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EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS | EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS Equity Compensation Plan The Werner Enterprises, Inc. 2023 Long-term Incentive Plan (the “Equity Plan”), approved by the Company’s shareholders in 2023, provides for grants to employees, non-employee directors, and consultants of the Company in the form of stock options, restricted stock and units (“restricted awards”), unrestricted stock awards, performance awards, and stock appreciation rights. The Board of Directors or the Compensation Committee of our Board of Directors determines the terms of each award, including the type, recipients, number of shares subject to and vesting conditions of each award. No awards of stock options, unrestricted stock, and stock appreciation rights have been issued under the Equity Plan to date. The maximum number of shares of common stock that may be awarded under the Equity Plan is 4,000,000 shares. As of December 31, 2023, there were 3,791,411 shares available for granting additional awards. Equity compensation expense is included in salaries, wages and benefits within the consolidated statements of income. As of December 31, 2023, the total unrecognized compensation cost related to non-vested equity compensation awards was approximately $10.2 million and is expected to be recognized over a weighted average period of 2.4 years. The following table summarizes the equity compensation expense and related income tax benefit recognized in the consolidated statements of income (in thousands):
|  | Years Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Restricted awards: |  |  |  |  |  |
Pre-tax compensation expense |  | $ | 10,229 |  |  | $ | 7,803 |  |  | $ | 6,349 |
Tax benefit |  | 2,634 |  |  | 1,954 |  |  | 1,587 |
Restricted stock expense, net of tax |  | $ | 7,595 |  |  | $ | 5,849 |  |  | $ | 4,762 |
Performance awards: |  |  |  |  |  |
Pre-tax compensation expense |  | $ | 1,723 |  |  | $ | 4,690 |  |  | $ | 4,452 |
Tax benefit |  | 444 |  |  | 1,174 |  |  | 1,113 |
Performance award expense, net of tax |  | $ | 1,279 |  |  | $ | 3,516 |  |  | $ | 3,339 |
We do not have a formal policy for issuing shares upon vesting of restricted and performance awards. Such shares are generally issued from treasury stock. From time to time, we repurchase shares of our common stock, the timing and amount of which depends on market and other factors. Historically, the shares acquired from such repurchases have provided us with sufficient quantities of stock to issue for equity compensation. Based on current treasury stock levels, we do not expect to repurchase additional shares specifically for equity compensation during 2024. Restricted Awards Restricted stock entitles the holder to shares of common stock when the award vests. Restricted stock units entitle the holder to a combination of cash or stock equal to the value of common stock when the unit vests. The value of these shares may fluctuate according to market conditions and other factors. Restricted awards currently outstanding vest over periods ranging from 12 to 60 months from the grant date of the award. The restricted awards do not confer any voting or dividend rights to recipients until such shares vest and do not have any post-vesting sales restrictions. The following table summarizes restricted award activity for the year ended December 31, 2023:
| Number of Restricted Awards (in thousands) |  | Weighted- Average Grant Date Fair Value ($)
Nonvested at beginning of period | 492 |  |  | $ | 41.42 |
Granted | 204 |  |  | 44.17 |
Vested | (233) |  |  | 40.44 |
Forfeited | (19) |  |  | 42.44 |
Nonvested at end of period | 444 |  |  | 43.15 |
We estimate the fair value of restricted awards based upon the market price of the underlying common stock on the date of grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for any known future changes in the dividend rate. Cash settled restricted stock units are recorded as a liability within the consolidated balance sheets and are adjusted to fair value each reporting period. The weighted-average grant date fair value of restricted awards granted during the years ended December 31, 2023, 2022, and 2021 was $44.17, $42.27, and $42.69, respectively. The total fair value of previously granted restricted awards vested during the years ended December 31, 2023, 2022, and 2021 was $10.4 million, $7.3 million, and $6.8 million, respectively. We withheld shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations were recorded as treasury stock. Performance Awards Performance awards entitle the recipient to shares of common stock upon attainment of performance objectives as pre-established by the Compensation Committee. If the performance objectives are achieved, performance awards currently outstanding vest, subject to continued employment, 36 months after the grant date of the award. The performance awards do not confer any voting or dividend rights to recipients until such shares vest and do not have any post-vesting sales restrictions. The following table summarizes performance award activity for the year ended December 31, 2023:
| Number of Performance Awards (in thousands) |  | Weighted- Average Grant Date Fair Value ($)
Nonvested at beginning of period | 289 |  |  | $ | 37.21 |
Granted | 121 |  |  | 45.07 |
Vested | (126) |  |  | 32.93 |
Forfeited | (4) |  |  | 38.34 |
Nonvested at end of period | 280 |  |  | 42.15 |
The 2023 performance awards are earned based upon the level of attainment by the Company of specified performance objectives related to cumulative diluted earnings per share for the two-year period from January 1, 2023 to December 31, 2024. Shares earned based on cumulative diluted earnings per share may increase or decrease by 25% based on the Company’s total shareholder return during the three-year period ended December 31, 2025, relative to the total shareholder return of a peer group of companies for the same period. The 2022 performance awards are earned based upon the level of attainment by the Company of specified performance objectives related to cumulative diluted earnings per share for the two-year period from January 1, 2022 to December 31, 2023. Shares earned based on cumulative diluted earnings per share may be capped based on the Company’s total shareholder return during the three-year period ended December 31, 2024, relative to the total shareholder return of a peer group of companies for the same period. The 2023 and 2022 performance awards will vest in one installment on the third anniversary from the respective grant dates. In January 2024, the Compensation Committee determined the 2021 fiscal year performance objectives were achieved at a level above the target level; although, shares earned based on cumulative diluted earnings per share were capped based on the Company’s total shareholder return during the three-year period ended December 31, 2023, relative to the total shareholder return of a peer group of companies for the same period. The additional shares earned above the target are included in the granted shares in the activity table above. We estimate the fair value of performance awards based upon the market price of the underlying common stock on the date of grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for any known future changes in the dividend rate. The weighted-average grant date fair value of performance awards granted during the years ended December 31, 2023, 2022, and 2021 was $45.07, $39.28, and $38.48, respectively. The vesting date fair value of performance awards that vested during the years ended December 31, 2023, 2022, or 2021 was $5.9 million, $3.0 million and $4.1 million, respectively. We withheld shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations were recorded as treasury stock. Employee Stock Purchase Plan Employee associates that meet certain eligibility requirements may participate in our Employee Stock Purchase Plan (the “Purchase Plan”). Eligible participants designate the amount of regular payroll deductions and/or a single annual payment (each subject to a yearly maximum amount) that is used to purchase shares of our common stock on the over-the-counter market. The maximum annual contribution amount is currently $20,000. These purchases are subject to the terms of the Purchase Plan. We contribute an amount equal to 15% of each participant’s contributions under the Purchase Plan. Interest accrues on Purchase Plan contributions at a rate of 5.25% until the purchase is made. We pay the trading commissions and administrative charges related to purchases of common stock under the Purchase Plan. Our contributions for the Purchase Plan were as follows (in thousands):
2023 | $ | 349 |
2022 | 309 |
2021 | 297 |
401(k) Retirement Savings Plan We have an Employees’ 401(k) Retirement Savings Plan (the “401(k) Plan”). Associates are eligible to participate in the 401(k) Plan if they have been continuously employed with us or one of our subsidiaries for six months or more. We match a portion of each associate’s 401(k) Plan elective deferrals. Salaries, wages and benefits expense in the accompanying consolidated statements of income includes our 401(k) Plan contributions and administrative expenses, which were as follows (in thousands):
2023 | $ | 6,351 |
2022 | 5,921 |
2021 | 4,904 |
Nonqualified Deferred Compensation Plan The Executive Nonqualified Excess Plan (the “Excess Plan”) is our nonqualified deferred compensation plan for the benefit of eligible key managerial associates whose 401(k) Plan contributions are limited because of IRS regulations affecting highly compensated associates. Under the terms of the Excess Plan, participants may elect to defer compensation on a pre-tax basis within annual dollar limits we establish. At December 31, 2023, there were 49 participants in the Excess Plan. Although our current intention is not to do so, we may also make matching credits and/or profit-sharing credits to participants’ accounts as we so determine each year. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject to general creditor claims until distributed to the participant. Under current federal tax law, we are not allowed a current income tax deduction for the compensation deferred by participants, but we are allowed a tax deduction when a distribution payment is made to a participant from the Excess Plan. The accumulated benefit obligation is included in other long-term liabilities in the consolidated balance sheets. We purchased life insurance policies to fund the future liability. The aggregate market value of the life insurance policies is included in other non-current assets in the consolidated balance sheets. The accumulated benefit obligation and aggregate market value of the life insurance policies were as follows (in thousands):
| December 31,
| 2023 |  | 2022
Accumulated benefit obligation | $ | 13,843 |  |  | $ | 10,883 |
Aggregate market value | 10,635 |  |  | 8,509 |

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 710 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//710/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 712 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//712/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 715 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//715/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//718/tableOfContent + Details
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