table of Contents Performance Graph Comparison of Five-Year Cumulative Total Return The following graph is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933 or the Exchange Act except to the extent we specifically request that such information be incorporated by reference or treated as soliciting material. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Werner Enterprises, Inc.
Equity Compensation Plan Information For information on our equity compensation plans, please refer to Item 12 of Part III of this Form 10-K. 14 Table of Contents Performance Graph Comparison of Five-Year Cumulative Total Return The following graph is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by us under the Securities Act of 1933 or the Exchange Act except to the extent we specifically request that such information be incorporated by reference or treated as soliciting material. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Werner Enterprises, Inc.
For more information about our insurance program and legal proceedings, see Item 1A, Risk Factors – “Our earnings could be reduced by increases in the number of insurance claims, cost per claim, costs of insurance premiums or availability of insurance coverage”, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates, and Item 8, Financial Statements and Supplementary Data – Note 1 and Note 12.
For more information about our insurance program and legal proceedings, see Item 1A, Risk Factors – “Our earnings could be reduced by increases in the number of insurance claims, cost per claim, costs of insurance premiums, availability of insurance coverage, or a significant uninsured liability”, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates, and Item 8, Financial Statements and Supplementary Data – Note 1 and Note 12.
As of February 9, 2023, our common stock was held by 432 stockholders of record. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
As of February 9, 2024, our common stock was held by 425 stockholders of record. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Our Peer Group includes companies similar to us in the transportation industry and has the following companies: ArcBest; Covenant Logistics Group; Forward Air; Heartland Express; Hub Group; JB Hunt; Knight-Swift Transportation; Landstar System; Marten Transport; Old Dominion Freight Line; Saia; Schneider National; US Xpress; and Yellow Corporation.
Our Peer Group includes companies similar to us in the transportation industry and has the following companies: ArcBest; Covenant Logistics Group; Daseke; Forward Air; Heartland Express; Hub Group; JB Hunt; Knight-Swift Transportation; Landstar System; Marten Transport; Old Dominion Freight Line; Saia; and Schneider National. We added Daseke, Inc. to our 2023 Peer Group and removed US Xpress Enterprises, Inc.
As of December 31, 2022, the Company had purchased 3,688,190 shares pursuant to this authorization and had 2,311,810 shares remaining available for repurchase. The Company may purchase shares from time to time depending on market, economic and other factors. The authorization will continue unless withdrawn by the Board of Directors.
As of December 31, 2023, the Company had purchased 3,688,190 shares pursuant to this authorization and had 2,311,810 shares remaining available for repurchase. The Company may purchase shares from time to time depending on market, economic and other factors.
No shares of common stock were repurchased during fourth quarter 2022 by either the Company or any “affiliated purchaser,” as defined by Rule 10b-18 of the Exchange Act. 14 Table of Contents
The authorization will continue unless withdrawn by the Board of Directors. 15 Table of Contents No shares of common stock were repurchased during fourth quarter 2023 by either the Company or any “affiliated purchaser,” as defined by Rule 10b-18 of the Exchange Act. ITEM 6. RESERVED
Our stock price was $40.26 as of December 30, 2022 (the last business day of fiscal year 2022). This price was used for purposes of calculating the total return on our common stock for the year ended December 31, 2022.
(acquired by Knight-Swift Transportation in 2023) and Yellow Corporation (ceased operations in 2023) from our 2023 and 2022 Peer Groups. Our stock price was $42.37 as of December 29, 2023 (the last business day of fiscal year 2023). This price was used for purposes of calculating the total return on our common stock for the year ended December 31, 2023.
Added
In 2023, we selected a new Peer Group in order to more closely align with our benchmarking Peer Group.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−2 removed0 unchanged
Biggest changeFiled herewith 21 Subsidiaries of the Registrant Filed herewith 23.1 Consent of KPMG LLP Filed herewith 31.1 Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 (Section 302 of the Sarbanes-Oxley Act of 2002) Filed herewith 31.2 Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 (Section 302 of the Sarbanes-Oxley Act of 2002) Filed herewith 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Biggest changeExhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022 10.1 4 Credit Agreement, dated December 20, 2022 by and among Werner Enterprises, Inc., the lenders thereto, Wells Fargo Bank, National Association as Administrative Agent, Swingline Lender, and Issuing Lender, and BMO Harris Bank N.A. as Syndication Agent Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2022 59 Table of Contents Exhibit Number Description Incorporated by Reference to: 21 Subsidiaries of the Registrant Filed herewith 23.1 Consent of KPMG LLP Filed herewith 31.1 Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 (Section 302 of the Sarbanes-Oxley Act of 2002) Filed herewith 31.2 Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 (Section 302 of the Sarbanes-Oxley Act of 2002) Filed herewith 32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) Furnished herewith 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) Furnished herewith 32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) Furnished herewith 97 Werner Enterprises, Inc.
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 10.1 4 First Amendment to Facility Letter Agreement, dated June 30, 2021 between Werner Enterprises, Inc. and BMO Harris Bank N.A.
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 10.1 3 First Amendment to Term Loan Facility Letter, dated December 20, 2022 between Werner Enterprises, Inc. and BMO Harris Bank N.A.
Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) Furnished herewith 60 Table of Contents Exhibit Number Description Incorporated by Reference to: 101 The following audited financial information from Werner Enterprises’ Annual Report on Form 10-K for the year ended December 31, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020, (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020, (iii) Consolidated Balance Sheets as of December 31, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020, (v) Consolidated Statements of Stockholders’ Equity and Temporary Equity - Redeemable Noncontrolling Interest for the years ended December 31, 2022, 2021 and 2020, and (vi) the Notes to Consolidated Financial Statements as of December 31, 2022. 104 The cover page from this Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL (included as Exhibit 101).
Clawback Policy, effective as of December 1, 2023 Filed herewith 101 The following audited financial information from Werner Enterprises’ Annual Report on Form 10-K for the year ended December 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021, (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021, (iii) Consolidated Balance Sheets as of December 31, 2023 and 2022, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021, (v) Consolidated Statements of Stockholders’ Equity and Temporary Equity - Redeemable Noncontrolling Interest for the years ended December 31, 2023, 2022 and 2021, and (vi) the Notes to Consolidated Financial Statements as of December 31, 2023. 104 The cover page from this Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL (included as Exhibit 101).
Change in Control Severance Plan Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 10.1 0 Credit Agreement, dated May 14, 2019 between Werner Enterprises, Inc. and Wells Fargo Bank, National Association Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 10.1 1 Facility Letter Agreement, dated May 14, 2019 between Werner Enterprises, Inc. and BMO Harris Bank N.A.
Change in Control Severance Plan Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 10.1 1 Consulting Services Agreement dated July 1, 2023, between John J. Steele and Werner Enterprises, Inc.
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 10.1 2 First Amendment to Credit Agreement, dated October 20, 2020 between Werner Enterprises, Inc. and Wells Fargo Bank, National Association Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 10.1 3 Facility Letter and Promissory Note Agreement, dated June 30, 2021 between Werner Enterprises, Inc. and BMO Harris Bank N.A.
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 1, 2023 10.1 2 Facility Letter and Promissory Note Agreement, dated June 30, 2021 between Werner Enterprises, Inc. and BMO Harris Bank N.A.
Item 5.02 of the Company ’ s Current Report on Form 8-K dated February 10 , 2023 10. 5 Form of Notice of Grant of Nonqualified Stock Option Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 29, 2007 10. 6 Form of Restricted Stock Award Agreement Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 1, 2009 10. 7 Form of Performance-Based Restricted Stock Award Agreemen t, effective February 10, 2014 Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 10, 2014 10.8 Form of Performance-Based Restricted Stock Award Agreement, effective February 7, 2022 Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 7, 2022 10. 9 Werner Enterprises, Inc.
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 23, 2023 10. 7 Form of Restricted Stock Award Agreement Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 1, 2009 10. 8 Form of Restricted Stock Award Agreement, effective May 9, 2023 Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 10. 9 Form of Performance-Based Restricted Stock Award Agreement, effective February 7, 2022 Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 7, 2022 10.1 0 Werner Enterprises, Inc.
Removed
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 59 Table of Contents Exhibit Number Description Incorporated by Reference to: 10.1 5 Second Amendment to Credit Agreement, dated June 29, 2021 between Werner Enterprises, Inc. and Wells Fargo Bank, National Association Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 10.16 Credit Agreement, dated March 25, 2022 between Werner Enterprises, Inc. and Wells Fargo Bank, National Association Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 10.17 Revolving Line of Credit Note, dated March 25, 2022 between Werner Enterprises, Inc. and Wells Fargo Bank, National Association Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 10.18 Term Note, dated March 25, 2022 between Werner Enterprises, Inc. and Wells Fargo Bank, National Association Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 10.19 Second Amendment to Facility Letter Agreement, dated March 25, 2022 between Werner Enterprises, Inc. and BMO Harris Bank N.A.
Added
Item 5.02 of the Company ’ s Current Report on Fo rm 8-K dated February 9 , 2024 10. 6 Compensation Letter Agreement, dated February 7, 2023, between Christopher Wikoff and Werner Enterprises, Inc.
Removed
Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 10.2 0 Credit Agreement, dated December 20, 2022 by and among Werner Enterprises, Inc., the lenders thereto, Wells Fargo Bank, National Association as Administrative Agent, Swingline Lender, and Issuing Lender, and BMO Harris Bank N.A. as Syndication Agent Filed herewith 10.21 First Amendment to Term Loan Facility Letter, dated December 20, 2022 between Werner Enterprises, Inc. and BMO Harris Bank N.A.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+16 added−18 removed35 unchanged
Biggest changeNet capital expenditures (primarily revenue equipment) in 2023 currently are expected to b e in the rang e of $350 million to $400 million. 17 Table of Contents Results of Operations: The following table sets forth the consolidated statements of income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the prior year. 2022 2021 Percentage Change in Dollar Amounts (in thousands) $ % $ % % Operating revenues $ 3,289,978 100.0 $ 2,734,372 100.0 20.3 Operating expenses: Salaries, wages and benefits 1,020,609 31.0 895,012 32.7 14.0 Fuel 437,299 13.3 245,866 9.0 77.9 Supplies and maintenance 253,096 7.7 206,701 7.6 22.4 Taxes and licenses 97,929 3.0 96,095 3.5 1.9 Insurance and claims 147,365 4.5 98,658 3.6 49.4 Depreciation and amortization 279,923 8.5 267,700 9.8 4.6 Rent and purchased transportation 777,464 23.6 641,159 23.4 21.3 Communications and utilities 15,856 0.5 13,460 0.5 17.8 Other (62,639) (1.9) (39,425) (1.4) 58.9 Total operating expenses 2,966,902 90.2 2,425,226 88.7 22.3 Operating income 323,076 9.8 309,146 11.3 4.5 Total other income, net (1,710) (0.1) (36,869) (1.4) (95.4) Income before income taxes 324,786 9.9 346,015 12.7 (6.1) Income tax expense 79,206 2.4 84,537 3.1 (6.3) Net income 245,580 7.5 261,478 9.6 (6.1) Net income attributable to noncontrolling interest (4,324) (0.2) (2,426) (0.1) 78.2 Net income attributable to Werner $ 241,256 7.3 $ 259,052 9.5 (6.9) 18 Table of Contents The following tables set forth the operating revenues, operating expenses and operating income for the TTS segment and certain statistical data regarding our TTS segment operations, as well as statistical data for the One-Way Truckload and Dedicated operating units within TTS. 2022 2021 TTS segment (in thousands) $ % $ % % Chg Trucking revenues, net of fuel surcharge $ 1,982,639 $ 1,789,148 10.8 % Trucking fuel surcharge revenues 419,240 234,164 79.0 % Non-trucking and other operating revenues 26,807 21,761 23.2 % Operating revenues 2,428,686 100.0 2,045,073 100.0 18.8 % Operating expenses 2,134,131 87.9 1,763,250 86.2 21.0 % Operating income $ 294,555 12.1 $ 281,823 13.8 4.5 % TTS segment 2022 2021 % Chg Average tractors in service 8,437 7,982 5.7 % Average revenues per tractor per week (1) $ 4,519 $ 4,311 4.8 % Total tractors (at year end) Company 8,305 8,050 3.2 % Independent contractor 295 290 1.7 % Total tractors 8,600 8,340 3.1 % Total trailers (at year end) 27,650 25,760 7.3 % One-Way Truckload Trucking revenues, net of fuel surcharge (in 000’s) $ 766,013 $ 710,673 7.8 % Average tractors in service 3,153 2,942 7.2 % Total tractors (at year end) 3,150 3,105 1.4 % Average percentage of empty miles 12.70 % 11.25 % 12.9 % Average revenues per tractor per week (1) $ 4,672 $ 4,645 0.6 % Average % change in revenues per total mile (1) 8.6 % 17.3 % Average % change in total miles per tractor per week (7.4) % (8.2) % Average completed trip length in miles (loaded) 675 786 (14.1) % Dedicated Trucking revenues, net of fuel surcharge (in 000’s) $ 1,216,626 $ 1,078,475 12.8 % Average tractors in service 5,284 5,040 4.8 % Total tractors (at year end) 5,450 5,235 4.1 % Average revenues per tractor per week (1) $ 4,428 $ 4,116 7.6 % (1) Net of fuel surcharge revenues 19 Table of Contents 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. 2022 2021 Werner Logistics segment (in thousands) $ % $ % % Chg Operating revenues $ 793,492 100.0 $ 622,461 100.0 27.5 % Operating expenses: Purchased transportation expense 653,185 82.3 535,379 86.0 22.0 % Other operating expenses 104,123 13.1 59,209 9.5 75.9 % Total operating expenses 757,308 95.4 594,588 95.5 27.4 % Operating income $ 36,184 4.6 $ 27,873 4.5 29.8 % Werner Logistics segment 2022 2021 % Chg Average tractors in service 52 41 26.8 % Total tractors (at year end) 39 55 (29.1) % Total trailers (at year end) 2,315 1,465 58.0 % 2022 Compared to 2021 Operating Revenues Operating revenues increased 20.3% in 2022 compared to 2021.
Biggest changeResults of Operations: The following table sets forth the consolidated statements of income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the prior year. 2023 2022 Percentage Change in Dollar Amounts (in thousands) $ % $ % % Operating revenues $ 3,283,499 100.0 $ 3,289,978 100.0 (0.2) Operating expenses: Salaries, wages and benefits 1,072,558 32.7 1,020,609 31.0 5.1 Fuel 345,001 10.5 437,299 13.3 (21.1) Supplies and maintenance 256,494 7.8 253,096 7.7 1.3 Taxes and licenses 102,684 3.1 97,929 3.0 4.9 Insurance and claims 138,516 4.2 147,365 4.5 (6.0) Depreciation and amortization 299,509 9.1 279,923 8.5 7.0 Rent and purchased transportation 886,284 27.0 777,464 23.6 14.0 Communications and utilities 18,480 0.6 15,856 0.5 16.5 Other (12,443) (0.4) (62,639) (1.9) (80.1) Total operating expenses 3,107,083 94.6 2,966,902 90.2 4.7 Operating income 176,416 5.4 323,076 9.8 (45.4) Total other expense (income), net 28,635 0.9 (1,710) (0.1) (1,774.6) Income before income taxes 147,781 4.5 324,786 9.9 (54.5) Income tax expense 35,491 1.1 79,206 2.4 (55.2) Net income 112,290 3.4 245,580 7.5 (54.3) Net loss (income) attributable to noncontrolling interest 92 — (4,324) (0.2) (102.1) Net income attributable to Werner $ 112,382 3.4 $ 241,256 7.3 (53.4) 18 Table of Contents The following tables set forth the operating revenues, operating expenses and operating income for the TTS segment and certain statistical data regarding our TTS segment operations, as well as statistical data for the One-Way Truckload and Dedicated operating units within TTS. 2023 2022 TTS segment (in thousands) $ % $ % % Chg Trucking revenues, net of fuel surcharge $ 1,949,445 $ 1,982,639 (1.7) % Trucking fuel surcharge revenues 332,388 419,240 (20.7) % Non-trucking and other operating revenues 28,977 26,807 8.1 % Operating revenues 2,310,810 100.0 2,428,686 100.0 (4.9) % Operating expenses 2,141,480 92.7 2,134,131 87.9 0.3 % Operating income $ 169,330 7.3 $ 294,555 12.1 (42.5) % TTS segment 2023 2022 % Chg Average tractors in service 8,326 8,437 (1.3) % Average revenues per tractor per week (1) $ 4,502 $ 4,519 (0.4) % Total tractors (at year end) Company 7,740 8,305 (6.8) % Independent contractor 260 295 (11.9) % Total tractors 8,000 8,600 (7.0) % Total trailers (at year end) 27,850 27,650 0.7 % One-Way Truckload Trucking revenues, net of fuel surcharge (in 000’s) $ 713,762 $ 766,013 (6.8) % Average tractors in service 3,042 3,153 (3.5) % Total tractors (at year end) 2,735 3,150 (13.2) % Average percentage of empty miles 14.36 % 12.70 % 13.1 % Average revenues per tractor per week (1) $ 4,512 $ 4,672 (3.4) % Average % change in revenues per total mile (1) (5.5) % 8.6 % Average % change in total miles per tractor per week 2.2 % (7.4) % Average completed trip length in miles (loaded) 595 675 (11.9) % Dedicated Trucking revenues, net of fuel surcharge (in 000’s) $ 1,235,683 $ 1,216,626 1.6 % Average tractors in service 5,284 5,284 — % Total tractors (at year end) 5,265 5,450 (3.4) % Average revenues per tractor per week (1) $ 4,496 $ 4,428 1.5 % (1) Net of fuel surcharge revenues 19 Table of Contents 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. 2023 2022 Werner Logistics segment (in thousands) $ % $ % % Chg Operating revenues $ 910,433 100.0 $ 793,492 100.0 14.7 % Operating expenses: Purchased transportation expense 761,948 83.7 653,185 82.3 16.7 % Other operating expenses 132,606 14.6 104,123 13.1 27.4 % Total operating expenses 894,554 98.3 757,308 95.4 18.1 % Operating income $ 15,879 1.7 $ 36,184 4.6 (56.1) % Werner Logistics segment 2023 2022 % Chg Average tractors in service 37 52 (28.8) % Total tractors (at year end) 35 39 (10.3) % Total trailers (at year end) 2,960 2,315 27.9 % 2023 Compared to 2022 Operating Revenues Operating revenues decreased 0.2% in 2023 compared to 2022.
The majority of the higher unfavorable reserve development related to unexpected and unfortunate legal developments for prior year motor vehicle accidents that have been settled, including a settlement of a lawsuit in Texas arising from a May 24, 2020 accident for which we recognized $9.5 million of insurance and claims expense in 2022.
The majority of the higher unfavorable reserve development in 2022 related to unexpected and unfortunate legal developments for two prior year motor vehicle accidents that have been settled, including a settlement of a lawsuit in Texas arising from a May 24, 2020 accident for which we recognized $9.5 million of insurance and claims expense in 2022.
Because independent contractors supply their own tractors and drivers and are responsible for their operating expenses, the decrease in independent contractor miles as a percentage of total miles shifted costs from the rent and purchased transportation category to other expense categories, including (i) salaries, wages and benefits, (ii) fuel, (iii) depreciation, (iv) supplies and maintenance and (v) taxes and licenses.
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.
The TTS segment requires substantial cash expenditures for tractor and trailer purchases. We fund these purchases with net cash from operations and financing available under our existing credit facilities, as management deems necessary. We provide non-trucking services primarily through the three operating units within our Werner Logistics segment (Truckload Logistics, Intermodal, and Final Mile).
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).
It is also possible that materially different amounts would be reported if we used different estimates or assumptions. Estimates of accrued liabilities for insurance and claims for bodily injury, property damage and workers’ compensation is a critical accounting estimate that requires us to make significant judgments and estimates and affects our financial statements.
It is also possible that materially different amounts would be reported if we used different estimates or assumptions. Estimates of accrued liabilities for insurance and claims for bodily injury and property damage is a critical accounting estimate that requires us to make significant judgments and estimates and affects our financial statements.
Business Acquisitions: We recently acquired the following entities: • 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.
Business Acquisitions: We acquired the following entities in 2022 and 2021: • 100% of ReedTMS on November 5, 2022. Freight brokerage and truckload revenues generated by ReedTMS are reported in our Werner Logistics segment and in Dedicated within our TTS segment, respectively. • 100% of Baylor on October 1, 2022.
The accruals for bodily injury, property damage and workers’ compensation (current and non-current) are recorded at the estimated ultimate payment amounts and are based upon individual case estimates and actuarial estimates of loss development for reported losses and incurred-but-not-reported losses using loss development factors based upon past experience.
The accruals for bodily injury and property damage (current and non-current) are recorded at the estimated ultimate payment amounts and are based upon individual case estimates and actuarial estimates of loss development for reported losses and incurred-but-not-reported losses using loss development factors based upon past experience.
We have not made any material changes in the accounting methodology or assumptions used to calculate our accrued liabilities for insurance and claims for bodily injury, property damage, and workers’ compensation during the past three years.
We have not made any material changes in the accounting methodology or assumptions used to calculate our accrued liabilities for insurance and claims for bodily injury and property damage during the past three years.
We may also be affected by our customers’ financial failures or loss of customer business. Revenues for our TTS segment operating units (Dedicated and One-Way Truckload) are typically generated on a per-mile basis and also include revenues such as stop charges, loading and unloading charges, equipment detention charges and equipment 16 Table of Contents repositioning charges.
We may also be affected by our customers’ financial failures or loss of customer business. Revenues for our TTS segment operating units (Dedicated and One-Way Truckload) are typically generated on a per-mile basis and also include revenues such as stop charges, loading and unloading charges, equipment detention charges and equipment repositioning charges.
To lessen the effect of 20 Table of Contents fluctuating fuel prices on our margins, we collect fuel surcharge revenues from our customers for the cost of diesel fuel and taxes in excess of specified base fuel price levels according to terms in our customer contracts. Fuel surcharge rates generally adjust weekly based on an independent U.S.
To lessen the effect of fluctuating fuel prices on our margins, we collect fuel surcharge revenues from our customers for the cost of diesel fuel and taxes in excess of specified base fuel price levels according to terms in our customer contracts. Fuel surcharge rates generally adjust weekly based on an independent U.S.
As discussed further in the comparison of operating results for 2022 to 2021, several industry-wide issues have caused, and could continue to cause, costs to increase in future periods.
As discussed further in the comparison of operating results for 2023 to 2022, several industry-wide issues have caused, and could continue to cause, costs to increase in future periods.
These programs generally enable us to recover a majority, but not all, of the fuel price increases. The remaining portion is generally not recoverable because it results from empty and out-of-route miles (which are not billable to customers) and tractor idle time.
These programs generally enable us to recover a majority, but not all, of the fuel price increases. The 20 Table of Contents remaining portion is generally not recoverable because it results from empty and out-of-route miles (which are not billable to customers) and tractor idle time.
We also incurred insurance and claims expense of $5.4 million and $5.1 million in 2022 and 2021, respectively, for accrued interest related to a previously-disclosed adverse jury verdict rendered on May 17, 2018, which we are appealing (see Note 12 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K).
We also incurred insurance and claims expense of $5.7 million and $5.4 million in 2023 and 2022, respectively, for accrued interest related to a previously-disclosed adverse jury verdict rendered on May 17, 2018, which we are appealing (see Note 12 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K).
We continue to take significant actions to strengthen our driver recruiting and retention as we strive to be the truckload employer of choice, including raising driver pay, providing a modern tractor and trailer fleet with the latest safety equipment and technology, investing and expanding our driver training school network and offering a wide variety of driving positions including daily and weekly home time opportunities.
We continue to take significant actions to strengthen our driver recruiting and retention as we strive to be the truckload employer of choice, including competitive driver pay, providing a modern tractor and trailer fleet with the latest safety equipment and technology, investing in our driver training school network and offering a wide variety of driving positions including daily and weekly home time opportunities.
An independent actuary reviews our calculation of the undiscounted self-insurance reserves for bodily injury and property damage claims and workers’ compensation claims at year-end.
An independent actuary reviews our calculation of the undiscounted self-insurance reserves for bodily injury and property damage claims at year-end.
Capital expenditures, business acquisitions, stock repurchases, and dividend payments are components of our cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment.
Capital expenditures, business acquisitions, stock repurchases, and dividend 23 Table of Contents payments are components of our cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment.
We continue to employ measures to improve our fuel mpg such as (i) limiting tractor engine idle time, (ii) optimizing the speed, weight and specifications of our equipment and (iii) implementing mpg-enhancing equipment changes to our fleet including new tractors, more aerodynamic tractor features, idle reduction systems, trailer tire inflation systems, trailer skirts and automated manual transmissions to reduce our fuel gallons purchased.
We continue to employ measures to improve our fuel mpg such as (i) limiting tractor engine idle time by installing auxiliary power units, (ii) optimizing the speed, weight and specifications of our equipment and (iii) implementing mpg-enhancing equipment changes to our fleet including new tractors, more aerodynamic tractor features, idle reduction systems, trailer tire inflation systems, trailer skirts and automated manual transmissions to reduce our fuel gallons purchased.
Historically, we have been able to add company tractors and recruit additional company drivers to offset any decrease in the number of independent contractors. If a shortage of independent contractors and company drivers occurs, further increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract and retain these drivers.
Historically, we have been able to add company tractors and recruit additional company drivers to offset any decrease in the number of independent contractors. If a shortage of independent contractors and company drivers were to occur, increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract and retain these drivers.
Our ability to adapt to changes in customer transportation requirements is essential to efficiently deploy resources and make capital investments in tractors and trailers (with respect to our TTS segment) or obtain qualified third-party capacity at a reasonable price (with respect to our Werner Logistics segment).
Our ability to adapt to changes 16 Table of Contents in customer transportation requirements is essential to efficiently deploy resources and make capital investments in tractors and trailers (with respect to our TTS segment) or obtain qualified third-party capacity at a reasonable price (with respect to our Werner Logistics segment).
For the policy year that began August 1, 2021, we were responsible for the first $10.0 million per claim on all claims with an annual $10.0 million aggregate for claims between $10.0 million and $15.0 million. We maintain liability insurance coverage with insurance carriers in excess of the $10.0 million per claim.
For the policy year that began August 1, 2022 we were responsible for the first $10.0 million per claim on all claims with an annual $10.0 million aggregate for claims between $10.0 million and $20.0 million. We maintain liability insurance coverage with insurance carriers in excess of the $10.0 million per claim.
Securities and Exchange Commission on February 28, 2022. Liquidity and Capital Resources: We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing arrangements, and working capital management.
Securities and Exchange Commission on February 27, 2023. Liquidity and Capital Resources: We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing arrangements, and working capital management.
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, 2022, we have committed to property and equipment purchases of approximately $278.6 million within the next 12 months.
See Note 5 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K for further detail of our lease obligations and the timing of expected future payments. • Purchase Obligations – As of December 31, 2023, we have committed to property and equipment purchases of approximately $107.9 million within the next 12 months.
However, fuel savings from mpg improvement is partially offset by higher depreciation expense and the additional cost of diesel exhaust fluid. Although our fuel management programs require significant capital investment and research and development, we intend to continue these and other environmentally conscious initiatives, including our active participation as an EPA SmartWay Transport Partner.
However, fuel savings from mpg improvement is partially offset by higher depreciation expense and the additional cost of diesel exhaust fluid. Although our fuel management programs require significant capital investment and research and development, we intend to continue these and other environmentally conscious initiatives, including our active participation as a U.S. EPA SmartWay 21 Table of Contents Transport Partner.
As of December 31, 2022, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. Supplies and maintenance increased $46.4 million or 22.4% in 2022 compared to 2021 and increased 0.1% as a percentage of operating revenues.
As of December 31, 2023, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. Supplies and maintenance increased $3.4 million or 1.3% in 2023 compared to 2022 and increased 0.1% as a percentage of operating revenues.
At December 31, 2022 and 2021, we had an accrual of $323.6 million and $309.8 million, respectively, for estimated insurance and claims for (i) cargo loss and damage, (ii) bodily injury and property damage, (iii) group health, and (iv) workers’ compensation claims not covered by insurance.
At December 31, 2023 and 2022, we had an accrual of $321.5 million and $323.6 million, respectively, for estimated insurance and claims for (i) cargo loss and damage, (ii) bodily injury and property damage, (iii) group health, and (iv) workers’ compensation claims not covered by insurance.
Management’s approach to capital allocation focuses on investing in key priorities that support our business and growth strategies and providing shareholder returns, while funding ongoing operations. Management believes our financial position at December 31, 2022 is strong. As of December 31, 2022, we had $107.2 million of cash and cash equivalents and over $1.4 billion of stockholders’ equity.
Management’s approach to capital allocation focuses on investing in key priorities that support our business and growth strategies and providing shareholder returns, while funding ongoing operations. Management believes our financial position at December 31, 2023 is strong. As of December 31, 2023, we had $61.7 million of cash and cash equivalents and over $1.5 billion of stockholders’ equity.
We currently estimate our full year 2023 effective income tax rate to be approximately 24.0% to 25.0%. 2021 Compared to 2020 For a comparison of the Company’s results of operations for the fiscal year ended December 31, 2021 to the fiscal year ended December 31, 2020, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in 23 Table of Contents the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S.
We currently estimate our full year 2024 effective income tax rate to be approximately 24.5% to 25.5%. 2022 Compared to 2021 For a comparison of the Company’s results of operations for the fiscal year ended December 31, 2022 to the fiscal year ended December 31, 2021, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the U.S.
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 $88.6 million in 2022, compared to $61.5 million in 2021.
Gains on sales of property and equipment are reflected as a reduction of other operating expenses and are reported net of sales-related expenses (which include costs to prepare the equipment for sale). Gains on sales of property and equipment were $42.4 million in 2023, compared to $88.6 million in 2022.
This could negatively affect our results of operations to the extent that we would not be able to obtain corresponding freight rate increases.
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.
Our material cash requirements include the following contractual and other obligations. • Debt Obligations and Interest Payments – As of December 31, 2022, we had outstanding debt with an aggregate principal amount of $693.8 million, with $6.3 million payable within 12 months.
Our material cash requirements include the following contractual and other obligations. • Debt Obligations and Interest Payments – As of December 31, 2023, we had outstanding debt with an aggregate principal amount of $648.8 million, with $88.8 million payable within 12 months.
Our liability insurance premiums for the policy year that began August 1, 2022 are $1.9 million higher than premiums for the previous policy year.
Our liability insurance premiums for the policy year that began August 1, 2023 are $1.0 million higher than premiums for the previous policy year.
Our Dedicated unit ended 2022 with 5,450 tractors (or 63% of our total TTS segment fleet) compared to 5,235 tractors at the end of 2021.
Our Dedicated unit ended 2023 with 5,265 tractors (or 66% of our total TTS segment fleet) compared to 5,450 tractors (or 63%) at the end of 2022.
Considering the freight market outlook, we expect average revenues per total mile, net of fuel surcharge, for the One-Way Truckload fleet to decline in a range of 3% to 6% in the first half of 2023 when compared to the first half of 2022, and we expect Dedicated average revenues per tractor per week, net of fuel surcharge, to increase in a range of 0% to 3% in 2023 compared to 2022.
Considering the freight market outlook, we expect average revenues per total mile, net of fuel surcharge, for the One-Way Truckload fleet to decrease in a range of 6% to 3% in the first half of 2024 when compared to the first half of 2023, and we expect Dedicated average revenues per tractor per week, net of fuel surcharge, to remain flat or increase up to 3% in 2024 compared to 2023.
Werner Logistics also recorded revenue and brokered freight expense of $5.2 million in 2022 and $0.9 million in 2021 for movements 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 also recorded revenue and brokered freight expense of $17.7 million in 2023 and $5.2 million in 2022 for shipments performed by the TTS segment (also recorded as trucking revenue by the TTS segment), and these transactions between reporting segments are eliminated in consolidation.
At the end of 2022, we believe we are well positioned with a strong balance sheet and sufficient liquidity. Our debt is at $694 million, or a net debt ratio (debt less cash) o f 1.0 tim es earnings before interest, income taxes, depreciation and amortization for the year ended December 31, 2022.
At the end of 2023, we believe we are well positioned with a strong balance sheet and sufficient liquidity. Our debt is at $649 million, or a net debt ratio (debt less cash) of 1.2 times earnings before interest, income taxes, depreciation and amortization for the year ended December 31, 2023.
The most significant variable expenses that impact the TTS segment are driver salaries and benefits, fuel, fuel taxes (included in taxes and licenses expense), payments to independent contractors (included in rent and purchased transportation expense), supplies and maintenance and insurance and claims.
The operating ratio consists of operating expenses expressed as a percentage of operating revenues. The most significant variable expenses that impact the TTS segment are driver salaries and benefits, fuel, fuel taxes (included in taxes and licenses expense), payments to independent contractors (included in rent and purchased transportation expense), supplies and maintenance and insurance and claims.
Cash is invested primarily in government portfolio money market funds. In addition, we have a $1.075 billion credit facility, for which our total available borrowing capacity was $416.2 million as of December 31, 2022.
Cash is invested primarily in short-term money market funds. In addition, we have a $1.075 billion credit facility, for which our total available borrowing capacity was $463.9 million as of December 31, 2023.
Rent and purchased transportation expense increased $136.3 million or 21.3% in 2022 compared to 2021 and increased 0.2% as a percentage of operating revenues. Rent and purchased transportation expense consists mostly of payments to third-party capacity providers in the Werner Logistics segment and other non-trucking operations and payments to independent contractors in the TTS segment.
Rent and purchased transportation expense increased $108.8 million or 14.0% in 2023 compared to 2022 and increased 3.4% as a percentage of operating revenues. Rent and purchased transportation expense consists mostly of payments to third-party capacity providers in the Werner Logistics segment and other non-trucking operations, payments to independent contractors in the TTS segment, and cloud-based technology fees.
Net cash invested in our business acquisitions was $184.1 million during 2022 compared to $201.8 million during 2021. Net property and equipment additions (primarily revenue equipment) were $317.6 million during 2022 compared to $193.0 million during 2021. We currently estimate net capital expenditures (primarily revenue equipment) in 2023 to be in the range of $350 million to $400 million.
Net cash invested in our business acquisitions was $0.2 million during 2023 compared to $184.1 million during 2022. Net property and equipment additions (primarily revenue equipment) were $408.7 million during 2023 compared to $317.6 million during 2022. We currently estimate net capital expenditures (primarily revenue equipment) in 2024 to be in the range of $260 million to $310 million.
Interest is accrued at $0.5 million per month, until such time as the outcome of our appeal is finalized. The majority of our insurance and claims expense results from our claim experience and claim development under our self-insurance program; the remainder results from insurance premiums for claims in excess of our self-insured limits.
Interest will continue to accrue monthly until such time as the outcome of our appeal is finalized. The majority of our insurance and claims expense results from our claim experience and claim development under our self-insurance program; the remainder results from insurance premiums for claims in excess of our self-insured limits.
The average age of our tractor fleet remains low by industry standards and was 2.3 years as of December 31, 2022, and the average age of our trailers was 5.0 years.
The average age of our tractor fleet remains low by industry standards and was 2.1 years as of December 31, 2023, and the average age of our trailers was 4.9 years.
As of December 31, 2022, we had fixed lease payment obligations of $46.6 million, with $10.6 million payable within 12 months.
As of December 31, 2023, we had fixed lease payment obligations of $40.3 million, with $10.1 million payable within 12 months.
A 10% change in actuarial estimates at December 31, 2022, would have changed our insurance and claims accrual by approximately $30.3 million. 25 Table of Contents
A 10% change in actuarial estimates for insurance and claims for bodily injury and property damage at December 31, 2023, would have changed our insurance and claims accrual by approximately $24.8 million. 25 Table of Contents
Other Income, Net Other income, net of expense, decreased $35.2 million in 2022 compared to 2021 due primarily to a $28.1 million decrease in the amount of unrealized net gains recognized on our investments in equity securities (see Note 7 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K) and a $7.4 million increase in interest expense.
Other Expense (Income) Other expense, net of other income, increased $30.3 million in 2023 compared to 2022 due primarily to a $16.7 million increase in net interest expense, a $12.5 million decrease in the amount of unrealized net gains recognized on our investments in equity securities, and a loss from our equity method investment of $1.0 million (see Note 7 in the Notes to Consolidated Financial Statements set forth in Part II of this Form 10-K for information regarding our investments).
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 2022 are $0.4 million higher than the premiums for the previous policy year.
Our coverage levels are the same as the prior policy year. We continue to maintain a self-insurance retention of $2.0 million per claim. Our workers’ compensation insurance premiums for the policy year beginning April 2023 were flat compared to the previous policy year.
We continued to invest in new tractors and trailers and our terminals in 2022 to 22 Table of Contents improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs. In 2023, we expect to slightly lower the average age of our tractor fleet and maintain the average age of our trailer fleet.
We continued to invest in new tractors and trailers and our terminals in 2023 to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs. In 2024, we expect the average age of our tractor and trailer fleets to remain at or near current levels.
Trucking revenues, net of fuel surcharge, increased 10.8% in 2022 compared to 2021 due to a 5.7% increase in the average number of tractors in service and a 4.8% increase in average revenues per tractor per week, net of fuel surcharge.
Trucking revenues, net of fuel surcharge, decreased 1.7% in 2023 compared to 2022 due to a 1.3% decrease in the average number of tractors in service and a 0.4% decrease in average revenues per tractor per week, net of fuel surcharge.
We renewed our liability insurance policies on August 1, 2022 and are responsible for the first $10.0 million per claim on all claims with an annual $10.0 million aggregate for claims between $10.0 million and $20.0 million.
In 2023, we achieved our lowest DOT preventable accident rate per million miles in the last 19 years. We renewed our liability insurance policies on August 1, 2023 and are responsible for the first $10.0 million per claim on all claims with an annual $12.5 million aggregate for claims between $10.0 million and $20.0 million.
We plan to continue paying a quarterly dividend, which currently results in a cash outlay of slightly more than $8 million per quarter. Cash Flows We generated cash flow from operations of $448.7 million during 2022 compared to $332.8 million during 2021.
We plan to continue paying a quarterly dividend, which currently results in a cash outlay of nearly $9 million per quarter. Cash Flows We generated cash flow from operations of $474.4 million during 2023, a 5.7% or $25.7 million increase in cash flows compared to $448.7 million during 2022.
A portion of the proceeds were used to finance our Baylor and ReedTMS acquisitions. We had net borrowings of $227.5 million during 2021, which were primarily used to finance our ECM and NEHDS acquisitions. We paid dividends of $32.2 million during 2022 and $29.1 million during 2021.
We had net borrowings on our debt of $266.3 million during 2022, which a portion of the proceeds were used to finance our Baylor and ReedTMS acquisitions. We paid dividends of $34.2 million during 2023 and $32.2 million during 2022.
We were able to make net capital expenditures, make additional strategic investments, pay dividends, and repurchase Company stock with the net cash provided by operating activities and existing cash balances, supplemented by net borrowings under our credit facilities. Net cash used in investing activities was $514.3 million during 2022 compared to $397.3 million during 2021.
We were able to make net capital expenditures, make net repayments on our debt, make a strategic loan and investments, and pay dividends with the net cash provided by operating activities and existing cash balances. Net cash used in investing activities was $434.9 million during 2023 compared to $514.3 million during 2022.
Independent contractor miles decreased 10.0 million miles in 2022 and as a percentage of total miles were 4.5% in 2022 compared to 5.8% in 2021.
Independent contractor miles increased 1.3 million miles in 2023 and as a percentage of total miles were 4.6% in 2023 compared to 4.5% in 2022.
We had available liquidity of $523 million, considering cash on hand and available borrowing capacity of $416 million. As of December 31, 2022, we were in compliance with our debt covenants and expect to continue to be in compliance in 2023. We currently plan to continue paying our quarterly dividend, which we have paid quarterly since 1987.
We had available liquidity of $526 million, considering cash and cash equivalents on hand and available borrowing capacity of $464 million. As of December 31, 2023, we were in compliance with our debt covenants and expect to continue to be in compliance in 2024.
Salaries, wages and benefits increased $125.6 million or 14.0% in 2022 compared to 2021 and decreased 1.7% as a percentage of operating revenues. The higher dollar amount of salaries, wages and benefits expense in 2022 was due primarily to increased driver pay, including driver pay rate increases and the impact of 18.0 million more company tractor miles in 2022.
Salaries, wages and benefits increased $51.9 million or 5.1% in 2023 compared to 2022 and increased 1.7% as a percentage of operating revenues. The higher dollar amount of salaries, wages and benefits expense in 2023 was due primarily to increased non-driver pay, higher driver pay from 3.4 million more company tractor miles, and higher benefit costs.
When comparing 2022 to 2021, TTS segment revenues increased $383.6 million, or 18.8%. Revenues for the Werner Logistics segment increased $171.0 million or 27.5%. Dedicated continues to experience strong demand from the majority of our long-term customers, and our Dedicated pipeline of new opportunities remains strong.
When comparing 2023 to 2022, TTS segment revenues decreased $117.9 million, or 4.9%. Revenues for the Werner Logistics segment increased $116.9 million or 14.7%. Dedicated continues to experience steady demand from the majority of our long-term customers, and our Dedicated pipeline of new opportunities remains healthy.
The increase in net cash provided by operating activities was due primarily to working capital changes resulting from growth in accounts receivable during 2021.
The increase in net cash provided by operating activities was due primarily to working capital changes, including a decrease in accounts receivable days sales outstanding, offset by a decrease in net income during 2023.
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, following the sale of its WGL freight forwarding services for international ocean and air shipments in first quarter 2021.
Fuel prices that change rapidly in short time periods also impact our recovery because the surcharge rate in most programs only changes once per week. Werner Logistics revenues are generated by its three operating units. Werner Logistics revenues exclude revenues for full truckload shipments transferred to the TTS segment, which are recorded as trucking revenues by the TTS segment.
We realized substantially higher average gains per tractor and trailer sold in 2022 due to significantly improved pricing in the market for our used equipment, which we believe is a result of increased demand for previously used equipment because of production delays limiting availability of new equipment in the industry.
In 2023, we sold significantly more tractors and trailers than in 2022 and realized substantially lower average gains per tractor and trailer due to lower pricing in the market for our used equipment, which we believe is due to decreased demand for our used equipment because of carriers increasingly exiting the trucking industry in 2023 due to the challenging freight market and an increase in the availability of new equipment due to fewer production delays in 2023 compared to 2022.
We currently expect our fleet size at the end of 2023 to be in a range of 1% to 4% higher when compared to the fleet size at the end of 2022, with the majority of the growth planned for our Dedicated unit in the second half of the year.
We currently expect our fleet size at the end of 2024 to remain flat or decrease up to 3% when compared to the fleet size at the end of 2023, with potential for growth in our Dedicated unit in the second half of the year.
Rent and purchased transportation expense for the TTS segment increased $17.5 million in 2022 compared to 2021 due primarily to higher reimbursements to independent contractors because of significantly higher average diesel fuel prices. The higher expense was partially offset by fewer independent contractor miles in 2022.
Rent and purchased transportation expense for the TTS segment increased $10.6 million in 2023 compared to 2022 due primarily to an increase in cloud-based technology fees and more independent contactor miles in 2023, partially offset by lower 22 Table of Contents reimbursements to independent contractors because of lower average diesel fuel prices.
We are self-insured for a significant portion of bodily injury, property damage and cargo claims; workers’ compensation claims; and associate health claims (supplemented by premium-based insurance coverage above certain dollar levels). For that reason, our financial results may also be affected by driver safety, medical costs, weather, legal and regulatory environments and insurance coverage costs to protect against catastrophic losses.
Our financial results are affected by company driver and independent contractor availability and the markets for new and used revenue equipment. We are self-insured for a significant portion of bodily injury, property damage and cargo claims; workers’ compensation claims; and associate health claims (supplemented by premium-based insurance coverage above certain dollar levels).
Through February 17, the average diesel fuel price per gallon in 2023 was approximately 47 cents higher than the average diesel fuel price per gallon in the same period of 2022 and approximately 7 cents higher than the average for first quarter 2022.
Through February 16, the average diesel fuel price per gallon in 2024 was approximatel y 53 cents lower than the average diesel fuel price per gallon in the same period of 2023 and approxima tely 36 cents lower t han the average for first quarter 2023.
The Company has repurchased, and may continue to repurchase, shares of the Company’s common stock. The timing and amount of such purchases depend upon economic and stock market conditions and other factors.
As of December 31, 24 Table of Contents 2023, the Company had purchased 3,688,190 shares pursuant to this authorization and had 2,311,810 shares remaining available for repurchase. The Company has repurchased, and may continue to repurchase, shares of the Company’s common stock. The timing and amount of such purchases depend upon economic and stock market conditions and other factors.
We exclude such revenues from the statistical calculations. Our most significant resource requirements are company drivers, independent contractors, tractors and trailers. Independent contractors supply their own tractors and drivers and are responsible for their operating expenses. Our financial results are affected by company driver and independent contractor availability and the markets for new and used revenue equipment.
We exclude such revenues from the statistical calculations. Our most significant resource requirements are company drivers, independent contractors, tractors, and trailers with respect to our TTS segment and qualified third-party capacity providers with respect to our Werner Logistics segment. Independent contractors supply their own tractors and drivers and are responsible for their operating expenses.
Average diesel fuel prices, excluding fuel taxes, for the full year 2022 were $1.55 higher than the full year 2021, a 71% increase.
Average diesel fuel prices, excluding fuel taxes, for the full year 2023 were 80 cents lower than the full year 2022, a 22% decrease.
Depreciation and amortization expense increased $12.2 million or 4.6% in 2022 compared to 2021 and decreased 1.3% as a percentage of operating revenues due primarily to higher tractor depreciation on a larger company tractor fleet and depreciation and amortization on tangible and intangible assets recorded in our business acquisitions, partially offset by the impact of a change in accounting estimate effective January 1, 2022, due to the ongoing stronger used trailer market and the increasing cost of new trailers, which decreased trailer depreciation expense by $12.7 million in 2022.
Depreciation and amortization expense increased $19.6 million or 7.0% in 2023 compared to 2022 and increased 0.6% as a percentage of operating revenues due primarily to the higher cost of new tractors and trailers, a larger company trailer fleet, and depreciation and amortization on tangible and intangible assets recorded in the ReedTMS and Baylor acquisitions.
Werner Logistics purchased transportation expense increased $117.8 million as a result of higher logistics revenues, which includes 8 weeks of the acquired ReedTMS logistics business, and decreased to 82.3% as a percentage of Werner Logistics revenues in 2022 from 86.0% in 2021 due to improved pricing and the effect of the NEHDS acquisition, as NEHDS utilizes both employees and contracted drive teams.
Werner Logistics purchased transportation expense increased $108.8 million as a result of higher logistics revenues, including the ReedTMS logistics business, and increased to 83.7% as a percentage of Werner Logistics revenues in 2023 from 82.3% in 2022.
The average number of tractors in service in the TTS segment increased 5.7% to 8,437 in 2022 compared to 7,982 in 2021. We ended 2022 with 8,600 tractors in the TTS segment, a year-over-year increase of 260 tractors.
The average number of tractors in service in the TTS segment decreased 1.3% to 8,326 in 2023 compared to 8,437 in 2022, as we decreased our fleet size to adjust to the challenging freight market conditions. We ended 2023 with 8,000 tractors in the TTS segment, a year-over-year decrease of 600 tractors.
Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment increased 58.4% as a result of more employees to support the 27.5% growth of Logistics revenues. We renewed our workers’ compensation insurance coverage on April 1, 2022. Our coverage levels are the same as the prior policy year.
The increase in non-driver pay was primarily due to a larger average number of non-driver employees, including the impact from our ReedTMS and Baylor acquisitions. Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment increased 37.2%, primarily as a result of the ReedTMS acquisition. We renewed our workers’ compensation insurance coverage on April 1, 2023.
On November 9, 2021, our Board of Directors approved a new stock repurchase program under which the Company is authorized to repurchase up to 6,000,000 shares of its common stock. As of December 31, 2022, the Company had purchased 3,688,190 shares pursuant to this authorization and had 2,311,810 shares remaining available for repurchase.
On November 9, 2021, our Board of Directors approved a stock repurchase program under which the Company is authorized to repurchase up to 6,000,000 shares of its common stock. We did not repurchase any shares of common stock in 2023. Financing activities for 2022 included common stock repurchases of 2,710,304 shares at a cost of $110.4 million.
The effective income tax rate (income taxes expressed as a percentage of income before income taxes) was 24.4% in 2022 and 2021.
The effective income tax rate (income taxes expressed as a percentage of income before income taxes) was 24.0% in 2023 compared to 24.4% in 2022. The lower income tax rate in 2023 was attributed primarily to a higher amount of favorable discrete income tax items in 2023, partially offset by the income tax effect of the noncontrolling interest.
If such a driver shortage were to occur and additional driver pay rate increases became necessary to attract and retain drivers, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases. 21 Table of Contents Fuel increased $191.4 million or 77.9% in 2022 compared to 2021 and increased 4.3% as a percentage of operating revenues due to higher average diesel fuel prices and 18.0 million more company tractor miles in 2022.
We are unable to predict whether we will experience future driver shortages or maintain our current driver retention rates. If such a driver shortage were to occur and driver pay rate increases became necessary to attract and retain drivers, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases.
We intend to fund these net capital expenditures through cash flows from operations and financing available under our existing credit facilities, if necessary. Net cash provided by financing activities was $118.0 million during 2022 compared to $89.7 million during 2021. We had net borrowings of $266.3 million during 2022, increasing our outstanding debt to $693.8 million at December 31, 2022.
We intend to fund these net capital expenditures through cash flows from operations and financing available under our existing credit facility, if necessary.
We expect that the 2023 freight market will be challenging in the first half of the year, and then gradually begin to show improvement in the second half of the year, as capacity exits the market and retail inventory resets to normalized levels.
In 2024, we expect freight demand to remain steady in Dedicated and be seasonally weaker for One-Way Truckload and Werner Logistics early in the year, and then improve in the second half of the year, as capacity exits the market and retail inventory replenishments reset to normalized levels.
Operating older equipment has a direct impact on our supplies and maintenance costs. Insurance and claims increased $48.7 million or 49.4% in 2022 compared to 2021 and increased 0.9% as a percentage of operating revenues, due primarily to a higher amount of unfavorable reserve development, higher expense for new claims, and higher liability insurance premiums.
Insurance and claims decreased $8.8 million or 6.0% in 2023 compared to 2022 and decreased 0.3% as a percentage of operating revenues, due primarily to lower expense for large dollar liability claims resulting from a lower amount of unfavorable reserve development and lower new claims, partially offset by higher expense for new small dollar liability claims, increasing cost-per-claim, and increased cost for repairs.
Several ongoing market factors persisted including a declining number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck safety regulations.
While we currently believe the driver recruiting and retention market may be less difficult in the near term, a competitive driver market presents labor challenges for customers and carriers alike. Several factors impacting the driver market include a declining number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck safety regulations.
Trucking fuel surcharge revenues increased 79.0% to $419.2 million in 2022 from $234.2 million in 2021 due primarily to higher average diesel fuel prices, driven by impacts of the war in Ukraine early in the year.
Trucking fuel surcharge revenues decreased 20.7% to $332.4 million in 2023 from $419.2 million in 2022 due primarily to lower average diesel fuel prices.
Expense items that impacted the overall operating ratio are described on the following pages.
Operating Expenses Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 94.6% in 2023 compared to 90.2% in 2022. Expense items that impacted the overall operating ratio are described on the following pages.
Interest expense increased primarily due to higher average debt outstanding and higher interest rates. In 2023, we expect interest expense will be higher than in 2022, primarily due to higher interest rates, as well as maintaining a higher debt level. Income Tax Expense Income tax expense decreased $5.3 million in 2022 compared to 2021, due to lower pre-tax income.
We expect these increases in net interest expense to be partially offset by debt reduction during 2024. Income Tax Expense Income tax expense decreased $43.7 million in 2023 compared to 2022, due primarily to lower pre-tax income.
In 2023, we anticipate the used truck and trailer market will weaken, as we expect a greater number of small carriers to exit the trucking industry due to lower spot rates and much higher operating costs. As a result, we expect our gains on sales of property and equipment in 2023 to decrease to between $30 million and $50 million.
For the used tractor and trailer market, we expect continued low demand with moderating pricing and equipment gains through the first half of 2024. As a result, we expect our gains on sales of property and equipment in 2024 to decrease to between $10 million and $30 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign currency translation gains were $2.4 million for the year ended December 31, 2022 and foreign currency translation losses were $1.4 million for the year ended December 31, 2021, and were recorded in accumulated other comprehensive loss within stockholders’ equity in the consolidated balance sheets. The exchange rate between the Mexican Peso and the U.S.
Biggest changeForeign currency translation gains were $6.1 million and $2.4 million for the year ended December 31, 2023 and 2022, respectively, and were recorded in accumulated other comprehensive loss within stockholders’ equity in the consolidated balance sheets. The exchange rate between the Mexican Peso and the U.S.
The interest rates on our unused credit facility are based on Secured Overnight Financing Rate (“SOFR”). See Note 8 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K for further detail of our debt.
The interest rates on our credit facility are based on Secured Overnight Financing Rate (“SOFR”). See Note 8 in the Notes to Consolidated Financial Statements under Item 8 of Part II of this Form 10-K for further detail of our debt.
We implemented customer fuel surcharge programs with most of our customers to offset much of the higher fuel cost per gallon. However, we do not recover all of the fuel cost increase through these surcharge programs. As of December 31, 2022, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
We implemented customer fuel surcharge programs with most of our customers to offset much of the higher fuel cost per gallon. However, we do not recover all of the fuel cost increase through these surcharge programs. As of December 31, 2023, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
Dollar was 19.36 Pesos to $1.00 at December 31, 2022 compared to 20.58 Pesos to $1.00 at December 31, 2021. Interest Rate Risk We manage interest rate exposure through a mix of variable interest rate debt and interest rate swap agreements.
Dollar was 16.89 Pesos to $1.00 at December 31, 2023 compared to 19.36 Pesos to $1.00 at December 31, 2022. Interest Rate Risk We manage interest rate exposure through a mix of variable interest rate debt and interest rate swap agreements.
Assuming this level of borrowing, a hypothetical one-percentage point increase in the SOFR interest rate would increase our annual interest expense by approximately $4.5 million. 26 Table of Contents
Assuming this level of borrowing, a hypothetical one-percentage point increase in the SOFR interest rate would increase our interest expense by approximately $4.3 million for the next 12-month period. 26 Table of Contents
We had $150.0 million of variable interest rate debt outstanding at December 31, 2022, for which the interest rate is effectively fixed at 2.78% through May 2024 with two interest rate swap agreements to reduce our exposure to interest rate increases. In addition, we had $450.0 million of variable interest rate debt outstanding at December 31, 2022.
We had $280.0 million of variable interest rate debt outstanding at December 31, 2023, for which the interest rate is effectively fixed at 4.31% with interest rate swap agreements to reduce our exposure to interest rate increases. In addition, we had $280.0 million of variable interest rate debt outstanding at December 31, 2023.

Other WERN 10-K year-over-year comparisons