What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-09 compared with 2023-11-08 · 98 added, 278 removed, 409 unchanged (48% of the section changed)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share amounts) 2024 2023

15 unchanged sentences

Interest income ( 1,685 ) ( 1,552 )

Loss (gain) on investments in equity securities, net 34 ( 114 ) 36 ( 14,403 )

Loss on investments in equity securities 138 81

Loss from equity method investment 133 —

Other ( 261 ) 7

Total other expense (income) 7,362 2,349 20,905 ( 9,103 )

Total other expense, net 6,273 6,452

Income before income taxes 9,315 46,934

13 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2024 2023

3 unchanged sentences

Change in fair value of interest rate swaps, net of tax 116 ( 973 )

Other comprehensive income (loss), net ( 2,027 ) 1,149 2,642 7,169

Other comprehensive income, net 618 2,028

Comprehensive income 6,866 37,562

4 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share amounts) September 30,

(In thousands, except share amounts) March 31,

2024 December 31,

8 unchanged sentences

Total current assets 597,316 634,628

Property and equipment 2,952,430 2,885,641

Property and equipment, at cost 2,914,041 2,951,654

Less – accumulated depreciation 982,759 978,698

6 unchanged sentences

Current liabilities:

Checks issued in excess of cash balances $ 14,659 $ —

Accounts payable $ 136,242 $ 135,990

27 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(In thousands) 2024 2023

7 unchanged sentences

Insurance and claims accruals, net of current portion ( 4,015 ) 954

Loss (gain) on investments in equity securities, net 36 ( 14,403 )

Loss on investments in equity securities 138 81

Loss from equity method investment 133 —

10 unchanged sentences

Net cash invested in acquisition — ( 188 )

Investment in equity securities, net ( 2,865 ) ( 20,250 )

Investment in equity securities ( 11 ) —

Payment to acquire equity method investment ( 1,060 ) ( 2,125 )

Issuance of notes receivable ( 25,000 ) —

Purchase of promissory note — ( 25,000 )

Decrease in notes receivable 696 826

4 unchanged sentences

Repayments of long-term debt ( 50,000 ) —

Proceeds from issuance of long-term debt 50,000 250,000

Change in checks issued in excess of cash balances 14,659 —

Dividends on common stock ( 8,882 ) ( 8,220 )

1 unchanged sentence

Tax withholding related to net share settlements of restricted stock awards ( 4,087 ) ( 5,514 )

Other cash flows from financing activities — ( 750 )

Net cash provided by (used in) financing activities ( 19,978 ) 7,450

Net cash used in financing activities ( 70,769 ) ( 16,234 )

Effect of exchange rate fluctuations on cash 208 968

16 unchanged sentences

TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST

Three Months Ended September 30, 2023

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

Stock Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stockholders’

Equity Temporary Equity - Redeemable Noncontrolling Interest

BALANCE, June 30, 2023 $ 805 $ 130,694 $ 1,923,865 $ ( 6,623 ) $ ( 551,671 ) $ 1,497,070 $ 39,148

Net income attributable to Werner — — 23,704 — — 23,704 —

Net income (loss) attributable to noncontrolling interest — — — — — — ( 200 )

Other comprehensive loss — — — ( 2,027 ) — ( 2,027 ) —

Dividends on common stock ($ 0.14 per share)

— — ( 8,875 ) — — ( 8,875 ) —

Equity compensation activity, 1,020 shares

— ( 36 ) — — ( 1 ) ( 37 ) —

Non-cash equity compensation expense — 2,380 — — — 2,380 —

BALANCE, September 30, 2023 $ 805 $ 133,038 $ 1,938,694 $ ( 8,650 ) $ ( 551,672 ) $ 1,512,215 $ 38,948

Three Months Ended September 30, 2022

Three Months Ended March 31, 2024

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

6 unchanged sentences

Equity Temporary Equity - Redeemable Noncontrolling Interest

BALANCE, June 30, 2022 $ 805 $ 124,065 $ 1,777,092 $ ( 14,584 ) $ ( 543,506 ) $ 1,343,872 $ 38,552

BALANCE, December 31, 2023 $ 805 $ 134,894 $ 1,953,385 $ ( 9,684 ) $ ( 551,061 ) $ 1,528,339 $ 38,607

Net income attributable to Werner — — 6,312 — — 6,312 —

Net income attributable to noncontrolling interest — — — — — — 874

Net loss attributable to noncontrolling interest — — — — — — ( 64 )

Other comprehensive income — — — 618 — 618 —

6 unchanged sentences

Non-cash equity compensation expense — 2,250 — — — 2,250 —

Distribution to noncontrolling interest — — — — — — ( 750 )

BALANCE, September 30, 2022 $ 805 $ 127,046 $ 1,823,927 $ ( 13,435 ) $ ( 551,785 ) $ 1,386,558 $ 38,676

See Notes to Consolidated Financial Statements (Unaudited).

WERNER ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND

TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST (CONTINUED)

Nine Months Ended September 30, 2023

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

Stock Paid-In

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stockholders’

Equity Temporary Equity - Redeemable Noncontrolling Interest

BALANCE, December 31, 2022 $ 805 $ 129,837 $ 1,875,873 $ ( 11,292 ) $ ( 551,588 ) $ 1,443,635 $ 38,699

Net income attributable to Werner — — 88,809 — — 88,809 —

Net income attributable to noncontrolling interest — — — — — — 249

Other comprehensive income — — — 2,642 — 2,642 —

Dividends on common stock ($ 0.41 per share)

— — ( 25,988 ) — — ( 25,988 ) —

Equity compensation activity, 167,513 shares

— ( 5,470 ) — — ( 84 ) ( 5,554 ) —

Non-cash equity compensation expense — 8,671 — — — 8,671 —

BALANCE, September 30, 2023 $ 805 $ 133,038 $ 1,938,694 $ ( 8,650 ) $ ( 551,672 ) $ 1,512,215 $ 38,948

Nine Months Ended September 30, 2022

BALANCE, March 31, 2024 $ 805 $ 132,722 $ 1,950,819 $ ( 9,066 ) $ ( 557,276 ) $ 1,518,004 $ 38,543

Three Months Ended March 31, 2023

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

10 unchanged sentences

Other comprehensive income — — — 2,028 — 2,028 —

Purchases of 2,710,304 shares of common stock

— — — — ( 110,400 ) ( 110,400 ) —

Dividends on common stock ($ 0.13 per share)

3 unchanged sentences

Non-cash equity compensation expense — 3,403 — — — 3,403 —

Distribution to noncontrolling interest — — — — — — ( 750 )

BALANCE, September 30, 2022 $ 805 $ 127,046 $ 1,823,927 $ ( 13,435 ) $ ( 551,785 ) $ 1,386,558 $ 38,676

BALANCE, March 31, 2023 $ 805 $ 128,050 $ 1,902,858 $ ( 9,264 ) $ ( 551,912 ) $ 1,470,537 $ 39,009

See Notes to Consolidated Financial Statements (Unaudited).

5 unchanged sentences

and its 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.

Redeemable 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.

6 unchanged sentences

although in management’s opinion, the disclosures are adequate so that the information presented is not misleading.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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 2023 Form 10-K.

(2) Business Acquisitions

Developments during the nine months ended September 30, 2023 related to our 2022 business acquisitions are discussed below.

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 final purchase price of $ 108.6 million after including the impacts of working capital adjustments, cash acquired, net present value of future insurance payments, and contingent consideration.

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

Pro forma information for this acquisition is not provided as it did not have a material impact on our consolidated operating results.

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

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

Baylor operates in the east central and south central United States.

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

Pro forma information for this acquisition is not provided as it did not have a material impact on our consolidated operating results.

No measurement period adjustments were recorded during the nine months ended September 30, 2023.

Purchase Price Allocations

We accounted for the ReedTMS and Baylor purchases using the acquisition method of accounting under 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 allocations for ReedTMS and Baylor were considered final as of June 30, 2023.

The following table summarizes the purchase price allocation for ReedTMS, including any adjustments (in thousands):

November 5, 2022

Opening Balance sheet

as Reported at

December 31, 2022 Adjustments (1)

November 5, 2022

Opening Balance sheet

as Reported at

September 30, 2023

Purchase Price

Cash consideration paid

$ — $ 116,989 (2)

Cash and cash equivalents acquired

( 12,120 ) — ( 12,120 )

Contingent consideration arrangement

( 800 ) 4,200 (3)

Working capital surplus (deficiency)

( 689 ) 188 ( 501 )

Total purchase price (fair value of consideration)

109,180 ( 612 ) 108,568

Purchase Price Allocation

Current assets

52,531 49 52,580

Property and equipment

35,000 ( 12,485 ) 22,515

Intangible assets

12,000 15,300 27,300

Other non-current assets

7,927 ( 1 ) 7,926

Total assets acquired

107,458 2,863 110,321

Current liabilities

( 45,497 ) ( 389 ) ( 45,886 )

Other long-term liabilities

( 5,622 ) 527 ( 5,095 )

Total liabilities assumed

( 51,119 ) 138 ( 50,981 )

$ 52,841 $ ( 3,613 ) $ 49,228

(1) The measurement period adjustments were recorded during the three months ended March 31, 2023.

No material statement of income effects were identified with these adjustments.

(2) 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.

During the three months ended March 31, 2023, we received $ 2.1 million from escrow for post-closing adjustments.

The remaining balance of the escrow, except for $ 0.5 million, was returned to the sellers.

In exchange, the sellers obtained a $ 10.0 million Standby Letter of Credit with the Company named as beneficiary.

(3) The contingent earnout liability is recorded in other current liabilities on the consolidated condensed balance sheets as of September 30, 2023 and in other long-term liabilities as of December 31, 2022 .

For additional information regarding the valuation of the contingent liability, see Note 6 – Fair Value.

Recently Issued Accounting Pronouncements, Not Yet Effective:

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , with the objective of improving financial reporting, primarily through enhanced disclosures about significant segment expenses.

The provisions of this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, using a retrospective approach.

We are evaluating the impact of adopting ASU 2023-07, and we expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.

In December 2023, FASB issued ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , with the objective of enhancing the transparency and decision usefulness of income tax information through income tax disclosure improvements, primarily related to the rate reconciliation and income taxes paid information.

The provisions of this update are effective for annual periods beginning after December 15, 2024, using a prospective approach.

Retrospective application is permitted.

We are evaluating the impact of adopting ASU 2023-09, and we expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.

Revenue Recognition

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Truckload Transportation Services $ 551,126 $ 588,330

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

United States $ 721,861 $ 782,293

4 unchanged sentences

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 September 30, 2023 and December 31, 2022, the accounts receivable, trade, net, balance was $ 449.8 million and $ 518.8 million, respectively.

At March 31, 2024 and December 31, 2023, the accounts receivable, trade, net, balance was $ 417.5 million and $ 444.9 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 September 30, 2023 and December 31, 2022, the balance of contract assets was $ 8.2 million and $ 8.9 million, respectively.

At March 31, 2024 and December 31, 2023, the balance of contract assets was $ 8.6 million and $ 7.4 million, respectively.

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

1 unchanged sentence

Contract liabilities represent advance consideration received from customers and are recognized as revenues over time as the related performance obligation is satisfied.

A t September 30, 2023 and December 31, 2022, t he balance of contract liabilities was $ 1.2 million and $ 0.9 million, respectively .

The amount of revenues recognized in the nine months ended September 30, 2023 that was included in the December 31, 2022 contract liability balance was $ 0.9 million.

A t March 31, 2024 and December 31, 2023, t he balance o f contract liabilities was $ 1.1 million and $ 0.9 million, respectively.

The amount of revenues recognized in the three months ended March 31, 2024 that was included in the December 31, 2023 contract liability balance was $ 0.9 million.

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

4 unchanged sentences

transit times generally average approximately 3 days.

During the nine months ended September 30, 2023 and 2022, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material.

During the three months ended March 31, 2024 and 2023, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material.

(3) Goodwill and Intangible Assets

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired in business combinations.

The following table summarizes changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2023 (in thousands):

Werner Logistics

Balance as of December 31, 2022

$ 53,897 $ 78,820 $ 132,717

Purchase accounting adjustments (1)

( 7,841 ) 4,228 ( 3,613 )

Balance as of September 30, 2023

$ 46,056 $ 83,048 $ 129,104

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

For additional information regarding these purchase accounting adjustments, see Note 2.

There were no changes in the carrying amount of goodwill by segment for the three months ended March 31, 2024.

The following table presents acquired intangible assets (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Customer relationships

3 unchanged sentences

$ 104,800 $ ( 20,841 ) $ 83,959 $ 104,800 $ ( 18,323 ) $ 86,477

Amortization expense on intangible assets was $ 2.5 million and $ 7.8 million for the three and nine months ended September 30, 2023, respectively, and $ 1.4 million and $ 4.1 million for the three and nine months ended September 30, 2022, respectively, and is reported in depreciation and amortization on the consolidated statements of income.

As of September 30, 2023, we estimate future amortization expense for intangible assets will be $ 2.5 million for the remainder of 2023, and $ 10.1 million for each of the five succeeding fiscal years.

Amortization expense on intangible assets was $ 2.5 million and $ 2.8 million for the three months ended March 31, 2024 and 2023, respectively, and is reported in depreciation and amortization on the consolidated statements of income.

As of March 31, 2024, we estimate future amortization expense for intangible assets will be $ 7.6 million for the remainder of 2024, and $ 10.1 million for each of the five succeeding fiscal years.

We have entered into operating leases primarily for real estate.

8 unchanged sentences

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

September 30, 2023 December 31, 2022

Balance Sheet Classification

March 31, 2024 December 31, 2023

Right-of-use assets (recorded in other non-current assets) $ 34,339 $ 34,814

2 unchanged sentences

Total operating lease liabilities $ 36,049 $ 36,512

Other Information

Weighted-average remaining lease term for operating leases 6.06 years 6.15 years

Weighted-average discount rate for operating leases 3.8 % 3.6 %

The following table presents the maturities of operating lease liabilities as of September 30, 2023 (in thousands):

Maturity of Lease Liabilities

The following table presents the maturities of operating lease liabilities as of March 31, 2024 (in thousands):

2024 (remaining) $ 7,766

3 unchanged sentences

Present value of operating lease liabilities $ 36,049

During the nine months ended September 30, 2023 and 2022, right-of-use assets of $ 3.8 million and $ 12.4 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 $ 8.4 million and $ 5.9 million for the nine months ended September 30, 2023 and 2022, respectively, and are included in operating cash flows.

During the three months ended March 31, 2024 and 2023, right-of-use assets of $ 1.9 million and $ 1.5 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 $ 2.7 million and $ 2.9 million for the three months ended March 31, 2024 and 2023, respectively, and are included in operating cash flows.

Operating Lease Expense

Operating lease expense was $ 5.7 million and $ 17.8 million for the three and nine months ended September 30, 2023, respectively, and $ 5.4 million and $ 15.8 million for the three and nine months ended September 30, 2022, respectively.

This expense included $ 2.8 million and $ 8.8 million for the three and nine months ended September 30, 2023, respectively, and $ 2.2 million and $ 6.6 million for the three and nine months ended September 30, 2022, respectively, for long-term operating leases, with the remainder for variable and short-term lease expense .

Operating lease expense was $ 4.4 million and $ 6.2 million for the three months ended March 31, 2024 and 2023, respectively.

This expense included $ 2.7 million and $ 3.0 million for long-term operating leases for the three months ended March 31, 2024 and 2023, with the remainder for variable and short-term lease expense .

Lessor Operating Leases

1 unchanged sentence

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

Revenues were $ 2.8 million and $ 8.2 million for the three and nine months ended September 30, 2023, respectively, and $ 3.3 million and $ 9.6 million for the three and nine months ended September 30, 2022, respectively.

The following table presents information about the maturities of these operating leases as of September 30, 2023 (in thousands):

Revenues were $ 2.4 million and $ 2.7 million for the three months ended March 31, 2024 and 2023, respectively.

The following table presents information about the maturities of these operating leases as of March 31, 2024 (in thousands):

2024 (remaining) $ 5,362

17 unchanged sentences

Hierarchy Fair Value

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Other non-current assets:

1 unchanged sentence

1 $ 172 $ 310

Other current liabilities:

Contingent consideration associated with acquisitions 3 $ 4,390 $ —

Other long-term liabilities:

Contingent consideration associated with acquisitions 3 8,793 13,400

Total liabilities $ 13,183 $ 13,400

(1) Represents our investments in autonomous technology companies.

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

Contingent consideration associated with acquisition 3 $ 8,998 $ 8,896

(1) Represents our investment in an autonomous technology company.

For additional information regarding the valuation of this equity security, see Note 6 – Investments.

The following table presents changes in the fair value of our contingent earnout liabilities (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Balance at beginning of period

$ 8,896 $ 13,400

Measurement period adjustment associated with the acquisition of ReedTMS (1)

— — ( 800 ) —

Measurement period adjustment associated with the acquisition of ReedTMS Logistics (1)

Change in fair value 102 277

5 unchanged sentences

Change in fair value is recorded in other operating expenses 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 .

We have ownership interests in investments, primarily Mastery Logistics Systems, Inc.

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

Our ownership interest in Autotech Fund III, L.P.

2 unchanged sentences

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.

The carrying amount of our fixed-rate debt not measured at fair value on a recurring basis was $ 90.0 million and $ 93.8 million as of September 30, 2023 and December 31, 2022, 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 $ 86.6 million and $ 87.2 million as of September 30, 2023 and December 31, 2022, respectively (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 $ 87.5 million and $ 88.8 million as of March 31, 2024 and December 31, 2023, 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 $ 86.8 million and $ 86.7 million as of March 31, 2024 and December 31, 2023, respectively (categorized as Level 2 of the fair value hierarchy).

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).

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Equity Investments without Readily Determinable Fair Values

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.

Our strategic equity investments without readily determinable fair values primarily consist of our investment in MLSI, a transportation management systems company.

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 condensed balance sheets.

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

As of September 30, 2023 and December 31, 2022, the value of our investment in MLSI was $ 89.8 million and $ 86.8 million, respectively, and the value of our investment in Fleet Defender, Inc.

was $ 250 thousand.

The following table summarizes the activity related to our equity investments without readily determinable fair values during the periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Investment in equity securities

$ 3,000 $ — $ — $ 20,250

Upward adjustments (1)

(1) During 2022, 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 September 30, 2023, cumulative upward adjustments on our equity securities without readily determinable fair values totaled $ 56.8 million.

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

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

As of March 31, 2024 and December 31, 2023, the value of our investment in MLSI was $ 89.8 million, and the value of our other equity investments without readily determinable fair values was $ 327 thousand and $ 316 thousand, respectively.

No gains or losses were recorded for the three months ended March 31, 2024 and 2023.

As of March 31, 2024, cumulative upward adjustments on our equity securities without readily determinable fair values totaled $ 56.8 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 loss (gain) on investments in equity securities on the consolidated statements of income.

As of September 30, 2023 and December 31, 2022, the value of these investments was $ 0.6 million and $ 0.7 million, respectively.

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

We own a strategic minority equity investment in an autonomous technology company, which is being accounted for under ASC 321 and is recorded in other noncurrent assets on the consolidated condensed balance sheets.

As of March 31, 2024 and December 31, 2023, the value of this investment was $ 0.2 million and $ 0.3 million, respectively.

For additional information regarding the fair value of this equity investment, see Note 5 – Fair Value.

The following table summarizes the activity related to our equity investments with readily determinable fair values during the periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Loss (gain) on investments in equity securities, net $ 34 $ ( 114 ) $ 36 $ 14,235

Portion of unrealized loss (gain) for the period related to equity securities still held at the reporting date 35 ( 114 ) 28 14,235

Three Months Ended March 31,

Loss on investments in equity securities $ 138 $ 81

Portion of unrealized loss for the period related to equity securities still held at the reporting date 138 81

Equity Method Investment

2 unchanged sentences

Our interest, which represents an ownership percentage of less than 20 %, is being accounted for under ASC 323, “ Investments - Equity Method and Joint Ventures .” As a limited partner, we will make periodic capital contributions toward this total commitment amount.

We contributed $ 2.6 million to the Fund during the nine months ended September 30, 2023.

As of September 30, 2023, the value of our investment in the Fund was $ 1.7 million and is recorded in other noncurrent assets on the

consolidated condensed balance sheets.

The carrying amount of the Fund as of September 30, 2023 approximates its fair value as of June 30, 2023, as this is the most recent information available to us at this time.

We recognized a loss of $ 0.1 million and $ 1.0 million from the Fund for the three and nine months ended September 30, 2023, respectively, which is reported in loss from equity method investment on the consolidated statements of income.

(8) Notes Receivable

We provide financing to some individuals who want to become independent contractors by purchasing a tractor from us and leasing their services to us.

We maintain a primary security interest in the tractor until the independent contractor pays the note balance in full.

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 MLSI 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.

The independent contractor notes receivable, MLSI subordinated promissory note, and other notes receivable are included in other current assets and other non-current assets in the consolidated condensed balance sheets.

The following table presents our notes receivable (in thousands):

September 30, 2023 December 31, 2022

Independent contractor notes receivable

$ 7,432 $ 8,287

MLSI subordinated promissory note 25,000 —

Other notes receivable

Notes receivable

40,367 16,208

Less current portion

Notes receivable – non-current

$ 37,764 $ 13,517

We also provide financing to some individuals who attended our driver training schools.

The student notes receivable is included in other receivables and other non-current assets in the consolidated condensed balance sheets.

The following table presents our student notes receivable (in thousands):

September 30, 2023 December 31, 2022

Student notes receivable

$ 64,720 $ 63,351

Allowance for doubtful student notes receivable

( 22,945 ) ( 23,491 )

Total student notes receivable, net of allowance

41,775 39,860

Less current portion, net of allowance

13,433 12,574

Student notes receivable – non-current

$ 28,342 $ 27,286

As of March 31, 2024, our cumulative contributions in the Fund were $ 4.4 million.

We contributed $ 1.1 million and $ 2.1 million to the Fund during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023, the value of our investment in the Fund was $ 3.3 million and $ 2.3 million, respectively, and is recorded in other noncurrent assets on the consolidated condensed balance sheets.

The carrying amount of the Fund as of March 31, 2024 approximates its fair value as of December 31, 2023, as this is the most recent information available to us at this time.

We recognized a loss of $ 0.1 million from the Fund for the three months ended March 31, 2024, which is reported in loss from equity method investment on the consolidated statements of income.

No earnings or losses were recognized for the three months ended March 31, 2023.

(7) Debt and Credit Facilities

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, and the credit agreement with Wells Fargo Bank, National Association, dated March 25, 2022.

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 credit facilities.

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.

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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 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 and a final payment of principal and interest due and payable on May 14, 2024

("BMO Term Loan").

In July 2023 and April 2024, we entered into additional variable-for-fixed interest rate swap agreements for notional amounts of $ 130.0 million and $ 75.0 million, respectively, to further limit our exposure to increases in interest rates on a portion of our variable-rate indebtedness (see Note 11, Subsequent Event, for additional information regarding the April 2024 swap agreement).

We are currently planning to repay the remaining outstanding principal balance under the BMO Term Loan in May 2024 using proceeds from the 2022 Credit Agreement.

The outstanding principal balance of the BMO Term Loan bears interest at a fixed rate of 1.28 %, payable quarterly in arrears.

As of September 30, 2023 and December 31, 2022, our outstanding debt totaled $ 690.0 million and $ 693.8 million, respectively.

As of September 30, 2023, we had an outstanding revolving credit loan balance of $ 600.0 million under the 2022 Credit Agreement, including (i) $ 320.0 million at a variable interest rate of 6.67 %, (ii) $ 150.0 million which is effectively fixed at 2.88 % with interest rate swap agreements through May 2024, (iii) $ 40.0 million which is effectively fixed at 6.20 % with interest rate swap agreements through July 2025, and (iv) $ 90.0 million which is effectively fixed at 5.87 % with interest rate swap agreements through July 2026.

Subsequent to the end of the quarter, in October 2023, we borrowed an additional $ 15.0 million under our revolving line of credit.

The $ 1.075 billion of borrowing capacity under our 2022 Credit Agreement at September 30, 2023, is further reduced by $ 51.0 million in stand-by letters of credit under which we are obligated.

In addition, as of September 30, 2023, we had $ 90.0 million outstanding under the BMO Term Loan at a fixed interest rate of 1.28 %.

As of March 31, 2024 and December 31, 2023, our outstanding debt totaled $ 597.5 million and $ 648.8 million, respectively.

As of March 31, 2024, we had an outstanding revolving credit loan balance of $ 510.0 million under the 2022 Credit Agreement, including (i) $ 230.0 million at a variable interest rate of 6.67 %, (ii) $ 150.0 million which is effectively fixed at 2.88 % with interest rate swap agreements through May 2024, (iii) $ 40.0 million which is effectively fixed at 6.20 % with interest rate swap agreements through July 2025, and (iv) $ 90.0 million which is effectively fixed at 5.87 % with interest rate swap agreements through July 2026.

Subsequent to the end of the quarter, in April 2024, we borrowed an additional $ 30.0 million under our revolving line of credit.

Our total available borrowing capacity under the 2022 Credit Agreement was $ 559.1 million as of March 31, 2024, after considering $ 5.9 million in stand-by letters of credit under which we are obligated.

In addition, as of March 31, 2024, we had $ 87.5 million outstanding under the BMO Term Loan at a fixed interest rate of 1.28 %.

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 September 30, 2023, we were in compliance with these covenants.

At September 30, 2023, the aggregate future maturities of long-term debt by year are as follows (in thousands):

As of March 31, 2024, we were in compliance with these covenants.

At March 31, 2024, the aggregate future maturities of long-term debt by year are as follows (in thousands):

2024 (remaining) $ 87,500

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(8) Commitments and Contingencies

We have committed to property and equipment purchases of approximately $ 94.6 million at September 30, 2023 .

We have committed to property and equipment purchases of approximately $ 188.3 million at March 31, 2024 .

We are involved in certain claims and pending litigation, including those described herein, arising in the ordinary course of business.

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

As a result of this jury verdict, the Company had recorded a liability of $ 38.3 million as of September 30, 2023, and $ 34.1 million as of December 31, 2022.

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 September 30, 2023 and December 31, 2022.

As a result of this jury verdict, the Company had recorded a liability of $ 40.4 million as of March 31, 2024, and $ 39.8 million as of December 31, 2023.

The Company pursued an appeal of this verdict, and on May 18, 2023, the Texas Court of Appeals overruled Werner’s appeal and affirmed the trial court’s judgment.

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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.

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.

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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 September 30, 2023, 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.

Plaintiffs again have appealed the case

to the Eighth Circuit Court of Appeals.

As of March 31, 2024, we have an accrual for the jury’s award, attorney fees and costs in the short break matter and had not accrued for the sleeper berth matter.

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income attributable to Werner $ 6,312 $ 35,224

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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 property and equipment not attributable to our operating segments.

“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 property and equipment 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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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenues by Segment

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Operating Income (Loss) by Segment

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Depreciation and Amortization by Segment

4 unchanged sentences

Total $ 74,270 $ 74,313

(11) Subsequent Event

In April 2024, we entered into an additional variable-for-fixed interest rate swap agreement for a notional amount of $ 75.0 million, maturing in April 2027.

Under the terms of the interest rate swap agreement, we will receive monthly variable-rate interest payments based on one-month Term SOFR, and make monthly fixed-rate interest payments as specified in the interest rate swap agreement.

We have designated this interest rate swap agreement as a cash flow hedge.

Changes in fair value of an outstanding derivative in a cash flow hedge will be recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income until earnings are impacted by the hedged transaction.

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-Q

Item 1. Financial Statements