Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
[Markone]
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172022
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
Nebraska
47-0648386
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
14507 FRONTIER ROAD
POST OFFICE BOX 45308
OMAHA, NEBRASKA
Frontier Road		68145-0308
Post Office Box 45308
Omaha,Nebraska68145-0308
(Address of principal executive offices)(Zip Code)
(402) (402) 895-6640
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueWERNThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated Filerý☒Accelerated filer
o
☐
Non-accelerated filer
o  (Do not check if a smaller reporting company)
☐		Smaller reporting company
o
☐
Emerging growth company
o
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  ý☒
As of October 31, 2017, 72,336,976 August 4, 2022, 63,418,047shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


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WERNER ENTERPRISES, INC.
INDEX
 
PAGE
3
Item 1.
34
September 30, 2017June 30, 2022 and 20162021
4
Consolidated Statements of Comprehensive Income for the Three and NineSix Months Ended September 30, 2017June 30, 2022 and 20162021
5
6
7
Consolidated Statements of Stockholders’ Equity and Temporary Equity - Redeemable Noncontrolling Interest for the Three and Six Months Ended June 30, 2022and June 30, 2021
8
810
Item 2.
1519
Item 3.
2629
Item 4.
2630
Item 1.
31
Item 1A.
31
Item 2.
2731
Item 6.
2832

2
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PART I
FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements:
This Quarterly Report on Form 10-Q contains historical information and forward-looking statements based on information currently available to our management. The forward-looking statements in this report, including those made in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of Part I, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These safe harbor provisions encourage reporting companies to provide prospective information to investors. Forward-looking statements can be identified by the use of certain words, such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project” and other similar terms and language. We believe the forward-looking statements are reasonable based on currently available information. However, forward-looking statements involve risks, uncertainties and assumptions, whether known or unknown, that could cause our actual results, business, financial condition and cash flows to differ materially from those anticipated in the forward-looking statements. A discussion of important factors relating to forward-looking statements is included in Part I, Item 1A (Risk Factors) of Part I of our Annual Report on Form 10-K for the year ended December 31, 20162021 (“20162021 Form 10-K”). Readers should not unduly rely on the forward-looking statements included in this Form 10-Q because such statements speak only to the date they were made. Unless otherwise required by applicable securities laws, we undertake no obligation or duty to update or revise any forward-looking statements contained herein to reflect subsequent events or circumstances or the occurrence of unanticipated events.

3
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Item 1. Financial Statements.
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
  
Three Months Ended
June 30,		Six Months Ended
June 30,
(In thousands, except per share amounts)2022202120222021
Operating revenues$836,276 $649,814 $1,600,881 $1,266,260 
Operating expenses:
Salaries, wages and benefits253,639 210,095 495,635 414,948 
Fuel125,446 58,503 213,867 109,341 
Supplies and maintenance62,656 49,414 119,681 95,561 
Taxes and licenses23,791 23,744 47,624 46,977 
Insurance and claims41,071 20,739 68,563 42,795 
Depreciation and amortization68,471 63,865 135,700 127,816 
Rent and purchased transportation197,116 150,920 382,353 297,413 
Communications and utilities3,781 3,333 7,707 6,355 
Other(14,618)(7,662)(28,683)(14,280)
Total operating expenses761,353 572,951 1,442,447 1,126,926 
Operating income74,923 76,863 158,434 139,334 
Other expense (income):
Interest expense1,787 701 3,226 1,539 
Interest income(313)(334)(588)(631)
Gain on investments in equity securities, net(24,095)(20,191)(14,289)(20,191)
Other126 54 199 96 
Total other expense (income)(22,495)(19,770)(11,452)(19,187)
Income before income taxes97,418 96,633 169,886 158,521 
Income tax expense23,809 24,601 41,242 39,997 
Net income73,609 72,032 128,644 118,524 
Net income attributable to noncontrolling interest(1,319)— (2,605)— 
Net income attributable to Werner$72,290 $72,032 $126,039 $118,524 
Earnings per share:
Basic$1.12 $1.06 $1.94 $1.74 
Diluted$1.12 $1.06 $1.93 $1.74 
Weighted-average common shares outstanding:
Basic64,394 67,926 64,965 67,929 
Diluted64,726 68,216 65,327 68,237 
See Notes to Consolidated Financial Statements (Unaudited).
4
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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
  
Three Months Ended
June 30,		Six Months Ended
June 30,
(In thousands)2022202120222021
Net income$73,609 $72,032 $128,644 $118,524 
Other comprehensive income (loss):
Foreign currency translation adjustments(47)1,865 1,106 297 
Change in fair value of interest rate swaps, net of tax1,283 360 4,914 1,663 
Other comprehensive income1,236 2,225 6,020 1,960 
Comprehensive income74,845 74,257 134,664 120,484 
Comprehensive income attributable to noncontrolling interest(1,319)— (2,605)— 
Comprehensive income attributable to Werner$73,526 $74,257 $132,059 $120,484 
See Notes to Consolidated Financial Statements (Unaudited).
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WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share amounts)June 30,
2022		December 31,
2021
 (Unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$54,424 $54,196 
Accounts receivable, trade, less allowance of $9,976 and $9,169, respectively482,006 460,518 
Other receivables165,205 24,449 
Inventories and supplies12,568 11,140 
Prepaid taxes, licenses and permits8,803 17,549 
Other current assets49,399 63,361 
Total current assets772,405 631,213 
Property and equipment2,703,628 2,557,825 
Less – accumulated depreciation1,032,948 944,582 
Property and equipment, net1,670,680 1,613,243 
Goodwill74,404 74,618 
Intangible assets, net52,597 55,315 
Other non-current assets278,501 229,324 
Total assets$2,848,587 $2,603,713 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Checks issued in excess of cash balances$6,032 $— 
Accounts payable126,178 93,987 
Current portion of long-term debt5,000 5,000 
Insurance and claims accruals221,219 72,594 
Accrued payroll57,624 44,333 
Accrued expenses30,274 28,758 
Other current liabilities24,653 24,011 
Total current liabilities470,980 268,683 
Long-term debt, net of current portion440,000 422,500 
Other long-term liabilities43,782 43,314 
Insurance and claims accruals, net of current portion242,094 237,220 
Deferred income taxes269,307 268,499 
Total liabilities1,466,163 1,240,216 
Commitments and contingencies00
Temporary equity - redeemable noncontrolling interest38,552 35,947 
Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 shares authorized; 80,533,536 shares
issued; 63,415,565 and 65,790,112 shares outstanding, respectively805 805 
Paid-in capital124,065 121,904 
Retained earnings1,777,092 1,667,104 
Accumulated other comprehensive loss(14,584)(20,604)
Treasury stock, at cost; 17,117,971 and 14,743,424 shares, respectively(543,506)(441,659)
Total stockholders’ equity1,343,872 1,327,550 
Total liabilities, temporary equity and stockholders’ equity$2,848,587 $2,603,713 
See Notes to Consolidated Financial Statements (Unaudited).
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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended
June 30,
(In thousands)20222021
Cash flows from operating activities:
Net income$128,644 $118,524 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization135,700 127,816 
Deferred income taxes(630)15,036 
Gain on disposal of property and equipment(41,138)(24,008)
Non-cash equity compensation6,085 5,249 
Insurance and claims accruals, net of current portion4,874 4,632 
Other(4,142)842 
Gain on investments in equity securities, net(14,289)(20,191)
Changes in certain working capital items:
Accounts receivable, net(21,125)(49,978)
Other current assets20,728 3,144 
Accounts payable30,091 16,639 
Other current liabilities22,729 (8,241)
Net cash provided by operating activities267,527 189,464 
Cash flows from investing activities:
Additions to property and equipment(227,334)(192,983)
Proceeds from sales of property and equipment73,911 90,036 
Net cash invested in acquisition705 — 
Investment in equity securities(20,250)(5,000)
Decrease in notes receivable3,288 3,342 
Net cash used in investing activities(169,680)(104,605)
Cash flows from financing activities:
Repayments of short-term debt(2,500)(25,000)
Proceeds from issuance of short-term debt— 5,000 
Repayments of long-term debt(100,000)— 
Proceeds from issuance of long-term debt120,000 120,000 
Change in checks issued in excess of cash balances6,032 — 
Dividends on common stock(15,702)(12,906)
Repurchases of common stock(102,113)(5,507)
Tax withholding related to net share settlements of restricted stock awards(3,658)(3,740)
Net cash provided by (used in) financing activities(97,941)77,847 
Effect of exchange rate fluctuations on cash322 88 
Net increase in cash and cash equivalents228 162,794 
Cash and cash equivalents, beginning of period54,196 29,334 
Cash and cash equivalents, end of period$54,424 $192,128 
Supplemental disclosures of cash flow information:
Interest paid$3,236 $1,583 
Income taxes paid31,096 40,047 
Supplemental schedule of non-cash investing and financing activities:
Notes receivable issued upon sale of property and equipment$2,350 $2,646 
Change in fair value of interest rate swaps4,914 1,663 
Property and equipment acquired included in accounts payable8,431 6,715 
Property and equipment disposed included in other receivables1,205 32 
        Dividends accrued but not yet paid at end of period8,244 8,151 
See Notes to Consolidated Financial Statements (Unaudited).
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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND
TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST
(Unaudited)
Three Months Ended June 30, 2022
(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, March 31, 2022$805 $121,157 $1,713,046 $(15,820)$(477,724)$1,341,464 $37,233 
Net income attributable to Werner— — 72,290 — — 72,290 — 
Net income attributable to noncontrolling interest— — — — — — 1,319 
Other comprehensive income— — — 1,236 — 1,236 — 
Purchases of 1,650,000 shares of common stock— — — — (65,933)(65,933)— 
Dividends on common stock ($0.13 per share)— — (8,244)— — (8,244)— 
Equity compensation activity, 7,802 shares— (151)— — 151 — — 
Non-cash equity compensation expense— 3,059 — — — 3,059 — 
BALANCE, June 30, 2022$805 $124,065 $1,777,092 $(14,584)$(543,506)$1,343,872 $38,552 
Three Months Ended June 30, 2021
(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, March 31, 2021$805 $114,588 $1,478,616 $(23,098)$(343,181)$1,227,730 $— 
Net income attributable to Werner— — 72,032 — — 72,032 — 
Other comprehensive income— — — 2,225 — 2,225 — 
Dividends on common stock ($0.12 per share)— — (8,151)— — (8,151)— 
Equity compensation activity, 13,725 shares— (266)— — 266 — — 
Non-cash equity compensation expense— 2,747 — — — 2,747 — 
BALANCE, June 30, 2021$805 $117,069 $1,542,497 $(20,873)$(342,915)$1,296,583 $— 
See Notes to Consolidated Financial Statements (Unaudited).
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WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND
TEMPORARY EQUITY - REDEEMABLE NONCONTROLLING INTEREST (CONTINUED)
(Unaudited)
Six Months Ended June 30, 2022
(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, 2021$805 $121,904 $1,667,104 $(20,604)$(441,659)$1,327,550 $35,947 
Net income attributable to Werner— — 126,039 — — 126,039 — 
Net income attributable to noncontrolling interest— — — — — — 2,605 
Other comprehensive income— — — 6,020 — 6,020 — 
Purchases of 2,495,100 shares of common stock— — — — (102,113)(102,113)— 
Dividends on common stock ($0.25 per share)— — (16,051)— — (16,051)— 
Equity compensation activity, 120,553 shares— (3,924)— — 266 (3,658)— 
Non-cash equity compensation expense— 6,085 — — — 6,085 — 
BALANCE, June 30, 2022$805 $124,065 $1,777,092 $(14,584)$(543,506)$1,343,872 $38,552 
Six Months Ended June 30, 2021
(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, 2020$805 $116,039 $1,438,916 $(22,833)$(337,887)$1,195,040 $— 
Net income attributable to Werner— — 118,524 — — 118,524 — 
Other comprehensive income— — — 1,960 — 1,960 — 
Purchases of 130,446 shares of common stock— — — — (5,507)(5,507)— 
Dividends on common stock ($0.22 per share)— — (14,943)— — (14,943)— 
Equity compensation activity, 130,593 shares— (4,219)— — 479 (3,740)— 
Non-cash equity compensation expense— 5,249 — — — 5,249 — 
BALANCE, June 30, 2021$805 $117,069 $1,542,497 $(20,873)$(342,915)$1,296,583 $— 
See Notes to Consolidated Financial Statements (Unaudited).
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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 contained herein reflect all adjustmentsinclude the accounts of Werner Enterprises, Inc. and its controlled subsidiaries (collectively, the “Company” or “Werner”). Noncontrolling interest on the consolidated condensed balance sheets represents the portion of a consolidated entity in which inwe do not have a direct equity ownership. In these notes, the opinion of management, are necessary for a fair statement of the financial condition, results of operationsterms “we,” “us,” or “our” refer to Werner Enterprises, Inc. and cash flows for the periods presented. The interimits 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”)(SEC) instructions to Form 10-Q and, were also prepared without audit. The interimin 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 accounting principles generally accepted in the United States of AmericaGAAP for complete financial statements; although in management’s opinion, the disclosures are adequate so that the information presented is not misleading.
Operating results for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 2017,2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022. In the opinion of management, the information set forth in the accompanying consolidated condensed balance sheets is fairly stated in all material respects in relation to the consolidated balance sheets from which it has been derived.
These interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes contained in our 20162021 Form 10-K.

New Accounting Pronouncements Adopted
WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
  
Three Months Ended
September 30,		 Nine Months Ended
September 30,
(In thousands, except per share amounts)2017 2016 2017 2016
 (Unaudited)
Operating revenues$528,643
 $508,676
 $1,549,372
 $1,490,159
Operating expenses:       
Salaries, wages and benefits170,238
 162,862
 500,620
 479,298
Fuel50,266
 40,638
 140,551
 112,034
Supplies and maintenance41,986
 41,027
 120,276
 130,559
Taxes and licenses21,671
 21,540
 64,095
 64,353
Insurance and claims20,669
 19,106
 60,336
 59,384
Depreciation53,578
 51,781
 162,619
 152,849
Rent and purchased transportation126,087
 133,876
 377,146
 379,155
Communications and utilities4,199
 4,206
 12,158
 12,110
Other4,075
 4,566
 12,812
 9,303
Total operating expenses492,769
 479,602
 1,450,613
 1,399,045
Operating income35,874
 29,074
 98,759
 91,114
Other expense (income):       
Interest expense492
 749
 1,892
 1,839
Interest income(766) (1,055) (2,556) (3,154)
Other88
 46
 293
 148
Total other income(186) (260) (371) (1,167)
Income before income taxes36,060
 29,334
 99,130
 92,281
Income taxes13,543
 10,414
 37,375
 34,963
Net income$22,517
 $18,920
 $61,755
 $57,318
Earnings per share:       
Basic$0.31
 $0.26
 $0.85
 $0.80
Diluted$0.31
 $0.26
 $0.85
 $0.79
Dividends declared per share$0.070
 $0.060
 $0.200
 $0.180
Weighted-average common shares outstanding:       
Basic72,298
 72,058
 72,239
 72,043
Diluted72,601
 72,406
 72,517
 72,364
See Notes to Consolidated Financial Statements (Unaudited).

WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  
Three Months Ended
September 30,		 Nine Months Ended
September 30,
(In thousands)2017 2016 2017 2016
 
(Unaudited)

Net income$22,517
 $18,920
 $61,755
 $57,318
Other comprehensive income (loss):       
Foreign currency translation adjustments(627) (1,023) 3,205
 (3,009)
Change in fair value of interest rate swap100
 388
 334
 (517)
Other comprehensive income (loss)(527) (635) 3,539
 (3,526)
Comprehensive income$21,990
 $18,285
 $65,294
 $53,792
See Notes to Consolidated Financial Statements (Unaudited).

WERNER ENTERPRISES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share amounts)September 30,
2017		 December 31,
2016
 (Unaudited)  
ASSETS   
Current assets:   
Cash and cash equivalents$10,733
 $16,962
Accounts receivable, trade, less allowance of $8,410 and $9,183, respectively279,716
 261,372
Other receivables27,028
 15,168
Inventories and supplies11,624
 12,768
Prepaid taxes, licenses and permits6,935
 15,374
Income taxes receivable6,538
 21,497
Other current assets38,898
 29,987
Total current assets381,472
 373,128
Property and equipment2,078,229
 2,109,991
Less – accumulated depreciation758,331
 747,353
Property and equipment, net1,319,898
 1,362,638
Other non-current assets61,571
 57,237
Total assets$1,762,941
 $1,793,003
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Checks issued in excess of cash balances$3,538
 $—
Accounts payable72,343
 66,618
Current portion of long-term debt—
 20,000
Insurance and claims accruals84,436
 83,404
Accrued payroll31,029
 26,189
Other current liabilities22,938
 18,650
Total current liabilities214,284
 214,861
Long-term debt, net of current portion75,000
 160,000
Other long-term liabilities14,321
 16,711
Insurance and claims accruals, net of current portion107,230
 113,875
Deferred income taxes301,199
 292,769
Commitments and contingencies
 
Stockholders’ equity:   
Common stock, $0.01 par value, 200,000,000 shares authorized; 80,533,536 shares   
issued; 72,334,476 and 72,166,969 shares outstanding, respectively805
 805
Paid-in capital103,296
 101,035
Retained earnings1,131,805
 1,084,796
Accumulated other comprehensive loss(13,378) (16,917)
Treasury stock, at cost; 8,199,060 and 8,366,567 shares, respectively(171,621) (174,932)
Total stockholders’ equity1,050,907
 994,787
Total liabilities and stockholders’ equity$1,762,941
 $1,793,003
See Notes to Consolidated Financial Statements (Unaudited).


WERNER ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
Nine Months Ended
September 30,
(In thousands)2017 2016
 (Unaudited)
Cash flows from operating activities:   
Net income$61,755
 $57,318
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation162,619
 152,849
Deferred income taxes6,492
 23,773
Gain on disposal of property and equipment(6,031) (13,250)
Non-cash equity compensation3,215
 2,325
Insurance and claims accruals, net of current portion(6,645) (11,070)
Other(8,755) (8,500)
Changes in certain working capital items:   
Accounts receivable, net(18,344) (1,489)
Other current assets15,184
 (11,647)
Accounts payable7,107
 1,898
Other current liabilities351
 8,968
Net cash provided by operating activities216,948
 201,175
Cash flows from investing activities:   
Additions to property and equipment(205,874) (388,386)
Proceeds from sales of property and equipment84,769
 94,372
Issuance of notes receivable(5,000)
—
Decrease in notes receivable15,637
 14,007
Net cash used in investing activities(110,468) (280,007)
Cash flows from financing activities:   
Repayments of short-term debt(45,000) (20,000)
Proceeds from issuance of short-term debt—
 20,000
Repayments of long-term debt(60,000) (40,000)
Proceeds from issuance of long-term debt—
 115,000
Change in net checks issued in excess of cash balances3,538
 2,665
Dividends on common stock(13,721) (12,966)
Tax withholding related to net share settlements of restricted stock awards(445) (623)
Stock options exercised2,339
 298
Excess tax benefits from equity compensation—
 (17)
Payment of notes payable—
 (3,117)
Net cash provided by (used in) financing activities(113,289) 61,240
Effect of exchange rate fluctuations on cash580
 (505)
Net decrease in cash and cash equivalents(6,229) (18,097)
Cash and cash equivalents, beginning of period16,962
 31,833
Cash and cash equivalents, end of period$10,733
 $13,736
Supplemental disclosures of cash flow information:   
Interest paid$2,004
 $1,838
Income taxes paid15,819
 4,257
Supplemental schedule of non-cash investing activities:   
Notes receivable issued upon sale of property and equipment$4,058
 $22,952
Change in fair value of interest rate swap334
 (517)
Property and equipment acquired included in accounts payable492
 821
Property and equipment disposed included in other receivables1,300
 259
See Notes to Consolidated Financial Statements (Unaudited).

WERNER ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Accounting Policies
In July 2015, the Financial Accounting Standards Board (“FASB”) issuedfirst quarter 2022, we adopted Accounting Standards Update (“ASU”) No. 2015-11, “Inventory: Simplifying2020-04, Reference Rate Reform (Topic 848), which provides optional guidance for a limited period of time to ease the Measurementpotential burden in accounting for reference rate reform on financial reporting. The provisions of Inventory,” which requires inventory to be recorded at the lower of cost and net realizable value (instead of lower of cost or market). The Company adopted ASU No. 2015-11this update are effective for all entities as of January 1, 2017. Upon adoption, this update had no effect on our consolidated financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting,” to simplify several aspects of the accounting for share-based payment transactions. The new update requires excess tax benefits and tax deficiencies to be recorded in the consolidated statements of income as a component of income tax expense when share-based awards vest or are settled. The update also eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the consolidated statements of cash flows. The standard also provides an accounting policy election to account for forfeitures as they occur and now allows for withholding up to the maximum statutory tax rate on certain share-based awards without triggering liability accounting.

The Company adopted ASU No. 2016-09 as of January 1, 2017. Upon adoption, share-based payment excess tax benefits and tax deficiencies are recognized in the consolidated statements of income as a component of income tax expense, rather than additional paid-in capital as previously recognized. The Company elected to report excess tax benefits as operating activities in the consolidated statements of cash flows on a prospective basis, and prior period amounts have not been adjusted. The Company also elected to use actual forfeitures to determine the amount of share-based compensation expense to be recognized. This change was applied on a modified retrospective basis and resulted in a $0.3 million decrease to retained earnings in first quarter 2017.

(2) Credit Facilities
As of September 30, 2017, we had unsecured committed credit facilities with three banks as well as a term commitment with one of these banks. We had with Wells Fargo Bank, N.A., a $100.0 million credit facility which will expire on July 12, 2020 through December 31, 2022 and a $75.0 million term commitment with principal dueapply only to contracts, hedging relationships, and payable on September 15, 2019. We had an unsecured line of credit of $75.0 million with U.S. Bank, N.A., which will expire on July 13, 2020. We also had a $75.0 million credit facility with BMO Harris Bank, N.A., which will expire on March 5, 2020. Borrowings under these credit facilities and term note bear variable interest based onother transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The adoption of the new guidance did not have a material impact on our consolidated financial statements.
(2) Business Acquisitions
On July 1, 2021, we acquired an 80% ownership interest in ECM Associated, LLC ("ECM”) for a final purchase price of $141.3 million after net working capital changes and net of cash acquired. ECM, through its ECM Transport, LLC (“ECM Transport”) and Motor Carrier Service, LLC (“MCS”) subsidiaries, provides regional truckload carrier services in the Mid-Atlantic, Ohio, and Northeast regions of the United States. The results of operations for ECM are included in our consolidated financial statements beginning July 1, 2021, and the noncontrolling interest is presented as a separate component of the consolidated financial statements.
On November 22, 2021, we acquired 100% of the equity interests in NEHDS Logistics, LLC (“NEHDS”) for a final purchase price of $62.3 million after including the impacts of contingent consideration and net working capital changes. The purchase price allocation for NEHDS is considered final as of March 31, 2022. NEHDS is a final mile residential delivery provider serving customers primarily in the Northeast and Midwest U.S. markets. NEHDS delivers primarily big and bulky products (primarily furniture and appliances) using 2-person delivery teams performing residential and commercial deliveries. The results of operations for NEHDS are included in our consolidated financial statements beginning November 22, 2021.
Amortization expense on intangible assets was $1.4 million and $2.7 million for the three and six months ended June 30, 2022.
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(3) Revenue
Revenue Recognition
Revenues are recognized over time as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
The following table presents our revenues disaggregated by revenue source (in thousands):
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2022202120222021
Truckload Transportation Services$613,616 $491,200 $1,172,033 $954,149 
Werner Logistics203,861 141,673 392,869 279,526 
Inter-segment eliminations(625)(193)(1,347)(327)
   Transportation services816,852 632,680 1,563,555 1,233,348 
Other revenues19,424 17,134 37,326 32,912 
Total revenues$836,276 $649,814 $1,600,881 $1,266,260 
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
June 30,		Six Months Ended
June 30,
 2022202120222021
United States$770,849 $602,146 $1,481,753 $1,157,385 
Mexico51,461 39,325 94,752 78,081 
Other13,966 8,343 24,376 30,794 
Total revenues$836,276 $649,814 $1,600,881 $1,266,260 
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 June 30, 2022 and December 31, 2021, the accounts receivable, trade, net, balance was$482.0 million and $460.5 million, respectively. Contract assets represent a conditional right to consideration in exchange for goods or services and are transferred to receivables when the rights become unconditional. At June 30, 2022 and December 31, 2021, the balance of contract assets was $10.2 million and $9.0 million, respectively. We have recognized contract assets within the other current assets financial statement caption on the consolidated condensed balance sheets. These contract assets are considered current assets as they will be settled in less than 12 months.
Contract liabilities represent advance consideration received from customers and are recognized as revenues over time as the related performance obligation is satisfied. The balance of contract liabilities was $1.5 million and $1.2 million at June 30, 2022 and December 31, 2021, respectively. The amount of revenues recognized in the six months ended June 30, 2022 that was included in the December 31, 2021 contract liability balance was $1.2 million. We have recognized contract liabilities within the accounts payable and other current liabilities financial statement captions on the consolidated condensed balance sheets. These contract liabilities are considered current liabilities as they will be settled in less than 12 months.
Performance Obligations
We have elected to apply the practical expedient in Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts With Customers, to not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less. Remaining performance obligations represent the transaction price allocated to future reporting periods for freight shipments started but not completed at the reporting date that we expect to recognize as revenue in the period subsequent to the reporting date; transit times generally average approximately 3 days.
During the six months ended June 30, 2022 and 2021, revenues recognized from performance obligations related to prior periods (for example, due to changes in transaction price) were not material.
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(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):
 June 30, 2022December 31, 2021
Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)$34,143 $28,458 
Current lease liabilities (recorded in other current liabilities)$7,191 $6,380 
Long-term lease liabilities (recorded in other long-term liabilities)28,042 22,634 
Total operating lease liabilities$35,233 $29,014 
Other Information
Weighted-average remaining lease term for operating leases7.40 years7.63 years
Weighted-average discount rate for operating leases2.6 %2.7 %
The following table presents the maturities of operating lease liabilities as of June 30, 2022 (in thousands):
Maturity of Lease Liabilities
2022 (remaining)$4,145 
20237,102 
20246,146 
20255,238 
20264,230 
Thereafter11,883 
Total undiscounted operating lease payments$38,744 
Less: Imputed interest(3,511)
Present value of operating lease liabilities$35,233 
Cash Flows
During the six months ended June 30, 2022 and 2021, right-of-use assets of $11.2 million and $2.1 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 $3.8 million and $1.9 million for the six months ended June 30, 2022 and 2021, respectively, and are included in operating cash flows.
Operating Lease Expense
Operating lease expense was $5.3 million and $10.4 million for the three and six months ended June 30, 2022, respectively, and $3.5 million and $7.1 million for the three and six months ended June 30, 2021, respectively. This expense included $2.3 million and $4.4 million for the three and six months ended June 30, 2022, respectively, and $1.0 million and $2.0 million for the three and six months ended June 30, 2021, respectively, for long-term operating leases, with the remainder for variable and short-term lease expense.
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Lessor Operating Leases
We are the lessor of tractors and trailers under operating leases with initial terms of 1 to 10 years. We recognize revenue for such leases on a straight-line basis over the term of the lease. Revenues were $3.1 million and $6.3 million for the three and six months ended June 30, 2022, respectively, and $3.0 million and $6.1 million for the three and six months ended June 30, 2021, respectively. The following table presents information about the maturities of these operating leases as of June 30, 2022 (in thousands):
2022 (remaining)$4,267 
20232,986 
2024— 
2025— 
2026— 
Thereafter— 
Total$7,253 
(5) Fair Value
Fair Value Measurement — Definition and Hierarchy
ASC 820-10, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.
ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.
Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Such inputs include quoted prices in markets that are not active, quoted prices for similar assets and liabilities in active and inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 — Unobservable inputs for the asset or liability, where there is little, if any, observable market activity or data for the asset or liability.
In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. This pricing methodology applies to our Level 1 assets and liabilities. If quoted prices in active markets for identical assets and liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable, either directly or indirectly. This pricing methodology would apply to Level 2 assets and liabilities.
The following table presents the Company's fair value hierarchy for assets measured at fair value on a recurring basis (in thousands):
Level in
Fair Value
Hierarchy		Fair Value
June 30, 2022December 31, 2021
Other non-current assets:
Equity securities (1)
1$2,818 $17,166 

(1) Represents our investments in autonomous technology companies. For additional information regarding the valuation of these equity securities, see Note 6 – Investments.
We have no material liabilities measured at fair value on a recurring basis for the periods presented.
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Our ownership interest in Mastery Logistics Systems, Inc. (“MLSI”) does not have a readily determinable fair value and is accounted for using the measurement alternative in ASC 321, Investments - Equity Securities. For additional information regarding the valuation of our investment in MLSI, see Note 6 – Investments.
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. These financial instruments are recorded at or near their respective transaction prices and historically have been settled or converted to cash at approximately that value (categorized as Level 2 of the fair value hierarchy).

The carrying amounts of our long-term debt approximate fair value due to the duration of our credit arrangements and the variable interest rates (categorized as Level 2 of the fair value hierarchy).
(6) Investments
Equity Investments without Readily Determinable Fair Values
In 2020, we entered into a strategic partnership with MLSI, a transportation management systems company. We are collaborating with MLSI to develop a cloud-based transportation management system using MLSI's SaaS technology which we have agreed to license. In June 2022, we paid MLSI $20.0 million for additional shares of its preferred stock. This minority equity investment is being accounted for under ASC 321 using the measurement alternative, and is recorded in other noncurrent assets on the consolidated condensed balance sheets. As of June 30, 2022 and December 31, 2021, the value of our investment was $86.8 million and $38.2 million, respectively. We record changes in the value of this investment, based on events that occur that would indicate the value of our investment in MLSI has changed, in gain or loss on investments in equity securities on the consolidated statements of income. During second quarter 2022, investments by third-parties resulted in the remeasurement of our investment in MLSI, and in the three and six months ended June 30, 2022, we recognized an unrealized gain of $28.6 million. No gains or losses were recorded in the three and six months ended June 30, 2021. At June 30, 2022, cumulative unrealized gains on our investment in MLSI totaled $56.8 million.
Equity Investments with Readily Determinable Fair Values
We own strategic minority equity investments in autonomous technology companies, which are being accounted for under ASC 321 and are recorded in other noncurrent assets on the consolidated condensed balance sheets. We record changes in the value of these investments, based on the share prices reported by Nasdaq, in gain or loss on investments in equity securities on the consolidated statements of income. We recognized an unrealized loss of $4.5 million and $14.3 million on these investments for the three and six months ended June 30, 2022, respectively, and an unrealized gain of $20.2 million for the three and six months ended June 30, 2021. For additional information regarding the fair value of these equity investments, see Note 5 – Fair Value.
(7) Debt and Credit Facilities
On March 25, 2022, we entered into a new credit agreement (the “Wells Credit Agreement”) with Wells Fargo Bank, National Association ("Wells Fargo"), replacing our previous credit agreement with Wells Fargo dated May 14, 2019, as amended. The Wells Credit Agreement provides for a $300.0 million unsecured revolving line of credit ("Wells Line of Credit"), with a $75.0 million maximum limit for the aggregate amount of letters of credit issued, and expires on May 14, 2024. The Wells Credit Agreement also provides for an unsecured term loan commitment not to exceed a principal amount of $100.0 million ("Wells Term Loan"), with the outstanding principal balance due and payable in full on May 14, 2024. The proceeds of the Wells Line of Credit and Wells Term Loan may be used for the Company's general corporate purposes.
Amounts drawn under the Wells Line of Credit and the outstanding principal balance of the Wells Term Loan bear interest either, at our option, (i) at a variable rate based on the daily Secured Overnight Financing Rate ("SOFR") plus 0.10% and a margin ranging between 0.675% and 0.925%, or (ii) at a fixed rate based on the Term SOFR in effect on the first day of an applicable interest period designated by us plus 0.10% in the case of one month Term SOFR, 0.15% in the case of three month Term SOFR, 0.25% in the case of six month Term SOFR, and plus, in each case, a margin ranging between 0.675% and 0.925%, payable monthly. The margin rates are based on our ratio of total funded debt to earnings before interest, income taxes, depreciation and amortization (“EBITDA”). The Wells Credit Agreement also requires us to pay Wells Fargo (i) an annualized letter of credit fee based on the face amount of each letter of credit outstanding at rates ranging between 0.55% and 0.80% per annum and (ii) a nonrefundable commitment fee on the average daily unused amount of the Wells Line of Credit (after deducting undrawn letters of credit) at rates ranging between 0.11% and 0.15% per annum. The rates for the letter of credit and nonrefundable commitment fees are based on our ratio of total funded debt to EBITDA.
On March 25, 2022, we also entered into a second amendment to our existing unsecured revolving line of credit agreement, dated May 14, 2019, with BMO Harris Bank N.A. (“BMO Harris”), expiring May 14, 2024 (“BMO Line of Credit”). The
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second amendment increased our BMO Line of Credit from $200.0 million to $300.0 million and changed the variable interest rate calculation by replacing the LIBOR with the SOFR. Amounts drawn under the BMO Line of Credit bear interest, for a selected interest period, at a variable rate based on the SOFR plus 0.10% and a margin ranging between 0.70% and 1.50%, based on our ratio of total funded debt to EBITDA, payable at the end of the applicable interest period. No changes were made to the annualized letter of credit fee, nonrefundable commitment fee, and financial covenants as a result of the second amendment. We also have a $100.0 million unsecured fixed-rate term loan commitment with BMO Harris, with quarterly principal payments of $1.25 million, which began on September 30, 2021, and a final payment of principal and interest due and payable on May 14, 2024 ("BMO Term Loan"). The outstanding principal balance of the BMO Term Loan bears interest at a fixed rate of 1.28%, payable quarterly in arrears.
As of SeptemberJune 30, 2017,2022 and December 31, 2016,2021, our outstanding debt totaled $75.0$445.0 million and $180.0$427.5 million, respectively. WeAs of June 30, 2022, we had $75.0a total of $250.0 million outstanding under the term commitmentour revolving lines of credit, including (i) $100.0 million at a weighted average variable interest rate of 2.10%; (ii) $75.0 million at a variable interest rate of 1.83% as of September 30, 2017,1.93%, which is effectively fixed at 2.5%2.29% with an interest rate swap agreement.agreement through May 14, 2024; and (iii) $75.0 million at a variable interest rate of 1.96%, which is effectively fixed at 2.34% with an interest rate swap agreement through May 14, 2024. The $325.0 million oftotal borrowing capacity of $600.0 million under our revolving lines of credit facilities at SeptemberJune 30, 2017,2022, is further reduced by $28.7$58.4 million in stand-by letters of credit under which we are obligated. EachIn addition, as of June 30, 2022, we had $100.0 million outstanding under the Wells Term Loan at a variable interest rate of 2.23% and $95.0 million outstanding under the BMO Term Loan at a fixed interest rate of 1.28%. Availability of such funds under the debt agreements includes,is conditional upon various customary terms and covenants. Such covenants include, among other things, financial covenants requiring us (i) not to exceed a maximumminimum ratio of total debtearnings before interest, income taxes, depreciation and amortization to total capitalizationinterest expense and/or (ii) not to exceed a maximum ratio of total funded debt to earnings before interest, income taxes, depreciation and amortization (as such terms are defined in each credit facility). At SeptemberAs of June 30, 2017,2022 we were in compliance with these covenants.

At SeptemberJune 30, 2017,2022, the aggregate future maturities of long-term debt by year are as follows (in thousands):
2022 (remaining)$2,500 
20235,000 
2024437,500 
2025— 
2026— 
Total$445,000 
2017$—
2018—
201975,000
2020—
2021—
Total$75,000

The carrying amounts of our long-term debt approximate fair value due to the duration of the notes and the variable interest rates.
(3) Income Taxes
We accrued interest expense of $39 thousand and $58 thousand during the three-month periods ended September 30, 2017 and September 30, 2016, respectively, and $142 thousand and $185 thousand during the nine-month periods ended September 30,

2017 and September 30, 2016, respectively, excluding the reversal of accrued interest related to adjustments for the remeasurement of uncertain tax positions. Our total gross liability for unrecognized tax benefits at September 30, 2017 is $4.1 million. If recognized, $2.7 million of unrecognized tax benefits would impact our effective tax rate. Interest of $0.8 million has been reflected as a component of the total liability. We expect no significant increases or decreases for uncertain tax positions during the next twelve months.

We file U.S. federal income tax returns, as well as income tax returns in various states and several foreign jurisdictions. The years 2014 through 2016 are open for examination by the Internal Revenue Service (“IRS”), and various years are open for examination by state and foreign tax authorities. State and foreign jurisdictional statutes of limitations generally range from three to four years. 

(4)(8) Commitments and Contingencies
As of September 30, 2017, weWe have committed to property and equipment purchases of approximately $95.2 million.

$182.4 million at June 30, 2022.
We are involved in certain claims and pending litigation, including those described herein, arising in the ordinary course of business. The majority of these claims relate to bodily injury, property damage, cargo and workers’ compensation incurred in the transportation of freight, as well as certain class action litigation related to personnel and employment matters. We accrue for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on the knowledge of the facts, management believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and our view of these matters may change in the future as the litigation and related events unfold.

On May 17, 2018, in Harris County District Court in Houston, Texas, a jury rendered an adverse verdict against the Company in a lawsuit arising from a December 30, 2014 accident between a Werner tractor-trailer and a passenger vehicle. On July 30, 2018, the court entered a final judgment against Werner for $92.0 million, including pre-judgment interest.
The Company has premium-based liability insurance to cover the potential outcome from this jury verdict. Under the Company’s insurance policies in effect on the date of this accident, the Company’s maximum liability for this accident is $10.0 million (plus pre-judgment and post-judgment interest) with premium-based coverage that exceeds the jury verdict amount. As a result of this jury verdict, the Company had recorded a liability of $31.4 million as of June 30, 2022, and $28.8 million as of December 31, 2021. Under the terms of the Company’s insurance policies, the Company is the primary obligor of the verdict, and as such, the Company has also recorded a $79.2 million receivable from its third-party insurance providers in other non-current assets and a corresponding liability of the same amount in the long-term portion of insurance and claims accruals in the consolidated condensed balance sheets as of June 30, 2022 and December 31, 2021.
The Company is pursuing an appeal of this verdict. No assurances can be given regarding the outcome of any such appeal.
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In July 2022, the Hopkins County District Court in Sulphur Springs, Texas approved a $150.0 million settlement, voluntarily agreed to by the Company and its insurers, of a motor vehicle accident lawsuit in Texas arising from a May 24, 2020 accident between a Werner tractor-trailer and a passenger vehicle. 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 with premium-based coverage for the remainder of the settlement amount. As a result of this settlement, the Company recognized $9.5 million of insurance and claims expense for the three and six months ended June 30, 2022, and had recorded a liability of $10.0 million and $0.5 million as of June 30, 2022 and December 31, 2021, respectively. Under the terms of the Company’s insurance policies, the Company is the primary obligor of the settlement, and as such, the Company has also recorded a $140.0 million receivable from its third-party insurance providers in other current assets and a corresponding liability of the same amount in the current portion of insurance and claims accruals in the consolidated condensed balance sheets as of June 30, 2022.
We arehave 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)(“FLSA”) and the Nebraska Wage Payment and Collection Act and that we failed to pay minimum wage per hour for drivers in our student driver training program,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 Septembervarious 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, and that appeal remains pending. As of June 30, 2017,2022, we had accruedhave 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.

(5)(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 stock options and 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 periodperiods presented.
The computation of basic and diluted earnings per share is shown below (in thousands, except per share amounts).
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2022202120222021
Net income attributable to Werner$72,290 $72,032 $126,039 $118,524 
Weighted average common shares outstanding64,394 67,926 64,965 67,929 
Dilutive effect of stock-based awards332 290 362 308 
Shares used in computing diluted earnings per share64,726 68,216 65,327 68,237 
Basic earnings per share$1.12 $1.06 $1.94 $1.74 
Diluted earnings per share$1.12 $1.06 $1.93 $1.74 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net income$22,517
 $18,920
 $61,755
 $57,318
Weighted average common shares outstanding72,298
 72,058
 72,239
 72,043
Dilutive effect of stock-based awards303
 348
 278
 321
Shares used in computing diluted earnings per share72,601
 72,406
 72,517
 72,364
Basic earnings per share$0.31
 $0.26
 $0.85
 $0.80
Diluted earnings per share$0.31
 $0.26
 $0.85
 $0.79

There were no options to purchase shares of common stock that were outstanding during the periods indicated above that were excluded from the computation of diluted earnings per share because the option purchase price was greater than the average market

price of the common shares during the period. Performance awards are excluded from the calculation of dilutive potential common shares until the threshold performance conditions have been satisfied.

6) Equity Compensation
The Werner Enterprises, Inc. Amended and Restated Equity Plan (the “Equity Plan”), approved by the Company’s shareholders, provides for grants to employees and non-employee directors of the Company in the form of nonqualified stock options, restricted stock and units (“restricted awards”), performance awards, and stock appreciation rights. The Board of Directors or the Compensation Committee of our Board of Directors determines the terms of each award, including the type, recipients, number of shares subject to and vesting conditions of each award. No awards of stock appreciation rights have been issued under the Equity Plan to date. The maximum number of shares of common stock that may be awarded under the Equity Plan is 20,000,000 shares. The maximum aggregate number of shares that may be awarded to any one person in any one calendar year under the Equity Plan is 500,000. As of September 30, 2017, there were 7,346,315 shares available for granting additional awards.
Equity compensation expense is included in salaries, wages and benefits within the Consolidated Statements of Income. As of September 30, 2017, the total unrecognized compensation cost related to non-vested equity compensation awards was approximately $6.1 million and is expected to be recognized over a weighted average period of 2.2 years. The following table summarizes the equity compensation expense and related income tax benefit recognized in the Consolidated Statements of Income (in thousands):

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Stock options:       
Pre-tax compensation expense$2
 $5
 $5
 $14
Tax benefit1
 2
 2
 6
Stock option expense, net of tax$1
 $3
 $3
 $8
Restricted awards:    
 
Pre-tax compensation expense$941
 $813
 $2,440
 $1,743
Tax benefit367
 317
 952
 680
Restricted stock expense, net of tax$574
 $496
 $1,488
 $1,063
Performance awards:    
 
Pre-tax compensation expense$308
 $517
 $897
 $628
Tax benefit120
 202
 350
 245
Performance award expense, net of tax$188
 $315
 $547
 $383

During the nine-month period ended September 30, 2016, we recorded a $1.8 million reduction in compensation expense and a $0.7 million reduction of tax benefit resulting from a change in forfeiture estimates for certain restricted and performance awards, most of which relate to a previously disclosed executive retirement that occurred in February 2016.

We do not have a formal policy for issuing shares upon an exercise of stock options or vesting of restricted and performance awards. Such shares are generally issued from treasury stock. From time to time, we repurchase shares of our common stock, the timing and amount of which depends on market and other factors. Historically, the shares acquired from such repurchases have provided us with sufficient quantities of stock to issue for equity compensation. Based on current treasury stock levels, we do not expect to repurchase additional shares specifically for equity compensation during 2017.

Stock Options
Stock options are granted at prices equal to the market value of the common stock on the date the option award is granted. Option awards currently outstanding become exercisable in installments from 24 to 72 months after the date of grant. The options are exercisable over a period not to exceed ten years, one day from the date of grant. The following table summarizes stock option activity for the nine months ended September 30, 2017:


 
Number of
Options
(in thousands)
 
Weighted
Average
Exercise
Price ($)
 
Weighted
Average
Remaining
Contractual
Term
(Years)
 
Aggregate
Intrinsic Value
(in thousands)
Outstanding at beginning of period171
 $18.19
 
 
Granted—
 —
 
 
Exercised(132) 17.72
 
 
Forfeited—
 —
 
 
Expired—
 —
 
 
Outstanding at end of period39
 19.80
 2.53 $651
Exercisable at end of period34
 19.45
 2.30 $584

We did not grant any stock options during the nine-month periods ended September 30, 2017 and September 30, 2016. The fair value of stock option grants is estimated using a Black-Scholes valuation model. The total intrinsic value of stock options exercised was $1.6 million and $95 thousand for the nine-month periods ended September 30, 2017 and September 30, 2016, respectively.

Restricted Awards
Restricted stock entitles the holder to shares of common stock when the award vests. Restricted stock units entitle the holder to a combination of cash or stock equal to the value of common stock when the unit vests. The value of these shares may fluctuate according to market conditions and other factors. Restricted awards currently outstanding vest over periods ranging from 12 to 84 months from the grant date of the award. The restricted awards do not confer any voting or dividend rights to recipients until such shares vest and do not have any post-vesting sales restrictions. The following table summarizes restricted award activity for the nine months ended September 30, 2017:

 
Number of
Restricted
Awards (in
thousands)
 
Weighted
Average Grant
Date Fair
Value ($)
Nonvested at beginning of period293
 $25.98
Granted81
 26.90
Vested(16) 24.34
Forfeited(10) 26.87
Nonvested at end of period348
 26.24

We estimate the fair value of restricted awards based upon the market price of the underlying common stock on the date of grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for any known future changes in the dividend rate. Cash settled restricted stock units are recorded as a liability within the Consolidated Balance Sheets and are adjusted to fair value each reporting period.

The total fair value of previously granted restricted awards vested during the nine-month period ended September 30, 2017 was $0.5 million and for the nine-month period ended September 30, 2016 was $0.3 million. When restricted awards vest, we withhold shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations are recorded as treasury stock.

Performance Awards
Performance awards entitle the recipient to shares of common stock upon attainment of performance objectives as pre-established by the Compensation Committee. If the performance objectives are achieved, performance awards currently outstanding vest, subject to continued employment, over periods ranging from 12 to 60 months from the grant date of the award. The performance awards do not confer any voting or dividend rights to recipients until such shares vest and do not have any post-vesting sales restrictions. The following table summarizes performance award activity for the nine months ended September 30, 2017:


 
Number of
Performance
Awards (in
thousands)
 
Weighted
Average Grant
Date Fair
Value ($)
Nonvested at beginning of period124
 $27.33
Granted69
 26.89
Vested(35) 27.07
Forfeited—
 —
Nonvested at end of period158
 27.20

The 2017 performance awards are earned based upon the level of attainment by the Company of specified performance objectives related to cumulative diluted earnings per share for the two-year period from January 1, 2017 to December 31, 2018. Shares earned based on cumulative diluted earnings per share may be capped based on absolute total shareholder return during the three-year period ended December 31, 2019. The 2017 performance awards will vest in one installment on the third anniversary from the grant date. In February 2017, the Compensation Committee determined the 2016 fiscal year results upon which the 2016 performance awards were based fell below the threshold level; thus, no shares of common stock were earned, and the shares not earned were included in the 2016 forfeited shares.

We estimate the fair value of performance awards based upon the market price of the underlying common stock on the date of grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for any known future changes in the dividend rate.

The vesting date fair value of performance awards that vested during the nine-month periods ended September 30, 2017 and September 30, 2016 was $1.0 million and $1.6 million, respectively. We withhold shares based on the closing stock price on the vesting date to settle the employees’ statutory obligation for the applicable income and other employment taxes. The shares withheld to satisfy the tax withholding obligations are recorded as treasury stock.

(7)(10) Segment Information
We have two2 reportable segments – Truckload Transportation Services (“Truckload”TTS”) and Werner Logistics.

The TruckloadTTS segment consists of threetwo operating units, One-Way Truckload, Dedicated and Temperature Controlled.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
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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;trailers, including Mexico cross-border routes; (ii) the expedited (“Expedited”) fleet provides time-sensitive truckload services utilizing driver teams; and (iii) the regional short-haul (“Regional”) fleet, including ECM, provides comparable truckload van service within geographic regions across the United States. 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.States; and (iv) the Temperature Controlled fleet provides truckload services for temperature sensitive products over irregular routes utilizing temperature-controlled trailers. (We previously utilized the name “Specialized Services” to encompass the operations of both Dedicated and Temperature Controlled.) Revenues for the TruckloadTTS segment include a small amount of non-trucking revenues which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico where we utilize a third-party capacity provider.

The Werner Logistics segment generates the majority of our non-trucking revenues through fivethree operating units that provide non-trucking services to our customers. These fivethree Werner Logistics operating units are as follows: (i) truck brokerage (“Brokerage”)Truckload Logistics, which uses contracted carriers to complete customer shipments; (ii)shipments for brokerage customers and freight management (“Freight Management”) offerscustomers for which we offer a full range of single-source logistics management services and solutions; (iii)(ii) the intermodal (“Intermodal”) unit offers rail transportation through alliances with rail and drayage providers as an alternative to truck transportation; (iv) Werner Global Logistics international (“WGL”) provides complete management of global shipments from origin to destination using a combination of air, ocean, truck and rail transportation modes; and (v)(iii) Werner Final Mile (“Final Mile”), including NEHDS, offers homeresidential and businesscommercial deliveries of large or heavy items using two associatesthird-party agents, independent contractors, and Company employees with two-person delivery teams operating a liftgate straight truck.

In first quarter 2021, we completed the sale of the Werner Global Logistics (“WGL”) freight forwarding services for international ocean and air shipments to Scan Global Logistics Group, and we realized a $1.0 million gain when the transaction closed on February 26, 2021. Werner Logistics continues to provide North American truck brokerage, freight management, intermodal and final mile services.
We generate other revenues from our driver training schools, transportation-related activities such as third-party equipment maintenance and equipment leasing, and other business activities. None of these operations meets the quantitative reporting thresholds. As a result, these operations are grouped in “Other” in the tabletables below. “Corporate” includes revenues and expenses that are incidental to our activities and are not attributable to any of our operating segments, including gains and losses on sales of assets not attributable to our operating segments.
We do not prepare separate balance sheets by segment and, as a result, assets

are not separately identifiable by segment. Based on our operations, certain revenue-generating assets (primarily tractors and trailers) are interchangeable between segments. Depreciation for these interchangeable assets is allocated to segments based on the actual number of units utilized by the segment during the period. Other depreciation and amortization is allocated to segments based on specific identification or as a percentage of a metric such as average number of tractors. Inter-segment eliminations in the table below represent transactions between reporting segments that are eliminated in consolidation.

The following table summarizestables summarize our segment information (in thousands):
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2022202120222021
Revenues by Segment
Truckload Transportation Services$613,616 $491,200 $1,172,033 $954,149 
Werner Logistics203,861 141,673 392,869 279,526 
Other18,946 16,725 36,459 32,124 
Corporate478 409 867 788 
  Subtotal836,901 650,007 1,602,228 1,266,587 
Inter-segment eliminations(625)(193)(1,347)(327)
Total$836,276 $649,814 $1,600,881 $1,266,260 
Three Months Ended
June 30,		Six Months Ended
June 30,
2022202120222021
Operating Income (Loss) by Segment 
Truckload Transportation Services$64,004 $73,108 $140,097 $130,736 
Werner Logistics12,490 3,927 21,171 8,501 
Other461 1,663 906 2,529 
Corporate(2,032)(1,835)(3,740)(2,432)
Total$74,923 $76,863 $158,434 $139,334 
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Three Months Ended
June 30,		Six Months Ended
June 30,
Three Months Ended
September 30,		 Nine Months Ended
September 30,		2022202120222021
2017 2016 2017 2016
Revenues       
Truckload Transportation Services$407,566
 $384,312
 $1,196,071
 $1,136,478
Werner Logistics104,568
 109,459
 305,225
 310,001
Other16,020
 14,804
 47,257
 43,148
Corporate593
 313
 1,539
 1,300
Subtotal528,747
 508,888
 1,550,092
 1,490,927
Inter-segment eliminations(104) (212) (720) (768)
Total$528,643
 $508,676
 $1,549,372
 $1,490,159
    
  
Operating Income    
  
Depreciation and Amortization by SegmentDepreciation and Amortization by Segment
Truckload Transportation Services$34,009
 $19,846
 $93,511
 $74,971
Truckload Transportation Services$62,867 $58,533 $124,704 $117,058 
Werner Logistics1,318
 4,894
 6,652
 16,502
Werner Logistics2,351 2,085 4,619 4,306 
Other1,001
 (1,191) 605
 (4,964)Other2,791 2,761 5,472 5,490 
Corporate(454) 5,525
 (2,009) 4,605
Corporate462 486 905 962 
Total$35,874
 $29,074
 $98,759
 $91,114
Total$68,471 $63,865 $135,700 $127,816 

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(8) Derivative Financial Instrument
In the normal course of business we are subject to risk from adverse fluctuations in foreign exchange and interest rates and commodity prices. We manage our risks for interest rate changes through use of an interest rate swap. At September 30, 2017, we had one interest rate swap outstanding, which matures in September 2019, with a notional value of $75.0 million and a pre-tax fair value loss of $0.4 million. The counterparty to this contract is a major financial institution. We are exposed to credit loss in the event of non-performance by the counterparty. We do not use derivative instruments for trading or speculative purposes and have no derivative financial instruments to reduce our exposure to fuel price fluctuations.

Our objective in managing exposure to interest rate risk is to limit the impact on earnings and cash flow. The extent to which we use such instruments is dependent on our access to these contracts in the financial markets and our success using other methods.

Our outstanding derivative financial instrument is recognized as an other long-term liability in the Consolidated Balance Sheets at fair value. The interest rate swap is accounted for as a cash flow hedging instrument. At inception, we formally designated and documented the financial instrument as a hedge of a specific underlying exposure, the risk management objective, and the manner in which effectiveness of the hedge will be assessed. We formally assess, both at inception and at each reporting period thereafter, whether the derivative financial instrument is effective in offsetting changes in cash flows of the related underlying exposure. All changes in fair value of outstanding derivatives in cash flow hedges, except any ineffective portion, are recorded in other comprehensive income until earnings are impacted by the hedged transaction. Classification of the gain or loss in the Consolidated Statements of Income upon release from comprehensive income is the same as that of the underlying exposure. Any ineffective portion of the change in fair value of the instruments is recognized immediately in earnings.

We will discontinue the use of hedge accounting prospectively when (i) the derivative instrument is no longer effective in offsetting changes in fair value or cash flows of the underlying hedged item; (ii) the derivative instrument expires, is sold, terminated or exercised; or (iii) designating the derivative instrument as a hedge is no longer appropriate.

Should we discontinue hedge accounting because it is no longer probable that an anticipated transaction will occur in the originally expected period, or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income would be recognized immediately in earnings.

FASB ASC 815-10, Derivatives and Hedging, requires companies to recognize the derivative instrument as an asset or a liability at fair value in the statement of financial position. Fair value of the derivative instrument is required to be measured under the FASB’s Fair Value Measurements and Disclosures guidance, which establishes a hierarchy that distinguishes between market

participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. The fair value of our interest rate swap is based on Level 2 inputs.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) summarizes the financial statements from management’s perspective with respect to our financial condition, results of operations, liquidity and other factors that may affect actual results. The MD&A is organized in the following sections:
•Overview
•COVID-19
•Results of Operations
•Liquidity and Capital Resources
Contractual Obligations and Commercial Commitments•Regulations
Regulations
•Critical Accounting Policies and Estimates
Accounting Standards
The MD&A should be read in conjunction with our 20162021 Form 10-K.

Overview:
We have two reportable segments, Truckload Transportation Services (“Truckload”TTS”) and Werner Logistics, and we operate in the truckload and logistics sectors of the transportation industry. In the truckload sector, we focus on transporting consumer nondurable products that generally ship more consistently throughout the year. In the logistics sector, besides managing transportation requirements for individual customers, we provide additional sources of truck capacity, alternative modes of transportation, a globalNorth American delivery network and systems analysis to optimize transportation needs. Our success depends on our ability to efficiently and effectively manage our resources in the delivery of truckload transportation and logistics services to our customers. Resource requirements vary with customer demand, which may be subject to seasonal or general economic conditions. Our ability to adapt to changes in customer transportation requirements is essential to efficiently deploy resources and make capital investments in tractors and trailers (with respect to our TruckloadTTS segment) or obtain qualified third-party capacity at a reasonable price (with respect to our Werner Logistics segment). Although our business volume is not highly concentrated, weWe may also be affected by our customers’ financial failures or loss of customer business.

Revenues for our TruckloadTTS segment operating units (One-Way Truckload, Dedicated(Dedicated and Temperature Controlled)One-Way Truckload) are typically generated on a per-mile basis and also include revenues such as stop charges, loading and unloading charges, equipment detention charges and equipment repositioning charges. To mitigate our risk to fuel price increases, we recover additional fuel surcharge revenues from our customers additional fuel surcharges that generally recoup a majority of the increased fuel costs; however, we cannot assure that current recovery levels will continue in future periods. Because fuel surcharge revenues fluctuate in response to changes in fuel costs, we identify them separately and exclude them from the statistical calculations to provide a more meaningful comparison between periods. The key statistics used to evaluate trucking revenues, net of fuel surcharge, are (i) average revenues per tractor per week, (ii) average percentage of empty miles (miles without trailer cargo), (iii) average trip length (in loaded miles) and (iv) average number of tractors in service. General economic conditions, seasonal trucking industry freight patterns and industry capacity are important factors that impact these statistics. Our TruckloadTTS segment also generates a small amount of revenues categorized as non-trucking revenues, which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico where the TruckloadTTS segment utilizes a third-party capacity provider. We exclude such revenues from the statistical calculations.

Our most significant resource requirements are company drivers, independent contractors, tractors and trailers. Independent contractors supply their own tractors and drivers and are responsible for their operating expenses. Our financial results are affected by company driver and independent contractor availability and the markets for new and used revenue equipment. We are self-insured for a significant portion of bodily injury, property damage and cargo claims; workers’ compensation claims; and associate health claims (supplemented by premium-based insurance coverage above certain dollar levels). For that reason, our financial results may also be affected by driver safety, medical costs, weather, legal and regulatory environments and insurance coverage costs to protect against catastrophic losses.

The operating ratio is a common industry measure used to evaluate our profitability and that of our TruckloadTTS segment operating fleets. The operating ratio consists of operating expenses expressed as a percentage of operating revenues. The most significant variable expenses that impact the TruckloadTTS segment are driver salaries and benefits, fuel, fuel taxes (included in taxes and licenses expense), payments to independent contractors (included in rent and purchased transportation expense), supplies and maintenance and insurance and claims. As discussed further in the comparison of operating results for thirdsecond quarter 20172022 to thirdsecond quarter 2016,2021, several industry-wide issues have caused, and could continue to cause, costs to increase in future periods. These issues include shortages of drivers or independent contractors, changing fuel prices, higher new truck and trailer purchase prices and compliance with new or proposed regulations.regulations and tightening of the commercial truck liability insurance market. Our main fixed costs include depreciation expense for tractors and trailers and equipment licensing fees (included in taxes and licenses expense). The TruckloadTTS segment requires substantial cash expenditures for tractor

and trailer purchases. We fund these purchases with net cash from operations and financing available under our existing credit facilities, as management deems necessary.

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We provide non-trucking services primarily through the fivethree operating units within our Werner Logistics segment (Brokerage, Freight Management,(Truckload Logistics, Intermodal, and Final Mile). In first quarter 2021, we completed the sale of the Werner Global Logistics (“WGL”) freight forwarding services for international ocean and Final Mile).air shipments to Scan Global Logistics Group. WGL had annual revenues of $53 million in 2020, and we realized a $1.0 million gain from the sale in first quarter 2021, which assumed achievement of the full earnout. At the end of the twelve month period following the completed sale of WGL, the full earnout was achieved. Unlike our TruckloadTTS segment, the Werner Logistics segment is less asset-intensive and is instead dependent upon qualified associates, information systems and qualified third-party capacity providers. The largest expense item related to the Werner Logistics segment is the cost of purchased transportation we pay to third-party capacity providers. This expense item is recorded as rent and purchased transportation expense. Other operating expenses consist primarily of salaries, wages and benefits.benefits, as well as depreciation and amortization, supplies and maintenance, and other general expenses. We evaluate the Werner Logistics segment’s financial performance by reviewing the gross margin percentage (revenues less rentoperating expenses and purchased transportation expensesoperating income expressed as a percentage of revenues) and the operating income percentage. The gross marginrevenues. Purchased transportation expenses as a percentage of revenues can be impacted by the rates charged to customers and the costs of securing third-party capacity. We have a mix of contracted long-term rates and variable rates for the cost of third-party capacity, and we cannot assure that our operating results will not be adversely impacted in the future if our ability to obtain qualified third-party capacity providers changes or the rates of such providers increase.
COVID-19:
The COVID-19 pandemic continues to impact the U.S. and global economies and has resulted in ongoing supply chain challenges. During the pandemic, the transportation industry has been designated by the U.S. government as an essential industry for keeping the U.S. supply chain moving. We are monitoring and reacting to the evolving nature of the pandemic, governmental responses, and their impacts on our business, including employee availability. We are working hard to stay healthy while safely delivering our customers’ freight on time. Throughout our offices and terminal network, we are closely following the safety guidelines set forth by the Centers for Disease Control and Prevention (CDC) and World Health Organization (WHO).
Over the past several years, we have repositioned Werner to increase our ability to execute through different macroeconomic environments. We believe our freight base, which is heavily weighted toward customers delivering essential products that are continually being restocked in today’s economy, enabled us to more effectively manage through the difficult economic environment created by the pandemic. While there remain significant uncertainties related to COVID-19 and its effect on the economy, we believe that demand for our services will continue to moderate during the remainder of 2022.

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Results of Operations:
The following table sets forth the Consolidated Statementsconsolidated statements of Incomeincome in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the prior year.
Three Months Ended (3ME)
 June 30,		Six Months Ended (6ME)
 June 30,		Percentage Change in Dollar Amounts
20222021202220213ME6ME
(in thousands)$%$%$%$%%%
Operating revenues$836,276 100.0 $649,814 100.0 $1,600,881 100.0 $1,266,260 100.0 28.7 26.4 
Operating expenses:
Salaries, wages and benefits253,639 30.3 210,095 32.4 495,635 31.0 414,948 32.8 20.7 19.4 
Fuel125,446 15.0 58,503 9.0 213,867 13.3 109,341 8.6 114.4 95.6 
Supplies and maintenance62,656 7.5 49,414 7.6 119,681 7.4 95,561 7.5 26.8 25.2 
Taxes and licenses23,791 2.8 23,744 3.7 47,624 3.0 46,977 3.7 0.2 1.4 
Insurance and claims41,071 4.9 20,739 3.2 68,563 4.3 42,795 3.4 98.0 60.2 
Depreciation and amortization68,471 8.2 63,865 9.8 135,700 8.5 127,816 10.1 7.2 6.2 
Rent and purchased transportation197,116 23.6 150,920 23.2 382,353 23.9 297,413 23.5 30.6 28.6 
Communications and utilities3,781 0.4 3,333 0.5 7,707 0.5 6,355 0.5 13.4 21.3 
Other(14,618)(1.7)(7,662)(1.2)(28,683)(1.8)(14,280)(1.1)90.8 100.9 
Total operating expenses761,353 91.0 572,951 88.2 1,442,447 90.1 1,126,926 89.0 32.9 28.0 
Operating income74,923 9.0 76,863 11.8 158,434 9.9 139,334 11.0 (2.5)13.7 
Total other expense (income), net(22,495)(2.6)(19,770)(3.1)(11,452)(0.7)(19,187)(1.5)13.8 (40.3)
Income before income taxes97,418 11.6 96,633 14.9 169,886 10.6 158,521 12.5 0.8 7.2 
Income tax expense23,809 2.8 24,601 3.8 41,242 2.6 39,997 3.1 (3.2)3.1 
Net income73,609 8.8 72,032 11.1 128,644 8.0 118,524 9.4 2.2 8.5 
Net income attributable to noncontrolling interest(1,319)(0.2)— — (2,605)(0.1)— — N/AN/A
Net income attributable to Werner$72,290 8.6 $72,032 11.1 $126,039 7.9 $118,524 9.4 0.4 6.3 


21
 Three Months Ended (3ME)
September 30,		 Nine Months Ended (9ME)
September 30,		 
Percentage Change
in Dollar Amounts
 2017 2016 2017 2016 3ME9ME
(Amounts in thousands)$% $% $% $% %%
Operating revenues$528,643
100.0
 $508,676
100.0
 $1,549,372
100.0
 $1,490,159
100.0
 3.9 %4.0 %
               
Operating expenses:              
Salaries, wages and benefits170,238
32.2
 162,862
32.0
 500,620
32.3
 479,298
32.2
 4.5 %4.4 %
Fuel50,266
9.5
 40,638
8.0
 140,551
9.1
 112,034
7.5
 23.7 %25.5 %
Supplies and maintenance41,986
7.9
 41,027
8.1
 120,276
7.8
 130,559
8.8
 2.3 %(7.9)%
Taxes and licenses21,671
4.1
 21,540
4.2
 64,095
4.1
 64,353
4.3
 0.6 %(0.4)%
Insurance and claims20,669
3.9
 19,106
3.8
 60,336
3.9
 59,384
4.0
 8.2 %1.6 %
Depreciation53,578
10.1
 51,781
10.2
 162,619
10.5
 152,849
10.3
 3.5 %6.4 %
Rent and purchased transportation126,087
23.9
 133,876
26.3
 377,146
24.3
 379,155
25.4
 (5.8)%(0.5)%
Communications and utilities4,199
0.8
 4,206
0.8
 12,158
0.8
 12,110
0.8
 (0.2)%0.4 %
Other4,075
0.8
 4,566
0.9
 12,812
0.8
 9,303
0.6
 (10.8)%37.7 %
Total operating expenses492,769
93.2
 479,602
94.3
 1,450,613
93.6
 1,399,045
93.9
 2.7 %3.7 %
              
Operating income35,874
6.8
 29,074
5.7
 98,759
6.4
 91,114
6.1
 23.4 %8.4 %
Total other expense (income)(186)—
 (260)(0.1) (371)—
 (1,167)(0.1) 28.5 %68.2 %
Income before income taxes36,060
6.8
 29,334
5.8
 99,130
6.4
 92,281
6.2
 22.9 %7.4 %
Income taxes13,543
2.5
 10,414
2.1
 37,375
2.4
 34,963
2.4
 30.0 %6.9 %
Net income$22,517
4.3
 $18,920
3.7
 $61,755
4.0
 $57,318
3.8
 19.0 %7.7 %
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The following tables set forth the operating revenues, operating expenses and operating income for the TruckloadTTS segment as well asand certain statistical data regarding our TruckloadTTS segment operations, as well as statistical data for the periods indicated.One-Way Truckload and Dedicated operating units within TTS.
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2022202120222021
TTS segment (in thousands)$%$%$%$%
Trucking revenues, net of fuel surcharge$488,208 $428,523 $960,569 $839,175 
Trucking fuel surcharge revenues118,641 57,439 198,456 104,898 
Non-trucking and other operating revenues6,767 5,238 13,008 10,076 
Operating revenues613,616 100.0 491,200 100.0 1,172,033 100.0 954,149 100.0 
Operating expenses549,612 89.6 418,092 85.1 1,031,936 88.0 823,413 86.3 
Operating income$64,004 10.4 $73,108 14.9 $140,097 12.0 $130,736 13.7 

Three Months Ended
June 30,		Six Months Ended
June 30,
TTS segment20222021% Change20222021% Change
Average tractors in service8,286 7,664 8.1 %8,262 7,727 6.9 %
Average revenues per tractor per week (1)
$4,532 $4,301 5.4 %$4,472 $4,177 7.1 %
Total tractors (at quarter end)
  Company8,145 7,305 11.5 %8,145 7,305 11.5 %
  Independent contractor255 340 (25.0)%255 340 (25.0)%
  Total tractors8,400 7,645 9.9 %8,400 7,645 9.9 %
Total trailers (at quarter end)25,905 23,090 12.2 %25,905 23,090 12.2 %
One-Way Truckload
Trucking revenues, net of fuel surcharge (in 000’s)$188,173 $166,171 13.2 %$374,933 $323,010 16.1 %
Average tractors in service3,102 2,715 14.3 %3,083 2,785 10.7 %
Total tractors (at quarter end)3,080 2,605 18.2 %3,080 2,605 18.2 %
Average percentage of empty miles12.39 %10.72 %15.6 %12.07 %11.04 %9.3 %
Average revenues per tractor per week (1)
$4,665 $4,709 (0.9)%$4,677 $4,461 4.8 %
Average % change in revenues per total mile (1)
13.7 %16.7 %17.1 %13.1 %
Average % change in total miles per tractor per week(12.9)%(1.7)%(10.5)%(4.8)%
Average completed trip length in miles (loaded)692 877 (21.1)%704 865 (18.6)%
Dedicated
Trucking revenues, net of fuel surcharge (in 000’s)$300,035 $262,352 14.4 %$585,636 $516,165 13.5 %
Average tractors in service5,184 4,949 4.7 %5,179 4,942 4.8 %
Total tractors (at quarter end)5,320 5,040 5.6 %5,320 5,040 5.6 %
Average revenues per tractor per week (1)
$4,452 $4,079 9.1 %$4,349 $4,018 8.2 %
(1)Net of fuel surcharge revenues.
22
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Truckload Transportation Services (amounts in thousands)$ % $ % $ % $ %
Trucking revenues, net of fuel surcharge$351,114
   $336,673
   $1,029,036
   $1,008,738
  
Trucking fuel surcharge revenues50,164
   41,994
   147,641
   111,018
  
Non-trucking and other operating revenues6,288
   5,645
   19,394
   16,722
  
Operating revenues407,566
 100.0 384,312
 100.0 1,196,071
 100.0 1,136,478
 100.0
Operating expenses373,557
 91.7 364,466
 94.8 1,102,560
 92.2 1,061,507
 93.4
Operating income$34,009
 8.3 $19,846
 5.2 $93,511
 7.8 $74,971
 6.6
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 Three Months Ended
September 30,		   Nine Months Ended
September 30,		  
Truckload Transportation Services2017 2016 % Change 2017 2016 % Change
Operating ratio, net of fuel surcharge revenues (1)
90.5% 94.2%   91.1% 92.7%  
Average revenues per tractor per week (2)
$3,693
 $3,589
 2.9 % $3,634
 $3,547
 2.4 %
Average trip length in miles (loaded)469
 468
 0.2 % 469
 466
 0.6 %
Average percentage of empty miles (3)
12.53% 12.55% (0.2)% 12.40% 13.08% (5.2)%
Average tractors in service7,314
 7,216
 1.4 % 7,261
 7,291
 (0.4)%
Total trailers (at quarter end)22,435
 22,655
   22,435
 22,655
  
Total tractors (at quarter end):           
     Company6,700
 6,355
   6,700
 6,355
  
     Independent contractor675
 820
   675
 820
  
          Total tractors7,375
 7,175
   7,375
 7,175
  

(1)
Calculated as if fuel surcharge revenues are excluded from total revenues and instead reported as a reduction of operating expenses, which provides a more consistent basis for comparing results of operations from period to period.
(2)
Net of fuel surcharge revenues.
(3)
“Empty” refers to miles without trailer cargo.

The following tables set forth the Werner Logistics segment’s revenues, rent and purchased transportation expense, gross margin, other operating expenses (primarily salaries, wages and benefits expense), total operating expenses, and operating income, as well as certain statistical data regarding the Werner Logistics segment.
 Three Months Ended
June 30,		Six Months Ended
June 30,
  2022202120222021
Werner Logistics segment (in thousands)$%$%$%$%
Operating revenues$203,861 100.0 $141,673 100.0 $392,869 100.0 $279,526 100.0 
Operating expenses:
Purchased transportation expense166,241 81.6 124,388 87.8 323,762 82.4 244,915 87.6 
Other operating expenses25,130 12.3 13,358 9.4 47,936 12.2 26,110 9.4 
Total operating expenses191,371 93.9 137,746 97.2 371,698 94.6 271,025 97.0 
Operating income$12,490 6.1 $3,927 2.8 $21,171 5.4 $8,501 3.0 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2017 2016 2017 2016
Werner Logistics (amounts in thousands)$ % $ % $ % $ %
Operating revenues$104,568
 100.0 $109,459
 100.0 $305,225
 100.0 $310,001
 100.0
Rent and purchased transportation expense89,507
 85.6 91,695
 83.8 259,277
 84.9 255,954
 82.6
Gross margin15,061
 14.4 17,764
 16.2 45,948
 15.1 54,047
 17.4
Other operating expenses13,743
 13.1 12,870
 11.7 39,296
 12.9 37,545
 12.1
Operating income$1,318
 1.3 $4,894
 4.5 $6,652
 2.2 $16,502
 5.3

 Three Months Ended
June 30,		Six Months Ended
June 30,
Werner Logistics segment20222021% Change20222021% Change
Average tractors in service58 34 70.6 %55 36 52.8 %
Total tractors (at quarter end)57 41 39.0 %57 41 39.0 %
Total trailers (at quarter end)1,920 1,325 44.9 %1,920 1,325 44.9 %
 Three Months Ended
September 30,		   Nine Months Ended
September 30,		  
Werner Logistics2017 2016 % Change 2017 2016 % Change
Average tractors in service48
 75
 (36.0)% 53
 71
 (25.4)%
Total trailers (at quarter end)1,655
 1,590
 4.1 % 1,655
 1,590
 4.1 %
Total tractors (at quarter end)47
 86
 (45.3)% 47
 86
 (45.3)%

Three Months Ended SeptemberJune 30, 20172022 Compared to Three Months Ended SeptemberJune 30, 20162021
Operating Revenues
Operating revenues increased 3.9%28.7% for the three months ended SeptemberJune 30, 2017,2022, compared to the same period of the prior year. When comparing thirdsecond quarter 20172022 to thirdsecond quarter 2016, Truckload2021, TTS segment revenues increased $23.3$122.4 million, or 6.1%24.9%, and Werner Logistics revenues decreased $4.9increased $62.2 million, or 4.5%43.9%.

Our results in second quarter 2022 reflect strong freight market conditions. Our One-Way Truckload fleet freight demand in second quarter moderated from very good levels in April to seasonally normal levels by the end of June, while our Dedicated fleet freight demand remained strong and steady in second quarter 2022. For the remainder of 2022, we expect industry truckload freight demand to continue to moderate, more for discretionary goods and less for consumer staples. This may impact our One-Way Truckload fleet more than our Dedicated fleet or Logistics segment.
Trucking revenues, net of fuel surcharge, increased 4.3%13.9% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 due to an 8.1% increase in the average number of tractors in service and a 2.9%5.4% increase in average revenues per tractor per week, and a 1.4%net of fuel surcharge. The increase in average tractorsrevenues per tractor was due primarily to improved pricing in service. Ourboth Dedicated and One-Way Truckload, partially offset by a decline in miles per tractor caused by lower length of haul due to the ECM Associated, LLC (“ECM”) acquisition, growth in Dedicated, and fewer team drivers. We currently expect average revenues per total mile, net of fuel surcharge, increased by 3.4% infor the One-Way Truckload fleet for the third quarter 20172022 to increase in a range of 2% to 5% when compared to third quarter 2016 and average miles per truck decreased by 0.5%.

Third quarter 2017 freight demand in our One-Way Truckload fleet improved throughout the quarter. In July and August 2017, freight trended better than normal and meaningfully better than the challenging freight market of third quarter 2016. As we moved into September, the freight market strengthened further due in part to the significant disruption caused by two major hurricanes in south Texas and Florida. These catastrophic weather events resulted in short-term costs in September due to out-of-route miles, higher fuel costs, equipment issues, and driver domicile issues; additionally, the multiple days of school closings at our Florida-based driving schools negatively impacted our driver hiring. At the same time, these events improved spot market pricing and further widened the positive gap between demand and capacity, which better positions the freight and contractual rate markets going forward. Freight volumes in October 2017 were seasonally better than normal.

Freight metrics have improved,2021, and we have increasing confidence that contractual rates will strengthen over the next few quarters, particularly noting the improving freight market conditions and the expected tighteningcurrently expect Dedicated average revenues per tractor per week, net of supply when the electronic hoursfuel surcharge, to increase in a range of service mandate for the trucking industry becomes effective on December 18, 2017.

6% to 8% in 2022 compared to 2021.
The average number of tractors in service in the TruckloadTTS segment increased 1.4%8.1% to 7,3148,286 in thirdsecond quarter 20172022 from 7,2167,664 in thirdsecond quarter 2016.2021, primarily resulting from the nearly 500 tractors acquired in the ECM acquisition. We ended thirdsecond quarter 20172022 with 7,375 trucks8,400 tractors in the TruckloadTTS segment, a year-over-year increase of 200 trucks compared to the end of third quarter 2016, and a sequential increase of 60 trucks755 tractors compared to the end of second quarter 2017.2021, and a sequential increase of 175 tractors compared to the end of first quarter 2022. Within TTS, our Dedicated unit ended second quarter 2022 with 5,320 tractors (or 63% of our total TTS segment tractors) compared to 5,040 tractors (or 66%) a year ago. We expect our tractor count at the end of 2022 to be in a range of 2% to 5% higher when compared to the fleet size at year end 2021, subject to the availability of drivers and new equipment. We cannot predict whether future driver shortages, if any, will adversely affect our ability to maintaingrow our fleet size. If such a driver shortage were to occur, it could result in a fleet size reduction, and our results of operations could be adversely affected.

Trucking fuel surcharge revenues increased 19.5%106.6% to $50.2$118.6 million in thirdsecond quarter 20172022 from $42.0$57.4 million in thirdsecond quarter 20162021 due primarily to higher average diesel fuel prices in the 2017 quarter.second quarter 2022. These revenues represent collections from customers for the increase in fuel and fuel-related expenses, including the fuel component of our independent contractor cost (recorded as rent and purchased transportation expense) and fuel taxes (recorded in taxes and licenses expense), when diesel fuel prices rise. Conversely, when fuel prices decrease, fuel surcharge revenues decrease. To lessen the effect of
23
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fluctuating fuel prices on our margins, we collect fuel surcharge revenues from our customers for the cost of diesel fuel and taxes in excess of specified base fuel price levels according to terms in our customer contracts. Fuel surcharge rates generally adjust weekly based on an independent U.S. Department of Energy fuel price survey which is released every Monday. Our fuel surcharge programs are designed to (i) recoup higher fuel costs from customers when fuel prices rise and (ii) provide customers with the benefit of lower fuel costs when fuel prices decline. These programs generally enable us to recover a majority, but not all, of the fuel price increases. The remaining portion is generally not recoverable because it results from empty and out-of-route miles (which are not billable to customers) and trucktractor idle time. Fuel prices that change rapidly in short time periods also impact our recovery because the surcharge rate in most programs only changes once per week.

Werner Logistics revenues are generated by its fivethree operating units, following the sale of its WGL freight forwarding services for international ocean and air shipments in first quarter 2021. Werner Logistics revenues exclude revenues for full truckload shipments transferred to the TruckloadTTS segment, which are recorded as trucking revenues by the TruckloadTTS segment. Werner Logistics also recorded revenue and brokered freight expense of $0.1 million$625 thousand in thirdsecond quarter 20172022 and $0.2 million$193 thousand in thirdsecond quarter 20162021 for Intermodal drayage movements performed by the TruckloadTTS segment (also recorded as trucking revenue by the TruckloadTTS segment), and these transactions between reporting segments are eliminated in consolidation. In thirdsecond quarter 2017,2022, Werner Logistics revenues decreased $4.9increased $62.2 million, or 4.5%,43.9%. Truckload Logistics revenues (65% of total Logistics revenues) increased by 36% in second quarter 2022. Truckload Logistics volume increased 16% in second quarter 2022, and operating income dollars decreased $3.6revenues per shipment increased 17%. Intermodal revenues (23% of Logistics revenues) increased 18% in second quarter 2022, due to 35% higher revenues per shipment, partially offset by a decrease in volume of 13%. Final Mile revenues (12% of total Logistics revenues) increased $21.1 million or 73.1%, comparedin second quarter 2022, primarily due to third quarter 2016. The Wernergrowth from the November 2021 acquisition of NEHDS Logistics, gross margin percentage in third quarter 2017 of 14.4% decreasedLLC (“NEHDS”) and continued growth from 16.2% in third quarter 2016.our national final mile agent network. The Werner Logistics operating income increased to $12.5 million in second quarter 2022 from $3.9 million in second quarter 2021, due to revenue growth and an improved operating margin percentage in third quarter 2017 of 1.3% declined from third quarter 2016 of 4.5%. Tighter carrier capacity in third quarter 2017when compared to thirdthe 2021 quarter 2016 resultedwhen we experienced a significant increase in higher purchased transportation costs causing the lower gross margincost of capacity for contractual brokerage shipments and operating income percentages.

In third quarter 2017, Werner Logistics achieved solid revenue growth year over year in our truck brokerage solution, while our intermodal and international solutions had lower revenues due to more challenging market conditions. As previously disclosed, a large Werner Logistics Freight Management customer (5.5% of Werner Logistics revenues in third quarter 2016) that was acquired

in 2015 transitioned to their parent company’s transportation platform mid-quarter during first quarter 2017. We continue to see strong customer acceptance of the value of the Werner Logistics portfolio of service offerings, particularly as the market strengthens and shippers tend to consolidate their logistics business with the stability of larger asset-backed logistics providers.

shipments.
Operating Expenses
Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 93.2%91.0% for the three months ended SeptemberJune 30, 2017, compared to 94.3%2022 and 88.2% for the three months ended SeptemberJune 30, 2016.2021. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 16 and 1721 through 23 show the Consolidated Statementsconsolidated statements of Incomeincome in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the same quarterperiod of the prior year, as well as the operating ratios, operating margins, and certain statistical information for our two reportable segments, TruckloadTTS and Werner Logistics.

Salaries, wages and benefits increased $7.4$43.5 million or 4.5%20.7% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 and increased 0.2%decreased 2.1% as a percentage of operating revenues to 32.2%30.3%. The higher dollar amount of salaries, wages and benefits expense in the 2017 thirdsecond quarter of 2022 was due primarily to increased driver pay, including driver pay rate increases and the impact of 3.9 million more company trucktractor miles and higherin the second quarter of 2022. In August 2021, we implemented driver and student pay rates. These increases were partially offset by lower workers’ compensation expenseof approximately $11 million annually in third quarter 2017. When evaluated on a per-mile basis,our One-Way Truckload fleet. Within Dedicated, we continue to implement driver pay increases as needed. The increase in salaries, wages and benefits was also increased, which we primarily attributedue to an increase in the number of non-driver employees and higher driver pay in third quarter 2017 compared to third quarter 2016.benefits. Non-driver salaries, wages and benefits in theour non-trucking Werner Logistics segment increased 8.4%.

65.5% as a result of increased employees to support the 44% growth of Logistics revenues and higher pay rates per employee.
We renewed our workers’ compensation insurance coverage for the policy year beginningon April 1, 2017.2022. Our coverage levels are the same as the prior policy year. We continue to maintain a self-insurance retention of $1.0$2.0 million per claim. Our workers’ compensation insurance premiums for the policy year beginning April 2017 were similar to those2022 are $0.4 million higher than the premiums for the previous policy year.

Strong consumer demand combined with a very competitive driver market is presenting labor challenges for customers and carriers alike. The driver recruiting market became moreremained challenging in thirdsecond quarter 2017.2022, as the strong freight market caused increased competition for the finite number of experienced drivers that meet our hiring standards. Several ongoing market factors persistpersisted including a declining number of, and increased competition for, driver training school graduates, an historically low national unemployment rate, aging truck driver demographics and increased truck safety regulations. We proactively took manycontinue to take significant actions in the last two years to strengthen our driver recruiting and retention as we strive to make Wernerbe the preferredtruckload employer of choice, for the best drivers, including raising driver pay, loweringproviding a modern tractor and trailer fleet with the age of our truck fleet, installinglatest safety equipment and training features on all new trucks,technology, investing inand expanding our driver training schoolsschool network and collaborating with customers to improve or eliminate freight with unproductive operating characteristics that prevent our drivers from maximizing productivity. Our driver turnover rate once again improved, achieving the lowest third quarter rate in 19 years.offering a wide variety of driving positions including daily and weekly home time opportunities. We are unable to predict whether we will experience future driver shortages.shortages or maintain our current driver retention rates. If such a driver shortage were to occur and additional driver pay rate increases became necessary to attract and retain drivers, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases.

24
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Fuel increased $9.6$66.9 million or 23.7%114.4% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 and increased 1.5%6.0% as a percentage of operating revenues to 15.0% due to higher average diesel fuel prices and increased3.9 million more company truck miles.tractor miles in second quarter 2022. Average diesel fuel prices were 26 cents$2.21 per gallon higher in thirdsecond quarter 20172022 than in thirdsecond quarter 20162021 and were 15 cents$1.20 per gallon higher than in secondfirst quarter 2017. The increase was partially offset by slightly improved miles per gallon (“mpg”).

2022.
We continue to employ measures to improve our fuel mpg such as (i) limiting trucktractor engine idle time, (ii) optimizing the speed, weight and specifications of our equipment and (iii) implementing mpg-enhancing equipment changes to our fleet including new trucks with U.S. Environmental Protection Agency (the “EPA”) 2010 compliant engines,tractors, more aerodynamic trucktractor features, idle reduction systems, trailer tire inflation systems, trailer skirts and automated manual transmissions to reduce our fuel gallons purchased. However, fuel savings from mpg improvement is partially offset by higher depreciation expense and the additional cost of diesel exhaust fluid (required in tractors with engines that meet the 2010 EPA emission standards).fluid. Although our fuel management programs require significant capital investment and research and development, we intend to continue these and other environmentally conscious initiatives, including our active participation as an EPA SmartWay Transport Partner. The SmartWay Transport Partnership is a national voluntary program developed by the EPA and freight industry representatives to reduce greenhouse gases and air pollution and promote cleaner, more efficient ground freight transportation.

For October 2017,July 2022, the average diesel fuel price per gallon was approximately 28 cents$1.64 higher than the average diesel fuel price per gallon in October 2016July 2021 and approximately 32 cents$1.63 higher than in fourththird quarter 2016.

2021.
Shortages of fuel, increases in fuel prices and petroleum product rationing can have a materiallymaterial adverse effect on our operations and profitability. We are unable to predict whether fuel price levels will increase or decrease in the future or the extent to which fuel surcharges will be collected from customers. As of SeptemberJune 30, 2017,2022, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.


Supplies and maintenance increased $1.0$13.2 million or 2.3%26.8% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 and decreased 0.2%0.1% as a percentage of operating revenues. Supplies and maintenance expense increased due to increases in tractor and trailer parts and labor, over-the-road repairs, tires, and tolls. The average age of our tractors and trailers increased by 0.3 years and 0.6 years, respectively, in second quarter 2022 compared to second quarter 2021, primarily due to ongoing delays in receiving new equipment. Operating older equipment has a direct impact on our supplies and maintenance costs.
Insurance and claims increased $20.3 million or 98.0% in second quarter 2022 compared to second quarter 2021 and increased 1.7% as a percentage of operating revenues due primarily to a higher company truck miles drivenamount of unfavorable reserve development on large claims, higher expense for small dollar liability claims resulting from unfavorable reserve development and higher new claims, and higher liability insurance premiums. The majority of the higher unfavorable reserve development related to recent unexpected and unfortunate legal developments for two prior year motor vehicle accidents that have been settled, including a settlement of a lawsuit in thirdTexas arising from a May 24, 2020 accident for which we recognized $9.5 million of insurance and claims expense in second quarter 2017 compared to third quarter 2016, partially offset by our younger trailer fleet and the resulting lower equipment maintenance expense.2022. We also incurred higher driver recruitinginsurance and other driver-related costsclaims expense of $1.3 million in both second quarter 2022 and second quarter 2021 for accrued interest related to a previously-disclosed adverse jury verdict rendered May 17, 2018, which we are appealing. Interest is accrued at $0.4 million per month, until such time as the outcome of our appeal is finalized. For additional information related to these lawsuits, see Note 8 in the 2017 quarter.

Insurance and claims increased $1.6 million or 8.2%Notes to Consolidated Financial Statements (Unaudited) set forth in third quarter 2017 compared to third quarter 2016 and increased 0.1% as a percentagePart I of operating revenues. The increase in third quarter 2017 expense compared to third quarter 2016 was primarily the result of unfavorable development on prior period claims.this report. The majority of our insurance and claims expense results from our claim experience and claim development under our self-insurance program; the remainder results from insurance premiums for claims in excess of our self-insured limits.

We renewedrenewed our liability insurance policies on August 1, 20172022 and took on additional risk exposure by increasing our self-insured retention and deductible levels. Effective on that date, we are responsible for the first $3.0 million per claim with an annual $6.0 million aggregate for claims between $3.0 million and $5.0 million. We also have an additional $5.0 million deductible per claim for each claim between $5.0 million and $10.0 million. As a result, we are responsible for the first $10.0 million per claim until we meet the $6.0on all claims with an annual $10.0 million aggregate for claims between $3.0$10.0 million and $5.0$20.0 million. For the policy year that ended July 31, 2016,began August 1, 2021, we were responsible for the first $2.0$10.0 million per claim on all claims with an annual $8.0$10.0 million aggregate for claims between $2.0$10.0 million and $5.0$15.0 million and an annual aggregate of $5.0 million for claims between $5.0 million and $10.0 million.. We maintain liability insurance coverage with insurance carriers substantially in excess of the $10.0 million per claim. As a result of the higher self-insured retention and deductible amounts under the new policies, ourOur liability insurance premiums for the policy year that began August 1, 20172022 are about $3.7 $1.9 million lowerhigher than premiums for the previous policy year.

Depreciation and amortization expense increased $1.8$4.6 million or 3.5%7.2% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 and decreased 0.1%1.6% as a percentage of operating revenues. This expense increase isrevenues due primarily to depreciation and amortization on tangible and intangible assets recorded in the higherECM and NEHDS acquisitions, partially offset by the impact of a change in accounting estimate effective January 1, 2022, which decreased depreciation expense by $3.2 million in second quarter 2022. During the first quarter of 2022, we increased the estimated salvage value of our trailers by $5,000 per trailer due to the ongoing stronger used trailer market and the increasing cost of new trucks purchased compared to the costtrailers.
The average age of used trucks that were sold over the past 12 monthsour tractor fleet was 2.3 years as of June 30, 2022, and the purchase of new trailers over the past 12 months to replace older used trailers which were fully depreciated.

In 2015 and 2016, we invested nearly $1 billion of capital expenditures (before sales of equipment) primarily to reduce the average age of our trucks and trailers. Our investmenttrailers was 4.7 years. We are continuing to invest in newer trucksnew tractors and trailers improvesand our terminals in 2022 to improve our driver experience, raisesincrease operational efficiency and helps us to bettermore effectively manage our maintenance, safety and fuel costs. We intend to maintain our newer fleet ageDuring the remainder of trucks and trailers. The 2022, we expect the
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average age of our company trucktractor and trailer fleet wasto remain at 1.9 years as of September 30, 2017.

or near current levels, subject to potential delays in receiving new equipment.
Rent and purchased transportation expense decreased $7.8increased $46.2 million or 5.8%30.6% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 and decreased 2.4%increased 0.4% as a percentage of operating revenues. Rent and purchased transportation expense consists mostly of payments to third-party capacity providers in the Werner Logistics segment and other non-trucking operations and payments to independent contractors in the TruckloadTTS segment. The payments to third-party capacity providers generally vary depending on changes in the volume of services generated by the Werner Logistics segment. Werner Logistics rent and purchased transportation expense decreased $2.2increased $41.9 million butas a result of higher logistics revenues, and decreased as a percentage of Werner Logistics revenues increased to 85.6%81.5% in thirdsecond quarter 20172022 from 83.8%87.8% in thirdsecond quarter 2016. Tighter industry-wide carrier capacity in third quarter 2017 compared2021 due to third quarter 2016 resulted in higher purchased transportation costs causingimproved pricing and the lower gross margin percentage.

effect of the NEHDS acquisition, as NEHDS utilizes both employees and contracted drive teams.
Rent and purchased transportation expense for the TruckloadTTS segment decreased $5.8increased $3.5 million in thirdsecond quarter 20172022 compared to thirdsecond quarter 2016. This decrease is2021 due primarily to lower paymentshigher reimbursements to independent contractors due to higher average diesel fuel prices. The higher expense was partially offset by fewer independent contractor trucks and miles during thirdin second quarter 2017 compared to third quarter 2016, partially offset by higher average fuel reimbursement per mile in the 2017 quarter.2022. Independent contractor miles decreased approximately 3.4 million miles in second quarter 2022 and as a percentage of total miles were 11.8%4.4% in thirdsecond quarter 20172022 compared to 14.8%6.2% in thirdsecond quarter 2016.2021. Because independent contractors supply their own tractors and drivers and are responsible for their operating expenses, the decrease in independent contractor miles as a percentage of total miles shifted costs from the rent and purchased transportation category to other expense categories, including (i) salaries, wages and benefits, (ii) fuel, (iii) depreciation, (iv) supplies and maintenance and (v) taxes and licenses.

Challenging operating conditions continue to make independent contractor recruitment and retention difficult. Such conditions include inflationary cost increases that are the responsibility of independent contractors and a shortage of financing available to independent contractors for equipment purchases. Historically we have been able to add company tractors and recruit additional company drivers to offset any decrease in the number of independent contractors. If a shortage of independent contractors and company drivers occurs, further increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract and retain these drivers. ThisThese rate increases could negatively affect our results of operations to the extent that we would not be able to obtain corresponding freight rate increases.

Other operating expenses decreased $0.5$7.0 million or 10.8% in thirdsecond quarter 20172022 compared to thirdsecond quarter 20162021 and decreased 0.1%0.5% as a percentage of operating revenues. Gains on sales of assets (primarily used truckstractors and trailers) are reflected as a reduction of other operating expenses and are reported net of sales-related expenses (which include costs to prepare the equipment for sale). Gains on sales of assets were $2.2$20.7 million in thirdsecond quarter 20172022, compared to $3.1$13.5 million in thirdsecond quarter 2016, which included a $6.5 million real estate gain and $3.4 million of losses on equipment sales. In third quarter 2017, we sold fewer trucks and fewer trailers than in third quarter 2016.2021. We realized substantially higher average gains per truck in third quarter 2017 compared to average losses in third quarter 2016tractor and realized lower average gains per trailer in third quarter 2017 compared to third quarter 2016. The used truck pricing market remained difficult in third quarter 2017 due to a higher than normal supply of used truckssignificantly improved pricing in the market for our used equipment, which we believe is a temporary result of increased demand for previously used equipment because of production delays limiting availability of new equipment in the industry. We sold fewer tractors and low buyer demand. Other operating expenses, primarily provision for doubtful accounts related to the driver training schools and professional and consulting fees, declined by $1.4 milliontrailers in thirdsecond quarter 2017 compared to third2022 than in second quarter 2016.

2021.
Other Expense (Income)
Other income, net of expense, (income) increased $0.1$2.7 million and increased 0.1% as a percentage of operating revenues in thirdsecond quarter 20172022 compared to thirdsecond quarter 2016. Interest income was lower in the 2017 quarter2021 due primarily to lowera $3.9 million increase in the amount of unrealized net gains recognized on our investments in equity securities in second quarter 2022 compared to second quarter 2021 (see Note 6 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report), partially offset by a $1.1 million increase in interest expense. Interest expense increased primarily due to higher average outstanding notes receivable, and interest expense was lower as well.

debt outstanding.
Income TaxesTax Expense
Our effective income tax rate (income taxes expressed as a percentage of income before income taxes) was 37.6%24.4% in thirdsecond quarter 2017 and 35.5%2022 compared to 25.5% in thirdsecond quarter 2016.2021. The higherlower income tax rate in 2017 issecond quarter 2022 was attributed primarily to a lowerhigher amount of favorable discrete income tax adjustments foritems in the remeasurement of uncertain tax positions in thirdsecond quarter 2017 compared to third quarter 20162022 and the income tax effect of applying a state tax rate increase to our deferred tax liabilities, partially offset by recognizing excess tax benefits related to share-based awards as a component of income tax expense.the noncontrolling interest.

NineSix Months Ended SeptemberJune 30, 20172022 Compared to NineSix Months Ended SeptemberJune 30, 20162021
Operating Revenues
Operating revenues increased 4.0%26.4% for the ninesix months ended SeptemberJune 30, 2017,2022, compared to the same period of the prior year. When comparing the first six months of 2022 to the first six months of 2021, TTS segment revenues increased $217.9 million, or 22.8%, and Werner Logistics revenues increased $113.3 million, or 40.5%, due primarily to pricing and volume increases and the acquisition of NEHDS. In the TruckloadTTS segment, trucking revenues, net of fuel surcharge, increased 2.0% in the 2017 year-to-date period compared to the 2016 year-to-date period$121.4 million, or 14.5%, due primarily to a 2.4%7.1% increase in average revenues per tractor per week partially offset byand a 0.4% decrease6.9% increase in the average number of tractors in
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service. Average revenues per total mile, net of fuel surcharge, increased 2.3% in the first nine months of 2017 compared to the same period in 2016, and average monthly miles per tractor increased by 0.2%. TruckloadTTS segment fuel surcharge revenues for the ninesix months ended SeptemberJune 30, 20172022 increased $36.6$93.6 million or 33.0%89.2% when compared to the nine months ended September 30, 2016same period of the prior year due to higher average diesel fuel prices in the 2017 period. Werner Logistics revenues decreased to $305.2 million in the first nine months of 2017 compared to $310.0 million in the same 20162022 period.
Operating Expenses
Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 93.6%90.1% for the ninesix months ended SeptemberJune 30, 2017, compared to 93.9%2022 and 89.0% for the ninesix months ended SeptemberJune 30, 2016.2021. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 16 and 1721 through 23 show the Consolidated Statementsconsolidated statements of Incomeincome in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the same period of the prior year, as well as the operating ratios, operating margins, and certain statistical information for our two reportable segments, TruckloadTTS and Werner Logistics.
Salaries, wages and benefits increased $21.3$80.7 million or 4.4%19.4% in the first ninesix months of 20172022 compared to the first nine months of 2016same period in 2021 and increaseddecreased 1.8% as a percentage of operating revenues to 32.3%31.0%. The higher dollar amount of salaries, wages and benefits expense in the first six months of 2022 was due primarily to higherincreased driver pay, including driver pay rate increases and student pay rates, increasedthe impact of 8.0 million more company trucktractor miles in the first six months of 2022. The increase in salaries, wages and benefits was also due to an increase in the number of non-driver employees and higher workers’ compensation expense in the 2017 period. When evaluated on a per-mile basis, driver salaries increased as well.benefits. Non-driver salaries, wages and benefits in theour non-trucking Werner Logistics segment increased 9.8%.56.2% as a result of increased employees to support the 41% growth of Logistics revenues and higher pay rates per employee.
Fuel increased $28.5$104.5 million or 25.5%95.6% in the first ninesix months of 20172022 compared to the same period in 20162021 and increased 4.7% as a percentage of operating revenues due to higher average diesel fuel prices and 8.0 million more company tractor miles in the first six months of 2022. Average diesel fuel prices were $1.74 per gallon higher in the first six months of 2022 than in same period in 2021.
Supplies and maintenance increased $24.1 million or 25.2% in the first six months of 2022 compared to the same period in 2021 and decreased 0.1% as a percentage of operating revenues. Supplies and maintenance expense increased due to increases in tractor and trailer parts and labor, over-the-road repairs, tires, tolls, travel, and driver advertising.
Insurance and claims increased $25.8 million or 60.2% in the first six months of 2022 compared to the same period in 2021 and increased 0.9% as a percentage of operating revenues due primarily to a higher amount of unfavorable reserve development on large claims, higher expense for small dollar liability claims resulting from unfavorable reserve development and higher new claims, and higher liability insurance premiums.
Depreciation and amortization expense increased $7.9 million or 6.2% in the first six months of 2022 compared to the same period in 2021 and decreased 1.6% as a percentage of operating revenues due primarily to higher average diesel fuel pricesdepreciation and amortization on tangible and intangible assets recorded in 2017,the ECM and NEHDS acquisitions, partially offset by improved mpg. Average diesel fuel prices were 30 centsthe impact of a change in accounting estimate effective January 1, 2022, which decreased depreciation expense by $6.3 million in first six months of 2022. During the first quarter of 2022, we increased the estimated salvage value of our trailers by $5,000 per gallon highertrailer due to the ongoing stronger used trailer market and the increasing cost of new trailers.
Rent and purchased transportation expense for the TTS segment increased $5.0 million in the first ninesix months of 2017 than in the same 2016 period.
Supplies and maintenance decreased $10.3 million or 7.9% in the first nine months of 20172022 compared to the same period in 20162021 due primarily to higher reimbursements to independent contractors due to higher average diesel fuel prices. The higher expense was partially offset by fewer independent contractor miles in the first six months of 2022. Independent contractor miles decreased approximately 7.5 million miles in the first six months of 2022 and decreased 1.0% as a percentage of operating revenues. Repairs and maintenance for our tractor and trailer fleets decreased in the year-to-date 2017 period despite higher company drivertotal miles driven due to a newer fleet of tractors and trailers. These decreases were partially offset by higher driver recruiting and other driver-related costs in the 2017 period.

Insurance and claims expense increased $1.0 million or 1.6%4.4% in the first ninesix months of 20172022 compared to 6.4% in the first six months of 2021. Werner Logistics purchased transportation expense increased $78.8 million in the first six months of 2022 as a result of higher logistics revenues and decreased as a percentage of Werner Logistics revenues to 82.4% in the first six months of 2022 from 87.6% in the same period in 2021 due to improved pricing and the effect of the NEHDS acquisition, as NEHDS utilizes both employees and contracted drive teams.
Other operating expenses decreased $14.4 million in the first six months of 2022 compared to the same period in 2016 but2021 and decreased 0.1% as a percentage of operating revenues. The higher expense in the 2017 year-to-date period was due primarily to higher liability insurance premiums related to the policy year that ended July 31, 2017.
Depreciation expense increased $9.8 million or 6.4% in the first nine months of 2017 compared to the same 2016 period and increased 0.2%0.7% as a percentage of operating revenues due primarily to a change during fourth quarter 2016 inhigher gains on the estimated lifesales of certain trucks to more rapidly depreciate the trucks to their residual values due to the weak used truck market, which resulted in additional depreciation expense of $3.4 million in 2017, and the higher cost of new trucks purchased versus used trucks that were sold. In addition, the purchase of new trailers over the past 12 months to replace older used trailers which were fully depreciated also contributed to the increase in depreciation expense.
Rent and purchased transportation expense decreased $2.0 million or 0.5%assets in the first ninesix months of 2017 compared to2022, partially offset by the same 2016 period and decreased 1.1% asimpact of a percentage$1.0 million gain from the sale of operating revenues. Rent and purchased transportation for the Truckload segment decreased $5.3WGL in first quarter 2021. Gains on sales of assets were $41.1 million in the first ninesix months of 20172022, compared to $25.0 million in the same 2016 period. This decreaseperiod in 2021. We realized substantially higher average gains per tractor and trailer due to significantly improved pricing in the market for our used equipment, which we believe is due primarily toa temporary result of increased demand for previously used equipment because of production delays limiting availability of new equipment in the industry. We sold fewer independent contractor miles driventractors and trailers in the first ninesix months of 20172022 than in the same period in 2021.
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Other Expense (Income)
Other income, net of expense, decreased $7.7 million in the first six months of 2022 compared to the same period in 2016. Independent contractor miles as a percentage of total miles were 12.4% and 14.4% in the first nine months of 2017 and 2016, respectively. Werner Logistics rent and purchased transportation expense increased $3.3 million and as a percentage of Werner Logistics revenues increased to 84.9% in the 2017 period from 82.6% in the 2016 period. Tighter industry-wide carrier capacity in the 2017 period compared to the 2016 period resulted in higher purchased transportation costs causing the lower gross margin percentage.
Other operating expenses increased $3.5 million in the first nine months of 2017 compared to the same period in 2016 and increased 0.2% as a percentage of operating revenues. Gains on sales of assets (primarily used trucks and trailers) decreased to $6.0 million in the nine months ended September 30, 2017 from $13.3 million in the nine months ended September 30, 2016, which included gains of $10.5 million from sales of real estate. In the 2017 year-to-date period, we sold fewer trucks and trailers, realized average gains per truck compared to average losses and realized lower average gains per trailer sold when compared to same period of 2016. Provision for doubtful accounts related to our driver schools and professional and consulting fees were lower in the 2017 period.
Other Expense (Income)
Other expense (income) increased $0.8 million in the first nine months of 2017 compared to the same 2016 period and increased 0.1% as a percentage of operating revenues,2021 due primarily to lowera $5.9 million decrease in the amount of unrealized net gains recognized on our investments in equity securities (see Note 6 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report) and a $1.7 million increase in interest income.expense. Interest income decreasedexpense increased due to lowerhigher average debt outstanding, notes receivablepartially offset by a decrease in the first nine months of 2017 compared to the first nine months of 2016.average effective interest rate incurred on our debt.
Income TaxesTax Expense
Our effective income tax rate (income taxes expressed as a percentage of income before income taxes) decreased to 37.7%was 24.3% for the first ninesix months of 2017 from 37.9% for2022 compared to 25.2% in the first nine months of 2016.same period in 2021. The lower income tax rate isin the first six months of 2022 was attributed primarily to recognizing excess tax benefits related to share-based awards as a component of income tax expense, partially offset by a lowerhigher amount of favorable discrete income tax adjustments for the remeasurement of uncertain tax positionsitems in the first ninesix months of 2017 compared to2022 and the same periodincome tax effect of 2016.the noncontrolling interest.

Liquidity and Capital Resources:
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, stock repurchases, and dividend payments are components of our cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment. Management’s approach to capital allocation focuses on investing in key priorities that support our business and growth strategies and providing shareholder returns, while funding ongoing operations.
Management believes our financial position at June 30, 2022 is strong. As of June 30, 2022, we had $54.4 million of cash and cash equivalents and over $1.3 billion of stockholders’ equity. Cash is invested primarily in government portfolio money market funds. In addition, we have two $300.0 million revolving credit facilities, for which our total available borrowing capacity was $291.6 million as of June 30, 2022 (see Note 7 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding our credit agreements). We believe our liquid assets, cash generated from operating activities, and borrowing capacity under our existing credit facilities will provide sufficient funds to meet our cash requirements and our planned shareholder returns for the foreseeable future.
Item 7 of Part II of our 2021 Form 10-K includes our disclosure of material cash requirements as of December 31, 2021. On March 25, 2022, we entered into a new credit agreement, replacing a previous credit agreement, and we amended an existing credit agreement. These changes increased our borrowing capacity by $200.0 million. See Note 7 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for further details regarding our debt and the timing of expected future principal payments. Except for the changes related to our credit agreements, there were no other material changes in the nature of these items during the six months ended June 30, 2022.
Cash Flows
During the ninesix months ended SeptemberJune 30, 2017,2022, we generated cash flow from operations of $216.9$267.5 million, an 8%a 41.2% or $15.8$78.1 million increase in cash flows compared to the same nine-monthsix-month period a year ago. The increase in net cash provided by operating activities resultedwas due primarily to increased cash flows from the effect of depreciation on net income, lower gain on disposal of operating equipment, and general working capital items, partially offset by a decrease from deferred income taxes.capital. We were able to repay debt, make net capital expenditures, andmake additional strategic investments, pay dividends and repurchase company stock with the net cash provided by operating activities and existing cash balances.

Net cash used in investing activities decreased to $110.5was $169.7 million for the nine-monthsix-month period ended SeptemberJune 30, 2017 from $280.02022 compared to $104.6 million forduring the nine-monthsame period ended September 30, 2016.in 2021. Net property additions (primarily revenue equipment) were $121.1$153.4 million for the nine-monthsix-month period ended SeptemberJune 30, 2017,2022, compared to $294.0$102.9 million during the same period of 2016. This decrease occurred as we completed a significant reinvestment in our fleet. As of September 30, 2017, we were committed to property and equipment purchases of approximately $95.2 million.2021. We currently estimate net capital expenditures (primarily revenue equipment) in 20172022 to be in the range of $175$275 million to $225$325 million, compared to net capital expenditures in 20162021 of $429.6$193.0 million. We intend to fund these net capital expenditures through cash flow from operations and financing available under our existing credit facilities, if necessary.


As of June 30, 2022, we were committed to property and equipment purchases of approximately $182.4 million.
Net financing activities used $113.3$97.9 million during the ninesix months ended SeptemberJune 30, 2017,2022, and provided $61.2$77.8 million during the same period in 2016. During2021. We had net borrowings on our debt of $17.5 million during the ninesix months ended SeptemberJune 30, 2017, we repaid $105.02022, increasing our outstanding debt to $445.0 million of debt; in the same 2016 period, weat June 30, 2022. We had net borrowings of $135.0$100.0 million and repaymentsduring the six months ended June 30, 2021, which we used to finance the July 1, 2021 purchase of $60.0 million. Our outstanding debt at September 30, 2017 was $75.0 million.ECM. We paid dividends of $13.7$15.7 million in the nine-monthsix-month period ended SeptemberJune 30, 20172022 and $13.0$12.9 million during the same period in the period ended September 30, 2016.2021. We increasedcurrently plan to continue paying our quarterly dividend, rate by $0.01 per share, or 17%, beginning withwhich we have paid quarterly since 1987.
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Financing activities for the dividend paid in July 2017. We did not repurchase any shares ofsix months ended June 30, 2022, also included common stock during the nine months ended September 30, 2017 or 2016. From time to time, therepurchases of 2,495,100 shares at a cost of $102.1 million. The Company has repurchased, and may continue to repurchase, shares of the Company’s common stock. The timing and amount of such purchases depend upon economic and stock market conditions and other factors. As of SeptemberJune 30, 2017,2022, the Company had purchased 3,287,2913,472,986 shares pursuant to our current Board of Directors repurchase authorization and had 4,712,7092,527,014 shares remaining available for repurchase.

Management believes our financial position at September 30, 2017 is strong. As of September 30, 2017, we had $10.7 million of cash and cash equivalents and over $1 billion of stockholders’ equity. Cash is invested primarily in government portfolio money market funds. As of September 30, 2017, we had a total of $325.0 million of credit pursuant to three credit facilities (see Note 2 in the Notes to Consolidated Financial Statements under Item 1 of Part I of this Form 10-Q), of which we had borrowed $75.0 million. The remaining $250.0 million of credit available under these facilities at September 30, 2017 is reduced by the $28.7 million in stand-by letters of credit under which we are obligated. These stand-by letters of credit are primarily required as security for insurance policies. Based on our strong financial position, management does not foresee any significant barriers to obtaining sufficient financing, if necessary.

Contractual Obligations and Commercial Commitments:
The following tables set forth our contractual obligations and commercial commitments as of September 30, 2017.
Payments Due by Period
(Amounts in millions)Total 
Less than
1 year
 1-3 years 3-5 years 
More than
5 years
 
Period
Unknown
Contractual Obligations           
Unrecognized tax benefits$4.1
 $—
 $—
 $—
 $—
 $4.1
Long-term debt including current maturities75.0
 —
 75.0
 —
 —
 —
Interest payments on debt3.7
 1.9
 1.8
 —
 —
 —
Property and equipment purchase commitments95.2
 95.2
 —
 —
 —
 —
Total contractual cash obligations$178.0
 $97.1
 $76.8
 $—
 $—
 $4.1
Other Commercial Commitments           
Unused lines of credit$221.3
 $—
 $221.3
 $—
 $—
 $—
Stand-by letters of credit28.7
 28.7
 —
 —
 —
 —
Total commercial commitments$250.0
 $28.7
 $221.3
 $—
 $—
 $—
Total obligations$428.0
 $125.8
 $298.1
 $—
 $—
 $4.1

As of September 30, 2017, we had unsecured committed credit facilities with three banks as well as a term commitment with one of these banks. We had with Wells Fargo Bank, N.A., a $100 million credit facility which will expire on July 12, 2020, and a $75 million term commitment with principal due and payable on September 15, 2019. We had an unsecured line of credit of $75 million with U.S. Bank, N.A., which will expire on July 13, 2020. We also had a $75 million credit facility with BMO Harris Bank, N.A., which will expire on March 5, 2020. Borrowings under these credit facilities and term note bear variable interest based on the London Interbank Offered Rate (“LIBOR”). As of September 30, 2017, we had $75 million outstanding under the term commitment at a variable rate of 1.83%, which is effectively fixed at 2.5% with an interest rate swap agreement. Interest payments on debt are based on the debt balance and interest rates at September 30, 2017. The borrowing capacity under these credit facilities is further reduced by the amount of stand-by letters of credit under which we are obligated. The stand-by letters of credit are primarily required for insurance policies. The unused lines of credit are available to us in the event we need financing for the replacement of our fleet or for other significant capital expenditures. Management believes our financial position is strong, and we therefore expect that we could obtain additional financing, if necessary. Property and equipment purchase commitments relate to committed equipment expenditures, primarily for revenue equipment. As of September 30, 2017, we had recorded a $4.1 million liability for unrecognized tax benefits. We expect none of it to be settled within the next twelve months and are unable to reasonably determine when the $4.1 million categorized as “period unknown” will be settled.



Regulations:

Item 1 of Part I of our 20162021 Form 10-K includes a discussion of pending proposed regulations that may have an effect on our operations if they become adopted and effective as proposed. Except as described below, thereThere have been no material changes in the status of thesethe proposed regulations previously disclosed in the 20162021 Form 10-K.

The Federal Motor Carrier Safety Administration (“FMCSA”) proposed to change the method for assigning a motor carrier’s Safety Fitness Determination (“SFD”) in January 2016, which would replace the three-tier federal rating system in place since 1982 with a single determination of “unfit.” FMCSA announced on March 23, 2017 that it has withdrawn the SFD proposed rule altogether, pending completion of a study of the agency’s Compliance, Safety, Accountability program.

Interstate carriers are subject to the FMCSA Hours of Service (“HOS”) regulations. FMCSA adopted a final rule in December 2011 that included provisions affecting restart periods, rest breaks, on-duty time, and penalties for violations, and we began dispatching drivers under the revised HOS rules effective July 1, 2013. The Consolidated Appropriations Act of 2016 was passed by Congress with HOS language to reduce negative effects of restricted hours and require the FMCSA study to demonstrate results with statistically significant improvements in safety and driver health, among other things, before the agency could reinstate restart rule restrictions that became effective in July 2013. In March 2017, FMCSA released the HOS Restart study report, which indicated that the restrictions do not improve safety; as a result, the pre-July 2013 restart rule continues to be in effect indefinitely.

In an effort to increase highway safety and improve compliance, Werner supports FMCSA’s electronic logging devices (“ELDs”) mandate. The final ELD rule was issued in December 2015 and becomes effective on December 18, 2017, when carriers must adopt and use compliant ELDs. In March 2016, a legal complaint was filed by the Owner-Operator Independent Drivers Association (“OOIDA”) to overturn the ELD mandate. OOIDA asked the U.S. 7th Circuit Court of Appeals to strike down the rule, arguing the rule is an unconstitutional violation of truckers’ rights and will do little to enhance safety. On October 31, 2016, OOIDA’s lawsuit was denied. OOIDA appealed the decision to the U.S. Supreme Court on April 11, 2017. On June 12, 2017, the U.S. Supreme Court denied OOIDA’s request to take on the issue, leaving in place the lower court’s ruling to uphold the mandate and its December 18, 2017 effective date.

FMCSA issued its final rule for Entry-Level Driver Training (“ELDT”) in December 2016. On December 27, 2016, four groups petitioned FMCSA to reconsider the final rule. The petition was denied by FMCSA on January 19, 2017. This final rule was slated to take effect February 6, 2017, with a compliance date of February 7, 2020; however, agencies were directed by the President in January 2017 to postpone for 60 days the effective date of rules published in the Federal Register but not yet effective. On May 23, 2017, the rule was delayed for a third time; as a result, the final rule became effective June 5, 2017. The compliance date is still set for February 7, 2020.

Critical Accounting Policies and Estimates:
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make estimates and assumptions that affect the (i) reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (ii) reported amounts of revenues and expenses during the reporting period. We evaluate these estimates on an ongoing basis as events and circumstances change, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Actual results could differ from those estimates and may significantly impact our results of operations from period to period. It is also possible that materially different amounts would be reported if we used different estimates or assumptions.

Information regarding our Critical Accounting Policies and Estimates can be found in our 20162021 Form 10-K. The most critical accounting policies and estimates that require us to make significant judgments and estimates and affect our financial statements include the following:

Depreciation and impairment of tractors and trailers.
Estimates of accrued liabilities for insurance and claims for liability and physicalbodily injury, property damage losses and workers’ compensation.
Accounting for income taxes.

compensation is a critical accounting estimate that requires us to make significant judgments and estimates and affects our financial statements.
There have been no material changes to thesethis critical accounting policies and estimatesestimate from thosethat discussed in our 20162021 Form 10-K.




Accounting Standards:
In the descriptions under “New Accounting Pronouncements Adopted” and “Accounting Standards Updates Not Yet Effective” that follow, references in quotations identify guidance and Accounting Standards Updates (“ASU”) relating to the topics and subtopics (and their descriptive titles, as appropriate) of the Accounting Standards Codification™ of the Financial Accounting Standards Board (“FASB”).

New Accounting Pronouncements Adopted
We did not adopt any new accounting standards during third quarter 2017.

Accounting Standards Updates Not Yet Effective
On May 28, 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The FASB has also issued additional guidance related to revenue recognition matters in subsequent ASUs, including a one-year deferral of the effective date of the new revenue recognition standard. As a result of the deferral, the new standard will become effective for us beginning January 1, 2018. The standard permits the use of either the full retrospective or modified retrospective (cumulative effect) transition method. We have established an implementation team which is evaluating the effect that adopting the standard will have on our consolidated financial statements and related disclosures and developing the necessary processes, reporting and controls to comply with the new requirements. We currently intend to adopt the standard using the modified retrospective transition approach. While we have not yet determined the quantitative impact on our consolidated financial statements, we currently expect the new standard to affect the timing of revenue recognition. Today we recognize revenue and related direct costs when the shipment is delivered. The new standard will require us to recognize revenue over time.

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The provisions of this update are effective for fiscal years beginning after December 15, 2018. We are evaluating the effect that ASU No. 2016-02 will have on our consolidated financial position, results of operations and cash flows.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The provisions of this update are effective for fiscal years beginning after December 15, 2017. We are evaluating the effect that ASU No. 2016-15 will have on our consolidated cash flows.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires an entity to include in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. The provisions of this update are effective for fiscal years beginning after December 15, 2017. We are evaluating the effect ASU No. 2016-18 will have on our consolidated cash flows and related disclosures.

In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The provisions of this update are effective for fiscal years beginning after December 15, 2017. We are evaluating the effect that ASU No. 2017-09 will have on our financial position, results of operations and cash flows.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The provisions of this update are effective for fiscal years beginning after December 15, 2018. We are evaluating the effect that ASU No. 2017-12 will have on our financial position, results of operations and cash flows.

Other ASUs not identified above and which are not effective until after September 30, 2017 are not expected to have a material effect on our consolidated financial position, results of operations or cash flows.


Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk from changes in commodity prices, foreign currency exchange rates and interest rates.

Commodity Price Risk
The price and availability of diesel fuel are subject to fluctuations attributed to changes in the level of global oil production, refining capacity, regulatory changes, seasonality, weather and other market factors. Historically, we have recovered a majority, but not all, of fuel price increases from customers in the form of fuel surcharges. We implemented customer fuel surcharge programs with most of our customers to offset much of the higher fuel cost per gallon. However, we do not recover all of the fuel cost increase through these surcharge programs. We cannot predict the extent to which fuel prices will increase or decrease in the future or the extent to which fuel surcharges could be collected. As of SeptemberJune 30, 2017,2022, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

Foreign Currency Exchange Rate Risk
We conduct business in several foreign countries, including Mexico, Canada, China and Australia.primarily in Mexico. To date, most foreign revenues are denominated in U.S. Dollars, and we receive payment for foreign freight services primarily in U.S. Dollars to reduce direct foreign currency risk. Assets and liabilities maintained by a foreign subsidiary company in the local currency are subject to foreign exchange gains or losses. Foreign currency translation gains and losses primarily relate to changes in the value of revenue equipment owned by a subsidiary in Mexico, whose functional currency is the Peso. Foreign currency translation losses were $0.6$47 thousand for the second quarter 2022 and gains were $1.9 million for thirdsecond quarter 2017 and $1.0 million for third quarter 2016.2021. These were recorded in accumulated other comprehensive loss within stockholders’ equity in the Consolidated Balance Sheets.

consolidated condensed balance sheets.
Interest Rate Risk
We manage interest rate exposure through a mix of variable interest rate debt and interest rate swap agreements. We had $75$150 million of variable interest rate debt outstanding at SeptemberJune 30, 2017,2022, for which the interest rate is effectively fixed at 2.5%2.31% through September 2019May 2024 with antwo interest rate swap agreementagreements to reduce our exposure to interest rate increases. In addition, we had $200 million of variable interest rate debt outstanding at June 30, 2022. Interest rates on the variable rate debt and our unused credit facilities are based on the LIBOR (see Contractual Obligations and Commercial Commitments)Secured Overnight Financing Rate (“SOFR”). IncreasesSee Note 7 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for further detail of our debt. Assuming this level of borrowing, a hypothetical one-percentage point increase in the SOFR interest rates could impactrate would increase our annual interest expense on future borrowings.by approximately $2.0 million.
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Item 4. Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level in enabling us to record, process, summarize and report information required to be included in our periodic filings with the SECU.S. Securities and Exchange Commission (SEC) within the required time period and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that no changes in our internal control over financial reporting occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have confidence in our internal controls and procedures. Nevertheless, our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the internal controls or disclosure procedures and controls will prevent all errors or intentional fraud. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal control system must reflect that resource constraints exist, and the benefits of controls must be evaluated relative to their costs. Because of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements and instances of fraud, if any, have been prevented or detected.

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PART II
OTHER INFORMATION

Item 1. Legal Proceedings.
For information regarding legal proceedings, see Note 8 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed under Item 1A (Risk Factors) in our 2021 Form 10-K, which could materially affect our business, financial condition, and future results of operations. The risks described in our 2021 Form 10‑K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and results of operations.
There have been no material changes from the risk factors disclosed in our 2021 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 15, 2007, we announced that on October 11, 2007November 9, 2021, our Board of Directors approved an increase in the number of shares of our commonand announced a new stock thatrepurchase program under which the Company is authorized to repurchase. Under this authorization, the Company is permittedrepurchase up to repurchase an additional 8,000,000 shares.6,000,000 shares of its common stock. As of SeptemberJune 30, 2017,2022, the Company had purchased 3,287,2913,472,986 shares pursuant to this authorization and had 4,712,7092,527,014 shares remaining available for repurchase. The Company may purchase shares from time to time depending on market, economic, and other factors. The authorization will continue unless withdrawn by the Board of Directors.

NoThe following table summarizes our stock repurchases during second quarter 2022 made pursuant to this authorization. The Company did not purchase any shares of commonduring second quarter 2022 other than pursuant to this authorization. All stock repurchases were repurchased during the third quarter 2017made by either the Company or on its behalf and not by any “affiliated purchaser,” as defined by Rule 10b-18 of the Exchange Act.

Issuer Purchases of Equity Securities
PeriodTotal Number of
Shares Purchased		Average Price
Paid per Share		Total Number of Shares
Purchased as
Part of Publicly
Announced Plans or
Programs		Maximum Number (or
Approximate Dollar
Value) of Shares that May Yet Be
Purchased Under the
Plans or Programs
April 1-30, 2022— $— — 4,177,014 
May 1-31, 20221,001,909 $40.49 1,001,909 3,175,105 
June 1-30, 2022648,091 $39.14 648,091 2,527,014 
Total1,650,000 $39.96 1,650,000  
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Item 6. Exhibits.
Exhibit No.ExhibitIncorporated by Reference to:
3(i)
Exhibit 3(i) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007
3(ii)
Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 10, 2016August 14, 2018
1131.1
See Note 5 (Earnings Per Share) in the Notes to Consolidated Financial Statements (Unaudited) under Item 1 of Part I of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017
31.1
Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2
32.1
32.2
101.INS101XBRL Instance DocumentThe following unaudited financial information from Werner Enterprises’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021, (ii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021, (iii) Consolidated Condensed Balance Sheets as of June 30, 2022 and December 31, 2021, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021, (v) Consolidated Statements of Stockholders’ Equity and Temporary Equity - Redeemable Noncontrolling Interest for the three and six months ended June 30, 2022 and 2021, and (vi) the Notes to Consolidated Financial Statements (Unaudited) as of June 30, 2022.Filed herewith
101.SCH104The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL Taxonomy Extension Schema Document(included as Exhibit 101).Filed herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
WERNER ENTERPRISES, INC.
Date: November 2, 2017August 8, 2022
By:/s/ John J. Steele
John J. Steele
Executive Vice President, Treasurer and

Chief Financial Officer
Date: November 2, 2017August 8, 2022
By:/s/ James L. Johnson
James L. Johnson
Executive Vice President, Chief Accounting

Officer and Corporate Secretary

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