INVESTOR PRESENTATION August 2022 DISCLOSURE STATEMENT This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are based on information presently available to the Company's management and are current only as of the da ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements based on current management information, which are subject to various known and unknown risks, uncertainties, and assumptions - Forward-looking statements are based on currently available information but involve risks, uncertainties, and assumptions that could cause actual results to differ materially[10](index=10&type=chunk) - Readers should not unduly rely on these statements, which speak only to the date they were made, and the company has no obligation to update them unless required by applicable securities laws[10](index=10&type=chunk) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This chapter presents the unaudited consolidated financial statements for Werner Enterprises, Inc, including statements of income, comprehensive income, balance sheets, cash flows, stockholders' equity, and detailed notes [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) **Consolidated Statements of Income (Three Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $836,276 | $649,814 | 28.7% | | Total operating expenses | $761,353 | $572,951 | 32.9% | | Operating income | $74,923 | $76,863 | (2.5)% | | Net income attributable to Werner | $72,290 | $72,032 | 0.4% | | Basic EPS | $1.12 | $1.06 | 5.7% | | Diluted EPS | $1.12 | $1.06 | 5.7% | **Consolidated Statements of Income (Six Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $1,600,881 | $1,266,260 | 26.4% | | Total operating expenses | $1,442,447 | $1,126,926 | 28.0% | | Operating income | $158,434 | $139,334 | 13.7% | | Net income attributable to Werner | $126,039 | $118,524 | 6.3% | | Basic EPS | $1.94 | $1.74 | 11.5% | | Diluted EPS | $1.93 | $1.74 | 10.9% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) **Consolidated Statements of Comprehensive Income (Three Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net income | $73,609 | $72,032 | | Other comprehensive income (loss) | $1,236 | $2,225 | | Comprehensive income attributable to Werner | $73,526 | $74,257 | **Consolidated Statements of Comprehensive Income (Six Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net income | $128,644 | $118,524 | | Other comprehensive income (loss) | $6,020 | $1,960 | | Comprehensive income attributable to Werner | $132,059 | $120,484 | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) **Consolidated Condensed Balance Sheets (as of June 30, 2022 and December 31, 2021):** | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total current assets | $772,405 | $631,213 | | Property and equipment, net | $1,670,680 | $1,613,243 | | Total assets | $2,848,587 | $2,603,713 | | Total current liabilities | $470,980 | $268,683 | | Total liabilities | $1,466,163 | $1,240,216 | | Total stockholders' equity | $1,343,872 | $1,327,550 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) **Consolidated Statements of Cash Flows (Six Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $267,527 | $189,464 | | Net cash used in investing activities | $(169,680) | $(104,605) | | Net cash provided by (used in) financing activities | $(97,941) | $77,847 | | Net increase in cash and cash equivalents | $228 | $162,794 | | Cash and cash equivalents, end of period | $54,424 | $192,128 | [Consolidated Statements of Stockholders' Equity and Temporary Equity - Redeemable Noncontrolling Interest](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20and%20Temporary%20Equity%20-%20Redeemable%20Noncontrolling%20Interest) **Stockholders' Equity Changes (Three Months Ended June 30, 2022):** | Item | Amount (in thousands) | | :--- | :--- | | Balance, March 31, 2022 | $1,341,464 | | Net income attributable to Werner | $72,290 | | Other comprehensive income | $1,236 | | Purchases of common stock | $(65,933) | | Dividends on common stock | $(8,244) | | Balance, June 30, 2022 | $1,343,872 | **Stockholders' Equity Changes (Six Months Ended June 30, 2022):** | Item | Amount (in thousands) | | :--- | :--- | | Balance, December 31, 2021 | $1,327,550 | | Net income attributable to Werner | $126,039 | | Other comprehensive income | $6,020 | | Purchases of common stock | $(102,113) | | Dividends on common stock | $(16,051) | | Balance, June 30, 2022 | $1,343,872 | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [(1) Basis of Presentation and Recent Accounting Pronouncements](index=10&type=section&id=(1)%20Basis%20of%20Presentation%20and%20Recent%20Accounting%20Pronouncements) - The unaudited interim consolidated financial statements are prepared in accordance with SEC instructions to Form 10-Q and U.S. GAAP, reflecting all normal recurring adjustments[28](index=28&type=chunk) - The adoption of ASU No 2020-04, Reference Rate Reform (Topic 848), in Q1 2022 did not have a material impact on the consolidated financial statements[31](index=31&type=chunk) [(2) Business Acquisitions](index=10&type=section&id=(2)%20Business%20Acquisitions) - Acquired an **80% ownership interest in ECM Associated, LLC** on July 1, 2021, for **$141.3 million**, expanding regional truckload carrier services[32](index=32&type=chunk) - Acquired **100% of NEHDS Logistics, LLC** on November 22, 2021, for **$62.3 million**, enhancing final mile residential delivery services[33](index=33&type=chunk) **Amortization Expense on Intangible Assets:** | Period | Amount (in millions) | | :--- | :--- | | Three months ended June 30, 2022 | $1.4 | | Six months ended June 30, 2022 | $2.7 | [(3) Revenue](index=11&type=section&id=(3)%20Revenue) - Revenues are recognized over time as control of promised services is transferred to customers, reflecting the consideration expected for those services[35](index=35&type=chunk) **Revenues by Segment (Three Months Ended June 30):** | Revenue Source | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Truckload Transportation Services | $613,616 | $491,200 | | Werner Logistics | $203,861 | $141,673 | | Other revenues | $19,424 | $17,134 | | Total revenues | $836,276 | $649,814 | **Revenues by Geographic Area (Six Months Ended June 30):** | Geographic Area | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | United States | $1,481,753 | $1,157,385 | | Mexico | $94,752 | $78,081 | | Other | $24,376 | $30,794 | | Total revenues | $1,600,881 | $1,266,260 | [(4) Leases](index=12&type=section&id=(4)%20Leases) - The company primarily enters into operating leases for real estate, with terms ranging from 1 to 18 years, and recognizes right-of-use assets and lease liabilities on the balance sheet[41](index=41&type=chunk)[42](index=42&type=chunk) **Operating Lease Information (as of June 30, 2022):** | Metric | Value | | :--- | :--- | | Right-of-use assets | $34,143 thousand | | Total operating lease liabilities | $35,233 thousand | | Weighted-average remaining lease term | 7.40 years | | Weighted-average discount rate | 2.6% | **Operating Lease Expense:** | Period | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Three months ended June 30 | $5.3 | $3.5 | | Six months ended June 30 | $10.4 | $7.1 | [(5) Fair Value](index=13&type=section&id=(5)%20Fair%20Value) - The fair value hierarchy prioritizes observable inputs (Level 1 and 2) over unobservable inputs (Level 3) for measuring fair value[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Financial instruments not recorded at fair value, such as cash, accounts receivable, accounts payable, and long-term debt, are carried at amounts that approximate fair value (categorized as Level 2)[55](index=55&type=chunk)[56](index=56&type=chunk) **Fair Value of Equity Securities (Other non-current assets):** | Date | Fair Value (in thousands) | Level in Hierarchy | | :--- | :--- | :--- | | June 30, 2022 | $2,818 | 1 | | December 31, 2021 | $17,166 | 1 | [(6) Investments](index=14&type=section&id=(6)%20Investments) - The company invested **$20.0 million in Mastery Logistics Systems, Inc (MLSI)** preferred stock in June 2022, with the investment value increasing to **$86.8 million** as of June 30, 2022, from $38.2 million at December 31, 2021[57](index=57&type=chunk) - An **unrealized gain of $28.6 million** was recognized on the MLSI investment for the three and six months ended June 30, 2022, due to third-party investments[57](index=57&type=chunk) **Unrealized Gains/Losses on Equity Investments with Readily Determinable Fair Values:** | Period | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Three months ended June 30 | $(4.5) (loss) | $20.2 (gain) | | Six months ended June 30 | $(14.3) (loss) | $20.2 (gain) | [(7) Debt and Credit Facilities](index=14&type=section&id=(7)%20Debt%20and%20Credit%20Facilities) - Entered a new credit agreement with Wells Fargo for a **$300.0 million unsecured revolving line of credit** and a **$100.0 million unsecured term loan**, both expiring May 14, 2024[59](index=59&type=chunk) - Amended the BMO Harris credit agreement, increasing the revolving line of credit from **$200.0 million to $300.0 million**, expiring May 14, 2024[61](index=61&type=chunk)[62](index=62&type=chunk) **Outstanding Debt and Borrowing Capacity (as of June 30, 2022):** | Metric | Amount (in millions) | | :--- | :--- | | Total outstanding debt | $445.0 | | Outstanding under revolving lines of credit | $250.0 | | Outstanding under Wells Term Loan | $100.0 | | Outstanding under BMO Term Loan | $95.0 | | Total available borrowing capacity (revolving) | $291.6 | [(8) Commitments and Contingencies](index=15&type=section&id=(8)%20Commitments%20and%20Contingencies) - Committed to property and equipment purchases of approximately **$182.4 million** as of June 30, 2022[65](index=65&type=chunk) - A **$92.0 million adverse jury verdict** from a 2014 accident is under appeal; the company recorded a **$31.4 million liability** and a **$79.2 million receivable** from insurers[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - A **$150.0 million settlement** for a 2020 motor vehicle accident resulted in **$9.5 million insurance and claims expense** in Q2 2022, with a **$140.0 million receivable** from insurers[70](index=70&type=chunk) [(9) Earnings Per Share](index=16&type=section&id=(9)%20Earnings%20Per%20Share) - Basic earnings per share is computed by dividing net income attributable to Werner by the weighted average number of common shares outstanding[73](index=73&type=chunk) - Diluted earnings per share includes the effect of dilutive potential common shares (outstanding restricted stock awards) using the treasury stock method[73](index=73&type=chunk) **Earnings Per Share (Three Months Ended June 30):** | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income attributable to Werner (in thousands) | $72,290 | $72,032 | | Basic earnings per share | $1.12 | $1.06 | | Diluted earnings per share | $1.12 | $1.06 | [(10) Segment Information](index=16&type=section&id=(10)%20Segment%20Information) - The company has two reportable segments: Truckload Transportation Services (TTS), comprising Dedicated and One-Way Truckload, and Werner Logistics, including Truckload Logistics, Intermodal, and Final Mile[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) **Revenues by Segment (Three Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Truckload Transportation Services | $613,616 | $491,200 | | Werner Logistics | $203,861 | $141,673 | | Other | $18,946 | $16,725 | | Corporate | $478 | $409 | | Total | $836,276 | $649,814 | **Operating Income (Loss) by Segment (Six Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Truckload Transportation Services | $140,097 | $130,736 | | Werner Logistics | $21,171 | $8,501 | | Other | $906 | $2,529 | | Corporate | $(3,740) | $(2,432) | | Total | $158,434 | $139,334 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This chapter provides management's perspective on the company's financial condition, results of operations, and liquidity, discussing performance across its segments and analyzing key financial trends [Overview](index=19&type=section&id=Overview) - The company operates in two reportable segments: Truckload Transportation Services (TTS), focusing on consumer nondurable products, and Werner Logistics, providing broader transportation management and alternative modes[85](index=85&type=chunk) - TTS segment revenues are primarily per-mile, with fuel surcharges mitigating fuel price increases, while Werner Logistics is less asset-intensive and relies on qualified third-party capacity providers[86](index=86&type=chunk)[89](index=89&type=chunk) - Financial results are significantly affected by company driver and independent contractor availability, markets for new and used revenue equipment, and self-insurance costs for claims[87](index=87&type=chunk)[88](index=88&type=chunk) [COVID-19](index=20&type=section&id=COVID-19) - The transportation industry was designated essential during the COVID-19 pandemic, and the company's focus on essential products helped manage through the difficult economic environment[90](index=90&type=chunk)[91](index=91&type=chunk) - Demand for the company's services is expected to continue to moderate during the remainder of 2022[91](index=91&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) [Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021](index=23&type=section&id=Three%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202021) - Trucking revenues, net of fuel surcharge, **increased 13.9%** due to an **8.1% increase in average tractors** and a **5.4% increase in average revenues per tractor per week**, partially offset by lower length of haul[101](index=101&type=chunk) - Average diesel fuel prices were **$2.21 per gallon higher** in Q2 2022 than in Q2 2021, leading to a **106.6% increase** in trucking fuel surcharge revenues[103](index=103&type=chunk)[110](index=110&type=chunk) **Operating Revenues (Three Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $836,276 | $649,814 | 28.7% | | TTS segment revenues | $613,616 | $491,200 | 24.9% | | Werner Logistics revenues | $203,861 | $141,673 | 43.9% | **Key Operating Expenses (Three Months Ended June 30):** | Expense Category | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Salaries, wages and benefits | $253,639 | $210,095 | 20.7% | | Fuel | $125,446 | $58,503 | 114.4% | | Insurance and claims | $41,071 | $20,739 | 98.0% | | Rent and purchased transportation | $197,116 | $150,920 | 30.6% | | Operating income | $74,923 | $76,863 | (2.5)% | [Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021](index=26&type=section&id=Six%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202021) - Average diesel fuel prices were **$1.74 per gallon higher** in the first six months of 2022 compared to the same period in 2021[130](index=130&type=chunk) - Gains on sales of assets (primarily used tractors and trailers) were **$41.1 million** in the first six months of 2022, up from **$25.0 million** in 2021, driven by significantly improved pricing in the used equipment market[135](index=135&type=chunk) **Operating Revenues (Six Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $1,600,881 | $1,266,260 | 26.4% | | TTS segment revenues | $1,172,033 | $954,149 | 22.8% | | Werner Logistics revenues | $392,869 | $279,526 | 40.5% | **Key Operating Expenses (Six Months Ended June 30):** | Expense Category | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Salaries, wages and benefits | $495,635 | $414,948 | 19.4% | | Fuel | $213,867 | $109,341 | 95.6% | | Insurance and claims | $68,563 | $42,795 | 60.2% | | Rent and purchased transportation | $382,353 | $297,413 | 28.6% | | Operating income | $158,434 | $139,334 | 13.7% | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2022, the company maintained a strong financial position with **$54.4 million in cash and cash equivalents** and over **$1.3 billion in stockholders' equity**[139](index=139&type=chunk) - Cash flow from operations **increased by 41.2% to $267.5 million** for the six months ended June 30, 2022, compared to the prior year[141](index=141&type=chunk) - Net capital expenditures for 2022 are estimated to be in the range of **$275 million to $325 million**, primarily for revenue equipment, to be funded by operations and existing credit facilities[142](index=142&type=chunk) - The company repurchased **2,495,100 shares of common stock for $102.1 million** during the six months ended June 30, 2022, with 2,527,014 shares remaining available under the current authorization[144](index=144&type=chunk) [Regulations](index=29&type=section&id=Regulations) - There have been no material changes in the status of proposed regulations previously disclosed in the 2021 Form 10-K[145](index=145&type=chunk) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) - No material changes have occurred to the critical accounting estimates, such as accrued liabilities for insurance and claims, from those discussed in the 2021 Form 10-K[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This chapter discusses the company's exposure to market risks, including commodity price risk (diesel fuel), foreign currency exchange rate risk, and interest rate risk [Commodity Price Risk](index=29&type=section&id=Commodity%20Price%20Risk) - The company is exposed to diesel fuel price fluctuations, with a majority of increases recovered through customer fuel surcharge programs, though not all costs are offset[149](index=149&type=chunk) - As of June 30, 2022, the company had no derivative financial instruments to reduce its exposure to fuel price fluctuations[149](index=149&type=chunk) [Foreign Currency Exchange Rate Risk](index=29&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) - Business in foreign countries, primarily Mexico, is conducted with most foreign revenues denominated in U.S. Dollars to reduce direct foreign currency risk[150](index=150&type=chunk) - Foreign currency translation losses were **$47 thousand** for Q2 2022, compared to gains of **$1.9 million** for Q2 2021, primarily related to changes in the value of revenue equipment in Mexico[150](index=150&type=chunk) [Interest Rate Risk](index=29&type=section&id=Interest%20Rate%20Risk) - Interest rate exposure is managed through a mix of variable interest rate debt and interest rate swap agreements[151](index=151&type=chunk) - **$150 million** of variable interest rate debt was effectively fixed at **2.31%** through May 2024 with two interest rate swap agreements[151](index=151&type=chunk) - A hypothetical one-percentage point increase in the SOFR interest rate would increase annual interest expense by approximately **$2.0 million** on the remaining $200 million variable rate debt[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures, concluding they are effective at a reasonable assurance level - Management, including the CEO and CFO, concluded that disclosure controls and procedures are **effective at a reasonable assurance level**[152](index=152&type=chunk) - **No material changes** in internal control over financial reporting occurred during the most recent fiscal quarter[153](index=153&type=chunk) - Internal control systems provide reasonable, not absolute, assurance and are subject to inherent limitations, meaning they may not prevent all errors or intentional fraud[154](index=154&type=chunk) [PART II – OTHER INFORMATION](index=31&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) This section refers readers to Note 8 in the Notes to Consolidated Financial Statements for detailed information regarding the company's legal proceedings - Information regarding legal proceedings is provided in Note 8 of the Notes to Consolidated Financial Statements (Unaudited)[157](index=157&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This chapter states that there have been no material changes from the risk factors previously disclosed in the company's 2021 Form 10-K - There have been **no material changes** from the risk factors disclosed in the 2021 Form 10-K[159](index=159&type=chunk) - Readers should consider the risk factors from the 2021 Form 10-K and additional unknown risks that may adversely affect the business[158](index=158&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This chapter details the company's stock repurchase program, authorizing the repurchase of up to 6,000,000 shares of common stock - The Board of Directors approved a new stock repurchase program on November 9, 2021, authorizing the repurchase of up to **6,000,000 shares** of common stock[160](index=160&type=chunk) **Stock Repurchases (Q2 2022):** | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | April 1-30, 2022 | — | $— | 4,177,014 | | May 1-31, 2022 | 1,001,909 | $40.49 | 3,175,105 | | June 1-30, 2022 | 648,091 | $39.14 | 2,527,014 | | Total | 1,650,000 | $39.96 | | [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This chapter lists all exhibits filed with the Form 10-Q, including organizational documents, certifications from the CEO and CFO, and iXBRL formatted financial information - Exhibits include organizational documents (Restated Articles of Incorporation, Revised and Restated By-Laws) and certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act)[165](index=165&type=chunk) - Unaudited financial information for the quarter ended June 30, 2022, is provided in iXBRL format as Exhibit 101[165](index=165&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) This section confirms the official signing of the Quarterly Report on Form 10-Q by authorized officers of Werner Enterprises, Inc on August 8, 2022 - The report was signed on August 8, 2022, by John J Steele (Executive Vice President, Treasurer and Chief Financial Officer) and James L Johnson (Executive Vice President, Chief Accounting Officer and Corporate Secretary)[169](index=169&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2022, revenues increased by 29% to $836 million, while adjusted operating income declined by 2% to $77.6 million, and adjusted EPS increased by 1% to $0.87 per share [15][20][25] - The increase in insurance and claims expense was significant, rising over $20 million year-over-year, impacting adjusted EPS negatively by $0.19 per share [9][15] Business Line Data and Key Metrics Changes - The Dedicated segment ended the quarter with 5,320 trucks, achieving 6% truck growth year-over-year, while One-Way Truckload had 3,080 trucks, including a 14% increase in average trucks due to the ECM acquisition [16][17] - Dedicated revenues, net of fuel, increased by 14%, and revenue per truck per week increased by 9.1% [23][34] - One-Way Truckload revenues, net of fuel, increased by 13%, but revenue per truck per week declined nearly 1% due to a decrease in miles per truck [24] Market Data and Key Metrics Changes - The consumer-oriented freight base performed well, with nearly three-quarters of freight revenues coming from retail and food and beverage sectors [13][31] - The freight market for One-Way Truckload moderated from strong to seasonally normal levels, while Dedicated freight demand remained strong and steady [57][59] Company Strategy and Development Direction - The company introduced the Werner DRIVE strategy, focusing on durable financial positioning, exceptional service, and innovation to enhance customer value [42][46] - The strategy emphasizes a balanced revenue portfolio and a commitment to high-quality customers, particularly in consumer staples [30][41] Management Comments on Operating Environment and Future Outlook - Management noted that the current market is returning to a more normalized setting after a period of hyperinflation in metrics like spot market pricing [74] - Concerns about the economy and truckload freight market have increased, with expectations of moderating demand for discretionary goods [61][63] Other Important Information - The company is facing challenges in receiving new trucks and trailers due to supply chain issues, impacting fleet refreshment [19][38] - The CFO announced retirement after 33 years, with a search for a successor underway [64][66] Q&A Session Summary Question: Discussion on Dedicated revenue outlook - Management highlighted a strong pipeline for Dedicated, with significant interest from customers, allowing for selective growth despite economic conditions [72] Question: Market cycle perspective - Management expressed confidence that the supply side is more constrained than in previous cycles, which may prevent a significant decline in the overall environment [76] Question: Capacity in Dedicated market - Management noted that Dedicated is a unique market with high service requirements, and the pipeline remains strong, indicating resilience in demand [84] Question: Impact of AB5 legislation - Management indicated that while Werner is minimally impacted, the legislation could disrupt the industry and negatively affect overall capacity [100] Question: ESG initiatives and new ventures - Management emphasized a commitment to lowering carbon emissions and exploring new technologies, including electric and hydrogen fuel options [107]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [Mark one] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-14690 WERNER ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Nebraska 47-0648386 (State or other jurisdiction of incorpo ...

Financial Data and Key Metrics Changes - Revenues increased 24% to $765 million in Q1 2022, with adjusted EPS growing 40% to $0.96 per share and adjusted operating income rising 37% to $86.2 million [9][12][21] - TTS revenues per truck per week increased by 8.8%, with adjusted operating income growing 33% in TTS and 158% in logistics [12][21] Business Line Data and Key Metrics Changes - Dedicated segment achieved 5% truck growth year-over-year, with revenues net of fuel increasing 13% and revenue per truck per week rising 7.3% [9][14] - One-way Truckload revenues net of fuel increased 19%, with average trucks growing by 7% and revenue per truck per week rising 11% [14][21] - Logistics revenues grew 37% to $189 million, with Truckload Logistics revenues increasing by 46% [21] Market Data and Key Metrics Changes - Economic uncertainties are increasing due to inflation and interest rate tightening, but the business model is positioned to adapt and perform in disruptive markets [10][33] - Retail inventory levels have begun to increase, but inventory-to-sales ratios remain at historically low levels [32] Company Strategy and Development Direction - The company focuses on maintaining strong relationships with customers, particularly in the discount retail and food and beverage sectors, which are less sensitive to economic cycles [8][18] - Investments in technology and emerging cloud technology, including cybersecurity and predictive maintenance, remain a top priority [28][29] - The company aims to expand its dedicated fleet and improve driver satisfaction through targeted driver school networks [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning despite potential economic slowdowns, citing a resilient business model and strong customer relationships [33][50] - The company anticipates a moderation in freight demand but remains optimistic about dedicated customer demand and logistics growth [31][33] Other Important Information - The company reduced its net capital expenditures guidance for 2022 by $25 million due to expectations for lower new truck deliveries [23] - The average age of the truck and trailer fleet is expected to be 2.2 and 4.8 years, respectively, by year-end [31] Q&A Session Summary Question: Impact of China on Supply Chain - Management indicated that the situation in China could lead to a temporary slowdown in freight before improving, with expectations for a significant uptick in freight as restrictions ease [36][38] Question: Driver Turnover and Capacity Costs - Management noted that driver turnover has increased slightly due to lifestyle changes and the impact of Omicron, but they are expanding dedicated services to address this [39][40] Question: Market Characterization - Management characterized the current market as "very good" rather than "strong," emphasizing the stability of their customer base and the importance of consistent demand [44][45] Question: Contractual Negotiations - Management reported that they have not seen significant impacts on contractual negotiations despite moderation in the spot market, as most of their business is based on long-term contracts [56][58] Question: Margin Progression - Management provided insights on margin progression, indicating that while Q1 margins were strong, they expect some moderation in Q2 due to market conditions [60][61]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number: 0-14690 WERNER ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Nebraska 47-0648386 (S ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Werner Enterprises' unaudited interim consolidated financial statements as of September 30, 2021, covering income, balance, and cash flow [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The company reported significant growth in revenues and net income for both the third quarter and the first nine months of 2021 compared to the same periods in 2020, with Q3 2021 operating revenues increasing by **19.1%** to **$702.9 million** and net income rising by **37.6%** to **$63.8 million** Consolidated Statements of Income Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | YoY Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Operating Revenues** | $702,891 | $590,214 | 19.1% | $1,969,151 | $1,751,876 | 12.4% | | **Operating Income** | $71,324 | $62,103 | 14.8% | $210,658 | $145,987 | 44.3% | | **Net Income Attributable to Werner** | $63,761 | $46,332 | 37.6% | $182,285 | $108,522 | 68.0% | | **Diluted EPS** | $0.94 | $0.67 | 40.3% | $2.68 | $1.56 | 71.8% | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) As of September 30, 2021, total assets increased to **$2.48 billion** from **$2.16 billion** at year-end 2020, primarily due to the ECM acquisition, while total liabilities rose to **$1.14 billion** and stockholders' equity grew to **$1.31 billion** Balance Sheet Summary (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $569,791 | $456,916 | | **Property and Equipment, net** | $1,606,526 | $1,543,258 | | **Goodwill** | $44,710 | $0 | | **Total Assets** | **$2,479,141** | **$2,156,676** | | **Total Current Liabilities** | $261,228 | $274,014 | | **Long-term Debt** | $343,750 | $175,000 | | **Total Liabilities** | **$1,135,969** | **$961,636** | | **Total Stockholders' Equity** | **$1,306,557** | **$1,195,040** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash from operating activities was **$253.3 million**, a decrease from the prior year, while net cash used in investing activities significantly increased to **$308.9 million** due to the ECM acquisition Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $253,344 | $346,396 | | **Net Cash used in Investing Activities** | ($308,907) | ($180,986) | | **Net Cash from (used in) Financing Activities** | $71,869 | ($156,408) | | **Net Increase in Cash** | $16,094 | $7,034 | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) The notes detail key events and accounting treatments, including the **$141.3 million** ECM acquisition, strong segment revenue growth, significant unrealized gains on equity investments, and an increase in total debt to **$350.0 million** - On July 1, 2021, the company acquired an **80%** ownership interest in ECM Associated, LLC for **$141.3 million** to expand its fleet size and geographic presence. The acquisition added nearly **500** trucks and **2,000** trailers[34](index=34&type=chunk)[35](index=35&type=chunk) - The company recognized a **$28.2 million** unrealized gain on its investment in Mastery Logistics Systems, Inc. (MLSI) and an **$8.1 million** unrealized gain on its TuSimple investment during the first nine months of 2021[70](index=70&type=chunk)[71](index=71&type=chunk) - Total outstanding debt increased to **$350.0 million** as of September 30, 2021, up from **$200.0 million** at year-end 2020, primarily to finance the ECM acquisition[74](index=74&type=chunk) Segment Revenues (in thousands) | Segment | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Truckload Transportation Services** | $527,697 | $458,256 | $1,481,846 | $1,368,172 | | **Werner Logistics** | $157,968 | $117,351 | $437,494 | $339,678 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q3 2021 performance driven by robust freight market conditions and the ECM acquisition, despite driver shortages and rising costs - The acquisition of an **80%** interest in ECM on July 1, 2021, for **$141.3 million** was a key strategic move, adding a regional truckload carrier with nearly **500** trucks and **2,000** trailers[102](index=102&type=chunk) - Management highlights a strong freight market in Q3 2021, driven by robust consumer demand, but notes this is concurrent with an extremely competitive driver market and shortfalls in new truck manufacturing[120](index=120&type=chunk) - Gains on sales of assets were significantly higher at **$15.3 million** in Q3 2021 compared to **$3.9 million** in Q3 2020, due to a strong used equipment market caused by new equipment production delays[146](index=146&type=chunk) - The company's liquidity remains strong, with net capital expenditures for 2021 estimated to be between **$250 million** and **$275 million**, though equipment delivery delays are a known challenge[162](index=162&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) For Q3 2021, operating revenues grew **19.1%** to **$702.9 million**, driven by strong TTS and Werner Logistics segment performance, despite increased salaries and fuel costs, partially offset by gains on asset sales Q3 2021 vs Q3 2020 Performance | Metric | Q3 2021 | Q3 2020 | Change | | :--- | :--- | :--- | :--- | | **Operating Revenues** | $702.9M | $590.2M | +19.1% | | **Operating Income** | $71.3M | $62.1M | +14.8% | | **Operating Ratio** | 89.9% | 89.5% | +0.4 pts | | **Net Income (Werner)** | $63.8M | $46.3M | +37.6% | - TTS trucking revenues (net of fuel surcharge) increased **10.6%** in Q3 2021, driven by a **7.2%** increase in average tractors (largely from the ECM acquisition) and a **3.2%** increase in average revenues per tractor per week[121](index=121&type=chunk) - Werner Logistics revenues grew **34.6%** in Q3 2021, with its operating margin improving to **4.8%** from **-0.7%** in Q3 2020[125](index=125&type=chunk) - Driver pay per company driver mile increased nearly **20%** in Q3 2021 due to multiple pay rate increases implemented to address the competitive driver market[127](index=127&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong financial position with **$45.4 million** in cash and **$1.3 billion** in equity, with operating cash flow of **$253.3 million** for the first nine months of 2021, funding the ECM acquisition, stock repurchases, and dividends - Operating cash flow decreased by **26.9%** to **$253.3 million** in the first nine months of 2021 compared to the prior year, mainly due to working capital changes[161](index=161&type=chunk) - During the first nine months of 2021, the company repurchased **1,179,566** shares for **$53.3 million** and paid **$21.1 million** in dividends[163](index=163&type=chunk) - As of September 30, 2021, the company had **$350.0 million** of debt outstanding and **$199.1 million** of available borrowing capacity under its credit facilities (after accounting for letters of credit)[164](index=164&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from commodity prices, foreign currency, and interest rates, primarily mitigating fuel price volatility and interest rate risk - The company's primary market risk is commodity price risk related to diesel fuel, but it recovers a majority of fuel price increases through customer surcharges[171](index=171&type=chunk) - Interest rate risk is managed with a mix of debt instruments. Of the **$350 million** debt, **$150 million** is effectively fixed via swaps, **$100 million** is fixed-rate, and **$100 million** is variable-rate. A **1%** increase in LIBOR would increase annual interest expense by approximately **$1.0 million**[173](index=173&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures are effective at a reasonable assurance level[176](index=176&type=chunk) PART II – OTHER INFORMATION [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section highlights new and existing risks, including OSHA's COVID-19 rule impact on driver retention and challenges in acquiring new equipment due to supply chain issues - A new OSHA rule requiring COVID-19 vaccination or weekly testing for companies with over **100** employees could negatively impact driver retention, increase costs, and exacerbate the existing driver shortage[182](index=182&type=chunk) - The company is facing difficulties obtaining new tractors and trailers due to manufacturer shortages of semiconductor chips and other components, which could lead to higher maintenance costs, lower productivity, and challenges with driver retention[183](index=183&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2021, the company repurchased **1,049,120** shares for approximately **$47.7 million**, with **1,637,442** shares remaining under authorization as of September 30, 2021 Q3 2021 Stock Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | **July 2021** | 0 | N/A | | **August 2021** | 752,004 | $45.33 | | **September 2021** | 297,116 | $46.00 | | **Total Q3 2021** | **1,049,120** | **$45.52** | - As of September 30, 2021, the company had **1,637,442** shares remaining under its **5,000,000**-share repurchase authorization announced in May 2019[184](index=184&type=chunk)[187](index=187&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data in iXBRL format

E ER PITS E NET E S 3Q 2021 EARNINGS PRESENTATION October 28, 2021 DISCLOSURE STATEMENT This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are based on information presently available to the Company's management ...

Financial Data and Key Metrics Changes - Total revenues for Q3 increased by 19% to $703 million, with adjusted EPS growing by 14% to $0.79 per share [10][24] - Adjusted operating income rose by 15% to $73.9 million, while the adjusted operating margin net fuel declined by 150 basis points to 14% [10][12] - TTS revenues per truck per week increased by 3.2%, driven by a 15% year-over-year improvement in revenues for total miles, offset by a 10% decline in miles per truck [20] Business Line Data and Key Metrics Changes - Dedicated freight demand remained strong, with dedicated average trucks growing over 10% year-over-year and 2% sequentially [13] - One way truckload revenues net of fuel increased by 10% to $190 million, with revenues per truck per week rising by 7.8% [28] - Logistics segment revenues grew by 35%, with truckload logistics revenues increasing by 63% [34][23] Market Data and Key Metrics Changes - Employment in the trucking industry remains 1% below pre-COVID levels, while the cast truckload freight index is 16% higher [5] - The truckload industry capacity is significantly constrained due to a competitive driver market and shortages in new truck builds [6] - The average age of the truck fleet slightly increased due to OEM build challenges [44] Company Strategy and Development Direction - The company is focused on strategic investments in driver sourcing and pay to address the competitive labor market [3][7] - The acquisition of ECM is expected to enhance fleet growth and profitability, with strong performance noted since the acquisition [4][41] - The company aims to achieve a long-term adjusted operating margin goal range of 12% to 17% [60] Management's Comments on Operating Environment and Future Outlook - Management expects a strong freight market to continue through the end of the year and into 2022, despite challenges in the driver market [6] - The company is addressing cost pressures related to health insurance and liability insurance, which are expected to normalize [90] - Management is optimistic about restoring productivity and improving margins in the upcoming quarters [90][94] Other Important Information - The company has made significant progress in its ESG initiatives, including the launch of its corporate social responsibility report [54] - Werner was awarded the 2021 SmartWay Excellence Award for outstanding environmental performance [58] - The company is committed to maintaining a strong financial position, with a net debt to EBITDA ratio of 0.5 [42] Q&A Session Summary Question: Can you provide a breakdown of cost impacts on TTS profitability? - Management indicated that miles were a major issue due to parts availability, leading to increased costs in driver lodging and layover pay [75][79] Question: What are the expectations for operating ratio improvement in Q4? - Management expects to see operating ratio improvement in Q4, with adjustments made to address transitory costs [100][101] Question: How is the company preparing for potential vaccine mandates? - The company is pro-vaccine and is setting up vaccination clinics, while also preparing for potential impacts on the workforce [102][106] Question: What are the expectations for contractual rate increases in 2022? - Management anticipates double-digit rate increases for renewals, reflecting inflationary pressures across the P&L [116] Question: How are shippers responding to the current freight cycle? - Shippers are looking for longer-term partnerships with carriers that can provide consistent service and capacity [120][121]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited interim consolidated financial statements and accompanying notes [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The company reports significant year-over-year growth in revenues, operating income, and net income Consolidated Statements of Income (3 Months Ended June 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :------- | | Operating revenues | $649,814 | $568,959 | 14.2% | | Operating income | $76,863 | $52,818 | 45.5% | | Net income | $72,032 | $39,132 | 84.1% | | Basic EPS | $1.06 | $0.57 | 86.0% | | Diluted EPS | $1.06 | $0.56 | 89.3% | Consolidated Statements of Income (6 Months Ended June 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :------- | | Operating revenues | $1,266,260 | $1,161,662 | 9.0% | | Operating income | $139,334 | $83,884 | 66.1% | | Net income | $118,524 | $62,190 | 90.6% | | Basic EPS | $1.74 | $0.90 | 93.3% | | Diluted EPS | $1.74 | $0.89 | 95.5% | - Other expense (income) decreased by **$20.6 million** for the three months and **$21.0 million** for the six months ended June 30, 2021, primarily due to a **$20.2 million unrealized gain** on an equity investment[16](index=16&type=chunk)[129](index=129&type=chunk)[141](index=141&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income grew substantially, driven by higher net income and favorable currency and interest rate adjustments Consolidated Statements of Comprehensive Income | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | $72,032 | $39,132 | $118,524 | $62,190 | | Foreign currency translation adjustments | 1,865 | 929 | 297 | (8,964) | | Change in fair value of interest rate swaps, net of tax | 360 | (623) | 1,663 | (6,220) | | Other comprehensive income (loss) | 2,225 | 306 | 1,960 | (15,184) | | Comprehensive income | $74,257 | $39,438 | $120,484 | $47,006 | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) The balance sheet reflects growth in total assets and stockholders' equity, funded partly by increased long-term debt Key Balance Sheet Items (June 30, 2021 vs December 31, 2020) | Metric | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | | Cash and cash equivalents | $192,128 | $29,334 | 554.9% | | Total current assets | $666,511 | $456,916 | 45.9% | | Total assets | $2,382,867 | $2,156,676 | 10.5% | | Total current liabilities | $259,187 | $274,014 | (5.5)% | | Long-term debt, net of current portion | $295,000 | $175,000 | 68.6% | | Total stockholders' equity | $1,296,583 | $1,195,040 | 8.5% | - The significant increase in long-term debt is primarily due to new borrowings to finance the acquisition of ECM Transport Group[22](index=22&type=chunk)[145](index=145&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased due to working capital changes, while financing activities provided cash for acquisitions Cash Flow Summary (Six Months Ended June 30, 2021 vs 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :------- | | Net cash provided by operating activities | $189,464 | $287,342 | (34.1)% | | Net cash used in investing activities | $(104,605) | $(103,217) | (1.3)% | | Net cash provided by (used in) financing activities | $77,847 | $(150,183) | 151.8% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $162,794 | $31,947 | 409.6% | | Cash, cash equivalents and restricted cash, end of period | $192,128 | $65,389 | 193.8% | - The decrease in net cash provided by operating activities was primarily due to working capital changes resulting from the timing of federal and state estimated income tax payments and changes in accounts receivable, partially offset by higher net income[143](index=143&type=chunk) - Net cash provided by financing activities in 2021 was driven by **net borrowings of $100.0 million**, including proceeds from the issuance of **$120.0 million in long-term debt**, primarily to finance the ECM acquisition[24](index=24&type=chunk)[145](index=145&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased due to strong comprehensive income, partially offset by dividends and share repurchases Total Stockholders' Equity | Date | Amount (in thousands) | | :---------------- | :-------------------- | | June 30, 2021 | $1,296,583 | | December 31, 2020 | $1,195,040 | | % Change | 8.5% | - Key changes contributing to the increase in stockholders' equity from December 31, 2020, to June 30, 2021, include **comprehensive income of $120.5 million** and non-cash equity compensation expense of **$5.2 million**, partially offset by dividends of **$14.9 million** and common stock repurchases of **$5.5 million**[26](index=26&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) These notes provide detailed explanations of accounting policies, revenue sources, leases, investments, and other key items [(1) Accounting Policies](index=9&type=section&id=(1)%20Accounting%20Policies) The company adopted a new income tax accounting standard and is evaluating the impact of reference rate reform - The company adopted ASU 2019-12, 'Simplifying the Accounting for Income Taxes,' as of January 1, 2021, with **no effect** on its financial position, results of operations, or cash flows[29](index=29&type=chunk) - The company is evaluating the impact of ASU 2020-04, 'Reference Rate Reform,' on its existing credit facilities and hedging relationships that reference LIBOR[30](index=30&type=chunk) [(2) Revenue](index=9&type=section&id=(2)%20Revenue) Revenue growth was driven by both the Truckload Transportation Services and Werner Logistics segments Total Revenues by Period | Period | 2021 (in thousands) | 2020 (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :------- | | Three Months Ended June 30, | $649,814 | $568,959 | 14.2% | | Six Months Ended June 30, | $1,266,260 | $1,161,662 | 9.0% | Revenue by Source (6 Months Ended June 30) | Revenue Source | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Truckload Transportation Services | $954,149 | $909,916 | | Werner Logistics | $279,526 | $222,327 | - Accounts receivable, trade, net, increased to **$391.1 million** at June 30, 2021, from **$341.1 million** at December 31, 2020[34](index=34&type=chunk)[35](index=35&type=chunk) [(3) Leases](index=10&type=section&id=(3)%20Leases) The company details its operating lease liabilities and expenses, primarily for terminals and office facilities Operating Lease Liabilities (June 30, 2021) | Metric | Amount (in thousands) | | :---------------------------------------- | :-------------------- | | Total undiscounted operating lease payments | $11,136 | | Present value of operating lease liabilities | $10,480 | | Weighted-average remaining lease term | 3.85 years | | Weighted-average discount rate | 3.18% | Operating Lease Expense | Period | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Three Months Ended June 30, | $3,500 | $2,100 | | Six Months Ended June 30, | $7,100 | $4,100 | - Revenues from lessor operating leases (tractors and trailers) were **$3.0 million** for the three months ended June 30, 2021, and **$6.1 million** for the six months ended June 30, 2021[46](index=46&type=chunk) [(4) Investments](index=12&type=section&id=(4)%20Investments) An equity investment in TuSimple generated a significant unrealized gain following its initial public offering - The company made a **$5.0 million** equity investment in TuSimple on January 8, 2021, which resulted in a **$20.2 million unrealized gain** in the three and six months ended June 30, 2021, following its IPO[49](index=49&type=chunk) - A **$5.0 million** investment in Mastery Logistics Systems, Inc (MLSI) in 2020 represents approximately **5% ownership** and is accounted for under ASC 321[48](index=48&type=chunk) [(5) Credit Facilities](index=12&type=section&id=(5)%20Credit%20Facilities) The company amended its credit agreement, increasing borrowing capacity and adding a new term loan - On June 30, 2021, the company amended its credit agreement, adding a **$100.0 million** unsecured fixed-rate term loan (1.28% interest) and increasing its borrowing capacity with BMO Harris Bank N.A. from **$200.0 million to $300.0 million**[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - Total outstanding debt increased to **$300.0 million** as of June 30, 2021, from **$200.0 million** at December 31, 2020[52](index=52&type=chunk) Aggregate Future Maturities of Long-Term Debt (June 30, 2021) | Year | Amount (in thousands) | | :--- | :-------------------- | | 2021 | $2,500 | | 2022 | $5,000 | | 2023 | $5,000 | | 2024 | $287,500 | | 2025 | — | | Total | $300,000 | [(6) Commitments and Contingencies](index=13&type=section&id=(6)%20Commitments%20and%20Contingencies) The company has significant equipment purchase commitments and is appealing a large adverse jury verdict - The company has committed to property and equipment purchases of approximately **$269.8 million** as of June 30, 2021[56](index=56&type=chunk) - The company is appealing a **$92.0 million** adverse jury verdict from 2018, with its maximum liability limited to **$10.0 million** plus interest due to insurance coverage[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - Accrued interest related to the adverse jury verdict was **$1.3 million** for the three months ended June 30, 2021, accruing at **$0.4 million per month**[120](index=120&type=chunk) [(7) Earnings Per Share](index=14&type=section&id=(7)%20Earnings%20Per%20Share) Both basic and diluted earnings per share showed substantial growth compared to the prior year Basic and Diluted Earnings Per Share | Period | Basic EPS (2021) | Basic EPS (2020) | Diluted EPS (2021) | Diluted EPS (2020) | | :-------------------------- | :--------------- | :--------------- | :----------------- | :----------------- | | Three Months Ended June 30, | $1.06 | $0.57 | $1.06 | $0.56 | | Six Months Ended June 30, | $1.74 | $0.90 | $1.74 | $0.89 | [(8) Equity Compensation](index=14&type=section&id=(8)%20Equity%20Compensation) The company details its equity compensation plan, including available shares and recognized expenses - As of June 30, 2021, there were **6,534,087 shares available** for granting additional awards under the Equity Plan, with total unrecognized compensation cost of approximately **$15.7 million**[67](index=67&type=chunk)[68](index=68&type=chunk) - The total fair value of previously granted restricted awards vested during the six-month periods ended June 30, 2021 and 2020 was **$5.1 million** and **$3.4 million**, respectively[73](index=73&type=chunk)[77](index=77&type=chunk) Pre-tax Equity Compensation Expense (in thousands) | Award Type | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Restricted awards | $1,538 | $1,090 | $3,087 | $2,488 | | Performance awards | $1,209 | $53 | $2,155 | $1,063 | [(9) Segment Information](index=16&type=section&id=(9)%20Segment%20Information) Both the Truckload Transportation Services and Werner Logistics segments reported strong growth in revenues and operating income - The company operates in two reportable segments: **Truckload Transportation Services (TTS)** and **Werner Logistics**[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) Revenues by Segment (in thousands) | Segment | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Truckload Transportation Services | $491,200 | $445,053 | $954,149 | $909,916 | | Werner Logistics | $141,673 | $110,163 | $279,526 | $222,327 | Operating Income by Segment (in thousands) | Segment | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Truckload Transportation Services | $73,108 | $51,225 | $130,736 | $80,314 | | Werner Logistics | $3,927 | $3,139 | $8,501 | $4,224 | [(10) Subsequent Event](index=17&type=section&id=(10)%20Subsequent%20Event) The company acquired an 80% equity interest in ECM Transport Group immediately after the quarter ended - On July 1, 2021, the company acquired an **80% equity ownership interest** in ECM Transport Group for a cash purchase price of **$142.4 million**, with an exclusive option to purchase the remaining 20% after five years[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strong financial performance, the strategic ECM acquisition, and ongoing market dynamics [ECM Acquisition](index=18&type=section&id=ECM%20Acquisition) The company acquired a majority stake in ECM Transport Group to expand its regional truckload services - Werner acquired an **80% equity ownership interest** in ECM Transport Group on July 1, 2021, for **$142.4 million**, with an exclusive option to buy the remaining 20% after five years[85](index=85&type=chunk)[86](index=86&type=chunk) - ECM generated **$108 million in revenues in 2020** with a **19.8% operating margin**, and its future revenues will be reported in the One-Way Truckload unit within the TTS segment[85](index=85&type=chunk) - The acquisition was financed through a combination of cash on hand, existing credit facilities, and a new **$100.0 million fixed-rate term loan**[86](index=86&type=chunk) [Overview](index=18&type=section&id=Overview) The company operates through its TTS and Werner Logistics segments, with profitability measured by its operating ratio - The company operates in two reportable segments: **Truckload Transportation Services (TTS)** and **Werner Logistics**, focusing on transporting consumer nondurable products and providing logistics services[87](index=87&type=chunk) - TTS segment revenues are typically generated on a per-mile basis, supplemented by fuel surcharge revenues designed to recover a majority of increased fuel costs[88](index=88&type=chunk)[108](index=108&type=chunk) - The **operating ratio** (operating expenses as a percentage of operating revenues) is a key profitability measure for the TTS segment[91](index=91&type=chunk) [COVID-19](index=19&type=section&id=COVID-19) The company's focus on transporting essential products has enabled effective management through the pandemic environment - The transportation industry has been designated an essential industry during the COVID-19 pandemic, and Werner's freight base, heavily weighted toward essential products, has enabled effective management[93](index=93&type=chunk)[94](index=94&type=chunk) - Demand for the company's services is expected to **remain strong** through the remainder of 2021[93](index=93&type=chunk)[94](index=94&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) The company achieved significant growth in revenues and operating income, driven by strong freight market conditions [Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020](index=23&type=section&id=Three%20Months%20Ended%20June%2030%2C%202021%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202020) Quarterly revenue and income surged due to strong performance in both TTS and Logistics segments - Operating revenues increased **14.2% to $649.8 million**, with TTS segment revenues up **10.4%** and Werner Logistics revenues up **28.6%**[98](index=98&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - Operating income surged **45.5% to $76.9 million**, and net income increased **84.1% to $72.0 million**, with the operating ratio improving to **88.2%** from 90.7%[98](index=98&type=chunk)[110](index=110&type=chunk) - Key expense changes include a **90.7% increase in fuel costs**, a **7.8% increase in salaries**, and a **19.6% decrease in insurance and claims**[111](index=111&type=chunk)[114](index=114&type=chunk)[120](index=120&type=chunk)[128](index=128&type=chunk) [Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020](index=28&type=section&id=Six%20Months%20Ended%20June%2030%2C%202021%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202020) Half-year results show robust growth in revenue and profitability, with an improved operating ratio - Operating revenues increased **9.0% to $1,266.3 million**, with TTS segment revenues up **4.9%** and Werner Logistics revenues up **25.7%**[98](index=98&type=chunk)[131](index=131&type=chunk) - Operating income increased **66.1% to $139.3 million**, and net income increased **90.6% to $118.5 million**, with the operating ratio improving to **89.0%** from 92.8%[98](index=98&type=chunk)[132](index=132&type=chunk) - Key expense changes include a **37.6% increase in fuel costs**, a **3.5% increase in salaries**, and a **30.8% decrease in insurance and claims**[134](index=134&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk)[140](index=140&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with substantial cash, equity, and available credit - Cash flow from operations decreased by **34.1% ($97.9 million) to $189.5 million** for the six months ended June 30, 2021, primarily due to working capital changes[143](index=143&type=chunk) - Net financing activities provided **$77.8 million**, a significant increase from using $150.2 million in the prior year, driven by **$100.0 million in net borrowings** to finance the ECM acquisition[145](index=145&type=chunk) - As of June 30, 2021, the company had a strong financial position with **$192.1 million in cash**, nearly **$1.3 billion in stockholders' equity**, and **$300.0 million in available credit**[146](index=146&type=chunk) [Contractual Obligations and Commercial Commitments](index=30&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) No material changes occurred in contractual obligations, aside from new debt agreements for the ECM acquisition - There were no material changes in contractual obligations and commercial commitments as of June 30, 2021, compared to December 31, 2020, except for new borrowings as disclosed in Note 5[147](index=147&type=chunk) [Regulations](index=30&type=section&id=Regulations) There have been no material changes in the status of previously disclosed proposed regulations - There have been no material changes in the status of proposed regulations previously disclosed in the 2020 Form 10-K[148](index=148&type=chunk) [Critical Accounting Estimates](index=31&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates, particularly for insurance and claims liabilities, remain unchanged - The company's critical accounting estimates, particularly for accrued liabilities for insurance and claims, remain unchanged from those discussed in the 2020 Form 10-K[150](index=150&type=chunk)[151](index=151&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company actively manages market risks from commodity prices, foreign currency, and interest rates [Commodity Price Risk](index=31&type=section&id=Commodity%20Price%20Risk) Diesel fuel price fluctuations are the primary commodity risk, largely mitigated through customer fuel surcharges - The company is exposed to fluctuations in diesel fuel prices, which it largely mitigates through customer fuel surcharge programs[108](index=108&type=chunk)[153](index=153&type=chunk) - As of June 30, 2021, the company had **no derivative financial instruments** to reduce its exposure to fuel price fluctuations[118](index=118&type=chunk) [Foreign Currency Exchange Rate Risk](index=31&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) Foreign currency risk is primarily related to the Mexican Peso, with most foreign revenues denominated in U.S. Dollars - The company conducts business primarily in Mexico, with most foreign revenues denominated in U.S. Dollars to reduce direct foreign currency risk[154](index=154&type=chunk) - Foreign currency translation gains were **$1.9 million** for the second quarter of 2021 and **$0.9 million** for the second quarter of 2020[154](index=154&type=chunk) [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) Interest rate risk is managed through a mix of fixed and variable rate debt and interest rate swaps - The company manages interest rate exposure through a mix of variable rate debt and interest rate swap agreements, with **$150 million of debt effectively fixed at 2.34%** and **$100 million at a fixed rate of 1.28%**[155](index=155&type=chunk) - A hypothetical one-percentage point increase in the LIBOR interest rate would increase annual interest expense by approximately **$500,000**[155](index=155&type=chunk) - The company is evaluating the impact of the discontinuation of LIBOR, which is referenced by its unsecured credit facilities[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of the quarter-end - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective at a reasonable assurance level** as of June 30, 2021[157](index=157&type=chunk)[158](index=158&type=chunk) - **No changes** in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[159](index=159&type=chunk) - Management acknowledges that internal control systems provide only **reasonable, not absolute, assurance** that objectives are met[160](index=160&type=chunk) PART II – OTHER INFORMATION [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has an ongoing stock repurchase program with shares remaining available for purchase - The Board of Directors approved a stock repurchase program for up to 5,000,000 shares, with **2,686,562 shares remaining available** as of June 30, 2021[163](index=163&type=chunk) - **No shares** of common stock were repurchased during the second quarter of 2021[164](index=164&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate and financial documents - Exhibits include Restated Articles of Incorporation, By-Laws, credit agreements, CEO and CFO certifications, and iXBRL financial information[166](index=166&type=chunk)[167](index=167&type=chunk)