WERNER ENTERPRISES INC 10-Q

Item 1. Financial Statements. WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended March 31, (In thousands, except per share amounts) 2022 2021 (Unaudited) Operating revenues $ 764,605 $ 616,446 Operating expenses: Salaries, wages and benefits 241,996 204,853 Fuel 88,421 50,838 Supplies and maintenance 57,025 46,147 Taxes and licenses 23,833 23,233 Insurance and claims 27,492 22,056 Depreciation and amortization 67,229 63,951 Rent and purchased transportation 185,237 146,493 Communications and utilities 3,926 3,022 Other ( 14,065 ) ( 6,618 ) Total operating expenses 681,094 553,975 Operating income 83,511 62,471 Other expense (income): Interest expense 1,439 838 Interest income ( 275 ) ( 297 ) Loss on investments in equity securities 9,806 — Other 73 42 Total other expense (income) 11,043 583 Income before income taxes 72,468 61,888 Income tax expense 17,433 15,396 Net income 55,035 46,492 Net income attributable to noncontrolling interest ( 1,286 ) — Net income attributable to Werner $ 53,749 $ 46,492 Earnings per share: Basic $ 0.82 $ 0.68 Diluted $ 0.82 $ 0.68 Weighted-average common shares outstanding: Basic 65,543 67,932 Diluted 65,878 68,223 See Notes to Consolidated Financial Statements (Unaudited). 4 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended March 31, (In thousands) 2022 2021 (Unaudited) Net income $ 55,035 $ 46,492 Other comprehensive income (loss): Foreign currency translation adjustments 1,153 ( 1,568 ) Change in fair value of interest rate swaps, net of tax 3,631 1,303 Other comprehensive income (loss) 4,784 ( 265 ) Comprehensive income 59,819 46,227 Comprehensive income attributable to noncontrolling interest ( 1,286 ) — Comprehensive income attributable to Werner $ 58,533 $ 46,227 See Notes to Consolidated Financial Statements (Unaudited). 5 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands, except share amounts) March 31, 2022 December 31, 2021 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 125,949 $ 54,196 Accounts receivable, trade, less allowance of $ 9,539 and $ 9,169 , respectively 449,602 460,518 Other receivables 25,907 24,449 Inventories and supplies 12,105 11,140 Prepaid taxes, licenses and permits 13,716 17,549 Other current assets 51,075 63,361 Total current assets 678,354 631,213 Property and equipment 2,600,896 2,557,825 Less – accumulated depreciation 991,296 944,582 Property and equipment, net 1,609,600 1,613,243 Goodwill 74,404 74,618 Intangible assets, net 53,956 55,315 Other non-current assets 232,712 229,324 Total assets $ 2,649,026 $ 2,603,713 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 113,657 $ 93,987 Current portion of long-term debt 5,000 5,000 Insurance and claims accruals 66,818 72,594 Accrued payroll 50,367 44,333 Accrued expenses 30,061 28,758 Other current liabilities 24,368 24,011 Total current liabilities 290,271 268,683 Long-term debt, net of current portion 421,250 422,500 Other long-term liabilities 47,757 43,314 Insurance and claims accruals, net of current portion 241,690 237,220 Deferred income taxes 269,361 268,499 Total liabilities 1,270,329 1,240,216 Commitments and contingencies Temporary equity - redeemable noncontrolling interest 37,233 35,947 Stockholders’ equity: Common stock, $ 0.01 par value, 200,000,000 shares authorized; 80,533,536 shares issued; 65,057,763 and 65,790,112 shares outstanding, respectively 805 805 Paid-in capital 121,157 121,904 Retained earnings 1,713,046 1,667,104 Accumulated other comprehensive loss ( 15,820 ) ( 20,604 ) Treasury stock, at cost; 15,475,773 and 14,743,424 shares, respectively ( 477,724 ) ( 441,659 ) Total stockholders’ equity 1,341,464 1,327,550 Total liabilities, temporary equity and stockholders’ equity $ 2,649,026 $ 2,603,713 See Notes to Consolidated Financial Statements (Unaudited). 6 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, (In thousands) 2022 2021 (Unaudited) Cash flows from operating activities: Net income $ 55,035 $ 46,492 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 67,229 63,951 Deferred income taxes ( 254 ) 3,487 Gain on disposal of property and equipment ( 20,458 ) ( 10,520 ) Non-cash equity compensation 3,026 2,502 Insurance and claims accruals, net of current portion 4,470 4,212 Other ( 2,080 ) 1,285 Loss on investments in equity securities 9,806 — Changes in certain working capital items: Accounts receivable, net 11,279 ( 6,798 ) Other current assets 13,152 551 Accounts payable 12,330 18,481 Other current liabilities 1,422 12,224 Net cash provided by operating activities 154,957 135,867 Cash flows from investing activities: Additions to property and equipment ( 73,629 ) ( 82,555 ) Proceeds from sales of property and equipment 36,555 44,689 Net cash invested in acquisition 705 — Investment in equity securities — ( 5,000 ) Decrease in notes receivable 1,831 1,575 Net cash used in investing activities ( 34,538 ) ( 41,291 ) Cash flows from financing activities: Repayments of short-term debt ( 1,250 ) ( 25,000 ) Repayments of long-term debt ( 100,000 ) — Proceeds from issuance of long-term debt 100,000 — Dividends on common stock ( 7,895 ) ( 6,114 ) Repurchases of common stock ( 36,180 ) ( 5,507 ) Tax withholding related to net share settlements of restricted stock awards ( 3,658 ) ( 3,740 ) Net cash used in financing activities ( 48,983 ) ( 40,361 ) Effect of exchange rate fluctuations on cash 317 ( 419 ) Net increase in cash and cash equivalents 71,753 53,796 Cash and cash equivalents, beginning of period 54,196 29,334 Cash and cash equivalents, end of period $ 125,949 $ 83,130 Supplemental disclosures of cash flow information: Interest paid $ 1,536 $ 878 Income taxes paid 837 536 Supplemental schedule of non-cash investing and financing activities: Notes receivable issued upon sale of property and equipment $ 1,613 $ 988 Change in fair value of interest rate swaps 3,631 1,303 Property and equipment acquired included in accounts payable 13,671 23,570 Property and equipment disposed included in other receivables 154 17 Dividends accrued but not yet paid at end of period 7,807 6,792 See Notes to Consolidated Financial Statements (Unaudited). 7 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST (In thousands, except share and per share amounts) Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Temporary Equity - Redeemable Noncontrolling Interest (Unaudited) BALANCE, December 31, 2021 $ 805 $ 121,904 $ 1,667,104 $ ( 20,604 ) $ ( 441,659 ) $ 1,327,550 $ 35,947 Net income attributable to Werner — — 53,749 — — 53,749 — Net income attributable to noncontrolling interest — — — — — — 1,286 Other comprehensive income — — — 4,784 — 4,784 — Purchases of 845,100 shares of common stock — — — — ( 36,180 ) ( 36,180 ) — Dividends on common stock ($ 0.12 per share) — — ( 7,807 ) — — ( 7,807 ) — Equity compensation activity, 112,751 shares — ( 3,773 ) — — 115 ( 3,658 ) — Non-cash equity compensation expense — 3,026 — — — 3,026 — BALANCE, March 31, 2022 $ 805 $ 121,157 $ 1,713,046 $ ( 15,820 ) $ ( 477,724 ) $ 1,341,464 $ 37,233 BALANCE, December 31, 2020 $ 805 $ 116,039 $ 1,438,916 $ ( 22,833 ) $ ( 337,887 ) $ 1,195,040 $ — Net income attributable to Werner — — 46,492 — — 46,492 — Other comprehensive loss — — — ( 265 ) — ( 265 ) — Purchases of 130,446 shares of common stock — — — — ( 5,507 ) ( 5,507 ) — Dividends on common stock ($ 0.10 per share) — — ( 6,792 ) — — ( 6,792 ) — Equity compensation activity, 116,868 shares — ( 3,953 ) — — 213 ( 3,740 ) — Non-cash equity compensation expense — 2,502 — — — 2,502 — BALANCE, March 31, 2021 $ 805 $ 114,588 $ 1,478,616 $ ( 23,098 ) $ ( 343,181 ) $ 1,227,730 $ — See Notes to Consolidated Financial Statements (Unaudited). 8 Table of Contents WERNER ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Basis of Presentation and Recent Accounting Pronouncements Basis of Presentation The accompanying unaudited interim consolidated financial statements include the accounts of Werner Enterprises, Inc. and its controlled subsidiaries (collectively, the “Company” or “Werner”). Noncontrolling interest on the consolidated condensed balance sheets represents the portion of a consolidated entity in which we do not have a direct equity ownership. In these notes, the terms “we,” “us,” or “our” refer to Werner Enterprises, Inc. and its subsidiaries. All significant intercompany accounts and transactions relating to these entities have been eliminated. These consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (SEC) instructions to Form 10-Q and, in the opinion of management, reflect all adjustments, which are all of normal recurring nature, necessary to present fairly the financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles (“GAAP”). These consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements; although in management’s opinion, the disclosures are adequate so that the information presented is not misleading. Operating results for the three-month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31 , 2022. In the opinion of management, the information set forth in the accompanying consolidated condensed balance sheets is fairly stated in all material respects in relation to the consolidated balance sheets from which it has been derived. These consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes contained in our 2021 Form 10-K. New Accounting Pronouncements Adopted In the first quarter 2022, we adopted Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) , which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The provisions of this update are effective for all entities as of March 12, 2020 through December 31, 2022 and apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The adoption of the new guidance did not have a material impact on our consolidated financial statements. (2) Business Acquisitions On July 1, 2021, we acquired an 80 % ownership interest in ECM Associated, LLC ("ECM”) for a final purchase price of $ 141.3 million after net working capital changes and net of cash acquired. ECM, through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service, LLC (“MCS”) subsidiaries, provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the United States. The results of operations for ECM are included in our consolidated financial statements beginning July 1, 2021, and the noncontrolling interest is presented as a separate component of the consolidated financial statements. On November 22, 2021, we acquired 100 % of the equity interests in NEHDS Logistics, LLC (“NEHDS”) for a final purchase price of $ 62.3 million after including the impacts of contingent consideration and net working capital changes. The purchase price allocation for NEHDS is considered final as of March 31, 2022. NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest U.S. markets. NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries. The results of operations for NEHDS are included in our consolidated financial statements beginning November 22, 2021. Amortization expense on intangible assets was $ 1.4 million for the three months ended March 31, 2022. 9 Table of Contents (3) Revenue Revenue Recognition Revenues are recognized over time as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The following table presents our revenues disaggregated by revenue source (in thousands): Three Months Ended March 31, 2022 2021 Truckload Transportation Services $ 558,417 $ 462,949 Werner Logistics 189,008 137,853 Inter-segment eliminations ( 722 ) ( 134 ) Transportation services 746,703 600,668 Other revenues 17,902 15,778 Total revenues $ 764,605 $ 616,446 The following table presents our revenues disaggregated by geographic areas in which we conduct business (in thousands). Operating revenues for foreign countries include revenues for (i) shipments with an origin or destination in that country and (ii) other services provided in that country. If both the origin and destination are in a foreign country, the revenues are attributed to the country of origin. Three Months Ended March 31, 2022 2021 United States $ 710,904 $ 555,239 Mexico 43,291 38,756 Other 10,410 22,451 Total revenues $ 764,605 $ 616,446 Contract Balances and Accounts Receivable A receivable is an unconditional right to consideration and is recognized when shipments have been completed and the related performance obligation has been fully satisfied. At March 31, 2022 and December 31, 2021, the accounts receivable, trade, net, balance was $ 449.6 million and $ 460.5 million, respectively. Contract assets represent a conditional right to consideration in exchange for goods or services and are transferred to receivables when the rights become unconditional. At March 31, 2022 and December 31, 2021, the balance of contract assets was $ 10.9 million and $ 9.0 million, respectively. We have recognized contract assets within the other current assets financial statement caption on the consolidated condensed balance sheets. These contract assets are considered current assets as they will be settled in less than 12 months. Contract liabilities represent advance consideration received from customers and are recognized as revenues over time as the related performance obligation is satisfied. The balance of contract liabilities was $ 1.2 million at both March 31, 2022 and December 31, 2021 . The amount of revenues recognized in the three months ended March 31, 2022 that was included in the December 31, 2021 contract liability balance was $ 1.2 million. We have recognized contract liabilities within the accounts payable and other current liabilities financial statement captions on the consolidated condensed 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 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. 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 revenue in the period subsequent to the reporting date; transit times generally average approximately 3 days. During the three months ended March 31, 2022 and 2021, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material. 10 Table of Contents (4) Leases We have entered into operating leases primarily for real estate. The leases have terms which range from 1 year to 18 years, and some include options to renew. 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 other non-current assets, other current liabilities and other long-term liabilities on the consolidated condensed 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 is not readily determinable. 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. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense is reported in rent and purchased transportation on the consolidated statements of income. The following table presents balance sheet and other operating lease information (dollars in thousands): March 31, 2022 December 31, 2021 Balance Sheet Classification Right-of-use assets (recorded in other non-current assets) $ 36,649 $ 28,458 Current lease liabilities (recorded in other current liabilities) $ 7,231 $ 6,380 Long-term lease liabilities (recorded in other long-term liabilities) 30,291 22,634 Total operating lease liabilities $ 37,522 $ 29,014 Other Information Weighted-average remaining lease term for operating leases 7.45 years 7.63 years Weighted-average discount rate for operating leases 2.6 % 2.7 % The following table presents the maturities of operating lease liabilities as of March 31, 2022 (in thousands): Maturity of Lease Liabilities 2022 (remaining) $ 6,074 2023 7,055 2024 6,279 2025 5,578 2026 4,485 Thereafter 11,883 Total undiscounted operating lease payments $ 41,354 Less: Imputed interest ( 3,832 ) Present value of operating lease liabilities $ 37,522 Cash Flows During the three months ended March 31, 2022 and 2021, right-of-use assets of $ 10.2 million and $ 0.5 million, respectively, 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 $ 1.8 million and $ 0.9 million for the three months ended March 31, 2022 and 2021, respectively, and are included in operating cash flows. Operating Lease Expense Operating lease expense was $ 5.1 million and $ 3.6 million for the three months ended March 31, 2022 and 2021, respectively. This expense included $ 2.1 million and $ 1.0 million for the three months ended March 31, 2022 and 2021, respectively, for long-term operating leases, with the remainder for variable and short-term lease expense . Lessor Operating Leases We are the lessor of tractors and trailers under operating leases with initial terms of 1 to 10 years. We recognize revenue for such leases on a straight-line basis over the term of the lease. Revenues were $ 3.2 million and $ 3.1 million for the three months 11 Table of Contents ended March 31, 2022 and 2021, respectively. The following table presents information about the maturities of these operating leases as of March 31, 2022 (in thousands): 2022 (remaining) $ 6,124 2023 1,637 2024 — 2025 — 2026 — Thereafter — Total $ 7,761 (5) 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 Value Hierarchy Fair Value March 31, 2022 December 31, 2021 Other non-current assets: Equity securities (1) 1 $ 7,360 $ 17,166 (1) Represents our investments in autonomous technology companies. For additional information regarding the valuation of these equity securities, see Note 6 – Investments. We have no material liabilities measured at fair value on a recurring basis for the periods presented. 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 6 – Investments. 12 Table of Contents 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). (6) Investments 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. This minority equity investment is being accounted for under ASC 321 using the measurement alternative, and is recorded in other noncurrent assets on the consolidated condensed balance sheets. As of March 31, 2022 and December 31, 2021, the value of our investment was $ 38.2 million. 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 gain or loss on investments in equity securities on the consolidated statements of income. No gains or losses were recorded in the three months ended March 31, 2022 and 2021. At March 31, 2022, cumulative unrealized gains on our investment in MLSI totaled $ 28.2 million. Equity Investments with Readily Determinable Fair Values We own 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 condensed balance sheets. We record changes in the value of these investments, based on the share prices reported by Nasdaq, in gain or loss on investments in equity securities on the consolidated statements of income. In the three months ended March 31, 2022, we recognized a $ 9.8 million unrealized loss on these investments. No gains or losses were recorded in the three months ended March 31, 2021. For additional information regarding the fair value of these equity investments, see Note 5 – Fair Value. (7) Debt and Credit Facilities On March 25, 2022, we entered into a new credit agreement (the “Wells Credit Agreement”) with Wells Fargo Bank, National Association ("Wells Fargo"), replacing our previous credit agreement with Wells Fargo dated May 14, 2019, as amended. The Wells Credit Agreement provides for a $ 300.0 million unsecured revolving line of credit ("Wells Line of Credit"), with a $ 75.0 million maximum limit for the aggregate amount of letters of credit issued, and expires on May 14, 2024 . The Wells Credit Agreement also provides for an unsecured term loan commitment not to exceed a principal amount of $ 100.0 million ("Wells Term Loan"), with the outstanding principal balance due and payable in full on May 14, 2024 . The proceeds of the Wells Line of Credit and Wells Term Loan may be used for the Company's general corporate purposes. Amounts drawn under the Wells Line of Credit and the outstanding principal balance of the Wells Term Loan bear interest either, at our option, (i) at a variable rate based on the daily Secured Overnight Financing Rate (" SOFR ") plus 0.10 % and a margin ranging between 0.675 % and 0.925 %, or (ii) at a fixed rate based on the Term SOFR in effect on the first day of an applicable interest period designated by us plus 0.10 % in the case of one month Term SOFR, 0.15 % in the case of three month Term SOFR, 0.25 % in the case of six month Term SOFR, and plus, in each case, a margin ranging between 0.675 % and 0.925 %, payable monthly. The margin rates are based on our ratio of total funded debt to earnings before interest, income taxes, depreciation and amortization (“EBITDA”). The Wells Credit Agreement also requires us to pay Wells Fargo (i) an annualized letter of credit fee based on the face amount of each letter of credit outstanding at rates ranging between 0.55 % and 0.80 % per annum and (ii) a nonrefundable commitment fee on the average daily unused amount of the Wells Line of Credit (after deducting undrawn letters of credit) at rates ranging between 0.11 % and 0.15 % per annum. The rates for the letter of credit and nonrefundable commitment fees are based on our ratio of total funded debt to EBITDA. On March 25, 2022, we also entered into a second amendment to our existing unsecured revolving line of credit agreement, dated May 14, 2019, with BMO Harris Bank N.A. (“BMO Harris”), expiring May 14, 2024 (“BMO Line of Credit”). The second amendment increased our BMO Line of Credit from $ 200.0 million to $ 300.0 million and changed the variable interest rate calculation by replacing the LIBOR with the SOFR . Amounts drawn under the BMO Line of Credit bear interest, for a selected interest period, at a variable rate based on the SOFR plus 0.10 % and a margin ranging between 0.70 % and 1.50 %, based on our ratio of total funded debt to EBITDA, payable at the end of the applicable interest period. No changes were made to the annualized letter of credit fee, nonrefundable commitment fee, and financial covenants as a result of the second amendment. We also have a $ 100.0 million unsecured fixed-rate term loan commitment with BMO Harris, with quarterly principal payments of $ 1.25 million, which began on September 30, 2021, and a final payment of principal and interest due and 13 Table of Contents payable on May 14, 2024 ("BMO Term Loan"). The outstanding principal balance of the BMO Term Loan bears interest at a fixed rate of 1.28 %, payable quarterly in arrears. As of March 31, 2022 and December 31, 2021, our outstanding debt totaled $ 426.3 million and $ 427.5 million, respectively. As of March 31, 2022, we had a total of $ 230.0 million outstanding under our revolving lines of credit, including (i) $ 80.0 million at a weighted average variable interest rate of 1.02 %; (ii) $ 75.0 million at a variable interest rate of 0.99 %, 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 0.93 %, which is effectively fixed at 2.36 % with an interest rate swap agreement through May 14, 2024 . The total borrowing capacity of $ 600.0 million under our revolving lines of credit at March 31, 2022, is further reduced by $ 53.9 million in stand-by letters of credit under which we are obligated. In addition, as of March 31, 2022, we had $ 100.0 million outstanding under the Wells Term Loan at a variable interest rate of 1.05 % and $ 96.3 million outstanding under the BMO Term Loan at a fixed interest rate of 1.28 %. Availability of such funds under the debt agreements is conditional upon various customary terms and covenants. Such covenants include, 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). As of March 31, 2022 we were in compliance with these covenants. At March 31, 2022, the aggregate future maturities of long-term debt by year are as follows (in thousands): 2022 (remaining) $ 3,750 2023 5,000 2024 417,500 2025 — 2026 — Total $ 426,250 (8) Commitments and Contingencies We have committed to property and equipment purchases of approximately $ 182.3 million at March 31, 2022 . We are involved in certain claims and pending litigation, including those described herein, arising in the ordinary course of business. The majority of these claims relate to bodily injury, property damage, cargo and workers’ compensation incurred in the transportation of freight, as well as certain class action litigation related to personnel and employment matters. We accrue for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the knowledge of the facts, management believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and our view of these matters may change in the future as the litigation and related events unfold. On May 17, 2018, in Harris County District Court in Houston, Texas, a jury rendered an adverse verdict against the Company in a lawsuit arising from a December 30, 2014 accident between a Werner tractor-trailer and a passenger vehicle. On July 30, 2018, the court entered a final judgment against Werner for $ 92.0 million, including pre-judgment interest. The Company has premium-based liability insurance to cover the potential outcome from this jury verdict. 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 $ 30.1 million as of March 31, 2022, and $ 28.8 million as of December 31, 2021. 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 condensed balance sheets as of March 31, 2022 and December 31, 2021. The Company is pursuing an appeal of this verdict. No assurances can be given regarding the outcome of any such appeal. We have been involved in class action litigation in the U.S. District Court for the District of Nebraska, in which the plaintiffs allege that we owe drivers for unpaid wages under the Fair Labor Standards Act (“FLSA”) and the Nebraska Wage Payment and Collection Act and that we failed to pay minimum wage per hour for drivers in our Career Track Program, related to short break time and sleeper berth time. The period covered by this class action suit is August 2008 through March 2014. The case was tried to a jury in May 2017, resulting in a verdict of $ 0.8 million in plaintiffs’ favor on the short break matter and a verdict in our favor on the sleeper berth matter. As a result of various post-trial motions, the court awarded $ 0.5 million to the plaintiffs 14 Table of Contents for attorney fees and costs. 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. The appellate court sent the case back to the trial court for proceedings consistent with the appellate court’s opinion. 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, and that appeal remains pending. As of March 31, 2022, 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. Based on the knowledge of the facts, management does not currently believe the outcome of these class actions is likely to have a material adverse effect on our financial position or results of operations. However, the final disposition of these matters and the impact of such final dispositions cannot be determined at this time. (9) Earnings Per Share Basic earnings per share is computed by dividing net income attributable to Werner by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to Werner by the weighted average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock awards. Performance awards are excluded from the calculation of dilutive potential common shares until the threshold performance conditions have been satisfied. There are no differences in the numerators of our computations of basic and diluted earnings per share for any periods presented. The computation of basic and diluted earnings per share is shown below (in thousands, except per share amounts). Three Months Ended March 31, 2022 2021 Net income attributable to Werner $ 53,749 $ 46,492 Weighted average common shares outstanding 65,543 67,932 Dilutive effect of stock-based awards 335 291 Shares used in computing diluted earnings per share 65,878 68,223 Basic earnings per share $ 0.82 $ 0.68 Diluted earnings per share $ 0.82 $ 0.68 (10) Segment Information We have two reportable segments – Truckload Transportation Services (“TTS”) and Werner Logistics. The TTS segment consists of two operating units, Dedicated and One-Way Truckload. These units are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting. Dedicated provides truckload services dedicated to a specific customer, generally for a retail distribution center or manufacturing facility, utilizing either dry van or specialized trailers. One-Way Truckload is comprised of 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, 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 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; 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 15 Table of Contents first quarter 2021, we completed the 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 continues 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. None of these operations meets the quantitative reporting thresholds. As a result, these operations are grouped in “Other” in the tables below. “Corporate” includes revenues and expenses that are incidental to our activities and are not attributable to any of our operating segments, including gains and losses on sales of assets not attributable to our operating segments. We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment. 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): Three Months Ended March 31, 2022 2021 Revenues by Segment Truckload Transportation Services $ 558,417 $ 462,949 Werner Logistics 189,008 137,853 Other 17,513 15,399 Corporate 389 379 Subtotal 765,327 616,580 Inter-segment eliminations ( 722 ) ( 134 ) Total $ 764,605 $ 616,446 Three Months Ended March 31, 2022 2021 Operating Income (loss) by Segment Truckload Transportation Services $ 76,093 $ 57,628 Werner Logistics 8,681 4,574 Other 445 866 Corporate ( 1,708 ) ( 597 ) Total $ 83,511 $ 62,471 Three Months Ended March 31, 2022 2021 Depreciation and Amortization by Segment Truckload Transportation Services 61,837 58,525 Werner Logistics 2,268 2,221 Other 2,681 2,729 Corporate 443 476 Total $ 67,229 $ 63,951 16 Table of Contents