What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-02-24 · 304 added, 164 removed, 647 unchanged (42% of the section changed)

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We have audited the accompanying consolidated balance sheets of Werner Enterprises, Inc.

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2020, and the related notes and financial statement schedule II listed in the Index in Item 15(a)(2) (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and temporary equity - redeemable noncontrolling interest, and cash flows for each of the years in the three‑year period ended December 31, 2021, and the related notes and financial statement schedule II listed in the Index in Item 15(a)(2) (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2021, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASC Topic 842, Leases.

Basis for Opinion

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Insurance and claims 98,658 109,816 88,913

Depreciation 263,286 249,527 230,151

Depreciation and amortization 267,700 263,286 249,527

Rent and purchased transportation 641,159 519,184 549,438

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Interest income ( 1,211 ) ( 1,634 ) ( 3,326 )

Gain on investments in equity securities, net ( 40,317 ) — —

Other 236 163 38

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Net income 261,478 169,078 166,944

Net income attributable to noncontrolling interest ( 2,426 ) — —

Net income attributable to Werner $ 259,052 $ 169,078 $ 166,944

Earnings per share:

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Comprehensive income 263,707 160,973 168,289

Comprehensive income attributable to noncontrolling interest ( 2,426 ) — —

Comprehensive income attributable to Werner $ 261,281 $ 160,973 $ 168,289

See Notes to Consolidated Financial Statements.

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Property and equipment, at cost:

72,103 63,244

Land 77,172 72,103

Buildings and improvements 287,331 253,708

253,708 199,734

Revenue equipment 1,910,874 1,798,511

1,798,511 1,812,186

Service equipment and other 282,448 281,013

281,013 268,372

Total property and equipment 2,557,825 2,405,335

2,405,335 2,343,536

Less – accumulated depreciation 944,582 862,077

862,077 817,260

Property and equipment, net 1,613,243 1,543,258

1,543,258 1,526,276

Goodwill 74,618 —

Intangible assets, net 55,315 —

Other non-current assets 229,324 156,502

Total assets $ 2,603,713 $ 2,156,676

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Deferred income taxes 268,499 237,870

Total liabilities 1,240,216 961,636

Commitments and contingencies

Temporary equity - redeemable noncontrolling interest 35,947 —

Stockholders’ equity:

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Total stockholders’ equity 1,327,550 1,195,040

Total liabilities and stockholders’ equity $ 2,156,676 $ 2,143,864

Total liabilities, temporary equity and stockholders’ equity $ 2,603,713 $ 2,156,676

See Notes to Consolidated Financial Statements.

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Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 263,286 249,527 230,151

Depreciation and amortization 267,700 263,286 249,527

Deferred income taxes 29,488 ( 10,233 ) 16,401

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Other ( 3,105 ) 13,641 ( 3,360 )

Gains on investment in equity securities ( 40,317 ) — —

Changes in certain working capital items:

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Proceeds from sales of property and equipment 177,801 146,824 136,873

Net cash invested in acquisitions ( 201,845 ) — —

Investment in equity securities ( 10,000 ) ( 5,000 ) —

Decrease in notes receivable 7,593 7,966 11,566

Issuance of notes receivable — — ( 3,300 )

Net cash used in investing activities ( 397,301 ) ( 263,275 ) ( 272,309 )

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Proceeds from issuance of long-term debt 250,000 — 275,000

Change in net checks issued in excess of cash balances — — ( 21,539 )

Dividends on common stock ( 29,083 ) ( 24,888 ) ( 286,190 )

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Stock options exercised — — 171

Net cash used in financing activities ( 185,962 ) ( 155,219 ) ( 67,612 )

Distribution to noncontrolling interest ( 35 ) — —

Net cash provided by (used in) financing activities 89,668 ( 185,962 ) ( 155,219 )

Effect of exchange rate fluctuations on cash ( 324 ) ( 780 ) 396

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Income taxes paid 81,185 54,173 49,599

Supplemental schedule of non-cash investing activities:

Supplemental schedule of non-cash investing and financing activities:

Notes receivable issued upon sale of property and equipment $ 5,953 $ 3,441 $ 6,764

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Dividends accrued but not yet paid at end of period 7,895 6,114 6,232

Noncontrolling interest associated with acquisition 33,556 — —

Contingent consideration associated with acquisition 2,500 — —

(Continued on following page)

See Notes to Consolidated Financial Statements.

WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Consolidated Balance Sheets

Years Ended December 31,

(In thousands) 2021 2020 2019

Reconciliation of cash, cash equivalents and restricted cash:

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WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND

TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST

(In thousands, except share and per share amounts) Common

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Stockholders’

Equity Temporary Equity - Redeemable Noncontrolling Interest

BALANCE, December 31, 2018 $ 805 $ 107,455 $ 1,413,746 $ ( 16,073 ) $ ( 241,180 ) $ 1,264,753 $ —

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— — — — ( 42,301 ) ( 42,301 ) —

Dividends on common stock ($ 0.34 cents per share)

Dividends on common stock ($ 4.11 per share)

— — ( 286,082 ) — — ( 286,082 ) —

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Non-cash equity compensation expense — 8,077 — — — 8,077 —

Cumulative effect of accounting change — — 2,011 — — 2,011

BALANCE, December 31, 2019 805 112,649 1,294,608 ( 14,728 ) ( 282,326 ) 1,111,008 —

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Non-cash equity compensation expense — 10,807 — — — 10,807 —

Investment in noncontrolling interest — — — — — — 35,322

Purchase accounting adjustments — — — — — — ( 1,766 )

Distribution to noncontrolling interest — — — — — — ( 35 )

BALANCE, December 31, 2021 $ 805 $ 121,904 $ 1,667,104 $ ( 20,604 ) $ ( 441,659 ) $ 1,327,550 $ 35,947

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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation :

The accompanying consolidated financial statements include the accounts of Werner Enterprises, Inc.

and its subsidiaries (collectively, the “Company”).

All significant intercompany accounts and transactions relating to these entities have been eliminated.

Nature of Business :

Werner Enterprises, Inc.

(the “Company”) is a truckload transportation and logistics company operating under the jurisdiction of the U.S.

The Company is a truckload transportation and logistics provider operating under the jurisdiction of the U.S.

Department of Transportation, similar governmental transportation agencies in the foreign countries in which we operate and various U.S.

state regulatory authorities.

For the years ended December 31, 2020, 2019 and 2018, our ten largest customers comprised 49 %, 41 % and 45 %, respectively, of our revenues.

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

Our ten largest customers comprised 49 % of our revenues for the years ended December 31, 2021 and 2020, and 41 % for the year ended December 31, 2019.

Our largest customer, Dollar General, accounted for 14 % and 12 % of our total revenues in 2021 and 2020, respectively.

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

No single customer generated more than 9% of our total revenues in 2019 and 2018.

Principles of Consolidation :

The accompanying consolidated financial statements include the accounts of Werner Enterprises, Inc.

and our wholly-owned subsidiaries.

All significant intercompany accounts and transactions relating to these wholly-owned entities have been eliminated.

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

Use of Management Estimates :

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During first quarter 2020, we changed the estimated life of certain trucks expected to be sold in 2020 to more rapidly depreciate the trucks to their estimated residual values due to the weak used truck market.

The effect of this change in accounting estimate was a $ 9.6 million increase to 2020 depreciation expense.

The effect of this change in accounting estimate

was a $ 9.6 million increase to 2020 depreciation expense.

These trucks continued to depreciate at the same higher rate per truck, until all were sold in 2020.

Long-Lived Assets:

We review our long-lived assets for impairment whenever events or circumstances indicate the carrying amount of a long-lived asset may not be recoverable.

An impairment loss would be recognized if the carrying amount of the long-lived asset is not recoverable and the carrying amount exceeds its fair value.

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired in a business combination and is allocated to reporting units that are expected to benefit from the combination.

Goodwill is not amortized, but rather is tested for impairment annually in October, or more frequently if indicators of a potential impairment exist.

Impairment exists when the carrying amount of a reporting unit that includes goodwill exceeds its fair value, resulting in an impairment charge for the excess up to the amount of goodwill allocated to the reporting unit.

To test goodwill for impairment, we have the option to first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value.

If a qualitative test indicates a potential for impairment, a quantitative impairment test must be performed.

Alternatively, we may bypass the qualitative assessment and perform a quantitative impairment test.

A qualitative assessment considers relevant events and circumstances such as macroeconomic, industry, and market conditions;

legal, regulatory, and competitive environments;

and overall financial performance.

For a quantitative impairment test, we estimate the fair values of the goodwill reporting units and compare it to their carrying values.

The estimated fair values of the reporting units are established using a combination of the income and market approaches.

Our first annual goodwill impairment test is scheduled to be performed in October 2022.

As of December 31, 2021, there were no indications of goodwill impairment.

Amortization of Intangible Assets:

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives, ranging from ten to 12 years.

Long-Lived Assets and Intangible Assets:

We review our long-lived assets and finite-lived intangible assets for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable.

If based on that review, changes in circumstances indicate that the carrying amount of such assets may not be recoverable, we evaluate recoverability by comparing the undiscounted cash flows associated with the asset to the asset's carrying amount.

We also evaluate the remaining useful lives of intangible assets to determine if events or trends warrant a revision to the remaining period of amortization.

An impairment loss would be recognized if the carrying amount of the long-lived asset or intangible asset is not recoverable and the carrying amount exceeds its fair value.

For long-lived assets classified as held and used, the carrying amount is not recoverable when the carrying value of the long-lived asset exceeds the sum of the future net cash flows.

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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.

We renewed our liability insurance policies on August 1, 2020 and are now responsible for the first $ 10.0 million per claim on all claims with no annual aggregates.

We renewed our liability insurance policies on August 1, 2021 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 $ 15.0 million.

For the policy year that began August 1, 2020, we were responsible for the first $10.0 million per claim with no aggregates.

Our self-insured retention (“SIR”) and deductible amount was $ 3.0 million, with an additional $ 5.0 million deductible per claim for each claim between 5.0 million and $ 10.0 million, for policy years from August 1, 2017 through July 31, 2020, and we were also responsible for annual aggregate amounts of liability for claims in excess of the SIR/ deductible.

We maintain liability insurance coverage with insurance carriers in excess of the $ 10.0 million per claim, to coverage levels that our management considers adequate.

We maintain liability insurance coverage with insurance carriers in excess of the $ 10.0 million per claim.

We are also responsible for administrative expenses for each occurrence involving bodily injury or property damage.

Our SIR for workers’ compensation claims increased from $ 1.0 million to $ 2.0 million per claim on April 1, 2020, with premium-based insurance coverage (issued by insurance companies) for claims exceeding this amount.

Our SIR for workers’ compensation claims is $2.0 million per claim, with premium-based coverage (issued by insurance companies) for claims exceeding this amount.

Our SIR for workers’ compensation claims increased from $ 1.0 million to $ 2.0

million per claim on April 1, 2020.

We also maintain a $ 25.6 million bond for the State of Nebraska and a $ 13.4 million bond for our workers’ compensation insurance carrier.

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2021 2020 2019

Net income $ 169,078 $ 166,944 $ 168,148

Net income attributable to Werner $ 259,052 $ 169,078 $ 166,944

Weighted average common shares outstanding 67,434 69,018 69,567

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shares reacquired to satisfy tax withholding obligations upon vesting of restricted stock are recorded as treasury stock.

Grants of stock options, restricted stock, and performance awards vest in increments, and we recognize compensation expense over the requisite service period of each award.

Grants of stock options, restricted stock, and performance awards vest in

increments, and we recognize compensation expense over the requisite service period of each award.

We accrue compensation expense for performance awards for the estimated number of shares expected to be issued using the most current information available at the date of the financial statements.

If the performance objectives are not met, no compensation expense will be recognized, and any previously recognized compensation expense will be reversed.

We account for forfeitures in the period in which they occur.

Comprehensive Income :

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For the years ended December 31, 2021, 2020 and 2019, comprehensive income consists of net income, foreign currency translation adjustments and change in fair value of interest rate swaps.

The components of accumulated other comprehensive loss reported in the Consolidated Balance Sheets as of December 31, 2020, consisted of $ 17,198 of foreign currency translation adjustments and $ 5,635 related to our interest rate swaps.

The components of accumulated other comprehensive loss reported in the consolidated balance sheets as of December 31, 2021 and 2020, consisted of foreign currency translation adjustments of $ 18.6 million and $ 17.2 million, respectively, and changes in fair value of interest rate swaps, net of tax, of $ 2.0 million and $ 5.6 million, respectively.

New Accounting Pronouncements Adopted:

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “Leases,” to increase transparency and comparability by recognizing a right-of-use asset and a lease liability on the balance sheet and disclosing key information about leasing arrangements.

On January 1, 2019, we adopted ASU No.

2016-02 and related amendments, which is also known as Accounting Standards Codification (“ASC”) Topic 842, using the transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented.

We elected the following practical expedients upon adoption of ASU No.

not to reassess whether any existing contracts are or contain leases, not to reassess the lease classification for any existing leases, not to reassess initial direct costs for any existing leases and not to separately identify lease and non-lease components for all underlying classes of assets.

Additionally, we made a short-term lease accounting policy election to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less.

Adoption of the new standard resulted in recognition of right-of-use assets and corresponding lease liabilities of $ 8.7 million as of January 1, 2019.

The new standard did not have a significant impact on the consolidated statement of income.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Statements,” which requires measurement and recognition of expected versus incurred credit losses for financial assets.

We adopted ASU 2016-13 as of January 1, 2020.

Upon adoption, this update had no effect on our financial position, results of operations and cash flows.

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements on fair value measurements.

As part of its disclosure framework project, the FASB has eliminated, amended and added disclosure requirements for fair value measurements in Topic 820, Fair Value Measurement.

We adopted ASU 2018-13 as of January 1, 2020.

Upon adoption, this update had no effect on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force),” which updates the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract to align with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We adopted ASU 2018-15 as of January 1, 2020.

Upon adoption, this update had no effect on our financial position, results of operations and cash flows.

Accounting Standards Updates Not Yet Effective:

In December 2019, the FASB issued ASU No.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes,” which reduces complexity in accounting for income taxes by removing certain exceptions to the general principles stated in Topic 740 and by clarifying and amending existing guidance to improve consistent application of and simplify other areas of Topic 740.

The provisions of this update are effective for fiscal years beginning after December 15, 2020.

Based on our evaluation, the adoption of this standard will not have a material effect on our consolidated financial statements.

The Company adopted ASU 2019-12 as of January 1, 2021.

Upon adoption, this update had no effect on our financial position, results of operations, and cash flows.

Accounting Standards Updates Not Yet Effective:

In March 2020, the FASB issued ASU No.

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We are evaluating the impact of the optional expedients in this update and their applicability to modifications of our existing credit facilities and hedging relationships that reference LIBOR.

(2) BUSINESS ACQUISITIONS

ECM Acquisition

On July 1, 2021, pursuant to a Unit Purchase Agreement, we acquired an 80 % ownership interest in ECM Associated, LLC ("ECM”), based in Cheswick, Pennsylvania, for $ 141.3 million after net working capital changes and net of cash acquired.

We have an exclusive option to purchase the remaining 20 % ownership interest in ECM upon the occurrence of certain events or after a period of five years following transaction close, based on a fixed multiple of ECM’s average annual adjusted earnings before interest, taxes, depreciation and amortization.

The noncontrolling interest holder also has an option to put the remaining 20 % ownership interest to us on the same terms.

We record the 20 % remaining interest in temporary equity – redeemable noncontrolling interest in the consolidated balance sheets.

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

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

The primary reason for this acquisition was to expand our fleet size, operational facilities, geographic market presence, and short-haul expertise in a segment in which consumer demand and supply chain needs are growing.

We financed the cash transaction through a combination of cash on hand, existing credit facilities, and the addition of a $ 100.0 million unsecured fixed-rate term loan commitment with BMO Harris Bank N.A.

on June 30, 2021.

For more information regarding our debt, see Note 8 – Debt and Credit Facilities.

The results of operations for ECM are included in our consolidated financial statements beginning July 1, 2021.

Revenues generated by ECM are reported in our Truckload Transportation Services (“TTS”) segment.

We incurred transaction costs related to the acquisition, such as legal and professional fees, of $ 1.0 million for the year ended December 31, 2021, which is included in other operating expenses on the consolidated statements of income.

NEHDS Acquisition

On November 22, 2021, we acquired 100 % of the equity interests in NEHDS Logistics, LLC (“NEHDS”), based in Monroe, Connecticut, for a cash purchase price of $ 63.1 million after including the impacts of contingent consideration, net working capital changes and cash acquired.

We financed the transaction through a combination of cash on hand and existing credit facilities.

NEHDS is a final mile residential delivery provider with access to a network of 400 final mile delivery trucks serving

customers primarily in the Northeast and Midwest U.S.

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

The results of operations for NEHDS are included in our consolidated financial statements beginning November 22, 2021.

Revenues generated by NEHDS are reported in Final Mile within our Werner Logistics segment.

We incurred transaction costs related to the acquisition, such as legal and professional fees, of $ 0.6 million for the year ended December 31, 2021, which is included in other operating expenses on the consolidated statements of income.

Purchase Price Allocations

We accounted for the purchases of ECM and NEHDS using the acquisition method of accounting under U.S.

generally accepted accounting principles (GAAP).

The purchase price of each acquisition has been allocated to the assets acquired and liabilities assumed using market data and valuation techniques.

The purchase price allocation for ECM is considered final.

The estimated fair values of the assets acquired and liabilities assumed are considered provisional for NEHDS, pending the completion of the valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, and the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed.

The determination of estimated fair values requires management to make significant estimates and assumptions.

We believe that the information available provides a reasonable basis for estimating the values of assets acquired and liabilities assumed in the NEHDS acquisition;

however, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the acquisition date, and such adjustments may impact future earnings.

We expect to finalize the valuation of assets and liabilities for NEHDS as soon as practicable, but not later than one year from the acquisition date.

Any adjustments to the initial estimates of the fair value of the acquired assets and liabilities assumed in the NEHDS acquisition will be recorded as adjustments to the respective assets and liabilities, with the residual amounts allocated to goodwill.

The purchase price allocations for ECM and NEHDS as of December 31, 2021 are summarized as follows (in thousands):

Purchase Price

Cash consideration paid 155,686 (1)

Cash and cash equivalents acquired ( 13,327 ) ( 332 )

Contingent consideration arrangement — 2,500 (3)

Working capital surplus (deficiency) ( 1,068 ) 554

Total purchase price (fair value of consideration) 141,291 63,054

Provisional Purchase Price Allocation

Current assets 17,468 3,508

Property and equipment 88,632 5,420

Intangible assets 37,200 20,000

Other non-current assets 3,644 12,122

Total assets acquired 146,944 41,050

Current liabilities ( 7,721 ) ( 4,014 )

Other long-term liabilities ( 2,460 ) ( 10,516 )

Total liabilities assumed ( 10,181 ) ( 14,530 )

Temporary equity - redeemable noncontrolling interest in ECM ( 33,556 ) —

Goodwill $ 38,084 $ 36,534

(1) At closing, $1.5 million of the cash consideration was placed in escrow to cover post-closing adjustments and to secure certain indemnification obligations of the sellers.

(2) At closing, $3.1 million of the cash consideration was placed in escrow to cover post-closing adjustments and to secure certain indemnification obligations of the sellers.

(3) The contingent consideration arrangement, also referred to as earnout, requires us to pay the former owners of NEHDS additional amounts in cash if certain levels of gross profit and revenues are earned during calendar year 2022.

The potential undiscounted amount of all future earnout payments that we could be required to make is between $0 and $4.0 million.

The fair value of the contingent consideration arrangement of $2.5 million was estimated by management.

Goodwill and Intangible Assets

Goodwill associated with the ECM and NEHDS acquisitions was primarily attributable to acquiring and retaining each of the companies’ existing networks and the anticipated synergies from combining the operations of the Company and the acquired companies.

The goodwill associated with the acquisitions above is expected to be deductible for income tax purposes.

We have allocated a total of $ 57.2 million of the purchase prices above to finite-lived intangible assets, consisting of customer relationships and trade names.

The estimated fair values of the intangible assets were determined, with the assistance of an independent third-party valuation firm, using the multi-period excess earnings method for customer relationships and the relief-from-royalty method for trade names.

All methods are forms of the income approach, which require a forecast of all the expected future cash flows.

The following table summarizes the major classes of intangible assets and the respective weighted-average estimated amortization periods:

Estimated Fair Value

(in thousands) Weighted-Average Estimated

Amortization Period

Customer relationships $ 40,200 10

Trade names 17,000 12

Total intangible assets $ 57,200

Revenue Recognition

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Our performance obligation arises when we receive a shipment order to transport a customer’s freight and is satisfied upon delivery of the shipment.

The transaction price may be defined in a transportation services agreement or negotiated with the customer prior to accepting the shipment order.

The transaction price may be defined in a

transportation services agreement or negotiated with the customer prior to accepting the shipment order.

A customer may submit several shipment orders for transportation services at various times throughout a service agreement term, but each shipment represents a distinct service that is a separately identified performance obligation.

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Other revenues include revenues from our driver training schools, transportation-related activities such as third-party equipment maintenance and equipment leasing, and other business activities.

These revenues are generally recognized over time and accounted for 2% of our total revenues in 2020 and 3% of our total revenues in 2019.

These revenues are generally recognized over time and accounted for 2 % of our total revenues in both 2021 and 2020, and 3 % of our total revenues in 2019.

Revenues from our driver training schools require us to make judgments regarding price concessions in determining the amount of revenues to recognize.

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At December 31, 2021 and 2020, the balance of contract assets was $ 9.0 million and $ 6.9 million, respectively.

We have recognized contract assets within the other current assets financial statement caption on the balance sheet.

We have recognized contract assets within the other current assets financial statement caption on the consolidated balance sheets.

These contract assets are considered current assets as they will be settled in less than 12 months.

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The amount of revenues recognized in 2021 that was included in the December 31, 2020 contract liability balance was $ 1.5 million.

We have recognized contract liabilities within the accounts payable and other current liabilities financial statement captions on the balance sheet.

We have recognized contract liabilities within the accounts payable and other current liabilities financial statement captions on the consolidated balance sheets.

These contract liabilities are considered current liabilities as they will be settled in less than 12 months.

Performance Obligations

We have elected to apply the practical expedient in ASC Topic 606 to not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less.

Remaining performance obligations represent the transaction price allocated to future reporting periods for freight shipments started but not completed at the reporting date that we expect to recognize as revenues in the period subsequent to the reporting date;

We have elected to apply the practical expedient in Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts With Customers , to not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less.

transit times generally average approximately 3 days.

(4) GOODWILL AND INTANGIBLE ASSETS

The following table summarizes changes in the carrying amount of goodwill by segment for the year ended December 31, 2021 (in thousands):

TTS Werner Logistics Total

Balance as of December 31, 2020 $ — $ — $ —

Goodwill recorded in acquisition of ECM 44,710 — 44,710

Goodwill recorded in acquisition of NEHDS — 36,534 36,534

Purchase accounting adjustments (1)

( 6,626 ) — ( 6,626 )

Balance as of December 31, 2021 $ 38,084 $ 36,534 $ 74,618

(1) The purchase accounting adjustments are primarily attributable to post-closing adjustments related to assets assumed in, and the redeemable noncontrolling interest associated with, the acquisition of ECM.

Acquired intangible assets consists of the following as of December 31, 2021 (in thousands):

Amount Accumulated

Amortization Net

Customer relationships $ 40,200 $ ( 1,177 ) $ 39,023

Trade names 17,000 ( 708 ) 16,292

Total intangible assets $ 57,200 $ ( 1,885 ) $ 55,315

No acquired intangible assets were recorded on the consolidated balance sheet as of December 31, 2020.

Amortization expense on intangible assets was $ 1.9 million for the year ended December 31, 2021.

As of December 31, 2021, the estimated future amortization expense for intangible assets by year is as follows (in thousands):

Thereafter (to 2033) 28,130

Total $ 55,315

We have entered into operating leases primarily for real estate.

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Renewal terms are included in the lease term when it is reasonably certain that we will exercise the option to renew.

Operating leases are included in the other non-current assets, other current liabilities and other long-term liabilities on the consolidated balance sheets.

These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using our incremental borrowing rate because the rate implicit in each lease in not readily determinable.

Operating leases are included in other non-current assets, other current liabilities and other long-term liabilities on the consolidated balance sheets.

We have certain contracts for real estate that may contain lease and non-lease components which we have elected to treat as a single lease component.

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Lease expense is reported in rent and purchased transportation on the consolidated statements of income.

The following table presents information about the amount, timing and uncertainty of cash flows arising from our operating leases as of December 31, 2020 .

(In thousands) December 31, 2020

Maturity of Lease Liabilities

Thereafter 473

Total undiscounted operating lease payments $ 11,062

Imputed interest ( 692 )

Present value of operating lease liabilities $ 10,370

The following table presents balance sheet and other operating lease information (dollars in thousands):

Balance Sheet Classification

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Other Information

Weighted-average remaining lease term for operating leases 3.82 years

Weighted-average remaining lease term for operating leases 7.63 years 3.82 years

Weighted-average discount rate for operating leases 2.7 % 3.3 %

The following table presents the maturities of operating lease liabilities as of December 31, 2021 (in thousands):

Maturity of Lease Liabilities

Thereafter 8,077

Total undiscounted operating lease payments $ 32,065

Imputed interest ( 3,051 )

Present value of operating lease liabilities $ 29,014

An initial right-of-use asset of $ 8.7 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard on January 1, 2019.

During the years ended December 31, 2020 and December 31, 2019, additional right-of-use assets of $ 2.8 million and $ 6.1 million were recognized as non-cash asset additions that resulted from new operating lease liabilities.

Cash paid for amounts included in the present value of operating lease liabilities was $ 3.9 million and $ 3.8 million during the years ended December 31, 2020 and December 31, 2019, respectively, and is included in operating cash flows.

During the years ended December 31, 2021 , 2020, and 2019, additional right-of-use assets of $ 8.2 million, $ 2.8 million, and $ 6.1 million, respectively, were recognized as non-cash asset additions that resulted from new operating lease liabilities, and we acquired right-of-use assets of $ 15.6 million as a result of our business acquisitions during the year ended December 31, 2021 .

Cash paid for amounts included in the present value of operating lease liabilities was $ 4.6 million, $ 3.9 million, and $ 3.8 million during the years ended December 31, 2021 , 2020, and 2019, respectively, and are included in operating cash flows.

Operating Lease Expense

Operating lease expense was $ 6.8 million and $ 8.5 million during the years ended December 31, 2020 and December 31, 2019, respectively.

This expense included $ 3.8 million for long-term operating leases for both years ended December 31, 2020 and December 31, 2019, respectively, with the remainder for variable and short-term lease expense .

Operating lease expense was $ 15.7 million, $ 10.1 million, and $ 8.5 million during the years ended December 31, 2021 , 2020, and 2019, respectively.

This expense included $ 4.8 million for long-term operating leases for the year ended December 31, 2021 and $ 3.8 million for both years ended December 31, 2020 and 2019, with the remainder for variable and short-term lease expense .

Lessor Operating Leases

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We recognize revenue for such leases on a straight-line basis over the term of the lease.

Revenues for the years ended December 31, 2020 and December 31, 2019 were $ 12.6 million and $ 13.9 million, respectively.

The following table presents information about the maturities of these operating leases as of December 31, 2020 .

(In thousands) December 31, 2020

Revenues for the years ended December 31, 2021 , 2020, and 2019 were $ 11.7 million, $ 12.6 million, and $ 13.9 million, respectively.

The following table presents information about the maturities of these operating leases as of December 31, 2021 (in thousands):

Total $ 7,826

(6) FAIR VALUE

Fair Value Measurement — Definition and Hierarchy

ASC 820-10, Fair Value Measurement , defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company.

Unobservable inputs reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Such inputs include quoted prices in markets that are not active, quoted prices for similar assets and liabilities in active and inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 — Unobservable inputs for the asset or liability, where there is little, if any, observable market activity or data for the asset or liability.

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value.

This pricing methodology applies to our Level 1 assets and liabilities.

If quoted prices in active markets for identical assets and liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable, either directly or indirectly.

This pricing methodology would apply to Level 2 assets and liabilities.

The following table presents the Company's fair value hierarchy for assets measured at fair value on a recurring basis (in thousands):

Level in Fair December 31,

Value Hierarchy 2021 2020

Other non-current assets:

Equity securities (1)

1 $ 17,166 N/A

(1) Represents our investments in autonomous technology companies.

For additional information regarding the valuation of these equity securities, see Note 7 – Investments.

We have no material liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020.

Our ownership interest in Mastery Logistics Systems, Inc.

(“MLSI”) does not have a readily determinable fair value and is accounted for using the measurement alternative in ASC 321, Investments - Equity Securities .

For additional information regarding the valuation of our investment in MLSI, see Note 7 – Investments.

Fair Value of Financial Instruments Not Recorded at Fair Value

Cash, accounts receivable trade, and accounts payable are short-term in nature and accordingly are carried at amounts that approximate fair value.

These financial instruments are recorded at or near their respective transaction prices and historically have been settled or converted to cash at approximately that value (categorized as Level 2 of the fair value hierarchy).

The carrying amounts of our long-term debt approximate fair value due to the duration of our credit arrangements and the variable interest rates (categorized as Level 2 of the fair value hierarchy).

(7) INVESTMENTS

Investment in Mastery Logistics Systems, Inc.

On November 19, 2020, we entered into a strategic partnership with Mastery Logistics Systems, Inc.

(“MLSI”), a transportation technology development company, which included an agreement that allows us to purchase a non-controlling interest in MLSI.

Equity Investments without Readily Determinable Fair Values

In 2020, we entered into a strategic partnership with MLSI, a transportation management systems company.

We are collaborating with MLSI to develop a cloud-based transportation management system using MLSI's SaaS technology which we have agreed to license.

In the year ended December 31, 2020, we paid MLSI $ 5.0 million for shares of preferred stock of MLSI which represent approximately 5 % ownership in MLSI.

This investment is being accounted for under ASC 321, Investments - Equity Securities and is recorded in other noncurrent assets on the consolidated balance sheet.

As of December 31, 2020, no events have occurred that would indicate that the value of our investment in MLSI has changed.

Subsequent Event - Investment in TuSimple

On January 8, 2021, we made an equity investment in TuSimple, an autonomous trucking technology company.

Our non-controlling interest will be accounted for under ASC 321, Investments - Equity Securities.

(5) CREDIT FACILITIES

As of December 31, 2020, we had unsecured committed credit facilities with two banks.

We had with Wells Fargo Bank, N.A.

a $ 300.0 million credit facility which will expire on May 14, 2024 .

On October 20, 2020, we amended our agreement with Wells Fargo Bank, N.A.

to increase the maximum amount of outstanding letters of credit.

We also had a $ 200.0 million credit facility with BMO Harris Bank N.A., which will expire on May 14, 2024 .

Our unsecured line of credit with U.S.

expired on July 13, 2020.

Borrowings under these credit facilities bear variable interest based on the London Interbank Offered Rate (“LIBOR”).

In both November 2020 and September 2021, we paid MLSI $5.0 million for shares of its preferred stock.

As of December 31, 2021 , our ownership percentage in MLSI was approximately 9.8 %.

This investment is being accounted for under ASC 321 using the measurement alternative, and is recorded in other noncurrent assets on the consolidated balance sheets.

We record changes in the value of this investment, based on events that occur that would indicate the value of our investment in MLSI has changed, in other expense (income) on the consolidated statements of income.

During 2021, an investment by a third-party resulted in the remeasurement of our investment in MLSI and we recognized a $ 28.2 million unrealized gain on our investment based upon the price paid by the third party.

As of December 31, 2021 and 2020, the value of our investment was $ 38.2 million and $ 5.0 million, respectively.

Equity Investments with Readily Determinable Fair Values

During 2021, we acquired strategic minority equity investments in autonomous technology companies, which are being accounted for under ASC 321 and are recorded in other noncurrent assets on the consolidated balance sheets.

We record changes in the value of these investments, based on the share prices reported by Nasdaq, in other expense (income) on the consolidated statements of income.

We recognized a $ 12.1 million net unrealized gain on these investments for the year ended December 31, 2021.

For additional information regarding the fair value of these equity investments, see Note 6 – Fair Value.

(8) DEBT AND CREDIT FACILITIES

On June 30, 2021, we amended our existing credit agreement, dated May 14, 2019, with BMO Harris Bank N.A.

The amendment added an unsecured fixed-rate term loan commitment not to exceed a principal amount of $ 100.0 million and increased our borrowing capacity with BMO Harris Bank N.A.

from $ 200.0 million to $ 300.0 million.

The outstanding principal balance of the term loan bears interest at a fixed rate of 1.28 % .

As of December 31, 2021 , we had a $ 300.0 million and a $ 200.0 million unsecured committed credit facility with Wells Fargo Bank, N.A.

and BMO Harris Bank N.A.

(together, the “Credit Facilities”), respectively, which will expire on May 14, 2024 .

Borrowings under the Credit Facilities bear variable interest based on the London Interbank Offered Rate (“LIBOR”).

In addition, we had a $ 100.0 million unsecured fixed-rate term loan commitment with BMO Harris Bank N.A., as described above, with quarterly principal payments of $ 1.25 million, which began on September 30, 2021, and a final payment of principal and interest due and payable on May 14, 2024 .

As of December 31, 2021 and 2020, our outstanding debt totaled $ 427.5 million and $ 200.0 million, respectively.

We had $ 50.0 million outstanding under the credit facilities at a weighted average variable interest rate of 0.82 % as of December 31, 2020.

We had (i) an additional $ 75.0 million outstanding under the Wells Fargo Bank, N.A.

credit facility at a variable rate of 0.83 % as of December 31, 2020, which is effectively fixed at 2.32 % with an interest rate swap agreement through May 14, 2024 and (ii) an additional $ 75.0 million outstanding under the BMO Harris Bank N.A.

credit facility at a variable rate of 0.85 % as of December 31, 2020, which is effectively fixed at 2.36 % with an interest rate swap agreement through May 14, 2024 .

Subsequent to the end of the year, in January 2021, we repaid $ 25.0 million of debt, which we classified as current in the Consolidated Balance Sheets.

As of December 31, 2021 , we had $ 330.0 million outstanding under the Credit Facilities, including (i) $ 180.0 million at a weighted average variable interest rate of 0.78 %;

(ii) $ 75.0 million at a variable interest rate of 0.78 %, which is effectively fixed at 2.32 % with an interest rate swap agreement through May 14, 2024 ;

and (iii) $ 75.0 million at a variable interest rate of 0.80 %, which is effectively fixed at 2.36 % with an interest rate swap agreement through May 14, 2024 .

In addition, as of December 31, 2021 , we had $ 97.5 million outstanding under the term loan at a fixed interest rate of 1.28 %.

The $ 500.0 million of borrowing capacity under our Credit Facilities at December 31, 2021 , is further reduced by $ 54.9 million in stand-by letters of credit under which we are obligated.

Each of the debt agreements includes, among other things, financial covenants requiring us (i) to exceed a minimum ratio of earnings before interest, income taxes, depreciation and amortization to interest expense and/or (ii) not to exceed a maximum ratio of total funded debt to earnings before interest, income taxes, depreciation and amortization (as such terms are defined in each credit facility).

At December 31, 2020, we were in compliance with these covenants.

As of December 31, 2021 , we were in compliance with these covenants.

At December 31, 2021, the aggregate future maturities of long-term debt by year are as follows (in thousands):

2021 $ 25,000

Total $ 427,500

The carrying amounts of our long-term debt approximate fair value due to the duration of the notes and the variable interest rates.

(9) NOTES RECEIVABLE

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State income taxes, net of federal tax benefits 11,599 8,580 8,575

Non-deductible meals and entertainment 903 1,117 1,044

Income tax credits ( 1,200 ) ( 1,600 ) ( 1,800 )

Equity compensation ( 821 ) ( 207 ) ( 312 )

Other, net (1)

275 ( 150 ) ( 213 )

Total income tax expense $ 84,537 $ 55,616 $ 54,962

(1) Prior year amounts within the table have been reclassified to conform to current year presentation.

At December 31, deferred income tax assets and liabilities consisted of the following (in thousands):

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Allowance for uncollectible accounts 3,958 4,070

Other 5,374 1,863

Operating lease liabilities (1)

Gross deferred income tax assets 80,071 80,411

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Property and equipment 305,002 308,145

Investments in equity securities 10,985 —

Prepaid expenses 7,269 6,333

Other 3,803 1,323

Operating lease right-of-use assets (1)

Investment in partnership 17,076 —

Gross deferred income tax liabilities 348,570 318,281

Net deferred income tax liability $ 268,499 $ 237,870

(1) Prior year amounts within the table have been reclassified to conform to current year presentation.

Deferred income tax assets are more likely than not to be realized as a result of future taxable income and reversal of deferred income tax liabilities.

We recognized a $ 141 thousand decrease in the net liability for unrecognized tax benefits for the year ended December 31, 2020, and a $ 31 thousand decrease for the year ended December 31, 2019.

We recognized a $ 49 thousand increase in the net liability for unrecognized tax benefits for the year ended December 31, 2021, and a $ 141 thousand decrease for the year ended December 31, 2020.

We accrued interest expense of $ 0.1 million during 2021 and 2020, excluding from both years the reversal of accrued interest related to the adjustment of uncertain tax positions.

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Interest of $ 0.4 million as of December 31, 2021 and 2020 has been reflected as a component of the total liability.

We expect no other significant increases or decreases for uncertain tax positions during the next twelve months.

We expect no other significant increases or decreases for uncertain tax positions during the next 12 months.

The reconciliations of beginning and ending gross balances of unrecognized tax benefits for 2021 and 2020 are shown below (in thousands).

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(11) EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS

Equity Compensation Plan

The Werner Enterprises, Inc.

Amended and Restated Equity Plan (the “Equity Plan”), approved by the Company’s shareholders, provides for grants to employees and non-employee directors of the Company in the form of nonqualified stock options, restricted stock and units (“restricted awards”), performance awards and stock appreciation rights.

Amended and Restated Equity Plan (the “Equity Plan”), approved by the Company’s shareholders in 2013, provides for grants to employees and non-employee directors of the Company in the form of nonqualified stock options, restricted stock and units (“restricted 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.

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Performance award expense, net of tax $ 3,339 $ 2,610 $ 2,353

We do not have a formal policy for issuing shares for equity compensation.

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.

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Stock options are granted at prices equal to the market value of the common stock on the date the option award is granted.

No stock option awards were outstanding as of December 31, 2020, and there were no stock option awards granted or exercised during the year ended December 31, 2020.

No stock options were granted during the years ended December 31, 2019 or 2018, and the total intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was $ 136 thousand and $ 484 thousand, respectively.

No stock option awards were outstanding as of December 31, 2021 or 2020, and there were no stock option awards granted or exercised during the years ended December 31, 2021 or 2020.

No stock options were granted during the year ended December 31, 2019, and the total intrinsic value of stock options exercised during the year ended December 31, 2019 was $ 136 thousand.

Restricted Awards

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The 2021 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, 2021 to December 31, 2022.

Shares earned based on cumulative diluted earnings per share may be capped based on absolute total shareholder return during the three-year period ended December 31, 2022.

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, 2023, relative to the total shareholder return of a peer group of companies for the same period.

The 2021 performance awards will vest in one installment on the third anniversary from the grant date.

The 2020 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, 2020 to December 31, 2021.

Shares earned based on cumulative diluted earnings per share may be capped based on absolute total shareholder return during the three-year period ended December 31, 2021.

Shares earned based on cumulative diluted earnings per share may be capped based on the absolute total shareholder return during the three-year period ended December 31, 2022.

The 2020 performance awards will vest in one installment on the third anniversary from the grant date.

In January 2021, the Compensation Committee determined the 2018 fiscal year performance objectives were achieved at a level above the target level, and the additional shares earned above the target are included in the granted shares in the activity table above.

In January 2022, the Compensation Committee determined the 2019 fiscal year performance objectives were achieved at a level above the threshold level but below the target level, and the amount of shares earned below the target are included in the forfeited 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 vesting date fair value of the performance awards vested during the years ended December 31, 2020, 2019 and 2018 was $ 5.8 million, $ 1.2 million and $ 1.3 million, respectively.

The vesting date fair value of performance awards that vested during the years ended December 31, 2021, 2020 and 2019 was $ 4.1 million, $ 5.8 million and $ 1.2 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.

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Under the Company’s insurance policies in effect on the date of this accident, the Company’s maximum liability for this accident is $ 10.0 million (plus pre-judgment and post-judgment interest) with premium-based coverage that exceeds the jury verdict amount.

As a result of this jury verdict, the Company had recorded a liability of $ 23.6 million as of December 31, 2020, and $ 18.8 million as of December 31, 2019.

Under the terms of the Company’s insurance policies, the Company is the primary obligor of the verdict, and as such, the Company has also recorded a $ 79.2 million receivable from its third-party insurance providers in other non-current assets and a corresponding liability of the same amount in the long-term portion of insurance and claims accruals in the consolidated balance sheets as of December 31, 2020 and December 31, 2019.

As a result of this jury verdict, the Company had recorded a liability of $ 28.8 million and $ 23.6 million as of December 31, 2021 and 2020, respectively.

The Company is pursuing an appeal of this verdict.

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As a result of various post-trial motions, the court awarded $ 0.5 million to the plaintiffs for attorney fees and costs.

As of December 31, 2020, we had accrued for the jury’s award, attorney fees and costs in the short break matter and had not accrued for the sleeper berth matter.

Plaintiffs appealed the post-verdict amounts awarded by the trial court for fees, costs and liquidated damages.

Plaintiffs appealed the post-verdict amounts awarded by the trial court for fees, costs and liquidated damages, and the Company filed a cross appeal on the verdict that was in plaintiffs’ favor.

The United States Court of Appeals for the Eighth Circuit denied Plaintiffs’ appeal and granted Werner’s appeal, vacating the judgment in favor of the plaintiffs.

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On June 22, 2020, the trial court denied Plaintiffs’ request for a new trial and entered judgment in favor of the Company, dismissing the case with prejudice.

On July 21, 2020, Plaintiffs’ counsel filed a notice of appeal of that dismissal.

On July 21, 2020, Plaintiffs’ counsel filed a notice of appeal of that dismissal, and that appeal remains pending.

As of December 31, 2021 , we have an accrual for the jury’s award, attorney fees and costs in the short break matter and had not accrued for the sleeper berth matter.

We are also involved in certain class action litigation in which the plaintiffs allege claims for failure to provide meal and rest breaks, unpaid wages, unauthorized deductions and other items.

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(13) RELATED PARTY TRANSACTIONS

The Company leases land from a trust in which the Company’s Chairman is the sole trustee.

The Company leases land from a trust in which the Company’s Chairman Emeritus is the sole trustee.

The annual rent payments under this lease are $ 1.00 per year.

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(14) SEGMENT INFORMATION

We have two reportable segments – Truckload Transportation Services (“TTS”) and Werner Logistics.

We have two reportable segments – Truckload Transportation Services and Werner Logistics.

The TTS segment consists of two operating units, Dedicated and One-Way Truckload.

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(ii) the expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams;

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

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

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

Revenues for the TTS segment include a small amount of non-trucking revenues which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico where we utilize a third-party capacity provider.

The Werner Logistics segment generates the majority of our non-trucking revenues through four operating units that provide non-trucking services to our customers.

These four Werner Logistics operating units are as follows:

The Werner Logistics segment generates the majority of our non-trucking revenues through three operating units that provide non-trucking services to our customers.

These three Werner Logistics operating units are as follows:

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

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

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

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

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

In first quarter 2021, we completed the previously-announced sale of the Werner Global Logistics (“WGL”) freight forwarding services for international ocean and air shipments to Scan Global Logistics Group, and we realized a $ 1.0 million gain when the transaction closed on February 26, 2021.

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

We generate other revenues from our driver training schools, transportation-related activities such as third-party equipment maintenance and equipment leasing, and other business activities.

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We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment.

Inter-segment eliminations in the table below represent transactions between reporting segments that are eliminated in consolidation.

The following table summarizes our segment information (in thousands):

Based on our operations, certain revenue-generating assets (primarily tractors and trailers) are interchangeable between segments.

Depreciation for these interchangeable assets is allocated to segments based on the actual number of units utilized by the segment during the period.

Other depreciation and amortization is allocated to segments based on specific identification or as a percentage of a metric such as average number of tractors.

Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation.

The following tables summarize our segment information (in thousands):

Years Ended December 31,

2021 2020 2019

Revenues by Segment

Truckload Transportation Services $ 2,045,073 $ 1,843,209 $ 1,909,776

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Total $ 2,734,372 $ 2,372,178 $ 2,463,701

Operating Income

Years Ended December 31,

2021 2020 2019

Operating Income (loss) by Segment

Truckload Transportation Services $ 281,823 $ 222,007 $ 202,660

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Total $ 309,146 $ 227,438 $ 225,472

Years Ended December 31,

2021 2020 2019

Depreciation and Amortization by Segment

Truckload Transportation Services $ 245,169 $ 239,858 $ 228,768

Werner Logistics 8,833 7,712 7,182

Other 10,786 11,705 10,980

Corporate 2,912 4,011 2,597

Total $ 267,700 $ 263,286 $ 249,527

Information about the geographic areas in which we conduct business is summarized below (in thousands) as of and for the years ended December 31, 2021, 2020 and 2019.

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We generate substantially all of our revenues within the United States or from North American shipments with origins or destinations in the United States.

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

Our largest customer, Dollar General, accounted for 14 % and 12 % of our total revenues in 2021 and 2020, respectively.

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

No single customer generated more than 9% of our total revenues in 2019 and 2018.

(12) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter

Operating revenues $ 592,703 $ 568,959 $ 590,214 $ 620,302

Operating income 31,066 52,818 62,103 81,451

Net income 23,058 39,132 46,332 60,556

Basic earnings per share 0.33 0.57 0.67 0.88

Diluted earnings per share 0.33 0.56 0.67 0.88

(In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter

Operating revenues $ 596,117 $ 627,533 $ 618,264 $ 621,787

Operating income 48,019 58,442 53,357 65,654

Net income 36,086 43,318 39,044 48,496

Basic earnings per share 0.51 0.62 0.56 0.70

Diluted earnings per share 0.51 0.62 0.56 0.70

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

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data