WERNER ENTERPRISES INC 10-Q

Item 1. Financial Statements. WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, (In thousands, except per share amounts) 2024 2023 Operating revenues $ 769,080 $ 832,714 Operating expenses: Salaries, wages and benefits 265,403 268,315 Fuel 77,622 91,414 Supplies and maintenance 61,775 68,225 Taxes and licenses 25,164 25,425 Insurance and claims 36,362 36,485 Depreciation and amortization 74,270 74,313 Rent and purchased transportation 203,925 220,224 Communications and utilities 4,706 4,733 Other 4,265 ( 9,806 ) Total operating expenses 753,492 779,328 Operating income 15,588 53,386 Other expense (income): Interest expense 7,948 7,916 Interest income ( 1,685 ) ( 1,552 ) Loss on investments in equity securities 138 81 Loss from equity method investment 133 — Other ( 261 ) 7 Total other expense, net 6,273 6,452 Income before income taxes 9,315 46,934 Income tax expense 3,067 11,400 Net income 6,248 35,534 Net loss (income) attributable to noncontrolling interest 64 ( 310 ) Net income attributable to Werner $ 6,312 $ 35,224 Earnings per share: Basic $ 0.10 $ 0.56 Diluted $ 0.10 $ 0.55 Weighted-average common shares outstanding: Basic 63,472 63,306 Diluted 63,727 63,695 See Notes to Consolidated Financial Statements (Unaudited). 4 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended March 31, (In thousands) 2024 2023 Net income $ 6,248 $ 35,534 Other comprehensive income (loss): Foreign currency translation adjustments 502 3,001 Change in fair value of interest rate swaps, net of tax 116 ( 973 ) Other comprehensive income, net 618 2,028 Comprehensive income 6,866 37,562 Comprehensive loss (income) attributable to noncontrolling interest 64 ( 310 ) Comprehensive income attributable to Werner $ 6,930 $ 37,252 See Notes to Consolidated Financial Statements (Unaudited). 5 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands, except share amounts) March 31, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 60,337 $ 61,723 Accounts receivable, trade, less allowance of $ 9,101 and $ 9,337 , respectively 417,463 444,944 Other receivables 25,031 25,479 Inventories and supplies 17,173 18,077 Prepaid taxes, licenses and permits 12,803 16,505 Other current assets 64,509 67,900 Total current assets 597,316 634,628 Property and equipment, at cost 2,914,041 2,951,654 Less – accumulated depreciation 982,759 978,698 Property and equipment, net 1,931,282 1,972,956 Goodwill 129,104 129,104 Intangible assets, net 83,959 86,477 Other non-current assets 337,169 334,771 Total assets $ 3,078,830 $ 3,157,936 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 136,242 $ 135,990 Current portion of long-term debt 1,250 2,500 Insurance and claims accruals 81,537 81,794 Accrued payroll 48,318 50,549 Accrued expenses 22,202 30,282 Other current liabilities 24,503 29,470 Total current liabilities 314,052 330,585 Long-term debt, net of current portion 596,250 646,250 Other long-term liabilities 53,371 54,275 Insurance and claims accruals, net of current portion 235,685 239,700 Deferred income taxes 322,925 320,180 Total liabilities 1,522,283 1,590,990 Commitments and contingencies Temporary equity - redeemable noncontrolling interest 38,543 38,607 Stockholders’ equity: Common stock, $ 0.01 par value, 200,000,000 shares authorized; 80,533,536 shares issued; 63,412,833 and 63,444,681 shares outstanding, respectively 805 805 Paid-in capital 132,722 134,894 Retained earnings 1,950,819 1,953,385 Accumulated other comprehensive loss ( 9,066 ) ( 9,684 ) Treasury stock, at cost; 17,120,703 and 17,088,855 shares, respectively ( 557,276 ) ( 551,061 ) Total stockholders’ equity 1,518,004 1,528,339 Total liabilities, temporary equity and stockholders’ equity $ 3,078,830 $ 3,157,936 See Notes to Consolidated Financial Statements (Unaudited). 6 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, (In thousands) 2024 2023 Cash flows from operating activities: Net income $ 6,248 $ 35,534 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 74,270 74,313 Deferred income taxes 2,828 ( 111 ) Gain on disposal of property and equipment ( 3,568 ) ( 18,339 ) Non-cash equity compensation 2,250 3,403 Insurance and claims accruals, net of current portion ( 4,015 ) 954 Loss on investments in equity securities 138 81 Loss from equity method investment 133 — Other ( 3,141 ) ( 417 ) Changes in certain working capital items: Accounts receivable, net 27,481 57,866 Other current assets 7,139 17,336 Accounts payable ( 5,274 ) 6,484 Other current liabilities ( 15,904 ) ( 10,257 ) Net cash provided by operating activities 88,585 166,847 Cash flows from investing activities: Additions to property and equipment ( 58,235 ) ( 161,764 ) Proceeds from sales of property and equipment 39,200 59,021 Net cash invested in acquisition — ( 188 ) Investment in equity securities ( 11 ) — Payment to acquire equity method investment ( 1,060 ) ( 2,125 ) Purchase of promissory note — ( 25,000 ) Decrease in notes receivable 696 826 Net cash used in investing activities ( 19,410 ) ( 129,230 ) Cash flows from financing activities: Repayments of short-term debt ( 21,250 ) ( 2,500 ) Proceeds from issuance of short-term debt 20,000 — Repayments of long-term debt ( 50,000 ) — Dividends on common stock ( 8,882 ) ( 8,220 ) Repurchases of common stock ( 6,550 ) — Tax withholding related to net share settlements of restricted stock awards ( 4,087 ) ( 5,514 ) Net cash used in financing activities ( 70,769 ) ( 16,234 ) Effect of exchange rate fluctuations on cash 208 968 Net increase (decrease) in cash and cash equivalents ( 1,386 ) 22,351 Cash and cash equivalents, beginning of period 61,723 107,240 Cash and cash equivalents, end of period $ 60,337 $ 129,591 Supplemental disclosures of cash flow information: Interest paid $ 9,328 $ 8,244 Income taxes paid 1,165 219 Supplemental schedule of non-cash investing and financing activities: Notes receivable issued upon sale of property and equipment $ 402 $ 756 Change in fair value of interest rate swaps 116 ( 973 ) Property and equipment acquired included in accounts payable 19,765 4,008 Property and equipment disposed included in other receivables — 110 Dividends accrued but not yet paid at end of period 8,878 8,239 Contingent consideration associated with acquisitions — ( 800 ) See Notes to Consolidated Financial Statements (Unaudited). 7 Table of Contents WERNER ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST (Unaudited) Three Months Ended March 31, 2024 (In thousands, except share and per share amounts) Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders’ Equity Temporary Equity - Redeemable Noncontrolling Interest 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 loss attributable to noncontrolling interest — — — — — — ( 64 ) Other comprehensive income — — — 618 — 618 — Purchases of 167,818 shares of common stock — — — — ( 6,550 ) ( 6,550 ) — Dividends on common stock ($ 0.14 per share) — — ( 8,878 ) — — ( 8,878 ) — Equity compensation activity, 135,970 shares — ( 4,422 ) — — 335 ( 4,087 ) — Non-cash equity compensation expense — 2,250 — — — 2,250 — 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 Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total 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 — — 35,224 — — 35,224 — Net income attributable to noncontrolling interest — — — — — — 310 Other comprehensive income — — — 2,028 — 2,028 — Dividends on common stock ($ 0.13 per share) — — ( 8,239 ) — — ( 8,239 ) — Equity compensation activity, 153,931 shares — ( 5,190 ) — — ( 324 ) ( 5,514 ) — Non-cash equity compensation expense — 3,403 — — — 3,403 — 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). 8 Table of Contents WERNER ENTERPRISES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) Basis of Presentation and Recent Accounting Pronouncements Basis of Presentation The accompanying unaudited interim consolidated financial statements include the accounts of Werner Enterprises, Inc. and its subsidiaries (collectively, the “Company” or “Werner”). 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. and its subsidiaries. All significant intercompany accounts and transactions relating to these entities have been eliminated. These consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and, in the opinion of management, reflect all adjustments, which are all of normal recurring nature, necessary to present fairly the financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles (“GAAP”). These consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements; although in management’s opinion, the disclosures are adequate so that the information presented is not misleading. Operating results for the three 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. 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. (2) Revenue Revenue Recognition Revenues are recognized over time as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The following table presents our revenues disaggregated by revenue source (in thousands): Three Months Ended March 31, 2024 2023 Truckload Transportation Services $ 551,126 $ 588,330 Werner Logistics 202,482 228,669 Inter-segment eliminations ( 4,071 ) ( 5,261 ) Transportation services 749,537 811,738 Other revenues 19,543 20,976 Total revenues $ 769,080 $ 832,714 9 Table of Contents The following table presents our revenues disaggregated by geographic areas in which we conduct business (in thousands). Operating revenues for foreign countries include revenues for (i) shipments with an origin or destination in that country and (ii) other services provided in that country. If both the origin and destination are in a foreign country, the revenues are attributed to the country of origin. Three Months Ended March 31, 2024 2023 United States $ 721,861 $ 782,293 Mexico 39,119 41,813 Other 8,100 8,608 Total revenues $ 769,080 $ 832,714 Contract Balances and Accounts Receivable A receivable is an unconditional right to consideration and is recognized when shipments have been completed and the related performance obligation has been fully satisfied. At March 31, 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 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. These contract assets are considered current assets as they will be settled in less than 12 months. Contract liabilities represent advance consideration received from customers and are recognized as revenues over time as the related performance obligation is satisfied. 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. These contract liabilities are considered current liabilities as they will be settled in less than 12 months. Performance Obligations We have elected to apply the practical expedient in Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts With Customers , to not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less. Remaining performance obligations represent the transaction price allocated to future reporting periods for freight shipments started but not completed at the reporting date that we expect to recognize as revenue in the period subsequent to the reporting date; transit times generally average approximately 3 days. During the three months ended March 31, 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. 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): March 31, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 80,200 $ ( 15,994 ) $ 64,206 $ 80,200 $ ( 13,989 ) $ 66,211 Trade names 24,600 ( 4,847 ) 19,753 24,600 ( 4,334 ) 20,266 Total intangible assets $ 104,800 $ ( 20,841 ) $ 83,959 $ 104,800 $ ( 18,323 ) $ 86,477 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. 10 Table of Contents (4) Leases We have entered into operating leases primarily for real estate. The leases have terms which range from 1 year to 18 years, and some include options to renew. Renewal terms are included in the lease term when it is reasonably certain that we will exercise the option to renew. Operating leases are included in other non-current assets, other current liabilities and other long-term liabilities on the consolidated condensed balance sheets. These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using our incremental borrowing rate because the rate implicit in each lease is not readily determinable. We have certain contracts for real estate that may contain lease and non-lease components which we have elected to treat as a single lease component. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense is reported in rent and purchased transportation on the consolidated statements of income. The following table presents balance sheet and other operating lease information (dollars in thousands): March 31, 2024 December 31, 2023 Right-of-use assets (recorded in other non-current assets) $ 34,339 $ 34,814 Current lease liabilities (recorded in other current liabilities) $ 8,937 $ 9,017 Long-term lease liabilities (recorded in other long-term liabilities) 27,112 27,495 Total operating lease liabilities $ 36,049 $ 36,512 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 March 31, 2024 (in thousands): 2024 (remaining) $ 7,766 2025 8,768 2026 6,955 2027 4,852 2028 3,591 Thereafter 7,982 Total undiscounted operating lease payments $ 39,914 Less: Imputed interest ( 3,865 ) Present value of operating lease liabilities $ 36,049 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 $ 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 We are the lessor of tractors and trailers under operating leases with initial terms of 3 to 8 years. We recognize revenue for such leases on a straight-line basis over the term of the lease. Revenues were $ 2.4 million and $ 2.7 million for the three months ended March 31, 2024 and 2023, respectively. 11 Table of Contents The following table presents information about the maturities of these operating leases as of March 31, 2024 (in thousands): 2024 (remaining) $ 5,362 2025 1,664 2026 342 2027 86 2028 — Thereafter — Total $ 7,454 (5) Fair Value Fair Value Measurement — Definition and Hierarchy ASC 820-10, Fair Value Measurement , defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows: Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Such inputs include quoted prices in markets that are not active, quoted prices for similar assets and liabilities in active and inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 — Unobservable inputs for the asset or liability, where there is little, if any, observable market activity or data for the asset or liability. In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology applies to our Level 1 assets and liabilities. If quoted prices in active markets for identical assets and liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable, either directly or indirectly. This pricing methodology would apply to Level 2 assets and liabilities. The following table presents the fair value hierarchy for our assets and liabilities measured at fair value on a recurring basis (in thousands): Level in Fair Value Hierarchy Fair Value March 31, 2024 December 31, 2023 Assets: Other non-current assets: Equity securities (1) 1 $ 172 $ 310 Liabilities: Other long-term liabilities: 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. 12 Table of Contents The following table presents changes in the fair value of our contingent earnout liabilities (in thousands): Three Months Ended March 31, 2024 2023 Balance at beginning of period $ 8,896 $ 13,400 Measurement period adjustment associated with the acquisition of ReedTMS Logistics (1) — ( 800 ) Change in fair value 102 277 Balance at end of period $ 8,998 $ 12,877 (1) The measurement period adjustment was recorded in goodwill on the consolidated condensed balance sheet. The estimated fair values of our contingent consideration arrangements are based upon probability-adjusted inputs for each acquired entity. Additionally, as the liability is stated at present value, the passage of time alone will increase the estimated fair value of the liability each reporting period. Change in fair value is recorded in other operating expenses on the consolidated statements of income. 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. (“Autotech Fund III”) is accounted for under ASC 323, “ Investments - Equity Method and Joint Ventures .” For additional information regarding the valuation of these investments, see Note 6 – Investments. Fair Value of Financial Instruments Not Recorded at 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. 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). (6) Investments Equity Investments without Readily Determinable Fair Values 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. 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 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. 13 Table of Contents 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 March 31, 2024 2023 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 In January 2023, we committed to make a $ 20.0 million investment in Autotech Fund III (the “Fund”) pursuant to a limited partnership agreement. The Fund is managed by Autotech Ventures, a venture capital firm focused on ground transportation technology. 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. 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 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. 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. 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). 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"). 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 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 %. 14 Table of Contents 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 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 2025 — 2026 — 2027 510,000 2028 — Total $ 597,500 (8) Commitments and Contingencies 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. The majority of these claims relate to bodily injury, property damage, cargo and workers’ compensation incurred in the transportation of freight, as well as certain class action litigation related to personnel and employment matters. We accrue for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the knowledge of the facts, management believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and our view of these matters may change in the future as the litigation and related events unfold. On May 17, 2018, in Harris County District Court in Houston, Texas, a jury rendered an adverse verdict against the Company in a lawsuit arising from a December 30, 2014 accident between a Werner tractor-trailer and a passenger vehicle. On July 30, 2018, the court entered a final judgment against Werner for $ 92.0 million, including pre-judgment interest. The Company has premium-based liability insurance to cover the potential outcome from this jury verdict. Under the Company’s insurance policies in effect on the date of this accident, the Company’s maximum liability for this accident is $ 10.0 million (plus pre-judgment and post-judgment interest) with premium-based coverage that exceeds the jury verdict amount. As a result of this jury verdict, the Company had recorded a liability of $ 40.4 million as of March 31, 2024, and $ 39.8 million as of December 31, 2023. Under the terms of the Company’s insurance policies, the Company is the primary obligor of the verdict, and as such, the Company has also recorded a $ 79.2 million receivable from its third-party insurance providers in other non-current assets and a corresponding liability of the same amount in the long-term portion of insurance and claims accruals in the consolidated condensed balance sheets as of March 31, 2024 and 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. The Company has since filed a Petition for Review with the Texas Supreme Court, seeking further review of the Texas Court of Appeals decision. No assurances can be given regarding whether the Texas Supreme Court will accept the Company’s petition to review or the outcome of any such review. We have been involved in class action litigation in the U.S. District Court for the District of Nebraska, in which the plaintiffs allege that we owe drivers for unpaid wages under the Fair Labor Standards Act (“FLSA”) and the Nebraska Wage Payment and Collection Act and that we failed to pay minimum wage per hour for drivers in our Career Track Program, related to short break time and sleeper berth time. The period covered by this class action suit is August 2008 through March 2014. The case was tried to a jury in May 2017, resulting in a verdict of $ 0.8 million in plaintiffs’ favor on the short break matter and a verdict in our favor on the sleeper berth matter. As a result of various post-trial motions, the court awarded $ 0.5 million to the plaintiffs for attorney fees and costs. Plaintiffs appealed the post-verdict amounts awarded by the trial court for fees, costs and liquidated damages, and the Company filed a cross appeal on the verdict that was in plaintiffs’ favor. The United States Court of Appeals for the Eighth Circuit denied Plaintiffs’ appeal and granted Werner’s appeal, vacating the judgment in favor of the plaintiffs. The appellate court sent the case back to the trial court for proceedings consistent with the appellate court’s opinion. On June 22, 2020, the trial court denied Plaintiffs’ request for a new trial and entered judgment in favor of the Company, dismissing the case with prejudice. On July 21, 2020, Plaintiffs’ counsel filed a notice of appeal of that dismissal. 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. Plaintiffs again have appealed the case 15 Table of Contents 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. Based on the knowledge of the facts, management does not currently believe the outcome of these class actions is likely to have a material adverse effect on our financial position or results of operations. However, the final disposition of these matters and the impact of such final dispositions cannot be determined at this time. (9) Earnings Per Share Basic earnings per share is computed by dividing net income attributable to Werner by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to Werner by the weighted average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding restricted stock awards. Performance awards are excluded from the calculation of dilutive potential common shares until the threshold performance conditions have been satisfied. There are no differences in the numerators of our computations of basic and diluted earnings per share for any periods presented. The computation of basic and diluted earnings per share is shown below (in thousands, except per share amounts). Three Months Ended March 31, 2024 2023 Net income attributable to Werner $ 6,312 $ 35,224 Weighted average common shares outstanding 63,472 63,306 Dilutive effect of stock-based awards 255 389 Shares used in computing diluted earnings per share 63,727 63,695 Basic earnings per share $ 0.10 $ 0.56 Diluted earnings per share $ 0.10 $ 0.55 (10) Segment Information We have two reportable segments – Truckload Transportation Services (“TTS”) and Werner Logistics. The TTS segment consists of two operating units, Dedicated and One-Way Truckload. These units are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting. Dedicated provides truckload services dedicated to a specific customer, generally for a retail distribution center or manufacturing facility, utilizing either dry van or specialized trailers. One-Way Truckload is comprised of the following operating fleets: (i) the medium-to-long-haul van (“Van”) fleet transports a variety of consumer nondurable products and other commodities in truckload quantities over irregular routes using dry van trailers, including Mexico cross-border routes; (ii) the expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams; (iii) the regional short-haul (“Regional”) fleet 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 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: (i) Truckload Logistics, which uses contracted carriers to complete shipments for brokerage customers and freight management customers for which we offer a full range of single-source logistics management services and solutions; (ii) the Intermodal (“Intermodal”) unit offers rail transportation through alliances with rail and drayage providers as an alternative to truck transportation; and (iii) Werner Final Mile (“Final Mile”) 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. We generate other revenues from our driver training schools, transportation-related activities such as third-party equipment maintenance and equipment leasing, and other business activities. None of these operations meets the quantitative reporting thresholds. As a result, these operations are grouped in “Other” in the tables below. “Corporate” includes revenues and 16 Table of Contents 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. Based on our operations, certain revenue-generating assets (primarily tractors and trailers) are interchangeable between segments. Depreciation for these interchangeable assets is allocated to segments based on the actual number of units utilized by the segment during the period. Other depreciation and amortization is allocated to segments based on specific identification or as a percentage of a metric such as average number of tractors. Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation. The following tables summarize our segment information (in thousands): Three Months Ended March 31, 2024 2023 Revenues by Segment Truckload Transportation Services $ 551,126 $ 588,330 Werner Logistics 202,482 228,669 Other 18,953 20,501 Corporate 590 475 Subtotal 773,151 837,975 Inter-segment eliminations ( 4,071 ) ( 5,261 ) Total $ 769,080 $ 832,714 Three Months Ended March 31, 2024 2023 Operating Income (Loss) by Segment Truckload Transportation Services $ 20,840 $ 50,986 Werner Logistics ( 2,329 ) 4,937 Other ( 209 ) 549 Corporate ( 2,714 ) ( 3,086 ) Total $ 15,588 $ 53,386 Three Months Ended March 31, 2024 2023 Depreciation and Amortization by Segment Truckload Transportation Services $ 66,933 $ 66,843 Werner Logistics 3,667 4,059 Other 2,734 2,873 Corporate 936 538 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. 17 Table of Contents