What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-28 · 225 added, 170 removed, 781 unchanged (34% 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, 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).

and subsidiaries (the Company) as of December 31, 2022 and 2021, 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, 2022, and the related notes and financial statement schedule II valuation and qualifying accounts (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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2022, in conformity with U.S.

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• assessing the models used by the Company to determine these insurance and claims accruals for consistency with generally accepted actuarial standards

• assessing the determination of loss development factors used in the models for consistency with historical Company data and industry, regulatory, and company-specific trends

• assessing the determination of loss development factors used in the models for consistency with historical Company data and company-specific trends

• developing an independent expectation of the Company’s insurance and claims accruals and comparing to the Company’s estimate.

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Insurance and claims accruals, net of current portion 7,726 5,582 3,420

Gain on investments in equity securities, net ( 12,195 ) ( 40,317 ) —

Other ( 13,295 ) ( 3,105 ) 13,641

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

Changes in certain working capital items:

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Tax withholding related to net share settlements of restricted stock awards ( 4,082 ) ( 4,270 ) ( 4,553 )

Stock options exercised — — 171

Distribution to noncontrolling interest ( 1,572 ) ( 35 ) —

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Effect of exchange rate fluctuations on cash 632 ( 324 ) ( 780 )

Net increase (decrease) in cash, cash equivalents and restricted cash 24,862 ( 4,108 ) ( 488 )

Cash, cash equivalents and restricted cash, beginning of period 29,334 33,442 33,930

Cash, cash equivalents and restricted cash, end of period (1)

$ 54,196 $ 29,334 $ 33,442

Net increase (decrease) in cash and cash equivalents 53,044 24,862 ( 4,108 )

Cash and cash equivalents, beginning of period 54,196 29,334 33,442

Cash and cash equivalents, end of period $ 107,240 $ 54,196 $ 29,334

Supplemental disclosures of cash flow information:

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Contingent consideration associated with acquisition 13,400 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:

Cash and cash equivalents $ 54,196 $ 29,334 $ 26,418

Restricted cash included in other current assets — — 7,024

Total cash, cash equivalents and restricted cash $ 54,196 $ 29,334 $ 33,442

See Notes to Consolidated Financial Statements.

WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND

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Comprehensive

Income (Loss) Treasury

Loss Treasury

Stockholders’

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

Comprehensive income — — 166,944 1,345 — 168,289 —

Net income attributable to Werner — — 169,078 — — 169,078 —

Other comprehensive loss — — — ( 8,105 ) — ( 8,105 ) —

Purchase of 1,482,992 shares of common stock

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BALANCE, December 31, 2020 805 116,039 1,438,916 ( 22,833 ) ( 337,887 ) 1,195,040 —

Comprehensive income — — 169,078 ( 8,105 ) — 160,973 —

Net income attributable to Werner — — 259,052 — — 259,052 —

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

Other comprehensive income — — — 2,229 — 2,229 —

Purchase of 2,297,911 shares of common stock

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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

Comprehensive income — — 259,052 2,229 — 261,281 2,426

Net income attributable to Werner — — 241,256 — — 241,256 —

Net income attributable to noncontrolling interest — — — — — — 4,324

Other comprehensive income — — — 9,312 — 9,312 —

Purchase of 2,710,304 shares of common stock

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Non-cash equity compensation expense — 12,486 — — — 12,486 —

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

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

Distribution to noncontrolling interest — — — — — — ( 1,572 )

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state regulatory authorities.

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.

Our ten largest customers comprised 46 % of our revenues for the year ended December 31, 2022, and 49 % for the years ended December 31, 2021 and 2020.

Our largest customer, Dollar General, accounted for 14 % of our total revenues in 2022 and 2021, and 12 % in 2020.

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.

Dollar General accounted for 13 % and 16 % of our accounts receivable, trade balance as of December 31, 2022 and 2021, respectively.

Use of Management Estimates :

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the (i) reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (ii) reported amounts of revenues and expenses during the reporting period.

The most significant estimates that affect our financial statements include the accrued liabilities for insurance and claims, useful lives and salvage values of property and equipment, estimates for income taxes and the allowance for doubtful accounts.

The most significant estimates that affect our financial statements include the accrued liabilities for insurance and claims and useful lives and salvage values of property and equipment.

Actual results could differ from those estimates.

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Additions and improvements to property and equipment are capitalized at cost, while maintenance and repair expenditures are charged to operations as incurred.

Gains and losses on the sale or exchange of equipment are recorded in other operating expenses.

Gains and losses on the sale or exchange of property and equipment are recorded in other operating expenses.

Depreciation is calculated based on the cost of the asset, reduced by the asset’s estimated salvage value, using the straight-line method.

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Service and other equipment 3 - 10 years

Depreciation expense was $ 273.8 million, $ 265.8 million, and $ 263.3 million for the years ended December 31, 2022, 2021, and 2020 respectively, and is reported in depreciation and amortization on the consolidated statements of income.

Due to the ongoing stronger used trailer market and the increasing cost of new trailers, a change in accounting estimate was made during the first quarter of 2022, which decreased depreciation expense by $ 12.7 million in 2022.

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.

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.

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

Goodwill is not amortized, but rather is tested for impairment annually in the fourth quarter, 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.

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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.

No impairment charges have resulted from the annual impairment tests.

Amortization of Intangible Assets:

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Thus, the asset group used to assess impairment would include all of our assets.

No impairment charges were recorded during the years ended December 31, 2022, 2021, and 2020.

Insurance and Claims Accruals :

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These judgments consider the nature, frequency, severity, and age of claims, and industry, regulatory, and company-specific trends impacting the development of claims.

Actual costs related to insurance and claims have not differed materially from estimated accrued amounts for all years presented.

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, 2022 and are responsible for the first $ 10.0 million per claim on all claims with an annual $ 10.0 million aggregate for claims between $ 10.0 million and $ 20.0 million.

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.

For the policy year that began August 1, 2021, we were responsible for the first $ 10.0 million per claim on all claims with an annual $ 10.0 million aggregate for claims between $ 10.0 million and $ 15.0 million.

For the policy year that began on 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 and deductible.

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 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.

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 $ 25.0 million bond for the State of Nebraska and a $ 14.5 million bond for our workers’ compensation insurance carrier.

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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.

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For the years ended December 31, 2022, 2021, and 2020, 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, 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.

The components of accumulated other comprehensive loss reported in the consolidated balance sheets as of December 31, 2022 and 2021, consisted of foreign currency translation adjustment losses of $ 16.2 million and $ 18.6 million, respectively, and gains of $ 4.9 million and losses of $ 2.0 million related to changes in fair value of interest rate swaps, net of tax, respectively.

New Accounting Pronouncements Adopted:

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 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.

In 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 LIBOR or another reference rate expected to be discontinued because of reference rate reform.

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.

The provisions of this update 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

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.

2022 Business Acquisitions

ReedTMS Acquisition

On November 5, 2022, we acquired 100 % of the equity interests in Reed Transport Services, Inc.

and RTS-TMS, Inc., doing business as ReedTMS Logistics (“ReedTMS”), for a total purchase price of $ 109.2 million after including the impacts of working capital adjustments, cash acquired, net present value of future insurance payments, and contingent consideration.

The contingent consideration arrangement, also referred to as earnout, requires us to pay the former owners of ReedTMS an additional amount in cash if ReedTMS achieves certain performance financial goals over a one-year period beginning January 1, 2023.

The potential undiscounted future contingent earnout payment that we could be required to make is between $ 0 and $ 7.5 million.

On a pro forma basis (unaudited), operating revenues for ReedTMS for the year ended December 31, 2022 was $ 368.5 million and operating revenues for ReedTMS for the year ended December 31, 2021 was $ 339.8 million.

We financed the transaction through existing credit facilities.

ReedTMS, based in Tampa, Florida, is an asset-light logistics provider and dedicated truckload carrier that offers a comprehensive suite of freight brokerage and truckload solutions to a diverse customer base.

The acquisition further strengthens our freight brokerage capabilities and elevates our logistics portfolio with new customers.

The results of operations for ReedTMS are included in our consolidated financial statements beginning November 5, 2022.

Freight brokerage and truckload revenues generated by ReedTMS are reported in our Werner Logistics segment and in Dedicated within our Truckload Transportation Services (“TTS”) segment, respectively.

We incurred transaction costs related to the acquisition, such as legal and professional fees, of $ 0.7 million for the year ended December 31, 2022, 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.

Baylor Acquisition

On October 1, 2022, we acquired 100 % of the equity interests in FAB9, Inc., doing business as Baylor Trucking, Inc.

(“Baylor”), for a final total purchase price of $ 89.0 million after including the impacts of working capital adjustments, cash acquired, and contingent consideration.

The contingent consideration arrangement requires us to pay the former owner of Baylor an additional amount in cash if Baylor achieves certain performance financial goals over a three-year period beginning on November 1, 2022.

The potential undiscounted future contingent earnout payment that we could be required to make is between $ 0 and $ 15.0 million.

We financed the transaction through existing credit facilities.

Baylor, based in Milan, Indiana, operates 200 trucks and 980 trailers in the east central and south central United States.

The acquisition expands our terminal, fleet, and professional driver presence in these geographic truckload markets and adds two terminals to our network.

The results of operations for Baylor are included in our consolidated financial statements beginning October 1, 2022.

Revenues generated by Baylor are reported in One-Way Truckload within our TTS segment.

We incurred transaction costs related to the acquisition, such as legal and professional fees, of $ 0.4 million for the year ended December 31, 2022, 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.

We accounted for the ReedTMS and Baylor purchases 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 estimated fair values of the assets acquired and liabilities assumed are considered provisional for ReedTMS and Baylor, pending the completion of acquired tangible assets valuations, independent valuations of certain acquired intangible assets, and calculations 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):

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

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

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

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

The provisional purchase price allocations for ReedTMS and Baylor as of December 31, 2022 are summarized as follows (in thousands):

ReedTMS Baylor

Purchase Price

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Total purchase price (fair value of consideration) 109,180 89,043

Provisional Purchase Price Allocation

Purchase Price Allocation

Current assets 52,531 11,371

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Total liabilities assumed ( 51,119 ) ( 3,295 )

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

Goodwill $ 52,841 $ 5,472

(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.

(1) Includes $ 0.9 million related to the net present value of future insurance payments.

At closing, $ 11.5 million of the cash consideration was placed in escrow to secure certain indemnification obligations of the sellers and to cover post-closing adjustments.

(2) At closing, $ 8.5 million of the cash consideration was placed in escrow to secure certain indemnification obligations of the sellers and to cover post-closing adjustments.

(3) The estimated fair value of the ReedTMS and Baylor contingent consideration arrangements was based upon probability-adjusted inputs for each acquired entity and are recorded in other long-term liabilities on the consolidated balance sheet as of December 31, 2022.

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.

Goodwill associated with the ReedTMS and Baylor business 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 $ 32.3 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.

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.

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Total intangible assets $ 32,300

2021 Business Acquisitions

NEHDS Acquisition

On November 22, 2021, we acquired 100 % of the equity interests in NEHDS Logistics, LLC (“NEHDS”).

In first quarter 2022, post-closing net working capital changes of $ 0.7 million decreased the purchase price, resulting in a final total purchase price of $ 62.3 million after including the impacts of contingent consideration and net working capital changes.

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

NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest United States markets.

NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries.

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 (“Logistics”) segment.

The contingent earnout liability was $ 0 and $ 2.5 million as of December 31, 2022 and 2021, respectively.

The contingent earnout period related to the NEHDS acquisition ended on December, 31, 2022 and did not result in any additional cash payments, as the financial performance goals were not achieved.

This favorable change to the contingent earnout liability was recorded in other operating expense on the consolidated statements of income for the year ended December 31, 2022.

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.

ECM Acquisition

On July 1, 2021, we acquired an 80 % ownership interest in ECM Associated, LLC ("ECM”) for a final total purchase price of $ 141.3 million after net working capital changes and net of cash acquired.

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 provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the United States.

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 TTS segment.

We incurred transaction costs related to the ECM 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.

Revenue Recognition

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We generate nearly all of our revenues by transporting truckload freight shipments for our customers.

Transportation services are carried out by our Truckload Transportation Services (“TTS”) segment and our Werner Logistics (“Logistics”) segment.

Transportation services are carried out by our TTS segment and our Logistics segment.

The TTS segment utilizes company-owned and independent contractor trucks to deliver shipments, while the Logistics segment uses third-party capacity providers.

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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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Where we are the principal, we control the transportation service before it is provided to our customers, which is supported by us being primarily responsible for fulfilling the shipment obligation to the customer and having a level of discretion in establishing pricing with the customer.

During 2021, 2020, and 2019, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material.

Other Revenues

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 both 2021 and 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 2022, 2021 and 2020.

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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transit times generally average approximately 3 days.

During 2022, 2021, and 2020, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material.

(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):

The following table summarizes changes in the carrying amount of goodwill by segment for the years ended December 31, 2022 and 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

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

Purchase accounting adjustments (1)

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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):

Goodwill recorded in acquisition of ReedTMS 10,341 42,500 52,841

Goodwill recorded in acquisition of Baylor 5,472 — 5,472

Purchase accounting adjustments (2)

— ( 214 ) ( 214 )

Balance as of December 31, 2022 $ 53,897 $ 78,820 $ 132,717

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

(2) The purchase accounting adjustments consist of post-closing adjustments related to net assets assumed in the acquisition of NEHDS.

Acquired intangible assets consists of the following as of December 31, 2022 and 2021 (in thousands):

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Customer relationships $ 64,900 $ ( 5,714 ) $ 59,186 $ 40,200 $ ( 1,177 ) $ 39,023

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Total intangible assets $ 89,500 $ ( 7,998 ) $ 81,502 $ 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.

Amortization expense on intangible assets was $ 6.1 million and $ 1.9 million for the years ended December 31, 2022 and 2021, respectively, and is reported in depreciation and amortization on the consolidated statements of income.

No amortization expense on intangible assets was recorded for the year ended December 31, 2020.

As of December 31, 2022, the estimated future amortization expense for intangible assets by year is as follows (in thousands):

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Maturity of Lease Liabilities

2023 $ 10,595

Thereafter 9,429

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Present value of operating lease liabilities $ 42,293

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, 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 .

During the years ended December 31, 2022, 2021, and 2020, right-of-use assets of $ 14.7 million, $ 8.2 million, and $ 2.8 million, respectively, were recognized as non-cash asset additions that resulted from new operating lease liabilities, and we acquired right-of-use assets of $ 8.3 million and $ 15.6 million as a result of our business acquisitions during the years ended December 31, 2022 and 2021, respectively.

Cash paid for amounts included in the present value of operating lease liabilities was $ 8.5 million, $ 4.6 million, and $ 3.9 million during the years ended December 31, 2022, 2021, and 2020, respectively, and are included in operating cash flows.

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Operating lease expense was $ 22.1 million, $ 15.7 million, and $ 10.1 million during the years ended December 31, 2022, 2021, and 2020, 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 .

This expense included $ 9.4 million, $ 4.8 million, and $ 3.8 million for long-term operating leases for the years ended December 31, 2022, 2021, and 2020, respectively, with the remainder for variable and short-term lease expense .

Lessor Operating Leases

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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):

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

Level in Fair December 31,

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Equity securities (1)

1 $ 17,166 N/A

1 $ 723 $ 17,166

Other long-term liabilities:

Contingent consideration associated with acquisitions 3 13,400 2,500

(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.

The following table presents changes in the fair value of contingent consideration for the years ended December 31, 2022 and 2021 (in thousands):

Balance as of December 31, 2020 $ —

Contingent consideration associated with the acquisition of NEHDS (1)

Balance as of December 31, 2021 2,500

Contingent consideration associated with the acquisition of Baylor (1)

Contingent consideration associated with the acquisition of ReedTMS (1)

Change in fair value (2)

Balance as of December 31, 2022 $ 13,400

(1) The estimated fair value of our contingent consideration arrangements were based upon probability-adjusted inputs for each acquired entity.

For additional information regarding our contingent consideration arrangements, see Note 2 – Business Acquisitions.

(2) The contingent earnout period related to the NEHDS acquisition ended on December, 31, 2022 and did not result in any additional cash payments, as the financial performance goals were not achieved.

The change in the contingent earnout liability was recorded in other operating expense on the consolidated statements of income.

Our ownership interests in Mastery Logistics Systems, Inc.

(“MLSI”) and Fleet Defender, Inc.

do not have readily determinable fair values and are accounted for using the measurement alternative in ASC 321, Investments - Equity Securities .

For additional information regarding the valuation of these investments, 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.

Cash and cash equivalents, 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).

The carrying amount of our fixed-rate debt not measured at fair value on a recurring basis was $ 93.8 million and $ 97.5 million as of December 31, 2022 and 2021, respectively.

The estimated fair value of our fixed-rate debt using the income approach, based on its net present value, discounted at our current borrowing rate, was $ 87.2 million as of December 31, 2022 (categorized as Level 2 of the fair value hierarchy) and approximated the carrying value as of December 31, 2021.

The carrying amount of our variable-rate long-term debt approximates fair value due to the duration of our credit arrangement and the variable interest rate (categorized as Level 2 of the fair value hierarchy).

(7) 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.

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.

Our strategic equity investments without readily determinable fair values include MLSI, a transportation management systems company, and Fleet Defender, Inc., a platform cybersecurity company for fleet owners.

MLSI is developing a cloud-based transportation management system using MLSI's SaaS technology which we have agreed to license.

These investments are being accounted for under ASC 321 using the measurement alternative, and are recorded in other noncurrent assets on the consolidated balance sheets.

We record changes in the values of these investments based on events that occur that would indicate the values have changed, in gain or loss on investments in equity securities on the consolidated statements of income.

As of December 31, 2022 and 2021, the value of our investment in MLSI was $ 86.8 million and $ 38.2 million, respectively, and the value of our investment in Fleet Defender, Inc.

was $ 250 thousand as of December 31, 2022.

The following table summarizes the activity related to our equity investments without readily determinable fair values during the periods presented.

Years Ended December 31,

2022 2021 2020

Investment in equity securities $ 20,250 $ 5,000 $ 5,000

Upward adjustments (1)

28,638 28,151 —

(1) During 2022 and 2021, investments by third-parties resulted in the remeasurements of our investment in MLSI.

Our updated investment values were based upon the prices paid by third parties.

As of December 31, 2022, cumulative upward adjustments on our equity securities without readily determinable fair values totaled $ 56.8 million.

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.

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 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.

As of December 31, 2022 and 2021, the value of these investments were $ 0.7 million and $ 17.2 million, respectively.

We recognized a net unrealized loss of $ 16.4 million and a net unrealized gain of $ 12.1 million on these investments for the years ended December 31, 2022 and 2021, respectively.

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 .

On December 20, 2022, we entered into a $ 1.075 billion unsecured credit facility with a group of lenders (the “2022 Credit Agreement”), replacing our previous unsecured credit facility with BMO Harris Bank N.A.

(“BMO Harris”), dated May 14, 2019, as amended (the “BMO Line of Credit”), and the credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”), dated March 25, 2022 (the “Wells Credit Agreement”).

The BMO Line of Credit and Wells Credit Agreement are described below.

The 2022 Credit Agreement is scheduled to mature on December 20, 2027 and has a $ 100.0 million maximum limit for the aggregate amount of letters of credit issued.

The proceeds of the 2022 Credit Agreement may be used for working capital and other general corporate purposes, including the financing of acquisitions and other investments permitted under the agreement.

Revolving credit loans drawn under the 2022 Credit Agreement bear interest, at our option, at (i) the Base Rate (the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50 %, or (c) the one-month Term SOFR plus 1.10 %), plus a margin

ranging between 0.125 % and 0.750 %, or (ii) Term SOFR plus 0.10 % and a margin ranging between 1.125 % and 1.750 %.

Swingline loans drawn under the 2022 Credit Agreement bear interest at the Base Rate, as defined above, plus a margin ranging between 0.125 % and 0.750 %.

The 2022 Credit Agreement also requires us to pay quarterly (i) a letter of credit commission on the daily amount available to be drawn under such standby letters of credit at rates ranging between 1.125 % and 1.750 % per annum and (ii) a nonrefundable commitment fee on the average daily unused amount of the commitment at rates ranging between 0.125 % and 0.250 % per annum.

The margin, letter of credit commission, and commitment fee rates are based on our ratio of net funded debt to earnings before interest, income taxes, depreciation and amortization (“EBITDA”).

There are no scheduled principal payments due on the 2022 Credit Agreement until the maturity date, and interest is payable in arrears at periodic intervals not to exceed three months.

On March 25, 2022, we entered into the Wells Credit Agreement and a second amendment to the BMO Line of Credit.

The Wells Credit Agreement replaced our previous credit agreement with Wells Fargo dated May 14, 2019, as amended.

The Wells Credit Agreement provided 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 was scheduled to expire on May 14, 2024.

The Wells Credit Agreement also provided for an unsecured term loan commitment not to exceed a principal amount of $ 100.0 million ("Wells Term Loan").

The Wells Term Loan was fully funded on March 25, 2022 and there were no principal payments required prior to its scheduled maturity on May 14, 2024.

Amounts drawn under the Wells Line of Credit and the outstanding principal balance of the Wells Term Loan bore interest either, at our option, at a variable or fixed interest rate based on SOFR plus a SOFR rate adjustment and a margin rate based on our ratio of total funded debt to EBITDA, payable monthly.

The second amendment to the BMO Line of Credit increased the borrowing capacity 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 bore interest, for a selected interest period, at a variable rate based on the SOFR plus a SOFR rate adjustment and a margin rate based on our ratio of total funded debt to EBITDA, payable at the end of the applicable interest period.

On December 20, 2022, we paid off and terminated the Wells Line of Credit and Wells Term Loan under the Wells Credit Agreement and the BMO Line of Credit using the proceeds from the 2022 Credit Agreement discussed above.

On June 30, 2021, we entered into 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 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 December 31, 2022 and 2021, our outstanding debt totaled $ 693.8 million and $ 427.5 million, respectively.

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).

As of December 31, 2022, we had an outstanding revolving credit loan balance of $ 600.0 million under the 2022 Credit Agreement, including (i) $ 450.0 million at a variable interest rate of 5.67 % and (ii) $ 150.0 million which is effectively fixed at 2.78 % with two interest rate swap agreements through May 14, 2024.

In addition, as of December 31, 2022, we had $ 93.8 million outstanding under the BMO Term Loan at a fixed interest rate of 1.28 %.

The $ 1.075 billion of borrowing capacity under our 2022 Credit Agreement at December 31, 2022, is further reduced by $ 58.8 million in stand-by letters of credit under which we are obligated.

Availability of such funds under the current debt agreements is conditional upon various customary terms and covenants.

Such covenants include, among other things, two financial covenants requiring us (i) not to exceed a maximum ratio of net funded debt to EBITDA and (ii) to exceed a minimum ratio of EBITDA to interest expense.

As of December 31, 2022 we were in compliance with these covenants.

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Student notes receivable – non-current $ 27,286 $ 26,464

Subsequent Event - MLSI Subordinated Promissory Note

On January 24, 2023, we purchased a $ 25.0 million subordinated promissory note from MLSI with a maturity date of January 24, 2030.

The proceeds of the promissory note may be used by MLSI for working capital and general business purposes, including a limited amount for possible repayment of certain advances.

There are no scheduled principal payments due on the promissory note until the maturity date, and interest accrues at 7.5 % compounded annually, with the first accrued interest payment due on January 24, 2028, and at the end of each calendar year thereafter.

(10) INCOME TAXES

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Other, net ( 1,998 ) 275 ( 150 )

275 ( 150 ) ( 213 )

Total income tax expense $ 79,206 $ 84,537 $ 55,616

(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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Operating lease liabilities 10,324 7,033

Other 981 1,644

Gross deferred income tax assets 84,565 80,071

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Investment in partnership 19,745 17,076

Other 2,802 1,283

Gross deferred income tax liabilities 397,843 348,570

Net deferred income tax liability $ 313,278 $ 268,499

(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 $ 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.

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

We recognized a $ 54 thousand and $ 49 thousand increase in the net liability for unrecognized tax benefits for the year ended December 31, 2022, and 2021, respectively.

We recognized net interest expense of $ 42 thousand, $ 10 thousand, and $ 3 thousand during 2022, 2021, and 2020, respectively.

If recognized, $ 2.0 million and $ 1.9 million of unrecognized tax benefits as of December 31, 2022 and 2021, respectively, would impact our effective tax rate.

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

Interest of $ 0.5 million and $ 0.4 million as of December 31, 2022 and 2021, respectively, 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 12 months.

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No stock option awards were outstanding as of December 31, 2022 or 2021, and there were no stock option awards granted or exercised during the years ended December 31, 2022, 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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Cash settled restricted stock units are recorded as a liability within the consolidated balance sheets and are adjusted to fair value each reporting period.

The weighted-average grant date fair value of restricted awards granted during the years ended December 31, 2022, 2021, and 2020 was $ 42.27 , $ 42.69 , and $ 38.73 , respectively.

The total fair value of previously granted restricted awards vested during the years ended December 31, 2022, 2021, and 2020 was $ 7.3 million, $ 6.8 million, and $ 5.4 million, respectively.

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Shares earned based on cumulative diluted earnings per share may be capped based on the Company’s total shareholder return during the three-year period ended December 31, 2024, relative to the total shareholder return of a peer group of companies for the same period.

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

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 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 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.

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 2022 and 2021 performance awards will vest in one installment on the third anniversary from the respective grant dates.

In January 2023, the Compensation Committee determined the 2020 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.

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 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.

The weighted-average grant date fair value of performance awards granted during the years ended December 31, 2022, 2021, and 2020 was $ 39.28 , $ 38.48 , and $ 32.96 , respectively.

The vesting date fair value of performance awards that vested during the years ended December 31, 2022, 2021, or 2020 was $ 3.0 million, $ 4.1 million and $ 5.8 million, respectively.

We withheld shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes.

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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 Werner Enterprises, Inc.

(the “Company”) in a lawsuit arising from a December 30, 2014 accident between a Werner tractor-trailer and a passenger vehicle.

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.

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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, and that appeal remains pending.

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

On August 3, 2022, the Eighth Circuit Court of Appeals vacated the district court’s judgment and remanded the case, for the trial court to determine whether the plaintiffs should be granted a new trial on the short break claim.

On January 10, 2023, the trial court denied Plaintiff’s motion for a new trial and entered judgment in Werner’s favor on all claims.

As of December 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.

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However, the final disposition of these matters and the impact of such final dispositions cannot be determined at this time.

(13) RELATED PARTY TRANSACTIONS

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.

The Company is responsible for all real estate taxes and maintenance costs related to the property, which are recorded as expenses in the consolidated statements of income.

The Company has made leasehold improvements to the land for facilities used for business meetings and customer promotion.

The cost of these improvements was approximately $ 7.1 million, and the net book value (cost less accumulated depreciation) at December 31, 2021 was approximately $ 2.2 million.

(13) SEGMENT INFORMATION

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(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;

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

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

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.

The Werner Logistics segment is a non-asset based transportation and logistics provider.

Werner Logistics provides services throughout North America and generates the majority of our non-trucking revenues through three operating units.

These three Werner Logistics operating units are as follows:

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(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 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.

and (iii) Werner Final Mile (“Final Mile”) 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 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.

Prior to the sale of WGL, Werner Logistics provided international services throughout Asia, with additional coverage throughout Australia, Europe, South America, and Africa.

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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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.

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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 14 % and 12 % of our total revenues in 2021 and 2020, respectively.

Our largest customer, Dollar General, accounted for 14 % of our total revenues in 2022 and 2021, and 12 % in 2020.

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.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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